NASAA Series 63Regulation of Investment Advisers and IARsMedium
A state-chartered trust company, as part of its normal trust and fiduciary business, manages investment portfolios for trust accounts and charges a fee for this service. Must the trust company register as an investment adviser under the Uniform Securities Act?
- ANo, because banks and trust companies are excluded from the definition of investment adviser
- BYes, because it receives compensation for managing securities portfolios
- CYes, unless the trust company has fewer than 15 trust clients
- DNo, but only if the trust company registers instead as a broker-dealer
Show answer & explanationAnswer & explanation
Correct answer: A. No, because banks and trust companies are excluded from the definition of investment adviser
The Uniform Securities Act's definition of investment adviser expressly excludes banks, savings institutions, and trust companies performing their customary fiduciary functions. This exclusion applies regardless of fees charged or number of clients served.
Why the other options are wrong
- B. Compensation is irrelevant because the bank/trust company exclusion applies categorically.
- C. No client-count threshold applies to this exclusion.
- D. Broker-dealer registration is unrelated to the trust company's investment management activities.
Bank/Trust Company Exclusion
Banks, savings institutions, and trust companies are excluded from the investment adviser definition when performing customary fiduciary and trust functions.
- Exclusion applies to depository institutions, not their holding companies
- Covers trust and fiduciary account management
- No fee-based or client-count exception negates this exclusion
Memory trick: Banks bank on their own exclusion.