If you are (i) in the business (ii) of giving investment advice (iii) for compensation, you meet the definition of an “investment adviser,” so if you cannot find an exemption from registration as such, you must register as an investment adviser, obtain all the relevant licenses, and comply with all the other requirements of RIAs.
If you meet the above definition and you have less than $100 million in assets under management ($25 million if you are in New York), you are regulated by the state or states where you either have a place of business or more than 5 clients. If you have over $100 million (or $25 million if you are in New York), you must register or look for an exemption at the federal level, not at the state level. If you are regulated by the state(s), the following table is a resource for determining (i) whether there are any exemptions in your state; and (ii) where to find more information.
The states basically fall into one of three categories:
- No Exemptions. If you are an IA, you must register as such;
- ERA-type exemption. While you are “Exempt,” you still must file truncated Form ADV with the state; and
- Exempt. As long as you qualify for the exemption, the exemption is self-executing, which means you don’t need permission and you don’t need to file.
Keep in mind that while I try to keep the information up to date, it may not be. If you find anything that is no longer accurate, please comment below or reach out to me.
| State | Rule | Source |
|---|---|---|
| Alabama | Investment Advisers in Alabama are required to register with the state by filing Form ADV with the Financial Industry Regulatory Authority. Alabama does not have an exemption, so an adviser with either a place of business in Alabama or more than 5 clients who are residents of Alabama must file in the state. | Code Section |
| Alaska | Alaska does not have any relevant exemptions for private fund advisers. Advisers must register with the state unless they have no place of business in the state and fewer than 6 clients in the state or the adviser is federally registered. | Code |
| Arizona | Advisers are not required to be licensed or make notice filing if the adviser (1) advises private funds and (2) satisfies each of the following:The adviser and its affiliates are not subject to a disqualifying event that would disqualify an issuer under SEC rule 262 of Reg A;If the adviser advises funds other than venture capital funds, the adviser files truncated Form ADV and pays the relevant fees. | Code |
| Arkansas | By Rule, Arkansas exempts certain private fund adviser and venture capital fund advisers. Advisers that qualify for these exemptions must file for truncated form ADV. | Rule 302.02(h) |
| California | California private fund advisers may rely on a private fund exemption, which is a better exemption for advisers to “Venture Capital Funds.” California’s definition of venture capital fund is broader than the federal definition. Other private fund advisers are exempt from some of the provisions, but they have additional requirements they must follow. | Code |
| Colorado | Colorado passed, by rule, an exemption for both private fund advisers and venture capital fund advisers. VC fund advisers must file truncated Form ADV. Other private fund advisers have additional requirements such as, if the fund is a 3(c)(1) fund, the investors in the fund are “qualified clients,” additional disclosure is made to the investors, and the adviser obtains audited financial statements annually. | Rule |
| Connecticut | Any adviser that meets the federal definition of a venture capital fund adviser is exempt under CT law if the adviser files truncated Form ADV. | Rule |
| District of Columbia | The District of Columbia exempts venture capital fund advisers if they file truncated Form ADV. Otherwise, there is no exemption for private fund advisers. | Rule |
| Delaware | Delaware exempts investment advisers who provides advice solely to one or more qualifying private funds, other than a private fund that qualifies for the exclusion from the definition of “investment company” provided in section 3(c)(1) of the Investment Company Act of 1940, 15 U.S.C. §80a-3(c)(1). The adviser cannot be subject to disqualification and the adviser must file truncated Form ADV. | Rule |
| Florida | Florida exempts from the definition of investment adviser any adviser who (1) doesn’t hold itself out as an investment adviser; and (2) has, in the past 12 months, fewer than 16 clients in the state of Florida. States can increase the “De Minimis Exemption,” but they cannot make the requirement more restrictive. Here, FL is more lenient than most states. | Code |
| Georgia | Georgia exempts from the definition of investment adviser an adviser who, during the preceding 12 months, has had fewer than 6 clients in the state. | Rule 590-4-4-.13 |
| Hawaii | Hawaii does not have a private fund or venture capital fund exemption. Advisers that (1) are not federally covered, (2) have a place of business in Hawaii, or (3) have more than 5 clients in the state must register as an investment adviser in the state. | Code |
