Series 65 Investment Adviser Registration Practice Questions
Question 1
Meridian Advisory has its only office in State A, manages $72 million in client assets, and has 40 retail clients, all residing in State A. With which regulator must Meridian register as an investment adviser?
- A. The SEC, because its AUM exceeds the $50 million federal threshold and SEC registration pre-empts state registration
- B. State A's securities Administrator, because its AUM is below the $100 million federal threshold and it maintains a place of business there
- C. Both the SEC and State A concurrently, because an adviser with a place of business in a state must register at both levels, with the SEC reviewing filings first
- D. No registration is required, because all of its clients reside in State A and the adviser has no clients in other states
Show answer and explanation
Correct answer: B. State A's securities Administrator, because its AUM is below the $100 million federal threshold and it maintains a place of business there
Advisers with AUM under $100 million (absent an SEC-mandated exception) register at the state level where they maintain a place of business. Meridian is well under $100M, so State A registration governs; SEC registration only becomes mandatory generally at $100M+ (with a buffer to $110M). Choice A wrongly imports a $50M number that isn't a real registration threshold; C ignores that dual registration isn't how the demarcation works; D ignores that having clients and a place of business in-state triggers registration.
- A. The federal registration threshold is generally around $100 million, not $50 million, so this AUM does not trigger SEC registration.
- B. With AUM below the roughly $100 million federal threshold and a place of business in State A, Meridian is a state-regulated adviser and registers with State A's Administrator.
- C. Concurrent SEC and state registration, with the SEC reviewing first, isn't required for an adviser below the federal AUM threshold; it registers with the state alone.
- D. Having all clients in-state does not exempt an adviser with a place of business there from state registration.
Question 2
A growing advisory firm approaches the state-to-SEC registration transition range. What compliance decision is required?
- A. Choose either regulator at will based on fee levels, since eligibility is not tied to assets
- B. Apply the relevant eligibility thresholds, buffer rules and exceptions rather than assuming one universal switch point
- C. Decide by headcount, since the number of employees drives the transition to federal registration
- D. Delay the assets calculation until the firm changes its name or ownership, when eligibility is reassessed
Show answer and explanation
Correct answer: B. Apply the relevant eligibility thresholds, buffer rules and exceptions rather than assuming one universal switch point
Eligibility turns on regulatory assets under management measured against the statutory thresholds, including the buffer range and applicable exemptions. There is no single switch point to assume.
- A. Registration authority depends on regulatory assets under management, not on a free choice or fees.
- B. The firm must apply the thresholds, buffer rules and exceptions to its regulatory assets under management.
- C. Employee count does not determine state versus SEC registration.
- D. Assets under management are evaluated on the required annual basis, not when the firm changes its name or ownership.
Question 3
Absent an order of denial, suspension, or postponement by the Administrator, when does a securities registration filed under the Uniform Securities Act generally become effective?
- A. Immediately upon filing
- B. Noon of the 30th day after filing
- C. Noon of the 45th day after filing
- D. Noon of the 60th day after filing
Show answer and explanation
Correct answer: C. Noon of the 45th day after filing
Under Section 303 of the Uniform Securities Act, absent a denial, suspension, or postponement order, a registration becomes effective at noon of the 45th day after a complete application is filed with the Administrator. This default effective date applies to broker-dealers, agents, investment advisers, and IARs alike.
- A. Registration is not effective immediately upon filing; it becomes effective only after the statutory waiting period runs (absent a stop order).
- B. 30 days is not the standard effective period under the Uniform Securities Act's registration provisions.
- C. Under the Uniform Securities Act, absent a denial, suspension, or postponement order, registration generally becomes effective at noon of the 45th day after filing — the correct answer.
- D. 60 days overstates the standard waiting period specified under the Act.
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A brokerage representative gives occasional asset-allocation comments as part of executing securities transactions, but the brokerage firm starts charging a separate ongoing advisory fee for individualized portfolio recommendations. What is the key issue?
- A. Advice given by a registered broker-dealer is excluded from investment-adviser law as long as the firm is registered as a broker-dealer, even when it charges a separate advisory fee.
- B. A securities firm that charges a separate advisory fee must first surrender its broker-dealer registration and cannot continue executing client trades.
- C. Advice delivered by email is outside investment-adviser regulation because the rules apply to in-person advice rather than electronic communications.
- D. Special compensation and advisory business can remove the broker-dealer's solely-incidental exclusion, requiring investment-adviser analysis.
Show answer and explanation
Correct answer: D. Special compensation and advisory business can remove the broker-dealer's solely-incidental exclusion, requiring investment-adviser analysis.
The broker-dealer exclusion applies only when advice is solely incidental to brokerage and no special compensation is received for it. A separate ongoing advisory fee can take the firm outside the exclusion.
- A. The exclusion is conditional, and special compensation for advice can defeat it regardless of registration status.
- B. A firm can be dually registered and offer both brokerage and advisory services; it need not give up its broker-dealer registration.
- C. Advice is regulated by its content and compensation, not the delivery medium.
- D. Correct: special compensation and a distinct advisory business remove the incidental-advice exclusion.