All RIAs are required to register either with the SEC or a state securities regulator. In general, RIAs managing less than $100 million of assets register with their home state, while those managing more than $100 million register with the SEC. Both federal covered advisers and state registered advisers have requirements set for policies and procedures. While the requirements set are similar, some state regulations may be slightly different.
A wrap fee program is a program under which any client is charged a specified fee or fees not based directly on transactions in a client’s account for investment advisory services. Any RIA compensated under a wrap fee program does not use the normal brochure or Part 2A of the ADV. Instead, that adviser furnishes clients and prospective clients Part 2A, Appendix 1. Appendix 1 consists of 9 items, 10 for advisers who are registered or are registering with one or more state securities authorities.
Under the Investment Advisers Act of 1940, no specific financial requirements, such as a minimum net worth, are spelled out. However, there are financial disclosures that must be made to clients under certain conditions. Under the Uniform Securities Act, the Administrator may, by rule or order, establish minimum financial requirements for registration as an investment adviser in the state.
Part 2A of the Form ADV requires advisers to create narrative brochures containing information about the advisory firm. Both federal and state registered advisers must prepare and deliver a brochure to their clients. They both also have requirements set by the SEC and NASAA for timely updating their brochure
Any RIA compensated under a wrap fee program for sponsoring, organizing, or administering the program, or for selecting, or providing advice to clients regarding the selection of, other investment advisers in the program, does not use the normal brochure or Part 2A of the ADV. Instead, that adviser furnishes clients and prospective clients Part 2A, Appendix 1.
As a registered adviser, you must make and keep true, accurate and current certain books and records relating to your investment advisory business. Federal covered advisers registered under section 203 of the Act (15 U.S.C. 80b-3) are required by the SEC to make and keep true, accurate and current books and records relating to its investment advisory business of the following: