Who must register as an investment advisor under the Investment Advisers Act of 1940?

The correct answer is that anyone giving investment advice for compensation must register as an investment advisor under the Investment Advisers Act of 1940. This legislation was enacted to protect investors by requiring that those who provide investment advice and receive compensation for those services must be registered with the appropriate regulatory authority.

This requirement ensures that investment advisors meet certain qualifications and adhere to standards designed to promote transparency and fiduciary responsibility in their dealings with clients. By registering, advisors must disclose their qualifications, business practices, and any potential conflicts of interest, which helps to safeguard investors against fraudulent or misleading advice.

In contrast, individuals offering advisory services for free do not fall under the purview of this Act, as the requirement specifically pertains to those who are compensated for their advice. Similarly, banks and financial institutions have distinct regulatory frameworks that define their operations and do not necessitate registration under the Investment Advisers Act for the sole reason of providing advisory services. Individuals making social media posts about investments do not automatically require registration, especially if they are not providing personalized investment advice for compensation, as such communications can vary widely in intent and legality.