Laws, Regulations, Guidelines, and Ethics

About 50% of the Series 66. This is why the exam exists.

Who is an investment adviser

The Investment Advisers Act of 1940 and the Uniform Securities Act define an IA as someone in the business of advising others about securities for compensation. Broker-dealers who only get commissions for transactions are generally not IAs. Financial planners who charge fees usually are.

Federal vs state

A large adviser (typically $110 million or more of AUM, with a buffer around the line) registers with the SEC. Smaller advisers register with the state. Notice filings and Form ADV still matter at both levels. The exam loves the AUM thresholds and the exemptions (banks, late-of-last-year publishers, intrastate advisers under the federal act).

Fiduciary duty

An IA is a fiduciary: put the client first, disclose conflicts, and do not take undisclosed principal trades. Soft dollars (using client commissions to buy research) have a safe harbor only if the research helps the client.

Custody and brochures

Custody (holding client assets or having authority to take them) triggers surprise exams and extra ADV items. The brochure (ADV Part 2) must be delivered to clients. Part 3 (Form CRS) is the short relationship summary for retail.

Uniform Securities Act

State law covers registration of broker-dealers, agents, IAs, and IARs; exemptions; and fraud. An IAR of a state-registered IA typically registers in the state where the IAR has a place of business or a de minimis number of clients. Offers and sales that cross state lines can create jurisdiction even if nobody lives there.

Ethics in one line

If you would not put the conflict in writing and hand it to the client, do not do the trade.