How to start an RIA: the compliance path

Starting a registered investment adviser is mostly paperwork done in the right order. The order matters because the compliance-program rule binds an adviser “registered or required to be registered” with the SEC, and it makes advice unlawful until the program exists. A founder who files Form ADV first and writes the policies later has the sequence backwards: the program is part of opening the doors, not a project for the first quarter.

Each step below says what to do, which rule asks for it, and what paper it leaves behind. The page follows the SEC's rules and Form ADV's own instructions. Where a state decides instead, it says so and sends you to your state securities regulator. It is a map, not legal advice: check each decision with your compliance counsel before you file. If you want the cost of each step in one place, the RIA startup cost estimator lists the lines.

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The first question is not what to file but where. Form ADV's instructions put it as a test: if you are applying for registration with the SEC, “you must indicate in Item 2.A. why you are eligible to register with the SEC by checking at least one of the boxes.” A firm that cannot check a box registers with its state. For most founders the boxes that matter turn on regulatory assets under management.

Box 9 is the one written for founders. The instructions name “a newly formed adviser” as its example, and it is open only if, immediately before you file, you “were not registered or required to be registered with the SEC or a state securities authority”. It carries a deadline that is easy to miss.

If that amendment shows you are not eligible, you file Form ADV-W to withdraw “no later than 120 days after your registration was declared effective”, and the instructions tell you to ask the state how long its registration takes well before then. A founder whose expected assets are the reason for box 9 needs $100 million or more “no later than 120 days after your registration is declared effective.”

SEC registration does not take the states out of the picture. The states you check in Item 2.C receive copies of your filings, called notice filings, and they “may charge fees, which will be deducted from the account you establish with FINRA.” Your investment adviser representatives “may be subject to registration in those states in which the representative has a place of business.” Both answers come from the state. The SEC side of the lines is drawn in more detail in what Form ADV is and who files it.

SEC applicants file electronically through the Investment Adviser Registration Depository (IARD), and FINRA handles access to it. The firm first submits the IARD Entitlement Package. FINRA then assigns a CRD number, gives a user ID and password to each person who will file, and opens a financial account “from which the IARD will deduct filing fees and any state fees you are required to pay.” Once the account is funded, you can file.

Rule 204-1 sets an initial fee when you first file Part 1A and “an annual filing fee each time you file your annual updating amendment”, and “No portion of either fee is refundable.” Those IARD fees “are in addition to any registration or other fee that may be required by state law.” The amounts are on IARD's fee schedule; read them there on the day you file, and put them into the cost estimator beside your state's fees.

Two lines in that instruction decide the workload. “Every application for registration must include a narrative brochure” prepared under Part 2A, so the brochure is written before you file, not after. And every adviser with retail investors “must include in the application for registration a relationship summary”. The brochure and its supplements are walked through item by item in Form ADV Part 2A and Part 2B.

The filing date also starts a clock. Every registered adviser, SEC or state, files an annual updating amendment “within 90 days after the end of your fiscal year”, so the fiscal year end you pick when you form the firm sets the date of your first annual amendment. The Form ADV annual amendment planner dates it for you.

Rule 206(4)-7 has three duties, and its opening words tie all three to advice itself: without them “it shall be unlawful … for you to provide investment advice to clients”. For a new firm that settles the timing. The policies and the named chief compliance officer exist before the first advisory contract is signed, and the first annual review is already on the calendar.

The rule does not list the policies. It asks for policies “reasonably designed” for your firm, so a founder writes them for the business actually planned: the clients, the custody arrangement, how trades are placed, how the firm markets, which channels advisers use with clients. A manual bought for a different business fails that test on its first page. The RIA compliance manual template assembles a starting draft from those choices, and the Rule 206(4)-7 guide covers each duty in full.

In a one-person firm the founder is often also the chief compliance officer. The rule's words ask only that the officer be a supervised person. What the dual role changes is the annual review: the person who wrote the policies also tests them, so the review record should show what was tested and what was found, not only that a review happened.

