Definition of "Investment Adviser"
Chapters in this video
- 0:00 Ian the wannabe adviser and the ham sandwich
- 0:54 The USA statutory definition and Stan the state administrator
- 1:57 The ABC test: advice, business, compensation
- 3:26 The broad compensation trap: direct fees and indirect benefits
- 5:03 1986 NASAA amendment and the holding-out standard
- 7:16 Surviving exam day: mechanical ABC application
- 8:26 Rapid-fire exam recap
What this video covers
- The three elements of the ABC test (Advice about securities, Business, Compensation), and why ALL must be present for a person to qualify as an investment adviser (IA)
- Why free advice, one-time favors, or non-securities subjects remove a person from the IA definition entirely
- How compensation includes commissions, transaction-based fees, third-party payments, and any economic benefit received in connection with advisory services
- Why a financial planner who charges no direct fee but earns back-end commissions IS receiving compensation under the Uniform Securities Act (USA)
- The 1986 North American Securities Administrators Association (NASAA) amendment that explicitly brought financial planners into the IA definition
- How the holding-out standard works: marketing yourself as providing investment advisory services automatically satisfies the business element
- Why a flat fee for a comprehensive plan that includes even one page of investment recommendations satisfies the compensation element
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