14.3 IARs of Federal Covered Advisers
When an investment adviser is registered with the SEC (federal covered adviser), special rules govern the registration of their Investment Adviser Representatives. Understanding the interaction between federal and state jurisdiction is critical.
Key Principle: IARs Always Register at State Level
Regardless of whether the investment adviser is SEC-registered or state-registered, IARs always register at the state level. There is no federal registration for IARs.
SEC-Registered Adviser: Federal (SEC)
State-Registered Adviser: State
IAR of SEC Adviser: State
IAR of State Adviser: State
Place of Business Rule
IARs of Federal Covered Advisers
IARs of SEC-registered advisers have a more limited state registration requirement:
Registration Trigger: Must have a "place of business" in the state
No Place of Business: No registration required in that state
Contrast: IARs of state-registered advisers register in each state where they have a place of business, and in other states unless the no-place-of-business (de minimis) exemption applies
Definition of "Place of Business"
An IAR has a "place of business" in a state if they:
Office Location: Yes—physical office in the state
Meet Clients at Location: Yes—regularly meets clients at a location
Hold Out as Available: Yes—advertises presence in the state
Work from Home: Yes—if home is in the state
Only Phone/Email Contact: No—if no physical presence
Travel to State Occasionally: Generally No—unless regular presence
Comparison: IARs of Federal vs. State Advisers
Office in State A, calls clients in State B: IAR of Federal Covered Adviser — Register in State A only. IAR of State-Registered Adviser — Register in State A; also in State B unless the de minimis exemption applies (no more than five non-institutional clients there in 12 months)
No office, all clients reached remotely: IAR of Federal Covered Adviser — Register where IAR is located. IAR of State-Registered Adviser — Register where the IAR is located, plus each client state beyond the de minimis limit
Multiple offices in different states: IAR of Federal Covered Adviser — Register in each office state. IAR of State-Registered Adviser — Register in each office state + client states beyond the de minimis limit
On the Exam: This is a frequently tested distinction. IARs of federal covered advisers register only where they have a place of business, while IARs of state-registered advisers also register in states where they have clients unless the de minimis exemption (no place of business, no more than five non-institutional clients in 12 months) applies.
State Authority Over IARs
States CAN Regulate IARs of Federal Covered Advisers
Registration: Require IAR registration in the state
Qualification Exams: Require Series 65 or Series 66
Fees: Collect registration fees
Investigation: Investigate IAR misconduct
Discipline: Suspend, revoke, or bar IARs
Continuing Education: Require CE compliance
Books and Records: Examine IAR-related records
States CANNOT Regulate the Federal Covered Adviser Itself
Cannot Require Adviser Registration: SEC-registered advisers don't register with states
Cannot Impose Different Standards: Cannot add substantive requirements on the adviser
Cannot Charge More Than Notice Fees: Limited to notice filing fees
Cannot Require Different Disclosures: Must accept federal disclosure requirements
Federal Covered Adviser Notice Filing
Requirements
When Required: If adviser has place of business OR 6+ clients in state
Filing: Form ADV notice filing with state
Fees: State notice filing fees
Timing: Varies by state—often within 30-60 days
De Minimis Exemption
No Place of Business: No office in the state
Client Limit: 5 or fewer clients in the state in 12 months
Result: No notice filing required
Multi-State Registration for IARs
Process
Initial State: Register in home state where IAR is located
Additional States: File Form U4 for each additional state
Exam: Same exam valid for all states
Fees: Separate fees for each state
CE: May have different CE requirements by state
Practical Considerations
State Differences: Requirements may vary
Fee Management: Track multiple state fees
Renewal Timing: Most renew December 31
Record Keeping: Maintain records for each state
Dual Registration: IAR and Agent
Many individuals are registered as both an IAR and a broker-dealer agent:
Requirements
Separate Registrations: Must hold both registrations
Different Standards: Must comply with both sets of rules
Stricter Rule Applies: When rules conflict, follow more restrictive
Separate Exams: Different exam requirements for each
Combined Supervision: Firm must supervise both roles
Common Combinations
IAR Only: Series 65
Agent Only: SIE + Series 6 or Series 7 + Series 63 (most states)
Both (IAR + Agent): SIE + Series 7 + Series 66
Key Takeaways
1. IARs always register at the state level—even for SEC-registered advisers
2. IARs of federal covered advisers register only where they have a place of business
3. IARs of state-registered advisers register where they have a place of business and in client states beyond the de minimis limit
4. States can require IAR registration, exams, fees, and discipline IARs
5. States cannot require the federal covered adviser itself to register
6. Dual-registered individuals (IAR + agent) must comply with both sets of rules
Frequently Asked Questions
Q: An IAR who works for an SEC-registered (federal covered) adviser must register with states where:
A: They have a place of business. IARs of federal covered advisers must register only in states where they have a "place of business" (physical office, meet clients, or hold themselves out as available). IARs of state-registered advisers can also have to register in states where they have clients and no office, unless the de minimis exemption (no more than five non-institutional clients in 12 months) applies.
Q: Which statement about state authority over IARs of SEC-registered advisers is TRUE?
A: States can require IAR registration, qualification exams, and can discipline IARs. While states cannot require the federal covered adviser itself to register, they retain full authority over IARs—including requiring registration, qualification exams, collecting fees, investigating misconduct, and taking disciplinary action.
Q: An IAR of a federal covered adviser has an office in Texas and calls clients in Oklahoma and Kansas. The IAR must register in:
A: Texas only (where the place of business is located). IARs of federal covered advisers must register only in states where they have a place of business. Since the office is in Texas, only Texas registration is required—not Oklahoma or Kansas, even though clients are there. This differs from IARs of state-registered advisers.