Regulation of Investment Advisors and Investment Advisor Representatives - Investment Advisor Representatives: Exclusions

The term investment advisor representative DOES NOT include an individual who:

  • performs only clerical or ministerial acts.
     
  • is an agent whose performance of investment advice is solely incidental to the individual acting as an agent and who does not receive special compensation for investment advisory services.
     
  • is a federal covered investment advisor representative (however, if a federal covered investment advisor has a place of business in a state where a representative conducts business, the representative may be required to register with the Administrator). Do not confuse federal covered with an investment advisor that is required to file on a state level.

If you are listed as a partner, officer or director of an IA at the time of initial registration, you do not need to register separately as an IAR. If not, you must register as an IAR through your state. Your employing firm will supply the necessary information for registration. IA employees who perform any of these functions must register as IARs:

  • Making investment recommendations or giving securities advice
  • Managing client accounts or portfolios
  • Soliciting or offering investment advisory services
  • Supervising employees who perform any of the above

Example 1
If John calls Excellent Money Managers, Inc. to speak with someone about his portfolio and ends up talking to Kathy Kash, is he talking to the investment advisor representative or to the investment advisor?

Answer
John is talking to the investment advisor representative (Kathy Kash), an employee of the investment advisor: Excellent Money Managers, Inc.

Example 2
Big Bubba Bob is an investment advisor representative of Kamikaze Portfolio Managers, a federal covered investment advisor (meaning it is registered with the SEC). Bob has clients in California, New York, Colorado and Alaska. The company's offices are located in Georgia. In which states must he register with the Administrator to work as an investment advisor representative?

Answer
None, except Georgia if he does any business there. However, because Kamikaze Portfolio Managers is a federal covered investment advisor (registered with the SEC), he does not have to register in the state where his firm has no physical address.

Watch out for questions that ask if an office manager who supervises account managers or solicitors has to register as an IAR. While those who have only clerical duties do not need to register, those who supervise IAR employees must do so.

Watch out for the distinction between an IA and an IAR when you are reading exam questions, since there may be differences in registration requirements. You will likely find a number of questions that refer to both IAs and IARs, such as these two examples:

All of the following statements regarding individuals who transact business in the state are true EXCEPT:

  1. investment advisor representatives must register in the state.
  2. investment advisors must register in the state.
  3. representatives of federal covered advisors must register in the state.
  4. federal covered advisors must register in the state.

The correct answer is "d", since federal covered advisors are not required to also register with the state.

  1. The "consent to service of process" must accompany which of the following?
    1. advisor's initial registration application
    2. Investment advisor representative's initial registration application
    3. Investment advisor representative's renewal registration application
    4. Non-criminal complaint filed against an investment advisor
    1. II & III
    2. I & IV
    3. I & II
    4. I, II & III

The correct answer is "c": the consent to service of process is only necessary at the time of initial registration for both investment advisors and investment advisor representatives.

Introduction


Related Articles
  1. Professionals

    Investment Advisor Representatives: Definition

    FINRA/NASAA Series 66: Section 8 Investment Advisor Representatives: Definition. This section defines the investment advisor representative (IAR) under the USA.
  2. Professionals

    Investment Adviser Representatives (IARs)

    FINRA/NASAA Series 65 - Investment Adviser Representatives (IARs). This section explains what IARs with some sample questions.
  3. Professionals

    Investment Advisors Act of 1940

    FINRA Series 6 Exam Study Guide - Investment Advisors Act of 1940. This section defines investment advisor, IA 1092 and Investment Advisor Representatives.
  4. Professionals

    Investment Adviser Representative (IAR): Definition

    FINRA/NASAA Series 63 - Investment Adviser Representative (IAR): Definition. This section defines investment advisor representative and its exclusions.
  5. Professionals

    State Registered Investment Advisors

    FINRA/NASAA Series 66: Section 8 State Registered Investment Advisors. In this section IA registration under USA and exclusions from this. Also, registration requirement of IAs discussed.
  6. Professionals

    Registration with the SEC or with the State?

    FINRA/NASAA Series 66: Section 8 Registration with the SEC or with the State? This section discusses whether one should rregister with the SEC or the State.
  7. Professionals

    The Federal and State Registration Process

    FINRA/NASAA Series 66: Section 8 The Federal and State Registration Process. In this section Form ADV, Consent to Service of Process, state and financial requirements,
  8. Professionals

    Registration and Licensing (Contd.)

    Registration and Licensing (Contd.)
  9. Professionals

    Additional Information

    FINRA/NASAA Series 66: Section 8 Additional Information. In this section additional information on IA registration with sample questions.
  10. Professionals

    Registration and Licensing (Contd.)

    Registration and Licensing (Contd.)
RELATED TERMS
  1. Federal Covered Advisor

    An investment advisor in the United States that manages more ...
  2. Registered Investment Advisor - ...

    An advisor or firm engaged in the investment advisory business ...
  3. Investment Advisor

    As defined by the Investment Advisors Act of 1940, any person ...
  4. Advisor

    1. The person or company responsible for making investments on ...
  5. Fee-Based Investment

    An investment account in which the advisor's compensation is ...
  6. Brochure Rule

    Under the Investment Advisor's Act of 1940, the Brochure Rule ...
RELATED FAQS
  1. In your initial meeting with an investment advisor representative (IAR) ...

    The correct answer is b): The investment advisor representative (IAR) can tell the prospective client all of the following ... Read Answer >>
  2. Do financial advisors need to be approved by FINRA?

    Learn about whether a financial advisor may be required to be approved by FINRA, and what exams a financial advisor needs ... Read Answer >>
  3. Are hedge funds registered with the Securities and Exchange Commission (SEC)?

    Learn the conditions that require hedge fund advisors to register with the U.S. Securities and Exchange Commission. Read Answer >>
  4. Do financial advisors have a base salary?

    Find out how self-employed and corporate financial advisors make a living. Find out whether they get paid based on commission ... Read Answer >>
  5. What's the average salary of a financial advisor?

    Learn about average salaries for financial advisors. Explore different levels of compensation financial advisors receive ... Read Answer >>
  6. What fees do financial advisors charge?

    Learn how much financial advisors charge clients; discover the various payment plans available to customers seeking financial ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center