What Is SEC Release IA-1092?
Let me explain SEC Release IA-1092 directly to you—it's a release from the Securities and Exchange Commission that offers uniform interpretations of how state and federal adviser laws apply to those providing financial services.
This release builds on the Investment Advisers Act of 1940, which Congress enacted to protect people who rely on investment advisers for guidance on buying and selling securities.
Key Takeaways
You should know that SEC Release IA-1092 clarifies how state and federal securities laws apply to investment advisers and financial planners. Issued in 1987, this memo expands on the Investment Advisers Act of 1940. It specifically defines the roles and duties of investment advisers and pension consultants.
Understanding SEC Release IA-1092
SEC Release IA-1092 came about in 1987 from a collaboration between the federal Securities and Exchange Commission and the state-level North American Securities Administrators Association. They issued this memo in response to the growing number of financial planning and investment advice professionals in the 1980s.
The release reaffirmed the definition of an investment adviser as outlined in SEC Release IA-770 and added some key refinements. For instance, it included pension consultants and advisers to athletes and entertainers as providers of investment advice. In some cases, firms that recommend investment advisers must register themselves.
Even if investment advice isn't your principal business, doing it with some regularity often requires registration. If you're a registered representative of a broker-dealer and set up a separate entity for financial planning or advice for a fee, you can't rely on the broker-dealer exemption—this is known as a statutory investment adviser.
Compensation doesn't have to be monetary; receiving products, services, or discounts counts too. However, sports or entertainment agents who negotiate contracts without giving investment advice are excluded from the investment adviser definition.
SEC Release IA-1092 and the Investment Advisers Act of 1940
The Investment Advisers Act of 1940 defines an investment adviser as any person who, directly or indirectly through writings, engages in advising others on the value or profitability of securities and receives compensation for it.
You can find guidelines for this Act in Title 15, section 80b-1 of the United States Code, which states that investment advisers are of national concern because their advice, counsel, publications, writings, analyses, and reports align with interstate commerce.
Their work typically relates to securities traded on national exchanges and in interstate over-the-counter markets. It connects with securities from companies in interstate commerce, and the volume of transactions can materially affect interstate commerce, national securities exchanges, other markets, the national banking system, and the overall economy.
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