Snowbird exemption
Also known as: snowbird exclusion, snowbird rule
The snowbird exemption lets a broker-dealer or investment adviser with no office in a state avoid registering there when its only business in that state is with existing clients who live elsewhere and are just temporarily present, such as seasonal visitors.
The snowbird exemption is a state registration exclusion under the Uniform Securities Act. A firm normally must register in every state where it has a place of business or where it solicits clients. The snowbird provision recognizes that a client who winters in Florida or Arizona has not really become a new state's investor, so the firm serving that client does not need a new registration.
Two conditions must both be met. First, the firm must have no place of business in the state. Second, its only dealings in that state must be with existing clients who are not residents of the state and are only temporarily located there. If either condition fails — the firm opens a branch office, or it starts soliciting local residents — the exclusion disappears and registration is required.
The nickname comes from retirees who migrate south for the winter. Suppose a broker-dealer registered only in Michigan has a longtime Michigan client who spends January through March in Arizona. Trades placed for that client while she is in Arizona do not force the firm to register in Arizona. But if the firm used the trip to solicit her Arizona neighbors, it would need to register in Arizona.
The snowbird exemption appears on the Series 63, Series 65, and Series 66 exams, usually alongside the other exclusions from the state definitions of broker-dealer, agent, and investment adviser, and alongside the de minimis exemption. Test questions typically present a fact pattern and ask whether registration is required, so the trick is checking both conditions rather than just one.
Key takeaways
- The snowbird exemption excuses a firm from state registration when it has no place of business in the state and serves only existing non-resident clients temporarily present there.
- Both conditions must be satisfied — no office in the state and no new local clients.
- Soliciting residents of the state, or opening an office there, immediately triggers a registration requirement.
- It is tested on the Series 63, 65, and 66 exams alongside the de minimis exemption and other registration exclusions.