Who Must Register with Other Regulatory Regimes?

For investment advisers, the Investment Advisers Act of 1940 (the “Advisers Act”) and relevant state laws are the primary basis for their registration obligations.  However, depending on the type of clients they advise and funds they manage, advisers may also be required to register with other regulatory regimes.

Brokers and dealers are not considered to be investment advisers under the Advisers Act, provided that the investment advice that they provide is “solely incidental” to the brokerage services provided. (see Who is Excluded from the Investment Adviser Definition?) Under this rule, broker-dealers are not required to register with the United States Securities and Exchange Commission (SEC).  However, investment advisers who engage in the brokerage business are required to register as broker-dealers under the Securities Exchange Act of 1934.  To determine whether an investment adviser has engaged in the brokerage business, and therefore is required to register as a broker-dealer, the SEC will look to several factors, including whether the adviser held client funds or securities, received compensation, or solicited clients.

For municipal advisors, investment advisors who are registered with the SEC may not be required to also register as a municipal advisor, provided that certain conditions are met.  Under the Securities Exchange Act of 1934, Section 15B(e)(4)(C), a registered investment adviser and affiliated advisers are excluded from the definition of “municipal advisors.”  This rule applies to the extent that an adviser is providing investment advice in his or her capacity as a registered investment adviser, but only in a limited manner as it relates to municipal securities.  For example, an adviser could counsel a client on how to invest the proceeds of a municipal securities offering.  However, the adviser could not advise a client on whether to issue municipal securities or how to structure or implement municipal securities offerings.  If a registered investment adviser were to offer such advice, then he or she would also be required to register as a municipal advisor.

In addition to the SEC, there are other regulatory regimes that registered investment advisers may be required to registered with, including with the United States Commodity Futures Trading Commission.