As an investor, you probably rely on advisory services for your financial plans. If you’re a financial adviser, or think you might be wandering into the territory, you may also wonder what regulations and lines should and should not be crossed.
When issues arise, you may wonder what recourse you have.
Investors, rest assured that you’re protected by the SEC. Financial advisers, you need to know your boundaries.
In this article we’ll explain what the SEC Release IA 1092 is and how it affects your relationship with advisers and clients alike.
What Is SEC Release IA 1092?
SEC Release IA-1092, or simply SEC Form 1092, is a set of guidelines released by the Securities and Exchange Commission (SEC) that provides interpretations for how state and federal securities laws apply to financial services, or investment advisers and planners.
The release was issued in 1987, building on the Investment Advisers Act of 1940. The Investment Advisers Act was meant to protect people who rely on investment advisers for financial advice. The SEC Release IA 1092 came about because of the increase in the number of professionals offering financial planning and investment advice, and updates to the definition of an investment adviser needed to be made.
The release was created through a collaboration between the SEC on the federal side and the North American Securities Administrators Association (NASAA) on the state side.
What Are the Important Guidelines in the SEC Release IA 1092?
For starters, the release included a clear definition of “investment adviser” (IA), which could also be found in the 1940 Investment Advisers Act. According to the SEC, an investment adviser is a money manager, investment consultant, financial planner, or anyone who is in the business of advising others on their investments and finances.
Some updates and new definitions in the SEC Release IA-1092 beyond the 1940 advisers act include:
- Pension consultants and advisers to athletes and entertainers are classified as investment advisers.
- In some cases, firms that recommend investment advisers also have to register as investment advisers.
- Even if a person’s main business isn’t providing investment advice, if they dole out that advice regularly, they still need to complete the SEC registration.
- If a registered representative of a broker created a separate business to provide investment advice or financial planning, they also have to register and not rely on the SEC’s broker-dealer (BD) exemption.
- Compensation for investment advice and financial planning does not need to be monetary to qualify someone as an investment adviser. Other forms of compensation include products, services, and discounts.
How Does the SEC Release IA 1092 Apply to Commercial Real Estate?
When making decisions about your real estate investments and financial planning, SEC Release IA 1092 ensures that you’re speaking to a registered investment adviser. The release provides some assurance for investors that their advisers are registered with the United States government and adhering to its regulations, reducing the likelihood of any wrongdoing.
Before speaking to a commercial real estate investment adviser or financial planner, always make sure to check their registration status, simply by typing in their information on the SEC’s Investment Adviser Public Disclosure website.