Question of the Week

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


Answer:

The correct answer is a.

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.

Financial Professionals
  1. How Much Does A Financial Advisor Earn?
    Investing Basics

    How Much Does A Financial Advisor Earn?

  2. Growth Strategies For Financial Advisors
    Professionals

    Growth Strategies For Financial Advisors

  3. Eyeing China? Consider These Economic Indicators
    Economics

    Eyeing China? Consider These Economic Indicators

  4. 8 Essential Tips For Retirement Saving
    Investing Basics

    8 Essential Tips For Retirement Saving

  5. 'Donut Hole' Essentials For The Financial Advisor
    Investing Basics

    'Donut Hole' Essentials For The Financial Advisor