As defined by the Advisors Act of 1940, an investment advisor is :
Investment Adviser
(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 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,
as exempted securities for the purposes of that Act; or (F) such other persons not within the intent of this
paragraph, as the Commission may designate by rules and regulations or order.
Perhaps for the benefit of those clients looking for a more common definition an “investment adviser”
could be described simply as “the person or company responsible for making investments on behalf of,
and/or providing advice to investors. I have written this memorandum explaining what a “registered
investment advisor” is because as members of the financial services community they are somewhat new
to the scene. In fact, it is only in the last 10 – 15 years that their numbers have grown to where they are
today.
Download RIA_Memo
