Investment Advisers Act of 1940

DEFINITION of 'Investment Advisers Act of 1940'

A piece of legislation passed in 1940 that, among other things, defined the role and responsibilities of an investment advisor/adviser. The Investment Advisers Act of 1940 was largely drafted as a response to the stock market crash 11 years earlier, as well as the subsequent depression. The Act originated from a report on investment trusts and investment companies that the Securities and Exchange Commission (SEC) prepared for Congress in 1935. The SEC report warned of the dangers posed by certain investment counselors and advocated the regulation of those who provided investment advice. Based on this recommendation, Congress began work on the bill that eventually became the Investment Advisers Act of 1940.

BREAKING DOWN 'Investment Advisers Act of 1940'

A subsequent amendment to the act further stipulated that individuals designated as investment advisors with more than $25 million under management are required to register with the SEC; lower, and advisors only have to register with their state. The act also states the liability of investment advisors have and provides guidelines regarding the fees and commissions they can collect.

RELATED TERMS
  1. Registered Investment Advisor - ...

    An advisor or firm engaged in the investment advisory business ...
  2. Investment Company Act Of 1940

    Created in 1940 through an act of Congress, this piece of legislation ...
  3. Investment Advisor

    As defined by the Investment Advisors Act of 1940, any person ...
  4. Federal Covered Advisor

    An investment advisor in the United States that manages more ...
  5. Advisor

    1. The person or company responsible for making investments on ...
  6. Section 12D-1 Limit

    A rule added to the Investment Company Act in 1964 to provide ...
Related Articles
  1. Professionals

    Registration and Licensing

    Registration and Licensing
  2. Professionals

    Investment Advisors Act of 1940

    FINRA Series 6 Exam Study Guide - Investment Advisors Act of 1940. This section defines investment advisor, IA 1092 and Investment Advisor Representatives.
  3. Professionals

    Who Must Register As An Investment Adviser?

    FINRA/NASAA Series 65 - Who must register as an investment adviser?
  4. Professionals

    Federal (SEC) vs. State Registration

    FINRA/NASAA Series 65 - Federal (SEC) vs. State Registration. In this section the value of client assets and sample questions.
  5. Professionals

    Investment Adviser: Initial Registration and Requirements

    FINRA/NASAA Series 63 - Investment Adviser: Initial Registration and Requirements. In this section Investment Adviser initial registration, financial requirements, update and renewal.
  6. Professionals

    State Registered Investment Advisors

    FINRA/NASAA Series 66: Section 8 State Registered Investment Advisors. In this section IA registration under USA and exclusions from this. Also, registration requirement of IAs discussed.
  7. Professionals

    Investment Adviser Representative (IAR): Definition

    FINRA/NASAA Series 63 - Investment Adviser Representative (IAR): Definition. This section defines investment advisor representative and its exclusions.
  8. Professionals

    The Uniform Securities Act (USA) - Definitions Part 4

    FINRA/NASAA Series 63 - The Uniform Securities Act (USA) - Definitions Part 4. In this section definitions of guaranteed, institutional investor and investment advisor representative.
  9. Professionals

    The Securities Investor Protection Corp. (SIPC)

    The Securities Investor Protection Corp. (SIPC)
  10. Term

    What's an Investment Advisor?

    An investment or financial advisor makes investment recommendations and analyzes securities.
RELATED FAQS
  1. How are investment banks regulated in the United States?

    Read about the extensive regulations placed on investment banks in the United States, beginning with the Glass-Steagall Act ... Read Answer >>
  2. Under the Uniform Securities Act, which of the following advisers is NOT defined ...

    The correct answer is b). Federal covered advisers include those who manage client assets of $25,000,000 or more or who advises ... Read Answer >>
  3. The de Minimis clause for investment advisers means:

    A. An investment adviser must register with the state if it holds less than $25 million in assets.B. An investment adviser ... Read Answer >>
  4. Under the Uniform Securities Act, the registration of an investment adviser results ...

    The correct answer is b. Clerical employees do not need to be registered as investment adviser representatives, while solicitors, ... Read Answer >>
  5. 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 ... Read Answer >>
  6. Are hedge funds registered with the Securities and Exchange Commission (SEC)?

    Learn the conditions that require hedge fund advisors to register with the U.S. Securities and Exchange Commission. Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center