Which of the following professionals least likely meets the definition of an "investment adviser"?
A. an accountant who charges only a nominal fee to help tax clients with allocation strategies for their retirement accounts
B. an individual who writes a financial newsletter for compensation to a group of subscribers in several states
C. a financial planner
D. an insurance agent who occasionally provides financial planning services to his clients
EXPLANATION: according to the so-called "three-pronged approach" developed by the SEC's Release IA-1092, the individual has to be giving advice that is specific to the client's situation in order to meet the definition of "investment adviser." The writer of a financial newsletter is just a publisher/writer enjoying his First Amendment rights. Of course, an adviser who never meets face-to-face with clients would still be an adviser if he wrote up his personalized recommendations and sent them to each of his clients. The key here is the specificity--is the adviser writing to a general audience, or is he advising individuals based on their unique situations? The newsletter writer is just a publisher, not an adviser. The accountant is crossing the line by charging to help with investments. The financial planner is the perfect example of an investment adviser. And the insurance agent becomes an adviser as soon as he holds himself out as a professional who provides financial planning services. The only caveat there is that if the financial advice had absolutely nothing to do with securities, the insurance agent would escape the definition of "investment adviser." But that would require him to talk only about, say, credit cards, personal budgeting, real estate, and fixed annuities.
ANSWER: B
Walker,
ReplyDeleteWouldn't D classify as the least likely as he is giving "occasional" services, whereas financial newsletter is getting compensated through a group of subscribers rather than general public ?
Thanks.
the Uniform Securities Act excludes from the definition of "investment adviser" . . . a publisher of any bona fide newspaper, news column, newsletter, news magazine, or business or financial publication or service, whether communicated in hard copy form, or by electronic means, or otherwise, that does not consist of the rendering of advice on the basis of the specific investment situation of each client. SO, unless the publisher/writer is looking at the readers' situations and telling them what to do, he is just a publisher/writer. Not sure what the difference would be between a group of subscribers and "the general public." What does that mean? Financial planners are specifically included in the definition of "investment adviser" . . . “Investment adviser” also includes financial planners and other persons who, as an integral component of other financially related services, provide the foregoing investment advisory services to others for compensation and as part of a business or who hold themselves out as providing the foregoing investment advisory services to others for compensation.
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