Series 63 practice questionhardRegistration Requirements for IAs — Multi-State Operations and Notice Filing
An investment adviser with its principal office in State X is registered federally and maintains offices in both State X and State Y. The adviser has 7 retail clients in State Z but no office there. According to the Uniform Securities Act, which of the following statements is correct regarding its registration requirement in State Z?
- AThe adviser is exempt from notice filing in State Z if it only deals with institutional clients there.
- BThe adviser must notice file in State Z because it is a federal covered adviser with more than 5 clients.✓ Correct answer
- CThe adviser does not need to register or notice file in State Z if it has no place of business and fewer than 6 clients in any 12-month period.
- DThe adviser must register in State Z because it has more than 5 clients there.
Explanation
Why B — The adviser must notice file in State Z because it is a federal covered adviser with more than 5 clients.
Under the Uniform Securities Act, a federal covered adviser is generally required to notice file in states where it has more than 5 clients, even if it does not maintain a place of business there (USA Section 302(c)). The de minimis exemption applies only to advisers who are not federal covered advisers. Since this adviser is federally registered and has more than 5 clients in State Z, it must notice file there.
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