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← Series 63: Regulation of Investment Advisers
Series 63 practice questionhardInvestment Adviser Representatives — Registration and Exemptions

XYZ Advisors, a federally registered investment adviser with no place of business in State A, has two investment adviser representatives (IARs): One resides in State A and services 7 institutional clients located in State A; the other resides in State B but travels monthly to State A to meet with five individual clients. Under the Uniform Securities Act, which IAR(s) must register in State A?

  1. ABoth IARs, because both are either residents or conduct business with clients in State A.
  2. BOnly the IAR residing in State A, because presence in the state triggers registration regardless of client type.
  3. COnly the IAR traveling to State A, because soliciting individual clients in the state requires registration.✓ Correct answer
  4. DNeither IAR, because their firm is federally registered and the institutional client exemption applies.
Explanation

Why C — Only the IAR traveling to State A, because soliciting individual clients in the state requires registration.

Under the USA, IARs of a federal covered adviser must register in a state if they have a place of business there or if they have more than 5 non-institutional clients in the state. The IAR residing in State A only has institutional clients (exempt), while the IAR traveling to State A is considered to have a place of business in the state due to regular solicitation of individual clients there, triggering the registration requirement (USA Section 402(c)).

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