Demystifying RIA/IAR Legal Requirements

If the individual has not yet been exempted from the definition of investment advisor representative per the above, then we move on to the final stage of the analysis: Does the individual have a place of business located within that State?

"Place of business" of an investment advisor representative means:

• An office at which the investment advisor representative regularly provides investment advisory services, solicits, meets with, or otherwise communicates with clients; and • Any other location that is held out to the general public as a location at which the investment advisor representative provides investment advisory services, solicits, meets with, or otherwise communicates with clients.

For the purposes of rule 203A-3(b), an advisor representative generally would be considered to hold him/herself out to the general public as having a location at which he conducts advisory business by, for example, publishing information in a professional directory or a telephone listing, or distributing advertisements, business cards, stationery, or similar communications that identify the location as one at which the advisor representative is or will be available to meet or communicate with clients.

Investment advisor representatives can only be compelled to register in states in which they maintain a place of business. If an SEC-registered investment advisor only has a place of business in New Jersey, then New Jersey is the only state (subject to potential limited exceptions) that can require registration of that firm's investment advisor representatives, regardless of the number of clients served or amount of assets managed in any other state.

Once an advisory firm has determined that a state is permitted to require registration, it is then a matter of examining the laws of that state or states per the above to ascertain whether investment advisor representative registration is required.

Although the analysis of various state licensing requirements is a job better left to attorneys, the above analysis can serve as a helpful guide in winnowing down the number of possible states for review.

Thomas D. Giachetti is chairman of the Investment Management and Securities Practice Group of Stark & Stark, a law firm with offices in Princeton, New York and Philadelphia that represents investment advisors, financial planners, BDs, CPA firms, registered reps and investment companies, and is a regular contributor to Investment Advisor. He can be reached at [email protected].