Question

Paul works as a registered representative for Broker-Dealer X and also works as a financial planner under Broker-Dealer X's control. Paul's only source of compensation are commissions for trades that are executed. According to the Investment Advisers Act:

Paul must be registered as an investment adviserBroker-Dealer Y must be registered as an investment adviserPaul does not need to be registered as an investment adviserNeither Paul nor Broker-Dealer Y requires registration as an investment adviser

Answer 1

Answer: Paul must be registered as an investment adviser

Explanation:

The Investment Adviser's Act of 1940 defines an Investment adviser as someone who provides advice on securities and gets compensation from doing so.

Because Paul gets commissions for trades executed, he has to be a registered adviser. The only factor that would exempt him from registration is if the advice he offers clients is solely incidental to a different job role and he DOES NOT receive any compensation.

Even teachers, accountants and lawyers who receive compensation based on the advice they give regarding the securities market have to be registered investment advisers.