The Foundation - The Uniform Securities Act (USA) - Definitions Part 2

INVESTMENT ADVISER - "Investment adviser" means a person that, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities or that, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities. The term includes a financial planner or other person that, as an integral component of other financially related services, provides investment advice to others for compensation as part of a business or that holds itself out as providing investment advice to others for compensation. The term does not include:

    1. An investment adviser representative;
    2. A lawyer, accountant, engineer, or teacher whose performance of investment advice is solely incidental to the practice of the person's profession;
    3. A broker-dealer or its agents whose performance of investment advice is solely incidental to the conduct of business as a broker-dealer and that does not receive special compensation for the investment advice;
    4. A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation;
    5. A federal covered investment adviser;
    6. A bank or savings institution

First, an "investment adviser" (IA), as the Law defines it, is generally a company or a firm that is "in the business of" providing investment advice for a fee. The "investment adviser representative" is an individual who works for an investment adviser. The USA permits a sole proprietor to register as an investment adviser, but for exam purposes, think of an IA as a firm that hires others.

Notice that as long as any investment advice provided by Teachers, Engineers, Accountants and Lawyers(teal) is "solely incidental to the practice of the person's profession" that person is not defined as an investment adviser.

Broker-dealers are not defined as investment advisers as long as their advice is "solely incidental to the conduct of business as a broker-dealer and that does not receive special compensation for the investment advice." Here's another clue that a person is not an investment adviser: not receiving special compensation for the investment advice. The test sometimes uses the word, "remuneration," which simply means money paid for work or a service.

But what about broker-dealers that manage client accounts, take assets under management and charge "wrap fees"? Those B/Ds must be registered as both B/Ds and investment advisers.

Notice that banks are, again, not considered investment advisers. Subsidiaries of banks, however, may very frequently be registered as investment advisers.

 

Look Out!

Banks and similar institutions are exempt from many of the requirements of the USA because they are so heavily regulated by other entities. The USA, in recognition of this fact, has exempted banks and other similar institutions from yet another layer of regulation.

 

The Uniform Securities Act (USA) - Definitions Part 3
Related Articles
  1. Professionals

    Internal Advisor Consultant: Job Description & Average Salary

    Learn about the internal advisor consultant position and the national average salary as well as the key skills, education and experience needed.
  2. Professionals

    Career Advice: Stockbroker Vs. Insurance Agent

    Compare and contrast careers as a stockbroker and insurance agent. Understand the skills and attributes required for success in each career.
  3. Professionals

    Series 63 Exam Prep: The Broker-Dealer

    Before you take the series 63, you need to understand jurisdiction and how it affects broker-dealers.
  4. FA

    The Basics of The Series 79 Exam

    Passing the Series 79 exam is usually necessary for anyone who wants to work in investment banking.
  5. Your Clients

    Events in 2016 That'll Alter Your Retirement Plans

    Retirement savers who are trying to see what lies ahead can expect these changes affecting their retirement plans in 2016.
  6. Term

    What is the Series 66?

    The Series 66 exam is one of two tests required to register as both a securities agent and an investment advisor.
  7. Professionals

    Internal Advisor Consultant: Career Path & Qualifications

    Discover more about the responsibilities of an internal advisor consultant, the average salary he can expect and the qualifications he will need for the job.
  8. Your Practice

    How Likely is a New Fiduciary Rule in 2016?

    New fiduciary standards for advisors working with retirement accounts are on the horizon. Will they become reality in 2016?
  9. Professionals

    Breaking Down Financial Securities Licenses

    Find out which exam you need to begin your career as an investment professional.
  10. Brokers

    Duck These Illegal Sales Tactics Used By Brokers

    Many unscrupulous brokers employ illegal swindling tactics to sell bad securities. Here are sales strategies that should indicate red flags to investors.
RELATED TERMS
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Series 6

    A securities license entitling the holder to register as a limited ...
  3. Comprehensive Automated Risk Data ...

    The Comprehensive Automated Risk Data System (CARDS) is an initiative ...
  4. Corporate Financing Committee

    A regulatory group that reviews documentation that is submitted ...
  5. Division Of Reserve Bank Operations ...

    An entity under the Federal Reserve System that manages certain ...
  6. Series 79

    A examination to ensure a candidate is qualified to become a ...
RELATED FAQS
  1. Is there a limit on the number of times I can re-take the Series 63 exam?

    There is no limit to the number of times a candidate may retake the Series 63 exam. The North American Securities Administrators ... Read Full Answer >>
  2. How long must I wait after failing the Series 63 exam before I can take it again?

    Waiting periods are in place for candidates who wish to retake the Series 63 exam. Between retakes, the waiting period is ... Read Full Answer >>
  3. Do I have to be a U.S. citizen to sit for the Series 63 exam?

    United States citizenship is not required for Series 63 test-takers. Candidates may take the exam inside or outside the U.S. ... Read Full Answer >>
  4. My 120-day Series 63 exam window is about to close, but I need more time to study. ...

    Extensions are available on rare occasions. Candidates should apply for an extension with the North American Securities Administrators ... Read Full Answer >>
  5. Are waivers granted to the 180-day waiting period to re-take the Series 63 exam?

    Candidates retaking the Series 63 exam must wait for 30 days after failing it on the first or second attempt. After failing ... Read Full Answer >>
  6. If I failed the Series 66, does the waiting period apply if I want to take the Series ...

    The waiting period only applies to retaking the same North American Securities Administrators Association (NASAA) exam. Candidates ... Read Full Answer >>
  7. Are series 63 exams given outside of the United States?

    Series 63 exams are offered at authorized testing centers around the world. The exam does not require U.S. citizenship. Test ... Read Full Answer >>
  8. How often, and how, is a series 63 exam updated?

    Series 63 exams draw questions from a test bank based on state regulations, the Uniform Securities Act and North American ... Read Full Answer >>
  9. Does NASAA or anyone else give out the series 63 exam questions?

    Outside of the proctored exam, no access to Series 63 exam questions is offered. Providing access to questions would invalidate ... Read Full Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  3. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  4. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  6. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
Trading Center