A financial planner charges a flat fee for a written plan that recommends specific mutual funds. A stockbroker earns commissions selling those same funds. Both touch securities. Both serve clients. But only one is an investment adviser. Knowing where that line falls (and who must register where) is worth roughly 10 questions on your exam.
Two laws sit under every registration question, and the exam names both. The Investment Advisers Act of 1940 (codified at 15 U.S. Code sections 80b-1 and following) is the federal adviser statute, administered by the SEC. The Uniform Securities Act is the state counterpart, administered by each state's Administrator. A stem opening "Under the Investment Advisers Act" is asking about the federal rule. A stem opening "Under the Uniform Securities Act" is asking about state law.
The Advisers Act citations the exam uses by number:
KEY: When a federal rule and a state rule differ, read the registrant's status before you read the choices. An SEC-registered (federal covered) adviser follows the Advisers Act rule.
Common mistakes
- Confusing "excluded" with "exempt." On the Series 65, excluded persons never fall within the definition at all. Exempt persons fall within the definition but are relieved from registration. The distinction matters because excluded persons have no filing obligations whatsoever, while exempt persons may still face antifraud provisions.
- Applying the LATE exclusion with only one condition met. A lawyer who advertises "Securities Portfolio Reviews" on her website fails the "not holding out" condition, even if her advice is purely incidental to legal work. Both conditions must be satisfied simultaneously.
- Thinking IARs register where clients are located. IARs register in the state where they maintain an office, not where their clients reside. An IAR in a Denver office serving clients in five states registers only in Colorado. The trap answer is "must register in all five states."
Bottom line
- Investment adviser = advice + business + compensation (all three required)
- State registration for IAs under $100M AUM; SEC mandatory at $110M; the $100M to $110M buffer zone allows the firm to choose
- LATE professionals are excluded only when advice is incidental AND they do not hold themselves out as advisers
- Broker-dealer = effects transactions for others; banks and issuers are excluded, and banks are excluded from the IA definition too
Exam shortcut
When the exam asks "must this person register as an IA," run the three-part checklist (advice, business, compensation) and then check exclusions. If any element is missing, stop. The answer is no. If all three are present, check LATE and BD exclusions before concluding yes. Memory aids: "ABC" for the three IA elements (Advice, Business, Compensation. "LATE" for excluded professionals) Lawyers, Accountants, Teachers, Engineers.
The full lesson (about 5,577 words, 37 min read) adds 2 worked examples, all 7 common mistakes, a self-check, free in the app.
Learning objectives
- D30
- D31
- D32
- D33
- D34
- D35
- D36
- D37
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