Investment Advisers Flashcards
Regulation of Investment Advisers
Who is an investment adviser (IA)?
A person who charges fees for offering investment advice about securities
Are federal covered IAs included in the
USA definition of an IA?
No
Can an IA register with both the SEC and a State?
No.
But if federal covered, they must provide a notice filing in every state they plan on doing business
How does an IA know where to register?
As shown in the diagram, it is based on the amount of assets under management.
How does IA get discretionary account authorization?
In writing, received within 10 days after the initial discretionary trade
When must the IA brochure initially be delivered to a client?
- Not less than 48 hours prior to entering into any advisory contract with a client or prospective client
or - At the time of entry into any advisory contract
What determines whether or not an IA client can cancel their contract without penalty?
When the IA brochure is initially delivered.
- If delivered at least 48 hours before entering into contract, the withdrawal is not penalty free
- Otherwise, the client has a penalty-free withdrawal right for 5 business days after entering into the contract
If a federal covered adviser has an office in this state, can the Administrator require that the IA submit any documents that have been filed with the SEC?
Yes
What is a federal covered adviser?
An adviser, regulated under the Investors Advisers Act of 1940, who
- Registers with the SEC regardless of AUM
- Only registers with state to do a notice filing
- Primarily has investment companies as clients
What are the recurring delivery requirements for the IA brochure?
To Administrator
* Within 90 days of IA’s year end
* Promptly after any change of a material nature
To Clients
* Within 120 days of IA’s year end
* Must include a summary of material changes, if any have taken place
What are the exceptions to IA brochure delivery requirements?
- Clients who receive only impersonal advice and who pay less than $500 in yearly fees
- Clients who are registered investment companies
What are impersonal advisory services?
Any contract relating solely to the provision of IA services
* by means of writtten material or oral statements that do not purport to meet the objectives or needs of specific individuals or accounts
* through the issuance of statistical information containing no expression of opinion as to the merits of a particular security
* any combination of the above services
What are the financial requirements for IAs?
Net worth
* $10,000 with discretionary authority
* $35,000 if taking custody
* $35,000 if both discretionary authority and taking custody
Does an IA ever automatically become federal covered?
Yes
Once it provides advice to a registered investment company
Per NSMIA, any person excluded from the definition of investment adviser under the Investors Advisers Act of 1940
A federal covered adviser
SEC Release IA-1092
Updates the list of potential IAs to specifically include
* financial planners
* pension consultants
* sports and entertainment representatives
Who are specifically excluded from the definition of an investment advisor uder the Uniform Securities Act?
