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


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.

Professionals FAQs
  1. Where can I look for a financial planner?

    References from trusted friends or family members can help you find a financial planner; however, keep in mind that your friends' financial situations and goals may differ from yours and, therefore, their planners won't necessarily be the best fit for you.The Certified Financial Planner (CFP) Board of Standards certifies financial planners and maintains an online list of certified financial planners on its CFP Board of Standards website.
  2. If I am looking to get an Investment Banking job. What education do employers prefer? MBA or CFA?

    If you are looking specifically for an investment banking position, an MBA may be marginally preferable over the CFA. The caveat here is that the MBA would most probably need to be from a Top-20 B-School.The Chartered Financial Analyst (CFA) is well worth considering if you (a) are aiming for an entry-level position in investment banking, and/or (b) cannot afford to shell out six figures for an MBA or have to settle for a lesser-known B-school.That's because in the investment banking field, most entry-level positions are at the analyst level.
  3. Can I still pass the CFA Level I if I do poorly in the ethics section?

    You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't count on it. The CFA Institute has long emphasized that ethics is a particular area of focus for it. The seriousness with which the CFA Institute views ethics is evident from the fact that for exam candidates with borderline total scores, performance on the ethics section can mean the difference between passing and failing the exam.
  4. Under the USA, registration as an IAR includes all of the following EXCEPT:

    Under the USA, registration as an IAR includes all of the following EXCEPT: A. Minimum net capitalB. Passing a qualification examC. Filing a consent to service of processD. Posting a surety bond The correct answer is "A", since only an IA would need to prove minimum net capital requirements.