A full 30% of your Series 65 exam is dedicated to Laws, Regulations, and Ethics, with a heavy focus on Investment Adviser (IA) registration. Most candidates memorize the $100 million AUM number but fail to spot the specific facts that trigger the exceptions. The exam doesn't just test if you know the number; it tests if you can apply the buffer zone and de minimis rules under pressure, which is where most points are lost.
An Investment Adviser may register with the SEC at $100 million AUM and must register at $110 million AUM, becoming a federal covered adviser. An SEC-registered adviser whose AUM falls below $90 million must withdraw its federal registration and register with the appropriate state(s). Advisers with less than $100 million AUM register with the state unless a specific exemption applies.
Key facts
- Official Body: NASAA (North American Securities Administrators Association)
- Administrator: FINRA
- Scored Questions: 130
- Passing Score: 94 of 130 correct (~72.3%)
- Official Fee (2026): $187 (confirm with FINRA)
- Recommended Study: 70-100 hours
What Are the SEC vs. State IA Registration Thresholds?
The primary factor determining if an Investment Adviser (IA) registers with the SEC or a state is its Assets Under Management (AUM). This division of labor, established by the Investment Advisers Act of 1940 and refined by subsequent rules, places large, national firms under federal oversight and smaller firms under state jurisdiction.
The exam requires you to know three critical AUM numbers, not just one.
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- $110 Million AUM (The "Must Register" Trigger): Once a state-registered IA's AUM reaches $110 million, it must register with the SEC.
- $100 Million AUM (The "May Register" Option): A state-registered IA with AUM between $100 million and $110 million has the option to register with the SEC, but is not required to.
- $90 Million AUM (The "Must Switch Back" Trigger): If an SEC-registered IA's AUM falls below $90 million, it must withdraw its SEC registration and register with the appropriate state(s).
This $90M-$110M range creates a buffer zone designed to prevent firms from having to switch regulators due to normal market fluctuations. An adviser measures its AUM annually for its Form ADV update to determine if a switch is necessary.
> ⚠️ Exam trap: A question describes a state-registered IA whose AUM grows to $104 million. The tempting wrong answer is "The IA must register with the SEC." The correct answer is that the IA may register with the SEC but can remain state-registered. The mandatory switch doesn't happen until AUM hits $110 million. The exam preys on candidates who only remember the general "$100 million" figure.
Mastering these specific triggers is essential. You can sharpen your skills on these scenarios with VoraPrep's adaptive Series 65 practice questions, which are designed to test these exact judgment calls.
How Do State-Level Rules Like De Minimis Work?
While AUM is the main driver, state registration rules add another layer of complexity. The most frequently tested state-level concept is the de minimis exemption.
Under the Uniform Securities Act, an IA does not have to register in a particular state if two conditions are met:
- The IA has no place of business in that state.
- During any 12-month period, the IA has fewer than six retail clients who are residents of that state.
"Fewer than six" means five or fewer. On the sixth client, the exemption is lost, and the IA must register in that state (assuming no other exemption applies). This rule is applied on a state-by-state basis.
A critical distinction for the exam is the difference between state registration and federal notice filing.
- State-Registered IAs must register in every state where they have a place of business or where they exceed the de minimis client threshold.
- Federal Covered IAs (SEC-registered) do not register with states. Instead, they notice file by sending states a copy of their federal paperwork (Form ADV) and paying a fee. Notice filing is generally required in any state where the federal covered IA has a place of business or a certain number of clients.
And here's a rule that trips up many candidates: Investment Adviser Representatives (IARs)—the actual people giving advice—always register at the state level. Even if an IAR works for a massive, multi-billion-dollar SEC-registered firm, their personal registration is handled by the state securities authority.
The 7-Day Sprint to Master IA Registration
Use this intensive one-week plan to turn IA registration from a weakness into a strength.
Day 1: Master the AUM Buffer Zone
Focus exclusively on the three numbers: $90M, $100M, and $110M. Create a chart or flashcards. Write out the rule for each: "Below $90M = Must switch to state." "Between $100M and $110M = May switch to SEC." "At $110M = Must switch to SEC." Drill this until the "may vs. must" distinction is automatic.
