Seite - 99 - in Austrian Law Journal, Band 1/2015

ISSN: 2409-6911 (CC-BY) 3.0 license www.austrian-law-journal.at Fundstelle: Carroll, Observations on Judicial Approaches to Discerning Investment Adviser Status under the Investment Advisers Act of 1940, ALJ 1/2015, 99–126 (http://alj.uni-graz.at/index.php/alj/article/view/39). Observations on Judicial Approaches to Discerning Investment Adviser Status under the Investment Advisers Act of 1940 Brian Carroll*, U.S. Securities & Exchange Commission/Villanova Law School Abstract: This article analyzes judicial approaches to interpreting the definition of an invest- ment adviser under the Investment Advisers Act of 1940, the United States federal statute gov- erning investment advisers. It starts by noting the role of investment advisers in the United States financial services industry and introduces the statutory definition of an investment advis- er and each element of this definition. It explains briefly why adviser status is important and touches on the relationship between investment adviser status and registration as an invest- ment adviser with the United States Securities & Exchange Commission. Based on cases initiated by the United States Securities & Exchange Commission, the United States Department of Justice and investment adviser clients alleging investment adviser violations of the Investment Advisers Act of 1940, the article discusses key judicial interpretations of the elements of the definition of investment adviser. Along the way, the author shares his observations about these judicial ap- proaches to interpreting the definition of an investment adviser by, among other things, evaluat- ing some of the strengths and weaknesses reflected in these judicial approaches. Keywords: investment adviser; investment advice; investment management; Section 202(a)(11); Investment Advisers Act. I. Introduction Under United States federal securities law, the definition of an investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 (“Advisers Act”) covers services provided by thousands of investment management professionals ranging from portfolio managers advising private investment funds, such as hedge funds, to certain types of personal financial advisers and financial planners,1 collectively overseeing trillions of dollars in investment assets.2 The most signifi- * Brian Carroll, an attorney and a certified public accountant, serves as a Senior Special Counsel at the United States Securities & Exchange Commission, Philadelphia Regional Office. He is also an Adjunct Professor of Law at Villanova Law School. The United States Securities & Exchange Commission (“Commission”) disclaims responsibility for any private publications or statements of any of the Commission’s employee or commissioner. This article expresses the author’s views and does not necessarily reflect those of the Commission, the commissioners, or other members of the staff. 1 See SEC. AND EXCH. COMM’N, STUDY ON ENHANCING INVESTMENT ADVISER EXAMINATIONS 1, 32 (Jan. 2011) (discussing diver- sity of investment advisory industry as “ranging from small, locally-operated financial planning firms to money managers that are part of global financial institutions [...]”). 2 See id. at 10 (noting that as of Sept. 30, 2010, registered investment advisers managed $ 38.3 trillion in assets); see also SEC. AND EXCH. COMM’N, DODD-FRANK ACT CHANGES TO INVESTMENT ADVISER REGISTRATION REQUIREMENTS 5 (Jan. 13, 2013) (“There are 10,754 advisers registered with the Commission with total assets under management of $ 49.66 trillion.”).