Hello, the Registration Chapter states that large IAs with $110+ mln in AUM must register with the SEC. However, the exemption chapter says that an intrastate IA is exempt from registration at federal level (considering no exchange securities are advised by the IA). So I’m confused, if an IA with $150 mln in AUM working intrastate and offering limited advisory services must be registered with the SEC or is it exempt? Or is the exemption rule only applicable to IAs with under $110 mln in AUM?
If the firm exceeds $110 million of AUM, they must register with the SEC as a federal covered adviser.
Technically, is it possible an intrastate adviser with more than $110 million of AUM avoids registration as a federal covered adviser? Yes. In the real world, there are a few more requirements the adviser must meet (which we don’t expect you to see on the exam), but it is very possible for this scenario to occur. However, almost all advisers with that much in AUM will have interstate operations.
Here’s the best way to conceptualize this - intrastate advisers avoid SEC registration, even if exceeding $110 million of AUM. Be careful though - you only want to assume an adviser is intrastate if that’s clearly stated in the question.
Thank you. Then may be it’s worth adding a note something like “If the firm exceeds $110 million of AUM, they must register with the SEC as a federal covered adviser unless qualified for an exemption (see in the future chapter)” just to avoid similar confusions for the future. Because the way I learned it that this was a hard must
@brandonrith Brandon, another important clarification, please. Since large IAs with over 110 mln in AUM must register with SEC but qualified intrastate advisers are exempt, what happens to their registration with the state then? Whenever it’s a new large and qualified IA or an existing one that has already been registered with the state and that only does notice filings.
Also, question #2 if intrastate Private Fund Advisors with $150 mln in AUM are exempt from the Fedreal registration, meaning they’re not obliged to register at any level
Good suggestion re: your previous post. I’ll get the material updated soon.
For your most recent post - in regards to question #1, intrastate advisers obtaining this exemption from SEC registration would still continue to register with the state although their AUM size would be large. No notice filings, just full on registration.
For question #2 - honestly, I’d have to check with a securities attorney on this one. Also, I think you mean private fund advisers not exceeding $150 million of AUM (if they did, they would be considered federal covered). Good news - I could never imagine the exam asking a question on this topic. In fact, I only expect you would need to know the intrastate adviser exemption exists, not how it would apply in conjunction with other exemptions. On top of that, most test takers don’t encounter questions on the SEC exemption for intrastate advisers. You might see one question on the topic, if any at all.
For question #2 - honestly, I’d have to check with a securities attorney on this one. Also, I think you mean private fund advisers not exceeding $150 million of AUM (if they did, they would be considered federal covered).
Note quite. It says
“Those with $150 million or more of AUM must register with the SEC as a federal covered adviser. Regardless of the situation, state registration is never involved.”
So a private fund adviser with $150 million or more of AUM and working intrastate is an exempt and must not register with the SEC. And state registration is never involved. Therefore the adviser wouldn’t be state or federal covered at all.
I misunderstood your question. Given private funds advisers not exceeding $150 million of AUM are exempt from SEC registration, I thought your question was if intrastate private fund advisers also avoided state registration.
Regardless, I recommend you keep these exemptions in their respective buckets. The test writers want you to know off their existence, and it’s unlikely you’ll encounter test questions on how they overlap or apply in tandem.
@Justin@brandonrith
Thank you Justin, yes, this is the question - if a private fund advisor w/ $150M+ AUM and working intrastatemust register with the SEC or are they exempt.
p.s. I now understand the logic behind the test and what the test writers want from us, but I just want to clarify this question for myself. Thank you!
I had to consult a legal resource for this - the intrastate adviser exemption does not apply for private fund advisers with $150 million of AUM or more. To the best of my knowledge, this is the only time the intrastate adviser exemption would not apply. Therefore, SEC registration would be required.