In the world of fund management, Assets Under Management (AUM) is often the headline number, but when it comes to regulatory oversight, Regulatory Assets Under Management (RAUM) is the metric that actually matters. RAUM is not just a subset of AUM; it’s a compliance-defined threshold that determines whether a firm must register with the SEC, how it reports its activities, and what kind of scrutiny it faces.
This article breaks down what RAUM is, how it’s calculated, and why it’s critical for fund managers, legal counsel, and operations professionals to understand.
What Is RAUM?
Regulatory Assets Under Management (RAUM) is defined by the SEC as the gross market value of securities portfolios for which an adviser provides continuous and regular supervisory or management services. It is reported on Form ADV Part 1A, which is required for registration and disclosure.
RAUM is used to determine:
SEC vs. state registration eligibility
Examination frequency
Disclosure obligations
Marketing compliance
RAUM Calculation Criteria
To be included in RAUM, assets must meet three specific criteria:
1. Securities Portfolio Test
At least 50% of the account’s value must consist of securities.
Securities include stocks, bonds, cash equivalents (e.g., CDs, bank deposits), and derivatives.
Real estate, commodities, collectibles, and fixed annuities are excluded.
2. Continuous and Regular Management
The adviser must provide ongoing supervisory or management services.
This typically means: Discretionary authority to trade. Responsibility for investment decisions aligned with client goals.
Passive or one-time advice does not qualify.
3. Valuation Timing
Assets must be valued within 90 days of the Form ADV filing date.
This ensures the RAUM figure reflects current market conditions.
RAUM vs. AUM: A Critical Distinction
While Assets Under Management (AUM) is commonly used for marketing and investor communications, Regulatory Assets Under Management (RAUM) is the metric that matters for compliance and regulatory filings.
AUM refers to the total assets a firm manages, including accounts where the adviser may only provide occasional or non-discretionary advice. It’s a broad measure often used to showcase firm size and market presence.
RAUM, on the other hand, is narrowly defined by the SEC. It includes only those assets in securities portfolios that the adviser actively manages and supervises on a continuous and regular basis. This definition excludes advisory-only accounts, non-securities assets (like real estate or commodities), and portfolios without discretionary authority.
The distinction is critical: a firm may report $500 million in AUM, but only $120 million in RAUM. If the remaining assets are not actively managed or don’t meet the SEC’s criteria, they don’t count toward RAUM, and therefore don’t count toward SEC registration thresholds.
SEC Registration Thresholds Based on RAUM
RAUM is the trigger for SEC vs. state registration:
$110M+ RAUM → Mandatory SEC registration
$100M–$110M RAUM → Optional SEC registration
$25M–$100M RAUM → State registration required
Under $25M RAUM → Generally exempt from registration
There’s also a buffer zone:
SEC-registered advisers can remain registered if RAUM stays above $90M.
If RAUM drops below $90M, the adviser must deregister and switch to state registration
Operational and Compliance Implications
RAUM isn’t just a number, it’s a regulatory status indicator. Misreporting RAUM can lead to:
False advertising violations
SEC enforcement actions
Revocation of registration
Firms should:
Audit RAUM calculations annually (or more frequently if assets fluctuate).
Exclude non-qualifying assets (e.g., real estate, advisory-only accounts).
Coordinate with legal and compliance teams to ensure Form ADV accuracy.
Best Practices for RAUM Reporting
Use consistent valuation methods aligned with GAAP.
Document discretionary authority and supervisory responsibilities.
Exclude assets managed by third parties or held passively.
Review Form ADV Item 5.F and Instruction 5.b for detailed guidance
Bottom Line
RAUM is more than a compliance checkbox, it’s a regulatory identity. It determines how a firm is regulated, what it must disclose, and how it is perceived by investors and regulators. For fund managers, legal counsel, and operations professionals, understanding RAUM is essential to maintaining compliance, avoiding penalties, and positioning the firm for growth.