Series 66 Questions

I thought If you have a business in a state you have to register? I got couple questions wrong

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Hi @Lonely_pink_mole! Great questions.

For the first question you shared - doing business in a state usually requires registration, but not always. If you’re referring to opening an office (or having a physical presence) in a state, then yes - registration is almost always required (although there are exceptions). However, the question states UVX Advisers wants to begin doing business in Texas, and this doesn’t necessarily mean they’re opening an office (or going there physically). Calling a potential client in another state or sending them an offer via email is considered “doing business in a state.”

The question is asking what circumstance would require registration in a state. Answer choices A and C allow the adviser to claim the institution exemption (no place of business and only working with institutions). Private fund advisers (answer choice D) generally do not register at the state level. Answer choice B involves the adviser offering their services to more than 5 retail investors, so they cannot claim the de minimis or institution exemptions. This is the only circumstance that requires registration.

For the second question you referenced - answer choice A allows the adviser to claim the de minimis exemption (5 or fewer retail clients in a state where no office exists). Answer choice C results in the adviser being considered federal covered as they are providing advice to a registered investment company. Federal covered advisers never register with the state, although they are required to perform a notice filing. When an adviser has a place of business in a state, the primary way they can avoid state registration is if they’re considered federal covered (SEC registration only). Answer choice D allows the adviser to claim the institution exemption.

Answer choice B refers to ‘accredited investors,’ which can be wealthy retail investors. State laws and regulations do not recognize the term ‘accredited.’ This is only a relevant word for Regulation D, which is a federal exempt transaction from the Securities Act of 1933. Although this answer choice is a bit vague, it’s the only answer that will likely result in the adviser registering with the state.

I hope this helps!

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Thank you. This clears it up!

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