Q:
Inter-Galaxy Investors Inc is a large broker-dealer headquartered in North Dakota. The company conducts brokerage transactions for individual investors and receives commissions from its broker transactions. As a part of its client service, the company’s research department provides reports and advice regarding the purchase and sale of securities. Is Inter-Galaxy considered an investment advisor?
a) Yes, because it receives commissions on transactions
b) Yes, because it provides investment advice
c) No, because it does not charge specific fees for investment advice
d) Maybe, if the company also opens an office in South Dakota
A:
The correct answer is c)
Inter-Galaxy would appear to be an investment advisor because the company provides advice, is in the business of providing that advice and receives compensation for the advice (the ABC rule). However, broker-dealers are exempt from registering as investment advisors if they if they do not charge a specific fee for the advice they dispense. Inter-Galaxy, like most broker-dealers, receives a commission on the securities trades transacted; the company is not charging for research or investment recommendations.

MORE FAQS

  1. ABC Broker-dealer has no office in state and transacts fewer than five trades during a 12-month period

  2. By expanding its current broker-dealer business to include financial planning and portfolio management

  3. A sales representative solicits and executes a mutual fund trade ...

  4. How can I prevent commissions and fees from eating up my trading profits?

  5. Transactions are exempt from registration where …

  6. What are the best ways to lower my investing fees?

  7. Under the Uniform Securities Act, registration requirements for an investment adviser representative ...

  8. Under the Uniform Securities Act, a broker-dealer is generally required to obtain surety bond coverage ...

  9. My advisor wants to sell stocks that are performing well and invest in other stocks. Could this be a ploy to get additional commission?

  10. If ABC corporation, which is listed on the New York Stock Exchange ...

  11. Are hedge funds registered with the Securities and Exchange Commission (SEC)?

  12. How quickly should my financial advisor sell a stock that I have asked him or her to sell for me?

  13. Which of the following qualifies as an Investment Advisor Representative ...

  14. Which of the following deliveries for a 600 share order, broker-dealer to broker-dealer ...

  15. Dave, a conservative investor, comes to you for advice on a diversified fixed-income portfolio ...

  16. According to SEC Release IA-1092, which of the following would NOT qualify as an investment advisor

  17. Is there a time frame where B and C shares do not have back end fees? And do you have to keep them for a specific time frame?

  18. What is the cheapest, fastest way to research, buy and trade stock?

  19. At what point in the ordering process does a broker charge commission?

  20. Is a financial advisor required to have a degree?

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. By expanding its current broker-dealer business to include financial planning and ...

    The correct answer is a. Typically, TransPlanet would not be required to register as an investment advisor under the broker-dealer ...
  3. A sales representative solicits and executes a mutual fund trade ...

    The correct answer is c). This would be considered a private securities transaction, which is not permitted. All securities ...
  4. How can I prevent commissions and fees from eating up my trading profits?

    First off, understand that there is no universal system regarding trading commissions charged by brokerage firms. Some charge ...
  5. 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 ...
  6. What are the best ways to lower my investing fees?

    Lower your investing fees by buying index funds or ETFs, choosing the right mutual fund share class, evaluating breakpoints ...
RELATED TERMS
  1. Investment Advice

    Any recommendation or guidance that attempts to educate, inform ...
  2. Commission

    A service charge assessed by a broker or investment advisor in ...
  3. Financial Adviser

    A professional who helps individuals manage their finances by ...
  4. Advisor

    1. The person or company responsible for making investments on ...
  5. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  6. Advisor Fee

    The fee that is paid to a financial advisor for recommending ...
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center