Wednesday, April 13, 2011
The Series 65/66 exam asks LOTS of questions on what I call "registration of persons." Does this broker-dealer or that adviser have to register in the state if it deals exclusively with institutional investors? That sort of thing. The exam is typically obsessed with these questions . . . which, to me, seems odd, since every single person taking the test obviously has to register and knows he has to register. Whatever. Let's keep it simple. If the "person," which means agent, broker-dealer, investment adviser, and investment adviser representative, has a place of business in the state, he/they have to register in that state. What does it mean to have a "place of business" in a state? More than you'd probably think. Most candidates assume that we're talking about an "office." And, we are, but that's just one example of a place of business. If the agent or adviser meets with people at a diner in New Jersey, THAT is their place of business. More surprising, simply "holding yourself out as an adviser" in a state means you have a place of business in that state. If you're soliciting clients in Minnesota, you're "holding yourself out as an adviser" in that state and need to register. After you get your 6th client? No, as soon as your start soliciting. Remember, if they have a place of business in the state, they register in the state. Except when they don't--the only exception here is the federal covered adviser. For everybody else, if they have a place of business in the state, they register with the state. For the federal covered adviser things are different. They might have a place of business in Nevada but since they're the adviser to a mutual fund company, they are federal covered. They register with the SEC and provide copies (notice filings) to Nevada. There, nice and simple, just the way the regulators like it.