Day 2: Deconstruct the De Minimis Exemption
Memorize the two-part test: (1) no office in the state AND (2) fewer than 6 clients in the state. Understand that this is an exemption from state registration only. It has no bearing on whether an IA must register with the SEC.
Day 3: Apply the Rules with a Worked Example
Walk through a multi-step scenario to see how the rules interact.
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> 💡 Worked example: > > "Momentum Advisory" is an IA firm based in Nevada. > > * Scenario A: Momentum has $80M AUM, all from Nevada residents. > * Decision: State-registered in Nevada. AUM is below the SEC threshold. > > * Scenario B: Momentum's AUM grows to $105M. > Decision: Remains state-registered in Nevada. They now may register with the SEC, but are not required* to until AUM hits $110M. > > * Scenario C: Momentum's AUM hits $112M. > Decision: Must* register with the SEC and withdraw its Nevada registration. > > * Scenario D: Now SEC-registered, Momentum's AUM drops to $98M due to market conditions. > * Decision: Remains SEC-registered. They are still within the buffer zone (above $90M). > > * Scenario E: Momentum's AUM drops further to $88M. > Decision: Must* withdraw its SEC registration and register with the state of Nevada. > > * Scenario F: Momentum is state-registered with $80M AUM. It has its office in Nevada, 4 clients in Utah, and 7 clients in Idaho. > Decision: Must register in Nevada (place of business), does not need to register in Utah (de minimis applies, 4 < 6), but must* register in Idaho (de minimis is exceeded, 7 > 5).
Day 4: Learn the Other Federal Covered Advisers
AUM isn't the only path to SEC registration. An IA must register with the SEC, regardless of AUM, if it provides advice to:
- A registered investment company (like a mutual fund).
- A business development company.
Additionally, pension consultants advising employee benefit plans with over $200 million in assets may register with the SEC.
Day 5: Review the "Who Is Not an IA?" Exclusions
The exam will try to trick you with entities that don't need to register at all. Review the key exclusions:
- L.A.T.E. Professionals: Lawyers, Accountants, Teachers, and Engineers whose advice is solely incidental to their practice and for which they receive no special compensation.
- Broker-Dealers: If their advice is solely incidental to their business and they receive no special compensation.
- Banks and bank holding companies.
- Publishers of bona fide, general circulation newspapers or magazines.
Day 6: Practice with a Focus on Distractors
Now, put it all together. The best way to prepare is with a large bank of 1,800+ practice questions with detailed explanations that mimic the exam's complexity. Focus on questions that combine AUM changes with multi-state clients and potential exemptions. Analyze every wrong answer to understand the logic.
Day 7: Run a Timed Testlet
Take 15-20 practice questions focused only on IA registration and related rules. Time yourself. This builds the mental muscle to quickly identify the relevant rule (AUM, de minimis, exclusion) and apply it correctly under exam pressure. If you get stuck, Vory, your AI tutor, is available 24/7 to break down the reasoning.
What Other Factors Determine IA Registration?
While AUM is the most common determinant, the exam tests several other scenarios that force or allow SEC registration. Understanding these edge cases is key to a passing score.
For example, an adviser operating primarily online (an "internet adviser") may be required to register with the SEC. Advisers to private funds may also fall under SEC jurisdiction depending on the fund's size and structure.
This table summarizes the key differences you must know.
| Feature | State-Registered IA | SEC-Registered (Federal Covered) IA |
|---|---|---|
| Primary Regulator | State securities administrator | U.S. Securities and Exchange Commission (SEC) |
| AUM Threshold | Generally < $100 million | Generally ≥ $100 million |
| Switching Rules | Must switch to SEC at $110M AUM | Must switch to state if AUM drops < $90M |
| Multi-State Activity | Registers in each state where it has an office or exceeds de minimis | Notice files in states where it has a place of business |
| IAR Registration | IARs must register with the state | IARs must still register with the state |
| Governing Law | Uniform Securities Act | Investment Advisers Act of 1940 |