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Federal Covered Advisor

What is 'Federal Covered Advisor'

An investment advisor in the United States that manages more than $25 million in assets for other investors or who is providing services in 30 or more states. Federal covered advisors are required to be registered and file annually with the U.S. Securities and Exchange Commission (SEC). In addition, federal covered advisors must meet specific regulations set forth by individual states.


Also called federal covered investment advisor.




Explaining 'Federal Covered Advisor'

Federal covered advisors are required to file a notice with the state in which they plan to conduct investment advisor business. A state covered investment advisor is an investment advisory firm that has assets under management of less than $25 million. States require federal covered advisors to file a notice if the firm has six or more clients who are residents of that state, or if the firm is operating a place of business in that state.


The Investment Advisors Supervision Coordination Act, which became effective on July 8, 1997, was established to reallocate federal and state regulation of investment advisors. The Act was designed to make states responsible for smaller advisors and the SEC responsible for larger advisors.


Further Reading


Dangerous interconnectedness: economists' conflicts of interest, ideology and financial crisis
academic.oup.com [PDF]
… and Second District Highlights, “a regional supplement to Current Issues covering financial and economic … the rules were: (1) the article was assigned to the Federal Reserve category … current or previous staff economist; current or previous visiting scholar, consultant, or advisor) …

Economic analysis by federal financial regulatorsEconomic analysis by federal financial regulators
heinonline.org [PDF]
… and Second District Highlights, “a regional supplement to Current Issues covering financial and economic … the rules were: (1) the article was assigned to the Federal Reserve category … current or previous staff economist; current or previous visiting scholar, consultant, or advisor) …

The economic importance of financial literacy: Theory and evidenceThe economic importance of financial literacy: Theory and evidence
www.aeaweb.org [PDF]
… and Second District Highlights, “a regional supplement to Current Issues covering financial and economic … the rules were: (1) the article was assigned to the Federal Reserve category … current or previous staff economist; current or previous visiting scholar, consultant, or advisor) …

Economic effects of federal credit programsEconomic effects of federal credit programs
www.jstor.org [PDF]
… and Second District Highlights, “a regional supplement to Current Issues covering financial and economic … the rules were: (1) the article was assigned to the Federal Reserve category … current or previous staff economist; current or previous visiting scholar, consultant, or advisor) …



Q&A About Federal Covered Advisor


Where is it located?

It is located in the Executive Office of the President.

What is the name of the agency?

The Council of Economic Advisers.

What is a federal covered advisor?

A federal covered advisor is an investment advisor in the United States that manages more than 25 million in assets for other investors or who is providing services in 3 or more states.

Who writes its annual report to Congress, and when must it be submitted by?

The president typically writes a letter introducing the report, serving as an executive summary and used for press coverage. The report proceeds with several hundred pages of qualitative and quantitative research by reviewing the impact of economic activity in the previous year, outlining the economic goals for the coming year (based on the President's economic agenda), and making numerical projections of economic performance and outcomes. Public criticism usually accompanies its release, sometimes attacking or praising particular data or goals. The data referenced or directly used in this report are from Bureau of Economic Analysis (BEA).

How many clients does a federal covered advisor need to have before they are required to register with the SEC?

Federal covered advisors must be registered and file annually with the U.S. Securities and Exchange Commission (SEC). In addition, federal covered advisors must meet specific regulations set forth by individual states.

Are there different types of investment advisors?

Yes, there are different types of investment advisors including state and federal covered advisors. State Covered Advisors are those that manage less than $25 million in assets for other investors or provide services in fewer than three states. These firms do not have to register with the SEC but they do have to register with their home state's securities regulator if they plan on conducting business within that state's borders. Federal Covered Advisors are those that manage more than $25 million in assets for other investors or provide services across three or more states. These firms must register with both the SEC and their home state's securities regulator if they plan on conducting business within that state's borders.

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