Each state has its own statutes and regulations governing the operation and registration of investment advisors. The investment advisor firm holds the registration/license. Investment advisors are regulated either by the SEC or by the states, depending on the amount of assets they maintain. If an investment advisor does not meet the SEC standard for registration, they generally must register with their home state and any other state in which they do business.
The primary document in the registration of an investment advisor is Form ADV – a 78 page application. All advisors must register with the SEC and the States electronically through IARD, a secure Internet based data system. The SEC processes registrations in 45 days, but each state has different processing times. In addition to the ADV, states may require a passing score on a competency examination for each individual acting as an investment advisor, payment of a fee for processing the applications, a bond or minimum net capital and certain other disclosures about the firm. Investment advisors must renew their registration/license annually.
Business license considerations
State and local authorities require businesses to obtain specific licenses and permits based on their industry. In some cases, regulations mandate specialized education and unique credentials.
Operating without the appropriate license typically results in penalties, which vary according to the size of the business and the severity of the violation.