Regulatory Assets Under Management: Calculation, Reporting, Thresholds

Regulatory assets under management, or RAUM, is the standardized figure the SEC uses to size an investment adviser’s business and decide whether the firm registers federally or with a state. It is the gross market value of every securities portfolio the adviser continuously and regularly manages, reported without subtracting debt, margin, accrued fees, or any other liabilities. Advisers report the number annually on Form ADV, and crossing certain dollar thresholds forces a change in registration status.

What Counts as a Securities Portfolio

Only qualifying accounts feed into the calculation. An account is a “securities portfolio” only if at least 50% of its total value consists of securities. For that test, you can choose to count cash and cash equivalents such as bank deposits and certificates of deposit as securities, which often pushes borderline accounts across the line.¹

Private funds are treated differently. The SEC treats all assets of a private fund as a securities portfolio regardless of what the fund actually holds, so real estate funds, commodity pools, and similar vehicles all qualify in full. For private funds you also add the contractual amount of any uncalled capital commitments from investors obligated to contribute.²

What Assets Get Included

Once you have your qualifying accounts, the inclusion rule is broad. Every securities portfolio for which you provide continuous and regular supervisory or management services counts, meaning any account where you exercise discretion or carry ongoing responsibility for selecting investments. Several categories catch firms off guard:

Your firm’s own proprietary accounts
Accounts you manage for family members
Portfolios you manage without receiving any fee
Accounts belonging to clients outside the United States

RAUM is a gross figure. You cannot subtract margin balances, outstanding loans, accrued management fees, or any other liabilities.¹ That is the main structural difference between RAUM and the “assets under management” figures firms use in marketing, where netting out liabilities is common. Regulators want the full picture of market exposure the firm influences, not a figure trimmed by accounting adjustments.

If you continuously manage only part of a portfolio, include only that part. Exclude the slice managed by another adviser, and exclude assets like real estate or operating businesses you handle for a client but not as investments.¹

How to Calculate the Number

The arithmetic is simple: add the gross market value of each qualifying securities portfolio. The preparation is where the work is.

Use each account’s current market value as determined within 90 days before your Form ADV filing date. Use the same valuation method you use for client reporting or advisory fee calculations.¹
For private funds without publicly traded prices, determine the current fair value of the fund’s assets and add the contractual amount of any uncalled capital commitments.²
Do not deduct margin loans, outstanding fees, or any other indebtedness.
Track discretionary and non-discretionary totals separately, because Form ADV asks for each.

Value all portfolios as of the same date, or as close to it as practicable. Brokerage statements, internal ledgers, and third-party valuation reports for illiquid holdings are the typical documentation. Keep the workpapers centralized; the SEC can request verification at any time.

Reporting RAUM on Form ADV

The number goes into Item 5.F of Part 1A on Form ADV, the section built for this purpose.³ Filings are submitted electronically through the Investment Adviser Registration Depository (IARD).

The main deadline is the annual updating amendment, due within 90 days after the end of your fiscal year.² You must also promptly file interim amendments if certain information on your Form ADV becomes materially inaccurate during the year. Maintaining a clear audit trail of how you arrived at your figure makes the difference between a routine exam and a longer inquiry.

The Thresholds That Depend on Your RAUM

Your RAUM decides whether you answer to the SEC or to state securities regulators. Section 203A of the Investment Advisers Act sets the framework, and SEC rules fill in the numbers:

Under $25 million: state registration, generally not SEC.⁴
$25 million to $100 million: “mid-sized” adviser, typically state-registered unless a specific exemption applies (such as advising a registered investment company).⁴
$100 million to $110 million: SEC registration is permitted but not required. This buffer keeps firms from flipping between regimes on ordinary market movement.⁵
$110 million or more: SEC registration is mandatory.²

The buffer on the way down is different from the one on the way up. An SEC-registered adviser whose assets decline does not have to withdraw federal registration until RAUM falls below $90 million.⁵ The asymmetry is intentional; only a sustained drop, not a single bad quarter, forces a return to state oversight.

What Happens When You Cross a Threshold

If your annual updating amendment shows RAUM at $110 million or more, you must apply for SEC registration within 90 days after filing that amendment.² The window lets you transition compliance systems to federal standards without disrupting client service.

The reverse direction is where firms most often stumble. If your annual update shows you are no longer eligible for SEC registration, you have 180 days from the end of your fiscal year to complete state registration and file Form ADV-W to withdraw from the SEC.² Until the ADV-W is filed, you remain under SEC regulation and are simultaneously subject to regulation in any state where you are registered. The SEC has stated that it does not grant grace periods for missed filing deadlines.⁶

Two Situations That Change the Picture

A mid-sized adviser who would otherwise be stuck at the state level can register with the SEC if the adviser would be required to register in 15 or more states. To use this route, you indicate on Schedule D of your Form ADV that you have reviewed applicable state and federal laws and concluded that registration would be required in at least 15 states, based on a review conducted within 90 days before filing. If a later annual update shows the count has dropped below 15 and no other basis for SEC registration applies, Form ADV-W must be filed within 180 days of fiscal year end.⁷

An adviser who advises only private funds and has U.S. assets under management below $150 million can operate as an exempt reporting adviser (ERA) rather than register with the SEC.⁸ Venture capital fund advisers have a separate exemption with no dollar threshold. ERAs still file Form ADV, but only Items 1, 2, 3, 6, 7, 10, and 11 of Part 1A and the corresponding schedules; they skip Item 5.F, where registered advisers report RAUM. The $150 million ceiling is still measured using the RAUM methodology, so the calculation has to happen internally even though the number is not reported in Item 5.F. Once private fund assets reach $150 million, SEC registration is required unless another exemption applies.²

Consequences of Getting It Wrong

A miscalculated RAUM is not just an administrative issue. The exposure runs from compliance findings to criminal charges, depending on whether the error was careless or deliberate.

On the administrative side, failing to update Form ADV on time violates SEC rules and can lead to revocation of registration.² The SEC has brought enforcement actions on this ground; in one recent matter, a firm agreed to pay a $75,000 penalty for failing to promptly file its annual updating amendment.⁹

Intentional misstatements are treated far more seriously. Willful violations of the Investment Advisers Act carry criminal penalties of up to five years in prison, a fine of up to $10,000, or both.¹⁰ Deliberately falsifying Form ADV entries also constitutes a federal criminal violation under the general false statements statute, which carries up to five years of imprisonment and additional fines.¹¹ Even unintentional errors that place a firm in the wrong registration category can trigger audits and sanctions. Documenting every step of the calculation is the reliable way to show good faith if the number is later questioned.

1
U.S. Securities and Exchange Commission. Form ADV Instructions for Part 1A
2
U.S. Securities and Exchange Commission. Form ADV General Instructions
3
Investment Adviser Registration Depository. Form ADV Part 1 General Instructions
4
GovInfo. Investment Advisers Act of 1940
5
eCFR. 17 CFR 275.203A-1 Eligibility for SEC Registration
6
U.S. Securities and Exchange Commission. Frequently Asked Questions on Form ADV and IARD
7
eCFR. 17 CFR 275.203A-2 Exemptions From Prohibition on Commission Registration
8
eCFR. 17 CFR 275.203(m)-1 Private Fund Adviser Exemption
9
U.S. Securities and Exchange Commission. Administrative Proceeding File No. 3-22086
10
Office of the Law Revision Counsel. 15 USC 80b-17 Penalties
11
Office of the Law Revision Counsel. 18 USC 1001 Statements or Entries Generally