The Dodd-Frank Wall Street Reform and Consumer Protection Act shifted a great deal of responsibility for regulating many mid-sized investment advisers with between $25 million and $100 million in assets under management (AUM) to state regulatory authorities.  See “Registration, Reporting, Disclosure and Operational Consequences for Hedge Fund Managers of the SEC’s New ‘Regulatory Assets Under Management’ Calculation,” Hedge Fund Law Report, Vol. 5, No. 9 (Mar. 1, 2012).  Hedge fund managers within that AUM range must therefore become familiar with the state laws, rules and regulations that govern their activities because they will likely be subject to periodic examinations from state regulatory authorities.  While the SEC staff attempts to convey its adviser examination priorities to the advisory industry through various speeches and pronouncements, state regulatory authorities are generally silent with respect to their adviser examination priorities.  As such, state-regulated investment advisers have little guidance to inform their preparations for regulatory examinations.  Given this backdrop, at the end of 2011, the North American Securities Administrators Association (NASAA), the lobbying arm of the various state securities authorities, issued a report (Report) detailing the most common deficiencies found during state regulatory examinations of investment advisers conducted between January 1, 2011 and June 30, 2011.  The Report also contained a series of recommended best practices to assist mid-sized hedge fund managers and other investment advisers in mitigating risks of regulatory violations.  While state examinations priorities can vary from state to state, the Report nonetheless provides valuable insight into what state regulators, as a whole, are focusing on in their examinations of investment advisers.  This article details the 13 categories of cited deficiencies and the 15 best practice recommendations contained in the Report.