Investment advisers may be primarily regulated by the U.S. Securities and Exchange Commission (SEC) or by one or more state securities authorities. Each state has one securities regulatory authority, but some investment advisers may be regulated by more than one state. Unlicensed, unregistered persons commit much of the investment fraud in the United States, so you should always check to see whether an investment adviser is registered with the SEC or your home state before making a decision to invest with them. To find out if your investment professional is licensed and registered, you can use the free Check Out Your Investment Professional search tool available on Investor.gov.
Sometimes it is helpful to know which regulatory authority is the primary regulator of an investment adviser—for example, if you have a question about which rules and regulations apply to that adviser. The authority with which an adviser is registered will serve as its primary regulator. Here are some general rules that apply to determining the primary regulator of an investment adviser.
What is the general rule for state regulation versus regulation by the SEC?
Investment advisers can be divided into three categories based on their regulatory assets under management (“RAUM”)--a specialized calculation of the assets over which they provide investment advice.
- A small adviser has less than $25 million of RAUM.
- A mid-sized adviser has between $25 million and $100 million of RAUM.
- A large adviser has greater than $100 million of RAUM.
In general, small and mid-sized advisers are registered with and primarily regulated by one or more state securities authorities, though certain federal securities provisions still apply to state-registered advisers (such as those prohibiting fraud). Large advisers are registered with the SEC and are primarily subject to federal regulation instead of state regulation. However, SEC-registered investment advisers must comply with state antifraud prohibitions, and states may license and register representatives of SEC-registered investment advisers.
Are there exceptions to the general rule based on RAUM noted above?
Yes. In some cases, a small or mid-sized adviser may be permitted or required to register with the SEC instead of with one or more state securities authorities. For example:
- Mid-sized advisers that are either not required to be registered as an adviser with, or not subject to examination by, the state securities authority where they maintain their principal office and place of business must register with the SEC.
- Advisers to investment companies registered under the Investment Company Act of 1940 must register with the SEC.
- Advisers to business development companies, when the adviser has at least $25 million of RAUM, must register with the SEC.
- Certain internet advisers who provide advice through an interactive website may register with the SEC.
- Multi-state advisers that would otherwise be obligated to register with 15 or more states may register with the SEC.
- Pension consultants providing advisory services to employee benefit plans having at least $200 million of assets may register with the SEC (even though the consultant does not itself have those assets under management).
- Related advisers that control, are controlled by, or are under common control of an SEC-registered adviser may register with the SEC, but only if they have the same principal office and place of business.
- Newly formed advisers that expect to be eligible for SEC registration within 120 days may register with the SEC.
- Non-U.S. advisers giving advice to U.S. persons must register with the SEC, unless an exemption from SEC registration is available (in which case it may be subject to state registration requirements).
Some advisers (like “multi-state advisers”) may have the option of choosing between SEC and state registration.
How do I find out who regulates my investment adviser?
Consider contacting your investment adviser to find out who has primary responsibility for regulating it. You can also get details about whether your investment adviser is registered with the SEC or a state securities authority by using the free Check Out Your Investment Professional search tool on Investor.gov. We can also assist you with determining the registration status of your investment adviser. Please call our toll-free investor assistance line at 1-800-SEC-0330 or use our online question web form.
If you need to get in touch with a state securities regulator, contact information can be found on the North American Securities Administrators Association website under Contact Your Regulator.