(1) It is unlawful for any person to transact business in this State as an investment adviser or investment adviser representative unless he is registered under this chapter or exempt from licensing under this chapter. The following investment advisers are exempt from the licensing requirements of Section 35-1-420:

1. (a) an investment adviser if:

   1. (i) it has as its only clients in this State other investment advisers, federal covered advisers, broker-dealers or financial or institutional investors; or
   2. (ii) it has no place of business in this State and the investment adviser during the preceding twelve-month period has not had more than five clients, other than those specified in sub-subitem (i), who are residents of this State; and
2. (b) other investment advisers the commissioner, by rule or order, exempts.

(2)

1. (a) It is unlawful for any person required to be registered as an investment adviser under this chapter to employ an investment adviser representative unless the investment adviser representative is registered under this chapter. The registration of an investment adviser representative is not effective during any period when he is not employed by an investment adviser registered under this chapter or a federal covered adviser not required to be registered.
2. (b) It is unlawful for an investment adviser representative of a federal covered adviser to transact business unless such investment adviser representative is registered under this chapter, or is exempt from registration.
3. (c) When an investment adviser representative begins or terminates employment with an investment adviser or a federal covered adviser, the investment adviser, in the case of Section 35-1-420(2)(a) and the investment adviser representative in the case of Section 35-1-420(2)(b), shall promptly notify the securities commissioner.