Advisor Exclusions

June 29, 2020  |  By

There are some specific exclusions from the SEC and Texas state rule for what constitutes an Investment Adviser. Some are what one would expect. Banks, lawyers, teachers, and those licensed as a Broker Dealer are exempt from the Adviser definition.  


Publishers are excluded if they:

  1. Provide advice that is not tailored to the needs of a specific client
  2. Are “bona fide” and only give disinterested commentary and analysis (Lowe- includes disinterested commentary)
  3. Are of general and regular circulation (Lowe- not people who send out bulletins from time to time on the advisability of buying and selling)

Yun Soo Oh Park involved an online chat room, where the purported publisher, “Tokyo Joe,” was giving advice on positions he personally traded in order to manipulate the share price. Tokyo Joe did not fall within the publisher exemption because the material was not disinterested.  

In the matter of Weiss Research, in addition to providing research for its readers, it also implemented a premium service to implement auto-trading for its clients for positions that it recommended in its publication. The SEC held that the auto-trading did not fall under the exclusion and Weiss was effectively giving investment advice.  

Family Offices

Family Offices are exempt from the definition so long as they: 

  1. Provide investment advice only to family clients, 
  2. Are wholly owned and controlled by family, and 
  3. Do not hold themselves out to the public as an advisor. 

The SEC’s definition of family is broad and the office can include key employees, non-profit or charitable organizations controlled by the family, and former family members as well. 

There is a common misconception that an office with under 15 clients can be considered a family office or exempt under the SEC, however this exemption was removed by the Dodd-Frank Act in 2010.

Advice about real estate

The SEC staff has stated that advice about real estate, coins, precious metals or commodities is not advice about securities. As such, the giver would not meet the qualification of “concerning securities.” Proceed with caution here as this must be advice about direct real estate…the advice must be regarding actual fee title (or- “the dirt”), not regarding an entity that may hold the fee title or dirt.  

About the Author(s)

Lacey Shrum

Lacey is an attorney at Vela Wood where she serves businesses that use blockchain technology and digital assets. She serves as a subject matter expert and expert witness to attorneys and advisors as they encounter digital assets in their traditional legal practice.

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