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Red Oak Blog

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Saturday, July 25 2015

RIA Firms: Are You Properly Registered in the States You Have Clients?

We regularly encounter this question when working with investment advisors interested in establishing their own new RIA firms, or existing firms going through the renewal process at the end of the year. It is critical to be properly registered in the states you have clients in since you cannot charge advisory fees if you are not.

Because most states follow the same general rules pertaining to the “de minimis exemption,” RIA firms must register or notice file under the following circumstances:

  • The RIA firm has a physical office location in the state
  • The RIA firm has more than 5 clients residing in the state
  • The RIA firm is actively soliciting in the state

It is also important to understand how the regulators define “clients”. When counting clients in a state, remember that members of the same household count as a single client. So, if you are managing assets for a married couple, residing in a state, that household counts as a single client.

At present, there are only two states that require an RIA Firm to notice file or register before taking on a single client. Those states are Texas and Louisiana. This is important to take into consideration if you are considering growing your business by expanding into other states or if one of your clients moves to a new state.

As always, because states often make regulation changes, it is a good idea to check with either your state regulator or RIA compliance consultants to confirm the latest RIA registration and notice filing requirements.

Everyone at Red Oak Compliance Solutions stands ready to assist you with any questions regarding this or any other compliance matters.