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I'm a registered investment advisor and have written a book that I would like to market to my clients and prospective clients. The book includes a description of my own portfolio to demonstrate how I managed my own account and weathered the worst of the market turmoil over the last three years. I've been told that doing so could run afoul of the advertising regulations of the Investment Advisers Act of 1940. I'd like to know your opinion.

F.W., via e-mail

By marketing the book to existing and prospective clients, it would most likely be considered advertising and, therefore, needs to comply with Rule 206(4)-1. That rule prohibits (among other things) advertisements which refer, directly or indirectly, to past specific recommendations of an investment advisor which were, or would have been, profitable to any person. There is, however, an exemption to this prohibition if the advertisement "sets out or offers to furnish a list of all recommendations made by such investment adviser within the immediately preceding period of not less than one year... ."

The advertisement or list must "(i) state the name of each such security recommended, the date and nature of each such recommendation (e.g., whether to buy, sell or hold), the market price at that time, the price at which the recommendation was to be acted upon, and the market price of each such security as of the most recent practicable date. The ad or list must also "(ii) contain the following cautionary legend on the first page. . .in print or type as large as the largest print or type used in the body or text thereof: 'it should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list.' " In other words, you cannot just select the profitable recommendations without also noting the bad picks you made as well. My suggestion is that you tread carefully.

I'm registering to become an investment advisor. Currently, I have a Series 7 license as a registered representative with a brokerage firm. I'm in the process of resigning from that firm, but I'd like to keep my Series 7 active. Once my RIA license is approved, I'll register with another broker-dealer that will allow me to also have my own independent RIA. On my registration filing, should I list the new brokerage firm I'll be registered with under the employment section?

P.G., Maryland

Generally, you should report your employment history as of the date you're filing for registration. If, for example, you expect to be registered with a broker-dealer by the time your RIA registration is approved, you could consider including the broker-dealer registration in the your filing.

If, on the other hand, you anticipate that you won't be in that position until after the RIA is approved, then you should probably leave it out of your filing. You can always go back and amend your filing when the brokerage firm approves your registration.

Think of it this way: If an examiner is looking at your RIA application and sees a disclosure stating that you're registered with a brokerage firm and that registration doesn't appear on your U4/CRD report, it will raise questions and could delay your approval.


Alan J.Foxman, is an attorney in private practice
in Boca Raton, Fla. He also works as an
independent contractor with National Compliance Services
Inc. He can be contacted at
this email address.


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