Registered investment adviser (RIA)

Registration as an investment adviser creates a critical regulatory framework for hedge fund managers. This registration fundamentally shapes how they operate and interact with clients. Before the of 2010, many hedge fund managers used the to avoid registration. However, regulatory changes eliminated this exemption for most substantial managers. This change fundamentally altered the regulatory landscape.

Investment advisers with $100 million or more in generally must register with the SEC. Those managing between $25 million and $100 million typically register with state regulators instead. The Dodd-Frank Act created three limited exemptions from SEC registration. These exemptions allow certain managers to avoid federal registration even above the $100 million threshold:

Private Fund Adviser Exemption allows advisers who manage only private funds with less than $150 million in regulatory assets under management in the United States to operate as . This means they avoid full registration requirements.

Venture Capital Fund Exemption allows advisers who manage only venture capital funds to remain exempt from SEC registration. This exemption applies regardless of how much money they manage.

Foreign Advisers Exemption provides an exemption for with minimal U.S. presence. To qualify, they must have fewer than 15 U.S. clients and investors and less than $25 million in U.S. assets under management.

Mid-sized advisers with assets between $25-100 million may qualify for SEC registration under specific circumstances. They can register with the SEC if their home state does not require registration or examination, or if they would be required to register in 15 or more states.

Investment advisers act as to their clients. This means they carry and that require them to act in clients' best interests. They must also disclose all material conflicts of interest. The SEC's 2019 clarified these requirements. The duty of care requires advisers to provide investment advice in the best interest of clients based on their objectives. The duty of loyalty requires advisers to eliminate or fully disclose conflicts of interest so clients can give .

The fiduciary standard applies whether advisers act with (making investment decisions for clients) or in a (providing advice only). These duties include seeking for trades, providing ongoing monitoring of investments, disclosing material conflicts, fairly allocating investment opportunities among clients, and ensuring fee reasonableness.

RIAs must establish comprehensive compliance programs under . This includes designating a who is a supervised person with sufficient familiarity with legal requirements. The officer must have adequate resources and authority to administer the compliance program effectively.

Written and procedures must be reasonably designed to prevent violations. They must address thirteen key areas including safeguarding client assets, accurate recordkeeping, marketing policies, valuation processes, confidentiality protection, business continuity plans, , cybersecurity, and client privacy protection.

Additional core requirements include several important obligations. RIAs must conduct annual written reviews to assess policy adequacy and effectiveness. They must establish under Rule 204A-1 with personal trading restrictions for supervised persons. RIAs must maintain detailed books and records under Rule 204-2 covering all aspects of advisory operations. They must file and update Parts 1 and 2 with business information and client disclosures. When authorized, they must implement . Finally, they must comply with custody requirements including annual surprise examinations when applicable.

The SEC's Marketing Rule took full effect in November 2022. This rule consolidates previous advertising and cash solicitation rules under a single framework governing investment adviser communications. The rule establishes comprehensive requirements for , testimonials, endorsements, and third-party ratings. It also provides more flexibility for institutional communications.

RIAs must maintain detailed records of all marketing materials. They must ensure compliance with performance presentation standards, including requirements to show alongside . They must also provide appropriate context for presentations.

RIAs face numerous operational restrictions. These include limitations on and cross trades requiring client consent. They face under Rule 206(4)-5 that restrict political contributions. There are limits on gifts and entertainment, and comprehensive disclosure requirements for outside business activities and potential conflicts.

requirements have gained increased importance, particularly following the COVID-19 pandemic. RIAs must address operational disruptions and remote work considerations. RIAs must also establish policies for and best execution when using client commissions for research and brokerage services.

The SEC conducts regular examinations of RIAs. These examinations focus on several key areas including conflicts of interest, compliance program effectiveness, , , performance fee calculations, and cybersecurity preparedness. The Division of Examinations regularly publishes highlighting common deficiencies and enforcement priorities. Compliance with these focus areas is essential for avoiding regulatory action and maintaining good standing as a registered adviser.

The regulatory environment for RIAs continues to evolve. In June 2024, the vacated the SEC's . These rules would have imposed additional quarterly reporting, audit requirements, and restrictions on preferential treatment for private fund advisers. This decision significantly reduced the additional compliance burden that had been scheduled to take effect in September 2024.

Acting SEC Chairman Mark Uyeda signaled in April 2025 that the Commission may revisit the current $100 million threshold for federal registration. This could potentially reduce the number of advisers required to register with the SEC. However, any changes would require formal rulemaking.