Quick Answer
Performing any one of five functions (recommending securities, managing accounts, deciding what advice clients get, soliciting advisory business, or supervising someone who does those things) makes a person an IAR under the state definition, unless purely clerical work excludes them. The federal definition adds a numeric client test and its own exclusions, and "place of business" decides which state has authority.
This section covers who qualifies as an investment adviser representative (IAR), the five functions that trigger IAR status, the difference between state and federal definitions, and the place of business concept.
What Makes Someone an IAR?
An investment adviser representative (IAR) is any individual employed by or associated with an investment adviser who performs any of the following functions:
| Function | Description | Key Example |
|---|---|---|
| 1. Makes recommendations | Provides investment advice or recommendations to clients | "I suggest you buy XYZ stock" |
| 2. Manages accounts | Exercises discretion or investment control over client portfolios | Placing trades in a managed account |
| 3. Determines advice | Shapes what investment guidance clients receive | Research director who decides firm's investment views |
| 4. Solicits advisory services | Solicits, offers, or negotiates for the sale of investment advisory services | Cold calling prospects, attending referral meetings |
| 5. Supervises the above | Oversees persons who perform any of the above four functions | Branch manager reviewing IAR recommendations |
Performing any one of these functions makes an individual an IAR and requires registration (unless excluded or exempt).
Exclusion: Clerical or ministerial personnel are NOT investment adviser representatives, even if employed by an investment adviser. Processing account paperwork and maintaining client records are examples of clerical functions: they support the advisory business but do not themselves involve giving advice, managing accounts, or soliciting clients.
Exam Tip: Gotchas
- Soliciting alone triggers IAR registration. Cold calling for new advisory accounts = IAR.
- Supervising IARs makes you an IAR too. Anyone who supervises employees performing IAR functions is themselves an IAR.
- Recordkeeping is clerical, not advisory. Maintaining client files or processing transfers does not trigger IAR status, even though both tasks touch client accounts.
How Do the State and Federal Definitions Differ?
The definition of IAR differs depending on whether the adviser is state-registered or SEC-registered:
| Feature | State Definition (Uniform Securities Act) | Federal Definition (SEC IAR Definition Rule) |
|---|---|---|
| Applies to | IARs of state-registered advisers | IARs of federal covered advisers (SEC-registered) |
| Who qualifies | Any individual who performs advisory functions (see list above) | A supervised person who has more than 5 clients who are natural persons AND more than 10% of whose clients are natural persons |
| Exclusions | Clerical/ministerial personnel | Supervised persons who do not regularly solicit, meet with, or otherwise communicate with clients; persons providing only impersonal investment advice |
| Excepted persons | N/A | Qualified clients (net worth >$2.7 million or assets under management >$1.4 million) do not count toward the 5-client / 10% thresholds |
Exam Tip: Gotchas
- The federal definition uses a narrower test with numerical thresholds (more than 5 natural-person clients AND more than 10%). A supervised person of a federal covered adviser who has only 4 natural-person clients is NOT an IAR under the federal definition, even if they give advice.
- The state definition has no numerical threshold. Anyone performing advisory functions qualifies (except clerical staff).
What Counts as a Place of Business?
Place of business means any office at which an IAR regularly provides investment advisory services, solicits, meets with, or otherwise communicates with clients.
- Includes any location held out to the general public as a place where advisory services are provided
- A home office from which an IAR regularly emails or videoconferences with clients counts as a place of business
- This concept determines which state has registration authority over the IAR
Exam Tip: Gotchas
- A home office where an IAR regularly communicates with clients IS a place of business under the federal IAR definition. Do not assume "home office" means it is not a place of business.
What Should You Check on Exam Day?
- Any one of the five functions (recommends, manages accounts, determines advice, solicits advisory services, or supervises those who do) makes a person an IAR under the state definition; only clerical or ministerial work is excluded. The federal definition adds its own exclusions: supervised persons who don't regularly solicit, meet with, or communicate with clients, and persons giving only impersonal advice.
- The state definition has no numerical threshold. The federal definition (for IARs of federal covered advisers) requires a supervised person to have more than 5 natural-person clients AND more than 10% of clients who are natural persons, and excludes qualified clients from that count.
- A home office used regularly to email or videoconference with clients counts as a place of business, and place of business is what determines which state has registration authority.