Page - 103 - in Austrian Law Journal, Volume 1/2015

ALJ 1/2015 Observations on Judicial Approaches to Discerning Investment Adviser Status 103 III. Investment Adviser Status and Investment Adviser Registration with the Commission Once the definition of an investment adviser is met, the adviser may or may not be required to register with the Commission. Sections 203 and 203A, and rules promulgated by the Commission thereunder, outline the circumstances triggering investment adviser registration.21 Commission registration carries with it a host of obligations as reflected in the Advisers Act and its rules promulgated by the Commission. These obligations include, for example, filing with the Commis- sion a registration form, Uniform Application for Investment Adviser Registration (“Form ADV”),22 and maintaining certain books and records,23 which are subject to Commission examination.24 As noted, while § 206, antifraud provisions generally apply to both registered and unregistered in- vestment advisers,25 not all antifraud rules promulgated by the Commission pursuant to § 206(4)26 apply to all investment advisers.27 21 See § 203, Registration of Investment Advisers, 15 U.S.C. § 80b-3; § 203A, State and Federal Responsibilities, 15 U.S.C. § 80b-3A (establishing requirements for Commission registration and exclusion from Commission registra- tion). The Commission has promulgated a series of rules interpreting the reach of these provisions. See, e.g., Rule 203A-1, Eligibility for SEC Registration: Switching to or from SEC Registration, 17 C.F.R. § 275.3A-1; Rule 203A-2, Exemption from Prohibition on SEC Registration, 17 C.F.R. § 275.3A-2. 22 See § 203(c)(1)(A)-(H), Procedure for Registration; Filing of Application, Effective Date of Registration; Amend- ments of Registration, 15 U.S.C. § 80b-3(c)(1) (requiring certain investment advisers to complete and file with the Commission Form ADV); Rule 203-1, Application for Investment Adviser Registration, 17 C.F.R. § 275.3-1; see also Amendments to Form ADV, Investment Advisers Act Release No. 3060 (July 28, 2010), 75 FR 49234 (Aug. 12, 2010) (adopting rule release). 23 See § 204, Annual and Other Reports, 15 U.S.C. § 80b-4; Rule 204-2, Books and Records to Be Maintained by Investment Advisers, 17 C.F.R. § 275.4-2. 24 See § 204(a), Annual and Other Reports, 15 U.S.C. § 80b-4(a) (“All records (as so defined) of such investment advisers are subject at any time, or from time to time, to such reasonable periodic, special, or other examina- tions by representatives of the Commission as the Commission deems necessary or appropriate in the public in- terest or for the protection of investors.”). See generally Brian Carroll, When the SEC Knocks …, 194 J. ACCOUNTANCY, Aug. 2002, at 35. 25 See § 206(1)-(2), 15 U.S.C. § 80b-6(1-2) (“It shall be unlawful for any investment adviser, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly – (1) to employ any device, scheme, or ar- tifice 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 prospective client […].”); Sec. & Exch. Comm’n v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 186 (1963) (seminal case interpreting the reach of § 206(2) as impos- ing on investment advisers a fiduciary duty owed to clients). See generally Brian Carroll, How To Prevent Investment Adviser Fraud, 201 J. ACCOUNTANCY, Jan. 2006, at 40; Brian Carroll, The Mutual Fund Trading Scandals, 198 J. ACCOUNT- ANCY, Dec. 2004, at 32. 26 See § 206(4), 15 U.S.C. § 80b-6(4), (“It shall be unlawful for any investment adviser, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly – […] (4) to engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative. The Commission shall, for the purpose of this paragraph (4) by rules and regulations define, and prescribe means reasonably designed to prevent, such acts, practices, and courses of business as are fraudulent, deceptive, or manipulative.”). 27 Pursuant to § 206(4), 15 U.S.C. § 80b-6(4), the Commission to date has promulgated eight anti-fraud rules. Five anti-fraud rules state that the rule applies to “any registered investment adviser or required to be registered.” See Rule 206(4)-1, Advertisements by Investment Advisers, 17 C.F.R. § 275.6(4)-1. See Brian Carroll, Investment Ad- viser Advertising, 196 J. ACCOUNTANCY, Nov. 2003, at 39; Rule 206(4)-2, Custody of Funds or Securities of Clients by Investment Advisers, 17 C.F.R. § 274.6(4)-2. See Brian Carroll, Custody of Client Assets under Rule 206(4)-2, 1 J. INV. COMPLIANCE, Spring 2001, at 47 (discussing predecessor rule to current Rule 206(4)-2); Rule 206(4)-3, Cash Pay- ments for Client Solicitations, 17 C.F.R. § 275.6(4)-3. See Brian Carroll, Third-Party Cash Solicitation Arrangements under Rule 206(4)-3 of the Investment Advisers Act, Inv. Counsel Ass’n of America, Dec. 8, 2000, 1, 7; Rule 206(4)-6, Proxy Voting, 17 C.F.R. § 275.6(4)-6;, and Rule 206(4)-7, Compliance Procedures and Practices, 17 C.F.R. § 275.6(4)-7. In contrast, Rule 206(4)-5, Political Contributions by Certain Investment Advisers, 17 C.F.R. § 275.6(4)-5, states that it applies to “any investment adviser registered (or required to be registered) with the Commission, or un- registered in reliance on the exemption available under § 203(b)(3) of the Advisers Act […].” Finally, Rule 206(4)-8, Pooled Investment Vehicles, 17 C.F.R. § 275.6(4)-8, states that it applies to “any investment adviser to a pooled investment vehicle.”