In a previous article, we covered how to register with the SEC, but in this article, we’ll explain what you need to register at a state level. In this particular instance, we’ll look at California.

 

Who is required to register in the state of California?

Investment Advisors who serve more than 5 California residents and manage less than $100 million in AUM need to register with the state. If the advisor manages more than $100 million in AUM, they must also register with the SEC. Finally, if investment advisors market their services in California, they must also register with the state. 



Key Takeaway from this article:

  • Hire a compliance consultant to help you with your registrations and make your life easier. If that’s not possible, this article covers the financial statement and document requirements you must provide to the state.

  • You must meet the licensing requirements or designations: Series 65, Series 66 & Series 7 combined, or have CFP, CFA, CIC, CHFC, PFS designation.


Financial statement requirements for RIAs

State requirements will vary slightly among states. In California, the state requires the following to be submitted:

  • California Customer Authorization of Disclosure of Financial Records PDF 

  • RIAs with discretion or custody must submit the California verification Form PDF, a balance sheet, the CA Minimum Financial Requirements Worksheet related to the balance sheet, and the California Customer Authorization of Disclosure of Financial Records PDF.


Pass Series 65, Series 66 & 7 combined, or have the appropriate designation

These licenses and designations enable financial professionals to become licensed advisors or planners. So, regardless of what state you're trying to register in, you must successfully obtain one of the following:

  • Series 65
  • Series 66 and 7 combined
  • Or have CFP, CFA, CIC, ChFC, or PFS designation

the ultimate breakaway guide for financial advisorsForms & Policies required by California 

  • Payment of all State of California registration filing fees

  • FINRA Entitlement paperwork

    Advisors must apply to FINRA for an account to their WebCRD/IARD online system to file a registered investment adviser application with California.

    While RIAs are not regulated or supervised by FINRA, California uses FINRA’s WebCRD/IARD system to process applications.

  • Form ADV 1 (online)

    Part 1 of the Form ADV covers details about the advisor's business and ownership structure and any affiliations related to business practices, clients, and additional information about employees.   

    In other words, part one discloses information about how the RIA conducts business. Also, since Part 1 is done online, it’s used to upload ADV Part 2A and Part 2B.

  • Form ADV 2A & 2B (paper and online)

    Part 2A & 2B is your RIA’s brochure. Here you will disclose a description of your services, fees you charge, disciplinary disclosures, and other details of your RIA. It includes employment, education, conflicts of interest, and disciplinary information. 

    These brochures are given to all clients: prospective and current. California requires that this portion of the ADV be written in plain English so your clients can easily understand it.

  • Client Advisory Contract

    This contract must meet the regulatory authority standards in California. Essentially, this outlines the relationship between you and your clients. 

  • Policies and Procedures Manual

    This manual includes all your RIA’s internal policies on all parts of your business. From training new advisors to handling clients' complaints–every policy and procedure your RIA adheres to must be included and explained in this manual.

    This manual must also include your RIA’s Information Technology Policy, Business Continuity Plan, Anti-insider Trading Policy, and Anti-money Laundering Policy.

  • Privacy Policy Statement

    Your RIA’s Privacy Policy is given to your clients at the beginning of your agreement, and must be shared on an ongoing basis, annually. It must explain how the firm stores and handles client information.

    Your policy should be tailored to your RIA’s specifications and must meet the State of California’s compliance requirements. 

  • Code of Ethics

    The state requires this to ensure you meet the standards of the State of California.


If you like to learn more about starting your RIA, check out this helpful RIA launch kit our team has put together. 

With Altruist, you can seamlessly transition to a custodial platform built for RIAs. Simplify your tech stack, reduce overhead, delight your clients, and grow your business. True independence awaits. Book a call with one of our transitional specialists now.

*Altruist and its affiliates do not provide legal advice, so it’s important to check with a qualified professional for each state’s registration requirements.

Step-by-step advice on forming your RIA
Altruist’s COO guides you toward a successful RIA launch.

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