On Investment Advisers
Duke, I would be happy to. In establishing Stock Operators as a site different from the corrupt standard that has been set in this field the past several years, my company, under close advice of legal counsel, pursued an intense investigation the past several months into the laws concerning investment advisers. In my next post, I will outline some important points on IA's, but first, following is the applicable law, (which may be found at www4.law.cornell.edu
Investment Adviser's Act of 1940, Title 15, Chapter 2D, Subchapter II, Section 80b-2 (11), Investment Advisers - Definitions
11) ''Investment adviser'' means any person who, for
compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; but does not include (A) a bank, or any bank holding company as defined in the Bank Holding Company Act
of 1956 (12 U.S.C. 1841 et seq.) which is not an investment
company; (B) any lawyer, accountant, engineer, or teacher whose performance of such services is solely incidental to the practice of his profession; (C) any broker or dealer whose performance of such services is solely incidental to the conduct of his business as a broker or dealer and who receives no special compensation therefor; (D) the publisher of any bona fide newspaper, news magazine or business or financial publication of general and regular circulation; (E) any person whose advice, analyses or
reports relate to no securities other than securities which are direct obligations of or obligations guaranteed as to principal or interest by the United States, or securities issued or guaranteed by corporations in which the United States has a direct or indirect interest which shall have been designated by the Secretary of the Treasury, pursuant to section 3(a)(12) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)), as exempted securities for the purposes of that Act (15 U.S.C. 78a et seq.); or (F) such other persons not within the intent of this paragraph, as the Commission may designate by rules and regulations or order.
Investment Adviser's Act of 1940, Title 15, Chapter 2D, Subchapter II, Section 80b-3(b), Investment Advisers - Exemptions
(b) Investment advisers who need not be registered
The provisions of subsection (a) of this section shall not apply to -
(1) any investment adviser all of whose clients are residents of the State within which such investment adviser maintains his or its principal office and place of business, and who does not furnish advice or issue analyses or reports with respect to securities listed or admitted to unlisted trading privileges on any national securities exchange;
(2) any investment adviser whose only clients are insurance
companies;
(3) any investment adviser who during the course of the
preceding twelve months has had fewer than fifteen clients and who neither holds himself out generally to the public as an investment adviser nor acts as an investment adviser to any investment company registered under subchapter I of this chapter, or a company which has elected to be a business development company pursuant to section 80a-53 of this title and has not withdrawn its election. For purposes of determining the number of clients of an investment adviser under this paragraph, no shareholder, partner, or beneficial owner of a business development company, as defined in this subchapter, shall be deemed to be a client of such investment adviser unless such person is a client of such investment adviser separate and apart from his status as a shareholder, partner, or beneficial owner;
(4) any investment adviser that is a charitable organization, as defined in section 3(c)(10)(D) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(10)(D)), or is a trustee, director, officer, employee, or volunteer of such a charitable organization acting within the scope of such person's employment or duties with such organization, whose advice, analyses, or reports are
provided only to one or more of the following:
(A) any such charitable organization;
(B) a fund that is excluded from the definition of an
investment company under section 3(c)(10)(B) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(10)(B)); or
(C) a trust or other donative instrument described in section
3(c)(10)(B) of the Investment Company Act of 1940 (15 U.S.C.
80a-3(c)(10)(B)), or the trustees, administrators, settlors (or potential settlors), or beneficiaries of any such trust or other instrument; or
(5) any plan described in section 414(e) of title 26, any
person or entity eligible to establish and maintain such a plan under title 26, or any trustee, director, officer, or employee of or volunteer for any such plan or person, if such person or entity, acting in such capacity, provides investment advice exclusively to, or with respect to, any plan, person, or entity or any company, account, or fund that is excluded from the definition of an investment company under section 3(c)(14) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(14)).
Investment Adviser's Act of 1940, Title 15, Chapter 2D, Subchapter II, Section 80b-3(b), Investment Advisers - State and Federal Responsibilities
a) Advisers subject to State authorities
(1) In general
No investment adviser that is regulated or required to be
regulated as an investment adviser in the State in which it
maintains its principal office and place of business shall
register under section 80b-3 of this title, unless the investment
adviser -
(A) has assets under management of not less than $25,000,000,
or such higher amount as the Commission may, by rule, deem
appropriate in accordance with the purposes of this subchapter;
or
(B) is an adviser to an investment company registered under
subchapter I of this chapter.
(2) ''Assets under management'' defined
For purposes of this subsection, the term ''assets under
management'' means the securities portfolios with respect to which an investment adviser provides continuous and regular supervisory or management services.
(b) Advisers subject to Commission authority
(1) In general
No law of any State or political subdivision thereof requiring the registration, licensing, or qualification as an investment adviser or supervised person of an investment adviser shall apply to any person -
(A) that is registered under section 80b-3 of this title as
an investment adviser, or that is a supervised person of such person, except that a State may license, register, or otherwise qualify any investment adviser representative who has a place of business located within that State; or
(B) that is not registered under section 80b-3 of this title because that person is excepted from the definition of an investment adviser under section 80b-2(a)(11) of this title.
(2) Limitation
Nothing in this subsection shall prohibit the securities
commission (or any agency or office performing like functions) of any State from investigating and bringing enforcement actions with respect to fraud or deceit against an investment adviser or person associated with an investment adviser.
(c) Exemptions
Notwithstanding subsection (a) of this section, the Commission, by rule or regulation upon its own motion, or by order upon application, may permit the registration with the Commission of any person or class of persons to which the application of subsection (a) of this section would be unfair, a burden on interstate commerce, or otherwise inconsistent with the purposes of this section. |
