According to the Uniform Securities Act, which of the following individuals is EXCLUDED from the definition of an investment adviser representative (IAR)?
- AAn individual who supervises other IARs within a state-registered investment adviser firm.
- BAn individual who provides investment advice to fewer than 5 clients in a state, but has a place of business there.
- CAn individual who works for an SEC-registered investment adviser and manages discretionary accounts for high-net-worth clients.
- DAn individual whose advice is solely incidental to their business as a lawyer, and who does not receive special compensation for it.
Show answer & explanationAnswer & explanation
Correct answer: D. An individual whose advice is solely incidental to their business as a lawyer, and who does not receive special compensation for it.
The Uniform Securities Act excludes individuals whose investment advice is solely incidental to their professional practice as a lawyer, accountant, teacher, or engineer (LATE professionals), provided they do not receive special compensation for the advice. This aligns with the 'LATE' exclusion from the definition of an Investment Adviser.
Why the other options are wrong
- A. Supervising IARs is a function that typically requires IAR registration itself, as it involves overseeing advisory activities.
- B. An individual with a place of business in a state, providing advice to any number of clients, would typically be an IAR.
- C. This individual performs typical IAR functions (managing accounts, providing advice) for an IA, making them an IAR.
IAR Exclusions (LATE)
Specific professionals (Lawyers, Accountants, Teachers, Engineers) who are excluded from the definition of an Investment Adviser Representative if their investment advice is solely incidental to their primary profession and they receive no special compensation for it.
- Advice must be incidental.
- No special compensation for advice.
- Applies to LATE professionals.
- Mirrors IA exclusion.
Memory trick: IARs advise for pay, unless they're LATE and incidental.