RIA Compliance and Practice Management Blog

Should You Register Your new RIA Firm with the State or the SEC?

Posted by RIA in a Box

Feb 25, 2021 2:46:57 PM

Where to register your RIA firm

Starting a new registered investment adviser ("RIA") firm is exciting and it’s important that you get the details right from the beginning. In this article, we are going to address the question of where to register your RIA firm - with the state(s) or the Securities and Exchange Commission ("SEC").

Where you register depends on a number of factors. The most common is your firm's regulatory assets under management ("AUM")—specifically, firms are generally sorted based on whether they fall above or below the $100 million AUM mark. 

Download our Free 10 Step Checklist to Start an RIA FirmWhen to Register with the State(s)

If your RIA firm manages less than $100 million, you generally will register with the relevant state(s), not the SEC. Relevant states may include any state where you:

  • Have a physical location or office 
  • Have a representative physically located
  • Have five or more clients (or a single client in states such as Texas and Louisiana)
  • Are actively soliciting clients

Registration processes vary from state to state and there are some exceptions to these general guidelines. Check out our Investment Advisor State Registration Directory for a complete list of each state’s RIA registration requirements.

When to Register with the SEC

While there are some exceptions, in general, investment advisory firms who start an RIA firm with or expect to reach $100 million or greater in regulatory assets under management (AUM) within 120 days of registration should register with the SEC as an RIA.

Some of the more common exceptions that may allow RIA firms with less than $100 million in AUM to register with the SEC include:

  • Advisors with principal office and place of business in New York generally must register with the SEC if their AUM is $25 million or greater
  • Advisors to investment companies registered under the Investment Company Act of 1940 must register with the SEC regardless of AUM
  • Advisors who are required to register in 15 or more states will generally register with the SEC regardless of AUM
  • Internet-only advisors may register with the SEC regardless of AUM

To learn more about SEC RIA registration, refer to the SEC’s definitive document on the subject: “Regulation of Investment Advisers by the U.S. Securities & Exchange Commission.”

What about FINRA?

You hear so much about the Financial Industry Regulatory Authority ("FINRA") these days that it may surprise you to hear that RIA firms do not register with FINRA.

FINRA does not have any regulatory authority over RIAs. However, it does administer the online application and filing system for the registration of investment advisory firms and individual investment adviser representatives, referred to as the Investment Adviser Registration Depository ("IARD"). This system handles all Form ADV and other related filings.

In short, where you register your new RIA firms depends on a number of factors, but your regulatory AUM is generally a reliable indicator. Just remember that if you manage less than $100 million in regulatory AUM, you generally will register with the relevant state(s). On the other hand, if you expect to manage more than $100 million in regulatory AUM within the first 120 days of your firm's registration, you will generally register your new RIA firm with the SEC.

What’s Next?

Once you know where to file, then you’ll need to gather the proper documentation, fill out some paperwork, and then file everything, either with the SEC or with the relevant state(s).

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Of course, that’s only the beginning. Click here to learn more about how we assist with the RIA registration process.

Topics: RIA Operations, RIA Compliance, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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