# SEC Release IA-1092: What It Is and Its History
**Summary:** SEC Release IA-1092 is a 1987 interpretive release that clarifies when persons who provide financial planning, pension consulting, or related services fall within the definition of an investment adviser under the Investment Advisers Act of 1940. Issued in collaboration with NASAA, IA-1092 provides practical guidance for applying federal and state adviser laws to hybrid financial-service providers and refines prior SEC interpretations.
## Definition & Key Takeaways
## Why It Matters
## Formula & Variables
## Worked Example
## Practical Use
## Comparisons
## Limits & Misconceptions
## Research Notes
## Definition & Key Takeaways
– SEC Release IA-1092 is an interpretive release (1987) from the U.S. Securities and Exchange Commission that explains how the Investment Advisers Act of 1940 applies to financial planners, pension consultants, and others offering investment advice as part of broader services.
– IA-1092 clarifies that the defining elements of an investment adviser are: (1) providing advice about securities, (2) doing so as part of a business, and (3) receiving compensation (directly or indirectly) for that advice.
– The release refines earlier guidance (for example, IA-770) and highlights particular fact patterns—such as compensation structure, the centrality of advice to a business model, and advertising—that push a practitioner into adviser status.
– IA-1092 distinguishes between negotiators of contracts (e.g., some sports or entertainment agents) and those who render securities advice; mere contract negotiation without investment advice can fall outside the Advisers Act scope.
– IA-1092 is interpretive (not statutory) and was developed alongside NASAA to harmonize federal and state approaches to the growing financial planning profession in the 1980s.
## Why It Matters
IA-1092 matters because it affects who must register or comply with fiduciary and disclosure obligations under federal and state adviser laws. During the 1980s the rise of financial planners, pension consultants, and integrated financial-service models created uncertainty about the boundaries of the Advisers Act. IA-1092 provided practical tests and examples to reduce ambiguity:
– Regulatory compliance: Being deemed an investment adviser triggers registration, recordkeeping, and disclosure obligations under the Advisers Act (or applicable state statutes).
– Investor protection: Clarifies when clients are owed a fiduciary duty and full disclosure of conflicts of interest.
– Business model design: Helps firms structure fee and marketing practices to align with the intended regulatory framework.
– Enforcement and supervision: Guides both SEC staff and state regulators in assessing conduct and appropriate supervision.
By clarifying the application of federal standards to modern advisory practices, IA-1092 remains a reference point for advisers and regulators despite subsequent regulatory developments.
## Formula & Variables
IA-1092 is interpretive rather than numeric, but practitioners often assess a set of criteria that can be expressed with simple variables and logical tests. Below is a compact representation that helps operationalize the interpretive guidance.
Symbols and definitions:
– A = Advice about the value or suitability of securities (binary: 1 if present, 0 if absent)
– B = Business context (binary: 1 if advice is provided as part of a business, 0 if incidental)
– C = Compensation for advice (monetary payment, direct or indirect; 1 if present, 0 if absent)
– P = Promotional solicitation or holding out as an adviser (1 if advertises investment advisory services, 0 otherwise)
Threshold test (logical):
– Adviser_status = 1 if (A = 1 AND B = 1 AND C = 1) OR (P = 1 AND A = 1)
Notes on units and scales:
– A, B, C, P are binary indicators representing factual elements; they are not continuous variables.
– Compensation (C) can be fees, commissions, or indirect payments (e.g., referral fees), and the presence of compensation is the relevant scale rather than dollar amount.
– Business context (B) considers frequency, marketing, and whether advice is an integral component of services offered.
This formula is a simplification for decision-making; IA-1092 uses examples and context to interpret each element.
## Worked Example
Scenario: Jane operates a small planning firm. She offers comprehensive financial advice, including retirement asset allocation and security-specific recommendations. Jane charges clients a flat annual planning fee of $2,400, and occasionally receives referral fees of $200 from estate attorneys for joint clients. She advertises “personal financial planning” and lists “investment allocation” among her services.
Step 1 — Identify A (advice about securities):
– Jane gives asset allocation and security-specific recommendations. A = 1.
Step 2 — Identify B (business context):
– Advice is central to her firm and is provided regularly to clients. She markets investment services. B = 1.
