NASAA Series 63Regulation of Investment Advisers and IARsMedium
An individual is employed by a registered investment adviser and is paid a referral fee for introducing new clients to the firm, but does not provide any investment advice or manage any accounts herself. Under the Uniform Securities Act, this individual is most accurately classified as:
- ANot subject to any registration requirements because she gives no advice
- BAn investment adviser representative, since she is compensated for soliciting advisory clients on behalf of the firm
- CExempt from registration if her referral fees are less than $500 per year
- DA broker-dealer agent because compensation is transaction-based
Show answer & explanationAnswer & explanation
Correct answer: B. An investment adviser representative, since she is compensated for soliciting advisory clients on behalf of the firm
Under the USA, a person who solicits clients for advisory services on behalf of an investment adviser, and is compensated for doing so, generally meets the definition of an investment adviser representative even if they do not provide advice directly.
Why the other options are wrong
- A. Soliciting clients for compensation is enough to require IAR registration, even without giving advice.
- C. There is no small-dollar exemption for solicitor compensation under the USA.
- D. There is no securities transaction involved; her role is client solicitation for advisory services.
Solicitor as IAR
A person compensated for soliciting or referring clients to an investment adviser is generally considered an investment adviser representative under the USA, even without giving advice directly.
- Solicitation for compensation triggers IAR status
- No minimum dollar threshold exemption exists
- Must meet state's IAR registration and disclosure requirements
Memory trick: Paid to bring in clients? You're an IAR too.