1.1.1 Investment Adviser—Definition
The first category of people and companies regulated under the Uniform Securities Act is investment advisers. In its most basic definition, an investment adviser is someone who provides investment advice in exchange for compensation of some kind. As you’ll quickly come to see however, the law makes it a little more complex than that simple definition, adding numerous exceptions you will be expected to know for the exam.
The Investment Advisers Act of 1940 states:
“Investment adviser” means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities.
The term person, as defined by the Investment Advisers Act of 1940, means a natural person or entity (a company). This distinction is important because, generally speaking, an investment adviser is typically not a living, breathing individual. Instead, an investment adviser is usually a business or firm that provides financial advisory services to clients. As we will see later, the individuals who actually work with clients and provide that advice are investment adviser representatives.
The term “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.
As you may have noticed, the definition itself includes some people who provide investment advice alongside other services (such as being a financial planner) and those who write newsletters that contain inves