By expanding its current broker-dealer
business to include financial planning and portfolio
management, TransPlanet Transactions has estimated
that it will increase annual revenues by 20%. In
addition to the commissions it receives on brokerage
transactions, TransPlanet will charge a separate
fee to individual investors who require financial
planning and portfolio management. By adding to company
profits, will TransPlanet be required to register
as an investment adviser?
a) Yes, because the company is receiving a separate fee for dispensing advice
b) Yes, it would be required to register as an investment advisor even prior to adding the new services
c) No, it is exempt as a broker-dealer
d) None of the above
Typically, TransPlanet would not be required to register as an investment advisor under the broker-dealer exemption, provided the company is only compensated through its brokerage commissions. Once TransPlanet adds fees for additional services, it no longer qualifies for the exemption and must register as an investment advisor. The requirement has nothing to do with the company’s desire to add to its profits.
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