Federal covered adviser
Also known as: federal covered investment adviser, SEC-registered investment adviser
A federal covered adviser is an investment adviser that registers with the SEC rather than with state securities administrators, typically because it manages $100 million or more in client assets.
A federal covered adviser is an investment adviser registered with the SEC instead of with individual state securities administrators. The term comes from the National Securities Markets Improvement Act of 1996 (NSMIA), which divided regulatory authority: larger advisers register federally, while smaller advisers register with the states where they do business.
The main trigger for federal registration is assets under management (AUM). Advisers generally must register with the SEC once their AUM reaches $110 million, and may choose SEC registration starting at $100 million. Certain advisers are federal covered regardless of size — for example, advisers to registered investment companies. Below the threshold, advisers register at the state level instead.
Federal coverage matters because it preempts most state-level regulation. A state cannot require a federal covered adviser to register in that state; at most, the state can require a notice filing — a copy of the adviser's SEC paperwork plus a fee. States do retain antifraud authority over any adviser operating within their borders, and the adviser's individual representatives (IARs) with a place of business in the state must still register with the state.
The Series 63, Series 65, and Series 66 exams test this distinction heavily. Know the AUM thresholds, which advisers are automatically federal covered, what a notice filing is, and the key trap: even when the advisory firm is federal covered, its investment adviser representatives register with the states.
Key takeaways
- Federal covered advisers register with the SEC; smaller advisers register with state securities administrators.
- SEC registration is generally required at $110 million in AUM and available starting at $100 million.
- States cannot require federal covered advisers to register but may require a notice filing and a fee.
- States keep antifraud jurisdiction over all advisers doing business in the state.
- Investment adviser representatives of a federal covered adviser still register at the state level.