Q:

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

A:
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.

RELATED FAQS

  1. ABC Broker-dealer has no office in state and transacts fewer than five trades during ...

    The correct answer is b. Under these circumstances, the broker-dealer is not required to register with the state and the ...
  2. Under the Uniform Securities Act, which of the following actions is permitted for ...

    The correct answer is d). A sales representative may not make trades in a state unless both the sales representative and ...
  3. Transactions are exempt from registration where …

    Transactions are exempt from registration where … a. A sale, or offer of sale is made to ALL clients of a brokerage ...
  4. Under the Uniform Securities Act, registration requirements for an investment adviser ...

    The correct answer is a) Investment advisor representatives do not need to include a minimum amount of net capital since ...
RELATED TERMS
  1. Broker-Dealer

    A person or firm in the business of buying and selling securities, ...
  2. Investment Advisor

    As defined by the Investment Advisors Act of 1940, any person ...
  3. Upstairs Market

    The trading of securities, such as stocks, that occurs within ...
  4. Section 12D-1 Limit

    A rule added to the Investment Company Act in 1964 to provide ...
  5. Average Ticket

    1. For credit card vendors, a business's average ticket refers ...
  6. Federal Covered Advisor

    An investment advisor in the United States that manages more ...
Hot Definitions
  1. Redlining

    The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...
  2. Nonfarm Payroll

    A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number ...
  3. Conflict Theory

    A theory propounded by Karl Marx that claims society is in a state of perpetual conflict due to competition for limited resources. ...
  4. Inflation-Linked Savings Bonds (I Bonds)

    U.S. government-issued debt securities similar to regular savings bonds, except they offer an investor inflationary protection, ...
  5. Peak Globalization

    Peak globalization is a theoretical point at which the trend towards more integrated world economies reverses or halts.
  6. Phishing

    A method of identity theft carried out through the creation of a website that seems to represent a legitimate company. The ...
Trading Center