Selling advisory services can trigger an investment adviser representative (IAR) registration requirement when you persuade a customer to hire a portfolio manager, even if you never select a security.
A customer may hire an advisory firm but receive recommendations from you. The IAR definition examines your role separately from the firm's because you perform different functions.
An investment adviser is a person or firm in the business of providing securities advice for compensation. An investment adviser representative (IAR) is an individual associated with an adviser whose functions satisfy the applicable representative definition. You determine your status from your work and the adviser's registration category.
A state-registered adviser is an adviser registered under state securities law. A federal covered adviser is an adviser registered with the Securities and Exchange Commission (SEC). The second category changes the IAR registration analysis by bringing federal limits on which associated individuals states may register.
The Uniform Securities Act of 1956, as amended, supplies the state-law framework used here. The North American Securities Administrators Association (NASAA) also publishes model language explaining IAR definitions.
Common mistakes
- Counting job titles instead of advisory functions. An officer handling only premises does not qualify through title; an employee selecting portfolio recommendations can qualify through work.
- Treating “mostly clerical” as “only clerical.” An assistant who spends 90% of the day scheduling but also solicits advisory clients cannot rely on that exclusion.
- Dropping former clients from the state count. Three current clients plus three others served within the preceding 12 months equal six counted clients, assuming none is institutional.
Bottom line
- An IAR is an individual whose actual functions satisfy the applicable definition.
- State-law functions include giving advice, managing portfolios, determining recommendations, selling advisory services and supervising those activities.
- Personnel performing only clerical or ministerial duties are excluded; additional exclusions may come through Administrator rules or orders.
- The state institutional-only and five-client exemptions both require no in-state place of business; the five-client period is the preceding 12 months.
Exam shortcut
Label the adviser “state” or “federal” before using any client number. This prevents applying the right threshold to the wrong rule. For a state-adviser question, check the office fact before counting clients. Then separate institutions and mark the rolling 12-month window. For a federal-adviser question, subtract qualified individuals from the special group, keep the total denominator, and test both strict thresholds.
The full lesson (about 3,725 words, 25 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- B2
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