NASAA Series 63Regulation of Investment Advisers and IARsMedium
A licensed CPA prepares tax returns for clients and, as part of year-end tax planning, occasionally suggests that clients consider municipal bond funds to reduce taxable income. She charges only her standard hourly accounting fee and does not hold herself out as offering investment advice. Under the Uniform Securities Act, this CPA is:
- ARequired to register as an investment adviser representative of a broker-dealer
- BRequired to register as an investment adviser because securities advice was given
- CExcluded from the definition of investment adviser because the advice is incidental to her accounting practice
- DExempt only if she limits her securities advice to five or fewer clients per year
Show answer & explanationAnswer & explanation
Correct answer: C. Excluded from the definition of investment adviser because the advice is incidental to her accounting practice
The USA excludes lawyers, accountants, teachers, and engineers (LATE) from the IA definition when investment advice is solely incidental to their profession and no special compensation is charged for it. Since her advice is incidental and uncompensated separately, she is excluded.
Why the other options are wrong
- A. Nothing in the facts ties her to a broker-dealer.
- B. She is excluded because the advice is incidental, not a separate advisory business.
- D. The de minimis client-count exemption applies to advisers, not to the LATE exclusion, which has no numeric limit.
LATE Exclusion
Lawyers, Accountants, Teachers, and Engineers are excluded from the IA definition if investment advice is solely incidental to their profession and no special compensation is charged.
- Advice must be incidental, not the primary service
- No extra fee for the advice itself
- If advice becomes a distinct paid service, exclusion is lost
Memory trick: LATE professionals give advice, but only as a side dish, not the main course