NASAA Series 63Regulation of Investment Advisers and IARsMedium
An investment adviser employs an analyst who works exclusively in a back office, has no direct contact with clients, but personally decides which securities from the firm's model portfolios will be recommended to advisory clients. Under the Uniform Securities Act, this analyst:
- Ais excluded because the analyst performs solely clerical or ministerial functions
- Bis an investment adviser representative because the analyst determines which recommendations are given to clients
- Cis exempt because the analyst does not exercise discretionary trading authority
- Dis not an investment adviser representative because IAR status requires direct client communication
Show answer & explanationAnswer & explanation
Correct answer: B. is an investment adviser representative because the analyst determines which recommendations are given to clients
The definition of IAR includes any person who makes recommendations or determines which recommendations should be given, regardless of whether they have direct client contact. This analyst's decision-making role over client recommendations makes them an IAR.
Why the other options are wrong
- A. Clerical/ministerial exclusion applies to purely administrative tasks, not decision-making on recommendations.
- C. Discretionary trading authority is a separate, additional basis for IAR status, not a prerequisite.
- D. Direct client contact is not required — determining recommendations is sufficient.
IAR Definition — Recommendation Determination
A person is an investment adviser representative if they make or determine which recommendations should be given to clients, even without direct client contact.
- No requirement of direct client interaction
- Contrasts with clerical/ministerial exclusion for purely administrative staff
- Also includes those with supervisory authority over other IARs
Memory trick: Decide the pick, become an IAR chick