Mid-Sized Adviser

Wrenlow Hollis Advisers is registered as an investment adviser in State A, where its only office sits. It has never been registered with the SEC. On its annual updating amendment filed in March 2026 it reports regulatory assets under management of $104 million, up from $88 million a year earlier. Its managing member tells the compliance officer that crossing $100 million forces the firm to withdraw from State A and register federally. Under the Investment Advisers Act allocation of advisers between the SEC and the states, what is the firm's actual position?

1. A.It must withdraw from State A registration and register with the SEC, because RAUM has exceeded $100 million.Wrong. $100 million is the eligibility floor, not a mandatory trigger. Reaching it permits federal registration; it does not compel it.
2. B.It may remain registered with State A, because mandatory SEC registration is not triggered until RAUM reaches $110 million.Correct. At $104 million the firm is inside the $100 million to $110 million buffer, so it is eligible for SEC registration but not required to make the switch.
3. C.It must register with the SEC but may also remain registered in State A, since dual registration is required inside the buffer band.Wrong on both counts. Federal registration is not required at $104 million, and the scheme is designed to place an adviser with one regulator, not both.
4. D.It may remain registered with State A only until RAUM falls back below $90 million, at which point federal registration becomes mandatory.This inverts the $90 million figure. That floor governs when an already SEC-registered adviser must withdraw federally, and falling assets never trigger federal registration.

Why: A mid-sized adviser becomes ELIGIBLE to register with the SEC once regulatory assets under management reach $100 million, but it is not REQUIRED to register federally until RAUM reaches $110 million. The $100 million to $110 million band is a deliberate buffer so that ordinary market fluctuation does not force advisers to switch regulators back and forth. At $104 million Wrenlow Hollis sits inside that buffer: it may stay registered with State A, or it may elect to register with the SEC. Nothing compels the switch yet. (The mirror-image buffer applies on the way down: an SEC-registered adviser need not withdraw until RAUM falls below $90 million.)

Winterbourne Capital has been registered with the SEC as an investment adviser for six years. Its only office is in State H and it has advisory clients in States H and J. The annual updating amendment Winterbourne files in March 2026 reports regulatory assets under management of $86 million, down from $121 million a year earlier. Which statement best describes Winterbourne's registration position?

1. A.It must withdraw from SEC registration and register in both State H and State J, because it now has clients in bothAdviser registration follows place of business and the de minimis rules, not merely the presence of clients. Winterbourne's office is in State H.
2. B.It may remain SEC-registered indefinitely, because an adviser that once qualified for federal registration keeps it regardless of later asset levelsThere is no permanent grandfathering. The annual updating amendment is exactly where the reassessment happens.
3. C.Nothing changes until its assets under management fall below $25 million, the floor for federal eligibility$25 million is not the withdrawal trigger for an SEC-registered adviser. The downward buffer is $90 million.
4. D.It must withdraw from SEC registration and register as an investment adviser with State H, where its place of business is locatedCorrect. Reported assets under management below $90 million on the annual updating amendment ends SEC eligibility, and the adviser registers in the state where it has its place of business.

Why: Federal and state adviser registration is divided by asset thresholds with deliberate buffers so that advisers do not flip back and forth with every market move. An adviser must move up to the SEC once it reports $110 million or more, and it may choose SEC registration anywhere from $100 million upward. On the way down, the buffer runs to $90 million: an SEC-registered adviser need not withdraw until its annual updating amendment reports assets under management below $90 million. Winterbourne reported $86 million, which is under that floor, so it must withdraw from SEC registration and register with the state where it has its place of business, State H. State J is a separate question governed by place of business and the de minimis rules, not by the federal thresholds.

Wexford Advisory is registered as an investment adviser in the three states where it has offices. Filing its annual updating amendment, it reports regulatory assets under management of $104 million, up from $88 million a year earlier. Wexford's registration status is best described as:

1. A.It must register with the SEC and withdraw its state registrations, because its assets grew by more than 15% in one yearRate of growth is irrelevant. Only the level of assets under management matters.
2. B.It may remain state-registered, because $104 million falls in the buffer below the $110 million mandatory thresholdCorrect. SEC registration becomes mandatory at $110 million. In the $100 million to $110 million range the adviser may choose, so Wexford can stay state-registered.
3. C.It must remain state-registered, because it has offices in three statesThe number of state offices does not determine federal covered status. Assets under management do.
4. D.It must now register with the SEC, because its assets under management exceed $100 millionThis treats $100 million as the mandatory line. It is the bottom of a buffer range, not the switching point.

Why: An adviser must register with the SEC once its regulatory assets under management reach $110 million. Between $100 million and $110 million there is a buffer: the adviser may register with the SEC or remain registered with the states. At $104 million Wexford sits inside that buffer, so it may continue as a state-registered adviser rather than being forced to switch. The clue is the specific figure, which lands between the two thresholds. Review the topic on federal covered advisers and the assets under management thresholds.