7.7.1. Definition of Investment Adviser
The first category of people and companies regulated under the Uniform Securities Act is investment advisers (IAs). In its most basic definition, an investment adviser is someone who provides investment advice in exchange for compensation of some kind. However, the law makes it more complex than that simple definition, adding numerous exceptions that 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 typ