Publication
2025 NASAA Report: Small Advisers, Big Impact in a Shifting Regulatory Landscape
The North American Securities Administrators Association (NASAA) published its Investment Adviser Section 2025 Annual Report on September 8. The report presents an interesting statistical picture of the state-registered segment of the investment advisory industry and offers intriguing glimpses into the work state regulators are doing to keep pace with pertinent technological developments.
Pursuant to Section 203A of the Investment Advisers Act, investment advisers with at least $100 million of regulatory assets under management typically must register with the Securities and Exchange Commission. Advisers with smaller portfolios register with state securities regulators.
The NASAA report reflects that, while the state-registered investment adviser sector contracted by 322 firms in 2024, assets under management grew by over $18 billion. This likely reflects a combination of market appreciation, new client inflows, and consolidation. The report makes clear that most state-registered firms are small, with 76% of them having two or fewer employees. Finally, these state-registered firms are largely serving retail investors and/or high-net-worth individuals.
The report includes a section summarizing the work of the various “project groups” that comprise the Investment Adviser Section. A common thread running through the summaries is the efforts regulators are making to understand developing technologies, provide appropriate support to the investment adviser community with respect to those technologies, and tailor enforcement practices to address circumstances when the technologies are abused or misused. Unsurprisingly, the report specifically refers to digital assets, fintech services, and artificial intelligence.
The report concludes with a brief summary of state securities regulator enforcement actions, noting that the top reasons underlying enforcement matters include failure to register, fees, undisclosed conflicts of interest, and fraud.
One area the report does not expressly discuss is the extent to which state-level enforcement has already, or may soon, address enforcement gaps created by the shifting priorities of federal regulators. SEC Chairman Paul Atkins has declared that the Commission’s enforcement program will focus on fraud, market manipulation, and securities violations that cause substantial investor harm. That implies a shift away from standalone operational compliance violations. Since January, state and local regulators have often sought to ramp up enforcement to compensate for areas the federal government has deprioritized. Indeed, just this week, NASAA announced the creation of a new Broker-Dealer Inspections & Compliance project group focused on multi-state collaboration in identifying new areas of investigation of broker-dealers. Given the SEC’s shifting priorities and the fact that many SEC compliance regulations do not apply to state-registered advisers, it is not difficult to imagine a similar enforcement effort in the state-registered investment advisers space.
State-registered advisers should stay informed about NASAA developments and should periodically review and update compliance programs to address common enforcement triggers and emerging technological developments.
About Snell & Wilmer
Founded in 1938, Snell & Wilmer is a full-service business law firm with more than 500 attorneys practicing in 17 locations throughout the United States and in Mexico, including Los Angeles, Orange County, Palo Alto and San Diego, California; Phoenix and Tucson, Arizona; Denver, Colorado; Washington, D.C.; Boise, Idaho; Las Vegas and Reno-Tahoe, Nevada; Albuquerque, New Mexico; Portland, Oregon; Dallas, Texas; Salt Lake City, Utah; Seattle, Washington; and Los Cabos, Mexico. The firm represents clients ranging from large, publicly traded corporations to small businesses, individuals and entrepreneurs. For more information, visit swlaw.com.