Step 3 — Identify C (compensation):
– She charges an annual advisory fee ($2,400) and receives referral payments. C = 1.
Step 4 — Identify P (holding out):
– She advertises investment allocation in marketing materials. P = 1.
Apply threshold test:
– Since A = 1, B = 1, and C = 1, Adviser_status = 1. The presence of advertising (P = 1) further supports adviser status.
Interpretation and practical consequences:
– Under IA-1092 guidance, Jane would be considered an investment adviser for federal and likely state purposes and should evaluate registration requirements (SEC or state), adopt adviser disclosures (Form ADV where applicable), maintain records, and consider fiduciary duties to clients.
## Practical Use
Checklist for advisers and compliance teams applying IA-1092:
– Identify whether advice relates to securities (A): document specific recommendations and whether they reference particular securities.
– Determine whether advice is given as part of a business (B): frequency, marketing language, and the role of advice in revenue generation.
– Inventory compensation sources (C): direct fees, commissions, referral fees, or revenue-sharing arrangements.
– Review marketing and communications (P): ensure solicitations do not create the appearance of advisory services if unintended.
– Consult registration thresholds: state vs. SEC requirements vary by assets under management and other factors.
– Maintain disclosure documents and conflict-of-interest policies if adviser status is established.
Common pitfalls to avoid:
– Assuming small-dollar payments mean exemption: IA-1092 emphasizes presence of compensation, not size.
– Relying solely on label: calling oneself a “consultant” or “planner” does not determine status—substance matters.
– Ignoring indirect compensation: referral fees and revenue-sharing can trigger adviser obligations.
## Comparisons
Related terms and when to prefer each framework:
– Investment Advisers Act of 1940: The statutory foundation; IA-1092 interprets how the Act applies to modern advisory practices. Use the Act for statutory obligations and IA-1092 for interpretive guidance.
– IA-770: Earlier SEC interpretive guidance about adviser definitions; IA-1092 refines and updates certain examples in light of evolving industry practice.
– Broker-dealer standard vs. adviser fiduciary standard: Brokers historically operate under suitability obligations vs. advisers’ fiduciary duties. For clients, adviser classification implies a higher standard of loyalty and disclosure.
– NASAA guidance: State regulators often coordinate with IA-1092 principles; use NASAA materials to understand state-level applications.
When to prefer IA-1092: For factual analyses determining whether integrated financial-service offerings cross the line into regulated investment advice, IA-1092 is a practical interpretive resource.
## Limits & Misconceptions
– IA-1092 is not law: It is an interpretive release that explains how the SEC staff will generally view certain fact patterns; it does not amend the Advisers Act nor does it by itself create statutory obligations.
– Not all advice to clients equals adviser status: Purely incidental or entirely non-securities advice (e.g., certain insurance or tax-only advice) may fall outside the Advisers Act if no securities advice or compensable services are involved.
– IA-1092 does not set registration thresholds: Registration (SEC vs. state) depends on separate rules (e.g., AUM thresholds) and later rulemaking; IA-1092 focuses on applicability, not assets under management limits.
– Industry evolution: Later regulatory developments, enforcement actions, and state laws may influence current interpretations; IA-1092 is one interpretive tool among others.
## Research Notes
Primary sources and methodology used for interpretation in this article:
– SEC interpretive releases and staff guidance: interpretive releases articulate staff views and provide examples for applying statutory definitions.
– NASAA materials: state regulator perspectives were integral to IA-1092’s development and remain relevant for state-level application.
– Secondary commentary and practitioner analyses (regulatory memoranda and industry guides) for practical examples.
– Law databases (e.g., Cornell LII, official SEC website) provide statutory text for the Advisers Act (Title 15 U.S.C. § 80b-1 and related sections).
Methodology: The article synthesizes the statutory text of the Advisers Act, IA-1092 interpretive examples, and common regulatory practice to produce a practical decision framework and illustrative example.
Educational disclaimer: This article summarizes public regulatory guidance for educational purposes and does not constitute legal or compliance advice. Readers should consult the original releases and qualified counsel for decisions specific to their fact patterns.
### FAQ
### See also
– Investment Advisers Act of 1940
– IA-770 (SEC Interpretive Guidance)
– NASAA guidance
– Broker-dealer vs. Investment Adviser
– Form ADV