Also, State registered advisers should review and verify compliance with state regulatory requirements governing the business of investment advisers. The regulation of investment advisers can vary significantly from one state to the other. Attempts to unify the patchwork of state requirements have fallen short, and the only sure way to determine the specific requirements of a state is to refer directly to the state’s securities laws and regulations, which many states make available online. Due to the practical difficulty of identifying and keeping current on the requirements of each state in which an investment adviser conducts business, it is often advantageous for an investment adviser to adopt a policy that requires it to comply with all state requirements.

Provided below is a non-exhaustive list of common regulatory requirements that states impose on investment advisers. Any investment adviser that does not comply with a particular requirement should thoroughly document its basis for believing that the requirement does not apply in the states in which it conducts business.

For information on investment adviser registration in each state, check out NASAA’s State Investment Adviser Registration Information.


The investment adviser’s designated person will periodically review this non-exhaustive list of common regulatory requirements to ensure that its firm complies. The reviewer should compare its firm’s business activities and implement necessary controls to comply with each such requirement.

Record Keeping, Net Capital, and Bonding Requirements of Home State

State registered advisers are required to follow the financial record keeping and net capital requirements. Some states may also impose bonding requirements, which may depend on prescribed factors, like whether the firm has discretionary authority over clients’ accounts or custody.

Requirement to Deliver Invoices to Clients

Many states require investment advisers that directly deduct advisory fees from client accounts (a common business practice) to deliver to the client, prior to such fee deduction, an invoice that provides the details of the fee calculation.

Requirement to Inspect Branch Offices

In many states, investment advisers are required to inspect each of its office locations at least annually. While the scope of the audits may vary, firms should consider its need to conduct branch audits.

Requirement to Register Branches and Provide Notification to State Regulators

In some states, investment advisers are required not only to register their branches but also to notify the Securities Commissioner of the names of each branch manager and the methods of compensating each manager.

Requirement to Comply with Solicitor Rules

In many states, investment advisers are prohibited from paying a cash fee, directly or indirectly, to an unregistered investment adviser representative or non-RIA. Before paying any solicitor, you should always research this requirement with each applicable state.


Certain states may require firms that are deemed to have custody to perform required audits (including surprise audits), maintain a higher level of net capital, provide notice, custodial requirements, etc. You should consider whether you are deemed to have custody with each state and unfortunately, not all states have adopted the same custody guidelines.

Also, in many states, the receipt of checks drawn by clients and made payable to third parties is deemed custody if the investment adviser fails to promptly forward a check to a third party or to maintain a check received and forwarded blotter (or similar record of original entry).

Registration and De-minimis Requirements

Under the Uniform Securities Act, states may only require registration of the firm and applicable investment advisor representatives should a firm exceed 5 clients in 12 months. However, some states have not adopted this exemption. A review should be conducted of each state for a variance in applicable registration rules.

Requirement to Comply with Other Laws, Rules, and Regulations

State registered advisers may be subject to other requirements that were not identified above. For example, certain states may require that you file advertising with the state before use (i.e. New York) or require that the supervisor maintain a Series 24 license (i.e. New Mexico).

Also, take note that most states have guidelines that apply to standard compliance items not included here. The following are examples, but not an all-inclusive list:

  • Contracts have content requirements and are in writing;
  • Borrowing/Lending to Clients;
  • Prohibited Conduct;
  • Books and Records;
  • Written Policies and Procedure; and
  • Training

Requirement to Deliver Financial Statements to State Securities Commissioners

In many states, investment advisers are required to deliver financial statements to the securities commissioner within ninety (90) days following the end of the investment adviser’s fiscal year. Also, states typically require the financial statements to be audited if the investment adviser has custody of client funds or securities or requires payment of its advisory fees six (6) months or more in advance and excess of $500 per client.

For more information on RIAs, check out some of our other blogs:

MasterCompliance provides expert consulting, outsourcing, and implementation tools in planning and budgeting your firm’s compliance responsibilities. If there are any areas where you would like to explore additional assistance or services, please contact us.