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← Series 63: Regulation of Investment Advisers
Series 63 practice questionmediumEdge Case—Bank Affiliates

A wholly-owned affiliate of a national bank sets up a separate subsidiary to offer investment advice for a fee. The subsidiary does not take custody of client funds or securities. Under the USA, the subsidiary is:

  1. AExcluded from the investment adviser definition because it is owned by a bank.
  2. BAn investment adviser, because it provides advice for a fee and is not itself a bank.✓ Correct answer
  3. CExcluded because custody is not involved.
  4. DExcluded if it only advises institutional clients.
Explanation

Why B — An investment adviser, because it provides advice for a fee and is not itself a bank.

Only banks and bank officers are excluded—not affiliates or subsidiaries (USA §401(c)). The subsidiary is a separate legal entity and meets the adviser definition by providing advice for compensation. Custody and client type are irrelevant for definition purposes.

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