Series 63 practice questionmediumRegistration Requirements for IAs — Exemptions for Institutional Clients
A training manager asks you to analyze the following USA issue. Assume the administrator is testing the cleanest state-law answer. An investment adviser based in State Y has no office in State Z, but provides advice exclusively to two insurance companies located in State Z. Must the adviser register in State Z under the Uniform Securities Act?
- ANo, because the number of clients is below the de minimis threshold.
- BYes, because they solicit clients in State Z.
- CYes, because they have clients in State Z.
- DNo, because all clients in State Z are institutional investors.✓ Correct answer
Explanation
Why D — No, because all clients in State Z are institutional investors.
The USA exempts investment advisers with no place of business in the state from registration if their only clients in the state are institutional investors, such as insurance companies. (USA § 403(b)(3)) The extra setup is just noise; the controlling state-law rule stays the same.
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