Series 65
Regulation of Investment Advisors - SEC Investment Adviser Releases IA 770 & 1092
IA 770 was issued in 1981 to clarify the definition of investment advisers. It provided guidance on the following matters:
The complete IA 1092 release can be viewed here.
- What is a "security" - life insurance and fixed securities are not securities, so those who give advice solely on these financial instruments are not required to register as IAs
- What is "advice" - the guideline here is very broad - simply recommending that a client buy "stocks" instead of insurance is considered advice
- Who is "in the business" of giving advice about securities - the standard requires only that you "hold yourself out" as a financial planner or investment adviser (e.g., by advertising, making business cards, etc.) even if you have no clients yet
- What is "compensation" for giving advice about securities - compensation includes fees, commissions, assigning a liability of the adviser to the client or requiring the purchase of another product
- Pension consultants and advisers to athletes and entertainers are considered to be providers of investment advice
- Firms that recommend investment advisers may have to register themselves
- An IA does not have to give advice as his/her principal business activity - simply doing so with some regularity is enough to require registration
- If a registered representative of a broker-dealer sets up a separate business entity to provide financial planning or investment advice for a fee, he/she may not rely on the broker-dealer exemption from registration (this is known as a statutory investment adviser)
- "Compensation" does not have to be monetary to fall under the definition - receipt of products, services or discounts is also considered compensation
The complete IA 1092 release can be viewed here.
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