The $100 Million and $110 Million Thresholds
The transition from state to SEC registration is one of the most significant regulatory milestones in an advisory firm's growth trajectory. Under Section 203A of the Investment Advisers Act, an adviser with regulatory assets under management (RAUM) between $100 million and $110 million may register with either its home state or the SEC, creating a buffer zone that prevents firms from having to switch registrations due to normal market fluctuations. A state-registered adviser whose annual updating amendment reports $110 million or more must apply for SEC registration within 90 days of filing that amendment, and it then withdraws its state registration(s).
The $90 Million Withdrawal Threshold and the $100–$110 Million Buffer
The buffer zone between $100 million and $110 million serves a practical purpose but requires careful monitoring. An adviser that reaches $100 million in RAUM has the option to apply for SEC registration, but it is not required to do so until it crosses the $110 million threshold. Conversely, an SEC-registered adviser whose annual updating amendment reports RAUM below $90 million must file Form ADV-W to withdraw its SEC registration within 180 days of its fiscal year end and register with the state(s), unless another basis for SEC registration applies, such as advising a registered investment company or having its principal office in New York with at least $25 million in RAUM.
Filing Requirements for SEC Registration
The filing requirements for transitioning to SEC registration involve several simultaneous actions. The adviser must file an initial Form ADV with the SEC through the IARD system, designating the SEC as its regulator. At the same time, or shortly thereafter, the adviser must file Form ADV-W to withdraw its state registration(s). An adviser whose annual updating amendment reports $110 million or more must apply for SEC registration within 90 days of filing that amendment. Mid-year transitions are also possible if the adviser determines that its RAUM has risen above the threshold and wishes to register sooner.
Transition Planning and Timeline
The transition timeline requires careful planning that should begin well before the firm actually crosses the threshold. From a practical standpoint, advisers should begin preparing for SEC registration when their RAUM approaches $85 million to $90 million. This preparation includes reviewing and updating the firm's compliance manual to address SEC-specific requirements, such as the custody rule (Rule 206(4)-2), proxy voting policies (Rule 206(4)-6), and the code of ethics rule (Rule 204A-1). While many of these requirements have state-level analogs, the SEC's specific standards and examination expectations often differ in important ways.
The Dual-Registration Period
The dual-registration period is an interim phase during which an adviser may be registered with both its state(s) and the SEC. This period should be as brief as practically possible, as dual registration can create confusion about which regulator has examination authority and which set of rules takes precedence. During this period, the adviser must ensure that it is meeting the compliance requirements of both the state(s) and the SEC. The Form ADV-W withdrawal from state registration should be filed promptly after the SEC registration is effective to minimize the duration of dual registration.
Form ADV Updates and Amendments
Form ADV changes associated with the transition are more extensive than a simple regulator designation switch. The adviser will need to update its Part 1A to reflect SEC registration, including updating Items 2 (SEC/state registration status), 5 (information about advisory activities), and 11 (disciplinary information, if applicable). Part 2A (the firm brochure) and Part 2B (brochure supplements) should be thoroughly reviewed and updated to reflect any new regulatory obligations, updated risk disclosures, and changes to the firm's compliance procedures that result from the transition.
Client Notification
Client notification is an important but often underestimated component of the transition process. While there is no specific regulatory requirement to notify clients that the firm has changed from state to SEC registration, best practices dictate that clients should be informed of the change, particularly because the firm's Part 2A brochure will be updated and must be delivered. Some firms use the transition as an opportunity to communicate more broadly about the firm's growth and the enhanced regulatory oversight that comes with SEC registration.
Compliance Approved Support
Compliance Approved supports advisers through the state-to-SEC transition with a regulatory calendar for filing deadlines, Form ADV amendment tracking, and policy coverage checks that compare a firm's policies against the requirements for its registration type. Those checks help firms identify SEC-specific requirements they may not have addressed under state registration; the firm still monitors its own RAUM against the thresholds.