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cant part of Section § 202(a)(11) defines an investment adviser as one who âfor compensation,
engages in the business of advising others [...] as to the value of securities or as to the advisability
of investing in, purchasing, or selling securities [...].â3 While much of the work of these and other
financial professionals falls clearly under this definition, investment adviser status is not always
obvious, particularly when dealing with newly created financial services and products.
This article examines how courts approach the elements of this definition and some of the chal-
lenges they face. It starts by noting briefly why investment adviser status is important. It then
reviews the complete statutory definition of an investment adviser and touches on the relation-
ship between investment adviser status and investment adviser registration with the U.S. Securi-
ties & Exchange Commission (âCommissionâ), a federal agency charged with administering the
Advisers Act. Next, the article identifies the types of cases that may implicate this definition. Final-
ly, it outlines key judicial approaches to interpreting this definition while sharing some observa-
tions about these approaches.
II. Investment Adviser: Definition, Exceptions and an Exemption
Investment adviser status is important because it carries with it certain responsibilities and op-
portunities. At the very least, an adviser that meets this definition owes a fiduciary duty to its
clients4 and is subject to the Commissionâs authority to investigate and prosecute in civil proceed-
ings investment adviser fraud under provisions of § 206,5 regardless of whether or not an in-
vestment adviser is required to register with the Commission.6 Similarly, an investment adviser is
designated by law as a potential whistleblower target under § 21F7 of the Securities Exchange Act
of 1934 (âExchange Actâ).8 On the other hand, registered investment advisers may participate as a
3 Investment Advisers Act of 1940 (âAdvisers Actâ), § 202(a)(11), 15 U.S.C. § 80b-2(a)(11) (1940). Hereafter references
to sections of Advisers Act and rules promulgated thereunder will not be identified as part of the Advisers Act,
but simply by section number and rule number.
4 Sec. & Exch. Commân v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 191 (1963) (citations omitted) (âThe
Investment Advisers Act of 1940 thus reflects a congressional recognition of the delicate fiduciary nature of an
investment advisory relationship.â); Santa Fe Indus., Inc. v. Green, 430 U.S. 462, 472 n.11 (1977) (â[âŠ] Congress in-
tended the Investment Advisers Act to establish federal fiduciary standards for investment advisers.â (citations
omitted); Transamerica Mortg. Advisors, Inc. v. Lewis, 444 U.S. 11, 17 (1979) (â[T]he [Advisers] Actâs legislative his-
tory leaves no doubt that Congress intended to impose enforceable fiduciary obligations.â).
5 See § 206(1)-(2), Prohibited Transactions by Investment Advisers, 15 U.S.C. § 80b-6(1-2), (âIt shall be unlawful for
any investment adviser, by use of the mails or any means or instrumentality of interstate commerce, directly or
indirectly â (1) to employ any device, scheme, or artifice to defraud any client or prospective client; (2) to engage
in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or pro-
spective client [âŠ].â).
6 See § 206, Prohibited Transactions by Investment Advisers, 15 U.S.C. § 80b-6; Transamerica Mortgage Advisors,
Inc. v. Lewis, 444 U.S. 11, 17 n.6 (1979) (When amending Section 206 by adding Section 206(4), â[âŠ] Congress also
extended the provision of § 206 to all investment advisers, whether or not such advisers were required to regis-
ter under § 203 of the [Advisers] Act, 15 U.S.C. § 80b-3. 74 Stat. 887.â); see also âInvestment Adviser Status and In-
vestment Adviser Registration with the Commissionâ in this article.
7 § 21F Securities Exchange Act of 1934 (âExchange Actâ), Securities Whistleblower Incentives and Protection, 15 U.S.C.
§ 78u-6; see Securities Whistleblower Incentives and Protections, Securities Exchange Act Release No. 64545 (May
25, 2011) 3, 76 FR 34300 (June 13, 2011) (adopting rule release) (âSection 21F directs that the Commission pay
awards, subject to certain limitations and conditions, to whistleblowers who voluntarily provide the Commission
with original information about a violation of the securities laws that leads to the successful enforcement of an
action brought by the Commission that results in monetary sanctions exceeding $ 1,000,000.â); see also Exchange
Act § 3(a)(47), 15 U.S.C. 78c(47) (âThe term âsecurities lawsâ means [...] the Investment Advisers Act of 1940 [...].â).
8 15 U.S.C. § 78a et seq.
zurĂŒck zum
Buch Austrian Law Journal, Band 1/2015"
Austrian Law Journal
Band 1/2015
- Titel
- Austrian Law Journal
- Band
- 1/2015
- Autor
- Karl-Franzens-UniversitÀt Graz
- Herausgeber
- Brigitta Lurger
- Elisabeth Staudegger
- Stefan Storr
- Ort
- Graz
- Datum
- 2015
- Sprache
- deutsch
- Lizenz
- CC BY 4.0
- Abmessungen
- 19.1 x 27.5 cm
- Seiten
- 188
- Schlagwörter
- Recht, Gesetz, Rechtswissenschaft, Jurisprudenz
- Kategorien
- Zeitschriften Austrian Law Journal