Investment Advisers Act of 1940
Defines who is an investment adviser and imposes fiduciary duty.
What is Investment Advisers Act of 1940?
Requires registration for those who, for compensation, advise on securities as part of a regular business. It is the statutory source of the adviser's fiduciary duty and of Form ADV disclosure obligations.
Investment Advisers Act of 1940: a worked example
The three-part test - advice, compensation, business - determines whether registration is required.
More terms in Regulation & Professional Duty
Fiduciary Duty
A legal obligation to act in the client's best interest.
Suitability Standard
A recommendation must be appropriate given the client's profile.
Regulation Best Interest (Reg BI)
SEC rule requiring broker-dealers to act in a retail client's best interest.
Registered Investment Adviser (RIA)
A firm registered to give advice for a fee, holding fiduciary duty.
Broker-Dealer
A firm that executes trades as agent (broker) or principal (dealer).
FINRA
The self-regulatory organization overseeing broker-dealers.
Securities and Exchange Commission (SEC)
The federal agency regulating securities markets.
SIPC
Insurance against broker failure - not against investment losses.