Investment Advisors Act Lawyer

Experienced Defense Team

If you have been contacted by the Securities and Exchange Commission (“SEC”) in connection with an enforcement action, it is imperative to seek legal advice immediately.

The SEC has increased in investigative and enforcement efforts to scrutinize individuals and firms suspected of violating the federal securities laws—whether relating to the reporting, disclosure, or registration requirements.

This can lead to significant penalties and other fines. It is important to do everything you can to protect yourself and your business against a federal investigation. We are here to help.

At Oberheiden, P.C., our attorneys are highly qualified in assisting our clients in both civil and criminal SEC-related investigations and are highly experienced in providing compliance services.

Our attorneys include former FBI agents, former U.S. attorneys, and former prosecutors—all ready to offer a personalized individualized defense strategy for your situation.

Put Oberheiden, P.C. on your side today to fight for your liberty, business, reputation, and future.

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena
Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney & Former District Attorney

Local Trial & Defense Counsel

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Michael Koslow
Michael Koslow

Former Supervisory Special Agent (FBI)

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

Kevin M. Sheridan
Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

What is the Investment Advisers Act and an Investment Adviser?

Investment Advisers Act of 1940

The Investment Advisers Act (“IAA”) regulates the profession of investment advisers and imposes various restrictions on offering investment advice. 15 U.S.C. 80b-1 et seq. With limited exclusions, the IAA requires that certain individuals or firms who are compensated for providing investment advice register with the SEC.

Its purpose is to monitor the activities of investment advisers who advise people or entities on investment-related matters in order to better protect investors. The Securities and Exchange Commission (“SEC”) is the federal agency charged with the authority to enforce the IAA and its rules thereunder.

Investment Adviser

The IAA addresses who qualifies as an investment adviser and who does not. An investment adviser is defined as any person or firm that, for compensation, engages in the business of advising others either directly or indirectly as to the value of securities or the investment, purchase, or sale of securities; or any person or firm that, for compensation and as a part of a regular business, issues analyses regarding securities.

Simply, an investment adviser must satisfy three elements:

  1. For compensation: This element is relatively straightforward and broadly interpreted. Receiving any form of economic benefit—such as some sort of fee for advisory services or a commission—typically satisfies the compensation element.
  2. Engaged in the Business: The individual or firm must be engaged in the business of providing investment advice to others. However, this does not have to be the individual or firm’s sole business activity.
  3. Advising others: This last element is satisfied if the individual or firm provides advice, makes recommendations, provides analyses, issues reports, etc. regarding specific securities.

If an individual or firm meets the definition of an “investment adviser,” they must register with the SEC and become subject to the SEC’s reporting, disclosure, and compliance obligations.

Exclusions from the Investment Adviser Definition

Even if an individual or firm satisfies the definition of an “investment adviser,” the IAA provides for several exclusions from the definition.

If the individual or firm satisfies one or more of these exclusions, they are not subject to the IAA and therefore do not have to register nor are regulated by the IAA. The exclusions are listed below:

  • Domestic banks and bank holding companies;
  • Lawyers, accountants, engineers, and teachers;
  • Brokers and dealers;
  • Publishers of bona fide newspapers;
  • Government securities advisers;
  • Credit rating agencies;
  • Family offices;
  • Governments and political subdivisions; and
  • Non-U.S. advisers.

Some of these categories have additional requirements attached to them in order for the exclusion to apply. For instance, lawyers, accountants, engineers, and teachers as well as brokers and dealers may only qualify if the advice given is incidental to their professional practice. Therefore, an accountant whose advice is incidental to their line of business may qualify for the exclusion, but other accountants may not.

This is why it is so critical to speak to an attorney experienced in SEC enforcement actions and the complexities of investment advice regulation under the IAA.

Investment Advice versus Financial Advice

The SEC only has enforcement jurisdiction over cases where the individual or firm has provided investment advice to a client. If the individual or firm merely gave financial planning services or financial advice to the client, the SEC does not have enforcement jurisdiction and has no basis to monitor the individual or firm.

What constitutes investment advice versus mere financial advice has been the topic of much debate. Basically, an individual or firm is considered to be giving investment advice where the advice, analysis, or reports relates in some manner to securities.

For instance, the SEC has noted that advice regarding one or more of the following could satisfy the definition of “investment advice:”

  • Advice about market trends;
  • Advice given in the form of statistical or historical data unless objectively or factually delivered;
  • Advice regarding the selection of a certain investment adviser;
  • Advice about the benefits of investing in securities as opposed to investing in other types of investments;
  • Giving the client a list of securities for which the client can choose securities—regardless of whether the adviser makes a recommendation to the client from that list.

As can be seen, the advice given must relate in some manner or form to securities. But this begs the question, what is a security?

The Securities Act of 1933 defines a security in a very broad manner to include multiple items such as any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest, option, certificate of deposit, etc. The definition is broad enough to encompass a mound of transactions and the definition is not even all-inclusive.

In 1946, the Supreme Court held in SEC v. W. J. Howey Co. that a transaction or contract meets the definition of a “security” if it is “a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party—referred to as the Howey test.

Once something is categorized as a security, a host of SEC rules and regulations come into play. As a critical starting point, every offer or sale of securities must be registered with the SEC or meet an enumerated exemption from registration as per the Securities Act of 1933.

Therefore, not only must you be registered as an investment adviser under the IAA, but you must also be following SEC guidelines, rules, and regulations regarding the offering of securities.

How to Protect Your Business Against SEC Investigations

Despite the aggressive approach taken by the SEC, there are many steps you can take to protect yourself against a protracted federal investigation:

  • Hire an attorney experienced in SEC-related investigations as well as experienced in conducting compliance reviews of business operations;
  • Ensure—by hiring counsel—that your marketing materials, documents, and public advertising are consistent and compliant with federal law;
  • Ask your attorney about your practices of offering or recommending securities to clients to ensure compliance with the IAA; and
  • Ask your attorney whether your usual business activities could constitute providing investment advice under the IAA—which would subject you to registration and compliance obligations—or whether you fit within one of the IAA’s exclusions.

Why Choose Oberheiden, P.C. for Investment Advice and SEC Defense

Below we offer critical reasons why you should choose Oberheiden, P.C. as your counsel:

  • Our team has extensive federal government experience as our attorneys include former FBI agents, former U.S. attorneys, and former prosecutors.
  • Our attorneys also include individuals with substantial experience in the private sector.
  • We have extensive SEC compliance experience, including advising our clients on the effectiveness of their compliance policies.
  • Our senior SEC attorneys offer a personalized defense strategy for every client.
  • We have completed more than 100 private placement memorandums (“PPMs”) for our clients in various industries.
  • Our team maintains ongoing communication and support for our clients and their families.
  • We have a positive track record in successfully defending clients in both civil and criminal SEC investigations as well as settlement negotiations.

Do You Need Investment Advice? Connect with an Investment Advisors Act Lawyer

It can sometimes be difficult to determine whether you are providing investment advice in your profession—which is subject to SEC enforcement authority—or merely providing financial advice—which is not subject to SEC regulation.

But this has not stopped the SEC from relentlessly investigating individuals and firms for suspected violations. A federal investigation could waste significant time, expense, and result in many legal challenges for your business and its future.

If you are under investigation by the SEC, have been contacted by SEC staff members, or are concerned about internal allegations, get an attorney on your side right away.

We have substantial SEC compliance experience and have assisted clients in civil and criminal SEC investigations. Our team of senior SEC defense attorneys has the knowledge needed to advise and protect you.

Call or contact the Investment Advisors Act attorneys at Oberheiden P.C. today.

If you are under
investigation
you should contact us today

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