| Idaho | Idaho does not have an exemption for private fund or venture capital fund advisers. Advisers that are not federally covered must file as investment advisers with the state. | Code |
| Illinois | Illinois exempts from registration investment advisers who, during the preceding 12 months, have had five or fewer clients in the state. There is no specific exemption for private fund advisers or venture capital fund advisers. Typically, each fund is a client, not each investor, so many private fund advisers would qualify for the exemption in the state. | Rule |
| Indiana | Indiana’s Securities Commissioner will not institute enforcement action against a person for failing to register as an investment adviser if the person:maintains a place of business in Indiana; has had 5 or fewer clients in the preceding 12 months; does not hold itself out to the public as an investment adviser; and advises only private funds and is not subject to disqualification.If the private funds are not venture capital funds, the adviser must make additional disclosures to the investors and obtain audited financial statements for each 3(c)(1) fund, which must be provided to the investors annually. | Order |
| Iowa | Iowa has a private fund exemption and a venture capital fund exemption. Each must file truncated Form ADV. Advisers of non-venture capital 3(c)(1) funds must only advise funds whose owners are “qualified clients,” must make additional disclosures to the investors, and must obtain annual audited financial statements for the funds. | Iowa Admin. Code 191-50.45(502) |
| Kansas | Kansas exempts investments advisers that:maintains its principal place of business in Kansas; provides investment advise to fewer than 15 clients; does not hold itself out as an investment adviser; and does not advise any registered investment company. Advisers must file truncated form ADV. | Rule 81-14-11 |
| Kentucky | Kentucky does not have an exemption for private fund advisers or venture capital fund advisers. Advisers with a place of business in or that have more than 5 clients in Kentucky must register as an investment adviser if the adviser is not registered with the SEC. | Overview |
| Louisiana | Louisiana exempts an adviser who, during any twelve month period, has had fewer than 15 clients in the state and does not hold itself out to the public as an investment adviser. | Section 7(f) |
| Maine | Maine exempts from registration venture capital fund advisers and private fund adviser if the adviser has a place of business in the state and the adviser does not hold itself out to the public as an investment adviser. Advisers that adviser 3(c)(1) funds that are not venture capital funds must provide additional disclosure to the investors and obtain annual audited financial statements. These exempt advisers must file truncated Form ADV. | Order |
| Maryland | Maryland exempts advisers if they are not disqualified and solely adviser private funds. If the private fund is a 3(c)(1) fund and not a venture capital fund, the adviser must make additional disclosures to the investors and provide audited financial statements. Exempt advisers must file truncated Form ADV. | Order |
| Massachusetts | Massachusetts exempts private fund advisers and venture capital fund advisers. Advisers must file truncated Form ADV. Advisers of 3(c)(1) funds that are not venture capital funds must provide additional disclosure and audited annual financial statements to all investors. | Rule 12.205(2)(c) |
| Michigan | Michigan will have a private fund adviser exemption effective in January 2020. | TBD |
| Minnesota | Minnesota exempts private fund advisers that are not subject to disqualification. The adviser must file truncated Form ADV. Advisers that advise 3(c)(1) funds that are not venture capital funds have additional disclosure and audit requirements. | Code 80A.58(b)-(c) |
| Mississippi | Mississippi does not have a private fund adviser exemption or a venture capital fund exemption. This means that an adviser with either a place of business in the state or more than 5 clients must register as an investment adviser. | Code Overview |
| Missouri | Missouri exempts investment advisers that advise private funds. Private fund advisers are exempt in Missouri if they are not subject to disqualification. The adviser must file truncated Form ADV. If the private fund adviser advises any 3(c)(1) funds that are not venture capital funds, the adviser must reasonably believe that all the beneficial owners are either (1) an “accredited investor” or (2) is a qualified client. Missouri, however, excludes an person from the definition of an “accredited investor” if the person would only be accredited based on his or her income (or joint income with a spouse). | Title 15, 30-51.180 |
| Montana | Montana does not have an exemption for private fund advisers or venture capital fund advisers. This means that advisers that either (1) have a place of business in the state or (2) have more than 5 clients who are residents of the state must register in the state of Montana. | Code |
