Registration Status

A broker-dealer's registered representatives begin offering an asset-based-fee wrap account program that involves ongoing investment advice for compensation not solely incidental to brokerage. What must the principal recognize about the firm's registration status?

1. A.State registration alone satisfies the requirement, with no federal filing neededWrong. Depending on assets under management, federal or state adviser registration may apply, but some form of adviser registration is required either way.
2. B.BD registration alone is sufficient for any activity performed by a registered representativeWrong. Activities that fall outside the broker-dealer exclusion in the Advisers Act require separate adviser registration.
3. C.The firm must obtain separate registration as an investment adviser for the advisory programCorrect. Fee-based advice that is not solely incidental to brokerage falls outside the Section 202(a)(11) exclusion and requires RIA registration.
4. D.Only the individual representatives, not the firm, need adviser registrationWrong. Firm-level adviser registration is generally required for a firm operating an advisory program, in addition to any individual requirements.

Why: Under Investment Advisers Act Section 202(a)(11), the broker-dealer exclusion from adviser registration applies only when advice is solely incidental to brokerage and no special compensation is charged for it. A fee-based advisory program with ongoing advice for compensation falls outside that exclusion, so the firm needs separate investment adviser registration for that business.

A representative who works a reduced, part-time schedule from a remote home office assumes her Regulatory Element continuing education obligation is proportionally reduced or waived because she is not working full-time or from a traditional office setting. Is this assumption correct?

1. A.Yes, representatives working a reduced or part-time schedule have a proportionally reduced continuing education obligation compared to full-time representatives.Wrong. This invents a schedule-proportional reduction that is not how the obligation works.
2. B.Yes, representatives working remotely from a home office are exempt from Regulatory Element continuing education entirely, regardless of their schedule.Wrong. This invents a remote-work-based exemption that does not exist.
3. C.No, but only representatives working fewer than a specific number of hours per week are exempt; representatives above that threshold have the full obligation regardless of location.Wrong. This invents an hours-based threshold exemption that is not the basis for the obligation.
4. D.No — the Regulatory Element continuing education obligation applies based on a representative's registration status, not on whether she works full-time, part-time, or from a remote location, so her assumption of a proportional reduction or waiver is incorrect.Correct. The obligation is tied to registration status, not schedule or work location.

Why: The Regulatory Element continuing education obligation applies based on a representative's registration status, not on whether she works full-time, part-time, or from a remote location, so her assumption of a proportional reduction or waiver is incorrect.

Sela Nakamura holds an effective registration as an investment adviser representative in State N. On May 4, 2026 she terminates her employment with Brightwater Advisers, an investment adviser registered with State N. On May 18, 2026 she begins work as an investment adviser representative of Coldstream Capital, an SEC-registered adviser that maintains an office in State N. Which party bears the duty to notify the State N Administrator of each of the two events?

1. A.Brightwater must report the termination and Coldstream must report the associationThis applies the state-registered adviser rule to both firms. Coldstream is federal covered, so the reporting duty passes to the representative.
2. B.Brightwater must report the termination, and Sela must report her association with ColdstreamCorrect. A state-registered adviser reports for its own representatives; a representative of a federal covered adviser reports for herself.
3. C.Neither event is reportable, because Sela stayed within State N and her registration never lapsedBoth events are reportable. An IAR registration is specific to one adviser, so a change of employer is exactly the event the notice requirement exists to capture.
4. D.Sela must report both events personallyShe reports the Coldstream association, but not the Brightwater termination. Brightwater is state-registered, so the firm carries that filing obligation.

Why: The duty to report an investment adviser representative's beginning or terminating employment turns on the registration status of the adviser. When the adviser is registered with the state, the adviser files the notice; when the adviser is federal covered, the obligation shifts to the representative personally, because the state has no registration relationship with the firm. So Brightwater, a state-registered adviser, reports the May 4 termination, and Sela reports her own May 18 association with the federal covered Coldstream.

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.