The advisor manages the assets of individuals and institutional investors, and performs the fiduciary duty to their clients of choosing the best possible investments for them, and providing full disclosure of transactions and ensuing fees. The investments may be in the form of stocks, mutual funds, hedge funds, or a combination of one or more forms of investment.
Registration of an investment advice body can be done in three ways, depending upon the sum of market value of assets being managed by that firm. This sum, commonly known as Assets Under Management (AUM), forms the basic registration criteria for the process of registration. While the exact definition of AUM is not clear, for registration purposes, the definition given under Form ADV Part 1, of the SEC, is used.
To register your investment advice firm with the SEC, you have to first determine the amount of AUM that your firm is managing. The amounts can be divided into 3 categories:
1. Up to $25 million
2. between $25 million and $30 million
3. above $30 million
Up to $25 Million
If your investment advice firm is not currently managing a sum of $25 million and does not anticipate managing $25 million within 120 days of registration, the firm has to register itself with the state in which it is operating.
$25 to $30 Million
If your AUM ranges between $25 and $30 million, you have the choice of either registering with the SEC, or with the state in which your firm is operating.
Above $30 Million
If your AUM is over $30 million, then the registration has to be done with the SEC.
Becoming an Investment Advisor
The first step is to figure out your AUM and the jurisdiction under which your investment advice firm falls. The firm