| Nebraska | Nebraska exempts from registration private fund advisers that are not subject to disqualification and that file truncated Form ADV. Advisers to 3(c)(1) funds that are not venture capital funds have additional disclosure requirements and must obtain annual audited financial statements for each 3(c)(1) fund that is not a venture capital fund. | Rule Chapter 42.003 |
| Nevada | Nevada exempts advisers if their only Nevada clients are “accredited investors” as defined in Rule 501, so most private fund and venture capital fund advisers are exempt from registration in Nevada. | Nevada exempts “institutional buyers,” which means “accredited investors.” |
| New Hampshire | New Hampshire exempts any investment advisers who solely advises “venture capital funds.” The adviser must file truncated Form ADV. | Order |
| New Jersey | New Jersey exempts advisers that have no more than 5 New Jersey clients, regardless of whether the adviser has a place of business in the state or not. Typically, each fund is a client, so advisers with 5 or fewer funds as clients will not be required to register. | 49:3-56(g) |
| New Mexico | New Mexico, by order, exempts advisers that are not disqualified by the SEC and that solely advise private funds. If the adviser advises 3(c)(1) funds that are not venture capital funds, the adviser must comply with additional disclosure requirements and the fund must obtain annual audited financial statements. Exempt advisers must file truncated Form ADV. | Order |
| New York | New York exempts advisers that have sold, during the previous 12 months, advisory services to fewer than 6 persons residing in the state. Fund advisers with 5 or fewer funds as clients (that were signed within the preceding 12 months) are exempt from registration. No truncated form ADV is required. | Code |
| North Carolina | North Carolina exempts investment advisers from the registration requirement if, during the preceding 12 months, the adviser has had fewer than 15 clients and the adviser does not hold itself out to the public as an investment adviser. | Rule |
| North Dakota | North Dakota does not exempt private fund or venture capital fund advisers. Advisers with either a place of business in North Dakota or more than five clients in the state must register as an investment adviser in the state. | Code |
| Ohio | Ohio exempts advisers who, during the preceding 12 months: has had fewer than 15 clients; does not hold itself out to the public as an investment adviser; and only has “accredited investors” as clients, as defined in Rule 501 of Regulation D. | Source |
| Oklahoma | Oklahoma exempts from the registration requirement advisers that solely advise private funds. This will include venture capital funds. Advisers of 3(c)(1) funds that are not venture capital funds have no additional requirements. Private fund advisers in Oklahoma must file truncated Form ADV and they cannot be disqualified. | Source |
| Oregon | Oregon exempts advisers who conduct no public advertising or general solicitation in the state and who’s only clients are “accredited investors.” | Source |
| Pennsylvania | Pennsylvania exempts from registration advisers that have a place of business in the state that have 5 or fewer total clients, either within or without the state. | Source |
| Rhode Island | Rhode Island exempts from registration advisers that solely adviser private funds. Advisers that advise 3(c)(1) funds that are not venture capital funds have additional disclosure requirements to the investors and must provide investors of those funds annual audited financial statements. | Code |
| South Carolina | South Carolina does not exempt private fund advisers. Private fund and venture capital fund adviser must register with and comply with the laws of South Carolina unless the adviser is federally covered. | Source |
| South Dakota | South Dakota exempts from registration advisers that solely adviser private funds or venture capital funds as defined federally under Sections 203(l) or 203(m). | Source |
| Tennessee | Tennessee exempts advisers who, during the preceding 12 months, has had fewer than 15 clients and who doesn’t hold itself out to the public as an investment adviser. | Source |
| Texas | Texas exempts private fund advisers subject to the following: (i) The private fund adviser files truncated Form ADV; (ii) The adviser is not subject to disqualification; (iii) Advisers to 3(c)(1) funds that are not “private equity funds,” “real estate funds,” or “venture capital funds” must comply with additional disclosure and audit requirements. | Source |
