What determines when state registration is typically necessary for Investment Advisers?

Investment advisers typically need to register with the state based on the propinquity of clients to their principal place of business. This is primarily due to state securities regulations that seek to ensure that advisory firms are registered in states where they have a significant number of clients or where they conduct a substantial portion of their business. This local registration requirement is structured to protect investors by ensuring that advisers are subject to regulation and oversight in the states where their clients reside.

The underlying principle is that the closer the adviser is to the clients, the greater the need for regulatory oversight to ensure compliance with state laws and to protect those clients from potential misconduct. Therefore, an adviser's registration obligations are closely tied to the geographical location and the number of clients rather than merely the amount of assets under management or other factors.