SEC Release IA-1092
Also known as: release ia-1092, investment advisers act release no. 1092
SEC Release IA-1092 is a 1987 interpretive release, issued jointly by the SEC and NASAA, that clarified who qualifies as an investment adviser. It established the three-part test of giving advice about securities, doing so as part of a business, and receiving compensation for it.
SEC Release IA-1092 is an interpretive release under the Investment Advisers Act of 1940 that explains when a person or firm must be treated as an investment adviser. It did not create a new law — it interpreted the existing statutory definition and applied it to categories of professionals who had argued they fell outside it, such as financial planners, pension consultants, and advisers to athletes and entertainers.
The release is best known for the three-prong test. A person is an investment adviser if all three prongs are met: they provide advice about securities, they do so as part of a business, and they receive compensation for the service. Each prong is read broadly. Advice includes general recommendations about asset allocation or the merits of investing in securities at all, not just picks of specific stocks. "As a business" does not require that advising be the person's only or even primary activity. Compensation need not be a separate advisory fee — it can be a commission, a bundled fee, or any economic benefit.
Because the prongs are interpreted expansively, IA-1092 pulled many financial planners into adviser registration. A planner who prepares a comprehensive plan that recommends putting a portion of a client's assets into securities is giving securities advice, even if the plan also covers insurance, budgeting, and taxes. Failing any one of the three prongs — for example, giving advice for free or advising only on non-securities such as fixed annuities or real estate — keeps a person outside the definition.
Securities licensing exams treat IA-1092 as foundational. The Series 63, Series 65, and Series 66 exams all test whether a described person meets the three-prong test, and expect you to distinguish investment advisers from investment adviser representatives, broker-dealers, and professionals covered by the incidental-advice exclusion.
Key takeaways
- SEC Release IA-1092 (1987) is a joint SEC and NASAA interpretation of who counts as an investment adviser.
- Its three-prong test asks whether a person gives advice about securities, does so as part of a business, and is compensated for it.
- All three prongs must be met, and each is interpreted broadly — compensation can be indirect, and advising need not be the person's main activity.
- The release extended adviser status to many financial planners, pension consultants, and sports and entertainment representatives.
- The Series 63, 65, and 66 exams regularly test fact patterns against the three-prong test.