Who Qualifies as an IAR

Overview

Investment advisers are businesses that provide investment advice on a regular basis in exchange for compensation.
🔑 The natural persons (human beings) who work for investment advisers are called investment adviser representatives (IARs).

🔑 Definitions

Term	Definition (statutory, word-for-word)	Example
Investment adviser representative	> Any partner, officer, director of (or a person occupying a similar status or performing similar functions) or other individual employed by or associated with an investment adviser that is registered or required to be registered under this act, or who has a place of business located in this state and is employed by or associated with a federal-covered adviser; and who does any of the following: (1) Makes any recommendations or otherwise renders advice regarding securities; (2) Manages accounts or portfolios of clients; (3) Determines which recommendation or advice regarding securities should be given; (4) Solicits, offers, or negotiates for the sale of or sells investment advisory services; (5) Supervises employees who perform any of the foregoing	Mary Callahan Erdoes, CEO of JP Morgan Asset Management, is registered as an IAR of the adviser that employs her.
Wrap account	> An investment account that offers a wide range of services, including investment management, trade execution, and financial planning, with all services “wrapped” up into one single fee	An advisory service an employee must be registered as an IAR to sell.
Power of attorney	A document that gives legal authority to a third party to act on another person’s behalf	Required for an adviser to run a discretionary account.

Investment adviser representative — word-for-word:

Any partner, officer, director of (or a person occupying a similar status or performing similar functions) or other individual employed by or associated with an investment adviser that is registered or required to be registered under this act, or who has a place of business located in this state and is employed by or associated with a federal-covered adviser; and who does any of the following:

Makes any recommendations or otherwise renders advice regarding securities

Manages accounts or portfolios of clients

Determines which recommendation or advice regarding securities should be given

Solicits, offers, or negotiates for the sale of or sells investment advisory services

Supervises employees who perform any of the foregoing

Wrap account — word-for-word:

An investment account that offers a wide range of services, including investment management, trade execution, and financial planning, with all services “wrapped” up into one single fee

📌 The text notes the definition is dense and unpacks it into two parts:

Part	Question it answers
1. Who can be an IAR	Which people at the firm are included
2. What activities make someone an IAR	The job functions that trigger IAR status

Part 1 — Who can be an IAR

Partners, officers, and directors

Partners, officers, and directors are high-level employees in business organizations.
📌 Including these roles in the definition ensures that executive-level employees are regulated, even if they aren’t personally giving day-to-day investment advice.
Example: Mary Callahan Erdoes, the CEO (Chief Executive Officer) of JP Morgan Asset Management, likely doesn’t create or deliver specific investment recommendations as part of her daily responsibilities. A CEO is essentially the “top boss” and is responsible for the organization’s overall direction and success. ⚠️ Even so, she is registered as an IAR of the investment adviser that employs her.

Other individuals employed by or associated with an adviser

The definition also covers any other individual employed by or associated with:

Firm type	Regulated under
State-registered investment adviser	The Uniform Securities Act (USA)
Federal-covered adviser (a federally registered adviser)	The Investment Advisers Act of 1940

📌 For now, assume that investment adviser firms (not the IARs) fall into one of these two categories.
📌 For exam purposes, you’ll need to know why an investment adviser firm would be state-registered or federal-covered (covered later). The text builds on both sets of rules through the unit.

🔑 Where IARs register

🔑 Regardless of whether an IAR works for a state-registered adviser or a federal-covered adviser, IARs are ALWAYS registered at the STATE level.
⚠️ 🔑 There is no such thing as a federally covered IAR.
⚠️ Even though IARs register with the state in both cases, some rules and procedures can differ depending on whether the firm is state-registered or federal-covered. Those differences are covered later in the Achievable materials.

