Quantum Prosperity Consortium Investment Education Foundation: US RIA license

What is an RIA license?

An RIA license is a certification regulated by the U.S. Securities and Exchange Commission (SEC) or state securities departments. Companies and individuals who are engaged in providing investment advisory services need to apply for this license. In the U.S., only Registered Investment Advisers (RIA) are qualified to offer investment analysis and advice on securities products to investors and provide regular investment reports. Furthermore, only institutions with this certification can charge management fees and assume fiduciary responsibility for their clients.

Fund managers of institutions applying to become registered investment advisers typically must pass the relevant licensing exam, namely the Series 65 – Uniform Investment Adviser Law Examination. In most U.S. states, the Series 65 exam can be waived if the manager holds financial certifications such as the Chartered Financial Analyst (CFA) or Personal Financial Specialist (PFS). In addition to this, the applying institution must manage assets worth over $25 million. Companies managing assets between $25 million and $100 million can register with state securities departments, while those managing over $100 million must register with the SEC.

Foreign institutions can also apply for an RIA license. According to SEC regulations, firms with their principal place of business outside the U.S. can register with the SEC, but they "must" apply for an RIA license if they intend to provide investment advice to U.S. clients.

What are the SEC’s regulatory requirements for RIAs?

The SEC mandates that registered investment advisers must act in the best interests of their clients and avoid deceitful practices. They must maintain transparency, fully disclose information, and provide unbiased investment advice suitable for their clients.

Asset management must be conducted through third-party custodians, and clients must be notified and give approval for each investment transaction. This "fiduciary responsibility" is imposed on investment advisers by relevant legislation, ensuring that the interests of clients working with registered investment advisers are effectively protected.

Additionally, the SEC periodically conducts regulatory examinations of RIAs. These inspections focus on the valuation of investment portfolios, performance, and asset review; the effectiveness and legality of compliance policies and procedures; and the publication of inspection results.