Monday, February 1, 2010

Or through publications or writings

Here's a good practice question on registration issues for investment advisers:

Diane Davis receives detailed financial information from 19 individuals residing in four states and emails financial plans to them based on the data supplied to her by email. If she charges just $189 per year for this service
A. she does not meet the definition of "investment adviser" due to the amount of compensation
B. she must register with the SEC
C. she meets the definition of "investment adviser"
D. she does not meet the definition of investment adviser because she does not meet with any clients in any of the four states

EXPLANATION: she receives compensation to provide financial plans based on specific situations. Whether she meets face-to-face or advises people "through publications or writings" is not what's relevant. The relevant point is that she gives advice specific to each client and receives compensation for doing so. Don't confuse what Diane is doing with somebody else who might be writing a newsletter on investing that goes out to paid subscribers. Diane is not writing articles--she is advising clients without having to shower or put on make-up. That's all. Also, Diane would have to be in 30+ states to claim federal eligibility. She has no assets under continuous, supervisory management, so she can't reach the $25 million threshold.


No comments:

Post a Comment