	Investment adviser (firm)	IAR (individual)
Can be state-registered	✅ Yes	✅ Always registers at the state level
Can be federal-covered	✅ Yes	❌ No — no such thing as a federally covered IAR
Governing law	USA (state-registered) / Investment Advisers Act of 1940 (federal-covered)	State registration in all cases

Part 2 — What activities make someone an IAR

🔑 The definition lists five activities that generally require registration as an IAR:

#	Activity	What it covers
1	Makes any recommendations or otherwise renders advice regarding securities	The most straightforward category. Advice might be as simple as recommending one security to buy or sell, or as broad as building a complete financial plan.
2	Manages accounts or portfolios of clients	Some IARs provide occasional guidance; others actively manage client portfolios. Often done through discretionary accounts, which allow an IAR to make investment decisions for the client without getting explicit approval before each trade. To do this the adviser must obtain a power of attorney.
3	Determines which recommendation or advice regarding securities should be given	Employees who create or control internal approved-security lists and protocols must register as IARs — ⚠️ even if they don’t personally meet with clients.
4	Solicits, offers, or negotiates for the sale of or sells investment advisory services	Selling (or attempting to sell) advisory services such as financial plans and wrap accounts.
5	Supervises employees who perform any of the foregoing	Leaders and managers at an investment adviser must be registered as IARs if they supervise employees who perform any of the activities listed above.

Detail on activity 3 — determining what advice is given

Many investment adviser firms create internal lists of securities that their IARs are allowed (or encouraged) to recommend.
These lists may be short or extensive, but they often exclude very aggressive or highly speculative investments.
This approach helps limit recommendations of securities with significant risk potential (for example, penny stocks).
🔑 Investment advisers and IARs must operate in a fiduciary capacity and can be held legally liable for exposing clients to inappropriate levels of risk.
🔑 A fiduciary must put the client’s interests ahead of their own and act in the client’s best interest.
⚠️ Because these internal lists and protocols shape what advice clients receive, employees who create or control them must register as IARs — even if they don’t personally meet with clients.

Detail on activity 4 — brokerage services vs. advisory services

⚠️ Classic confusion — which registration applies depends on what is being sold:

Service type	Sold through	Examples	Employee must register as
Brokerage services	A broker-dealer	Trading platforms, research tools	Agent
Advisory services	An investment adviser	Financial plans, wrap accounts	IAR

Financial firms may offer both brokerage services and advisory services.
🔑 Employees who sell (or attempt to sell) advisory services must be registered as IARs.

Who IS and who IS NOT an IAR (per this chapter)

Person / situation	IAR?	Basis in the text
Partner, officer, or director of an investment adviser (or person occupying similar status / performing similar functions)	✅ IS an IAR	Named in the definition; CEO example (Mary Callahan Erdoes)
Individual employed by or associated with a state-registered investment adviser who performs any of the five activities	✅ IS an IAR	Definition
Individual with a place of business located in this state employed by or associated with a federal-covered adviser who performs any of the five activities	✅ IS an IAR	Definition
Employee who creates or controls the firm’s approved-security lists / advice protocols but never meets clients	✅ IS an IAR	“must register as IARs - even if they don’t personally meet with clients”
Employee who solicits, offers, negotiates for the sale of, or sells advisory services (financial plans, wrap accounts)	✅ IS an IAR	Activity 4
Supervisor/manager of employees performing any of the five activities	✅ IS an IAR	Activity 5
Employee who sells brokerage products (trading platforms, research tools)	❌ NOT an IAR — must register as an AGENT	“Employees who sell brokerage products must be registered as agents”
The investment adviser firm itself	❌ NOT an IAR	IARs are the natural persons who work for investment advisers
An IAR registered “federally”	❌ Does not exist	🔑 “There is no such thing as a federally covered IAR”

Exempt vs. excluded reminder: this chapter states who the definition captures. Persons who never fall within the definition are excluded; persons who meet the definition but are relieved of registration are exempt. The text points to the separate “Exempt & excluded” section of Definitions for those carve-outs — do not conflate the two on the exam.

Key points

Investment adviser representative (IAR)

Individual who represents a financial firm in offering securities advice
Also includes supervisors of IARs

Wrap account

Account offering a wide range of services, including:
- Investment management
- Trade execution
- Financial planning
- Securities advice
All costs “wrapped” into a single fee

More from Definitions: Persons · Exempt & excluded · Issuers & securities · Broker-dealers · Agents

Sources

Primary/official references for the material in this chapter. Every link was fetched and returned HTTP 200 on 2026-08-15.

#	Source	Publisher
1	Advisers Act 1940 — investment adviser definition and exclusions	Cornell LII (15 U.S.C. 80b-2)
2	Uniform Securities Act 1956 with NASAA updates — the tested statute	NASAA
3	State IA registration resources, forms and fees	NASAA
4	Achievable Series 65 — chapter 4.2.7	Achievable (course text)

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