11.1 Investment Adviser Definition
Under both the Uniform Securities Act and the Investment Advisers Act of 1940, the statutory definition of an investment adviser determines registration, disclosure, and fiduciary compliance obligations.
Key NASAA Exam Takeaways
- The ABC Test: An Investment Adviser is any person who for Advice, as a Business, receives Compensation.
- Statutory Exclusions from IA definition under USA and Act of 1940: Banks and trust companies, LATE professionals (Lawyers, Accountants, Teachers, Engineers) whose advice is solely incidental, broker-dealers receiving no special compensation, and bona fide general financial publications.
- Special Compensation: Charging an advisory fee, asset-under-management fee, or financial planning retainer removes the broker-dealer exclusion and triggers IA status.
Knowledge Checkpoint • Section 11.1
An accountant prepares tax returns for clients and occasionally recommends municipal bonds for clients in high tax brackets. The accountant charges only standard hourly tax preparation fees and receives no commissions or advisory retainers. Is the accountant considered an Investment Adviser?