Friday, October 24, 2008

Who Is An "Investment Adviser"?

Investment Advisers can defined as a person that:
  • Gets paid for their advice or consultation.
  • Advises others regarding the value or suitability of various investments. This can be done directly or through media such as newsletters. OR
  • Creates analysis or reports that offer recommendations or advice. OR
  • Provide advice to others performing financial planning and advisory services.

    Exemptions - Investment advisers that do not need to register with the state. These advisers have clients in the state that are non-public. The clients may solely consist of:
  • Federal Covered Advisers
  • Broker-Dealers
  • Banks and other similar depository institutions
  • Insurance Companies
  • Investment Companies
  • Government Agencies
  • Some others
    The key to this is that the clients are not the general public, so protection is not needed.

    There is also an exemption known as the "De Minimis" Exemption in which advisers with fewer than 6 clients in a state are exempt from registering. This is because there are so few clients that the business in the state is considered minimal.

    Exclusions from the "investment adviser" definition:
  • Employees of investment advisers (because they register instead as Investment Adviser Representatives)
  • Banks and other similar depository institutions
  • Media, so long as they do not provide any specific advice for a specific client in a specific situation
  • Professionals such as lawyers, accountants, teachers, etc.
  • Broker-Dealers, as long as they aren't getting kick-backs, special perks or compensation
  • Federal Covered Advisers (because they are registered as the federal level, so they do not need to register at the state level)

    The information listed above is adapted from a number of sources, but mostly from a Series 63 study program from Please visit PassPerfect for more information about their program. The Series 63 exam has been developed by the NASAA, and you can visit their website HERE. Neither PassPerfect nor the NASAA have reviewed the material presented here for completeness or accuracy. Please visit them to find more information about their programs and exams.

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