The code of ethics, on the same day

Rule 204A-1 asks for a written code with a standard of business conduct, compliance with the federal securities laws, personal trading reports from access persons, prompt reporting of violations to the chief compliance officer, and a written acknowledgment from each supervised person. A new access person files an initial holdings report “No later than 10 days after the person becomes an access person”, and if providing advice is your primary business, your directors, officers and partners are presumed to be access persons. In a new firm that means the founders who hold those roles.

The solo exception is a records duty, not a free pass: the founder keeps the same holdings and transaction records, just without filing them to themselves. The day a second access person joins, the reports start. The full code, with the report calendar, is in the investment adviser code of ethics.

Rule 204-2 lists the records an SEC-registered adviser keeps, and several of them begin before the first client. The formation papers are the first entry in the file. They are kept in the principal office “until at least three years after termination of the enterprise”, which makes them the one record a founder keeps for as long as the firm exists.

Most of these records follow the general period: kept “in an easily accessible place for a period of not less than five years from the end of the fiscal year during which the last entry was made on such record, the first two years in an appropriate office of the investment adviser.” Advertisements, the code of ethics, some access-person records and the policies carry their own periods; the retention calculator runs each one.

Keeping records electronically is allowed, on conditions. The firm must “Arrange and index the records in a way that permits easy location, access, and retrieval of any particular record”, produce a copy promptly, keep a separate duplicate, and limit access “to properly authorized personnel and the Commission”. Rule 204-2(g) contains no audit-trail or WORM requirement and no third-party undertaking; those are conditions of the broker-dealer rule, 17a-4(f). Write down which system holds which record now, while the list is short. The whole rule is in Rule 204-2: adviser books and records.

A retail investor is “a natural person, or the legal representative of such natural person, who seeks to receive or receives services primarily for personal, family or household purposes.” A firm planning to serve individuals and families has them. A firm serving only institutions may not: “If you do not have any retail investors to whom you must deliver a relationship summary, you are not required to prepare or file one.”

If you do, Form CRS goes into the SEC application as Part 3 of Form ADV, and three duties start with the first client. You deliver it “before or at the time you enter into an investment advisory contract with that retail investor”, you post it prominently on your website if you have one, and on paper it may not exceed two pages. The SEC's instructions require five items, and Item 1 must point readers to Investor.gov/CRS. The Form CRS builder drafts those sections from your services and fees.

Choose software by the records it will hold, not by its feature list. Most systems in a new firm create a required record or store one, and for every record kept electronically Rule 204-2(g) sets the same tests: indexed for retrieval, produced promptly in the format stored, a separate duplicate copy, and access limited to authorized people. The table maps each layer to the record it touches and to our comparison of that layer.

Three choices are easy to get wrong at the start. The first is the website: an advertisement is any communication to more than one person “that offers the investment adviser's investment advisory services with regard to securities to prospective clients”, and Rule 204-2(a)(11) keeps a copy of each one, so the site you launch with is the first entry in your advertising file. The rules are in the SEC Marketing Rule guide. The second is texting. If clients will text you about their accounts, pick a capture tool before the first message, not after; the text message archiving comparison reads the vendors.

The third is the CRM. A CRM holds working records but is not, by itself, the separate duplicate copy the rule asks for, so check how it feeds your archive. The adviser rule does not require WORM storage; that is a broker-dealer condition. Whether to buy one platform for several layers or one vendor per layer is weighed in the whole-stack comparison in the table above.

A founder can hire help for the launch: a consultant to draft Form ADV and the policies, or an outsourced chief compliance officer to run the program after. Neither moves the duties off the firm, and three of them stay in-house whoever you hire.

Write the scope before the first call: which parts of Form ADV, which policies, whether the annual review is included, and whether the consultant serves state-registered firms if that is where you start. Our RIA compliance consultants comparison reads each firm's own pages for those points, and the outsourced CCO guide covers when an outside officer makes sense for a small adviser. If you choose neither, the RIA compliance checklist is the list to work from.

After registration the duties run on two kinds of clock: events (a new client, a new access person) and the fiscal year. The table puts the first year in order. Each date is counted the way the rule words it, so set the actual dates from your own fiscal year end and quarter ends.

From there the year repeats, and the program's whole year is laid out in RIA compliance: what a small adviser must run. This page describes the SEC rules as written; it is not legal advice, and a founder should have counsel read the Form ADV and the policies before they are filed.