| Utah | Utah exempts advisers that advise solely the following “Institutional Investors:” – non-individual “accredited investor,” which excludes an entity in which all equity owners are accredited – qualified institutional buyers; or – corporations, partnerships, trusts, estates, or other entities (excluding individuals) that have a net worth of not less than $10 million. Utah also exempts certain private fund advisers. The private funds must regularly make equity investments in companies and: – the private fund cannot grant investors the right or power to redeem their interests in the fund within two years of purchase; – at the time of investment, at least 80% of the fair market value of the investments made by the fund must possess all of the following characteristics: (i) the private fund (alone or with other similarly situated private funds) must have control of the target company; (ii) the private fund has access to material business, financial, and other corporate records of the target company; (iii) the private fund must have the right to elect one or more directors to the target company’s board of directors (or equivalent); and (iv) at the time of investment, the private fund’s securities must not have been listed on an exchange and must be highly iliquid so that no secondary market exists for the securities; and at the time of investment, at least 80% of the fair market value of the investments made by the private fund must possess at least two of the following characteristics: (i) the private fund’s interest must include common, preferred, convertible, or other direct or indirect equity stake; (ii) the private fund has the right, at the company’s expense, to have its equity interest registered for sale in a future public offering or otherwise redeemed upon the occurrence of given events or contingencies, or to otherwise obtain liquidity for the fund’s investment; (iii) the private fund has: (a) co-sale rights that allow the fund to sell its interests on the same terms as holders of a majority of the equity interests of the target; liquidation preferences with priority to holders of common equity; or (b) redemption rights to require the target company to repurchase or redeem the private fund’s equity at a price constituting a preference to that of the common equity holders; and the private fund has: (i) anti-dilution rights, materially limiting the power of the target company to issue new equity securities on terms that dilute the equity interest of the private fund without adjusting the investment rights of the fund; (ii) rights of first offer enabling the fund to acquire its pro rata share of newly issued securities; (iii) rights to materially preclude the company from issuing equity without first obtaining consent of the fund; or (iv) other rights superior to the rights of holders of common equity relating to cause or block an event or transaction that would provide full or partial liquidity to the fund The exemption in Utah is targeted at venture capital fund advisers, and advisers relying on the exemption must ensure they meet the requirements of the state. | Source |
| Vermont | Vermont exempts private fund and venture capital fund advisers. Advisers that advise 3(c)(1) funds that are not venture capital funds must comply with additional disclosure requirements and the fund must provide audited financial statements to investors. | Source |
| Virginia | Virginia exempts private fund and venture capital fund advisers. Advisers that advise 3(c)(1) funds that are not venture capital funds must comply with additional disclosure requirements and the fund must provide audited financial statements to investors. | Source |
| Washington | Private Fund Exemption Under Washington’s private fund exemption, Washington exempts advisers to 3(c)(7) funds, which includes funds that only sell interests to Qualified Purchasers. Private fund advisers must file truncated Form ADV. Source Venture Capital Fund Exemption Advisers to venture capital funds are exempt under Washington law from registration as an investment adviser. Venture Capital Fund advisers must file truncated Form ADV. Source | |
| West Virginia | West Virginia does not have a private fund or venture capital fund adviser registration, which means any adviser that either has a place of business or more than 5 clients in West Virginia must register as an investment adviser unless the adviser is a federally covered adviser. | Code |
| Wisconsin | Wisconsin exempts advisers that solely adviser private funds or venture capital funds. Advisers to 3(c)(1) funds that are not venture capital funds must provide additional disclosure to the investors in the funds and the funds must provide annual audited financial statements to the investors. Advisers must file truncated Form ADV. | Order |
| Wyoming | Wyoming incorporates, by reference, NASAA’s registration exemption for Investment Advisers to Private Funds Model Rule, adopted December 16, 2011. This means that private fund and venture capital advisers are exempt from registration. Advisers to 3(c)(1) funds that are not venture capital funds must comply with additional disclosure requirements and the funds must provide annual audited financial statements to the investors. Private fund and venture capital fund advisers must file truncated Form ADV. | Source |
Many states at least considered the model rules prepared by NASAA. This can be a good starting point and a great reference, but keep in mind that many states changed the model rules in significant ways, and, from an interpretation perspective, if they started with the model and changed it, they must have had a reason for doing so, so pay attention to those changes. A few states, like Utah, went a completely different route even though the is targeted at venture capital fund advisers.
