Investment Advisers Act of 1940

The Investment Advisers Act of 1940, codified at 15 U.S.C. § 80b-1 through 15 U.S.C. § 80b-21, is a United States federal law that was created to monitor and regulate the activities of investment advisers (also spelled "advisors") as defined by the law. It is the primary source of regulation of investment advisers and is administered by the U.S. Securities and Exchange Commission.

The law provides in part:

The Investment Advisers Act (IAA) was passed in 1940 in order to monitor those who, for a fee, advise people, pension funds, and institutions on investment matters. Impetus for passage of the act began with the Public Utility Holding Company Act of 1935 which authorized the Securities and Exchange Commission (SEC) to study investment trusts. The thrust of this study, which led to the passage of the Investment Company Act of 1940 and the Investment Advisers Act, was to provide a closer look at investment trusts and investment companies. The study, however, found many instances of investment adviser abuse such as unfounded "hot tips" and questionable performance fees. The IAA sought not to regulate investment advisers so much as to keep track of who was in the industry and their methods of operation. The IAA does not mandate qualifications for becoming an investment adviser but it does require registration for those using the mails to conduct investment counseling business.

The IAA mandated that all persons and firms receiving compensation for serving as investment advisers must register with the SEC. This requirement has been revised on several occasions since then, most notably with the passage of the Dodd-Frank Wall Street Reform Act of 2010. There are, however, several exceptions and exemptions to the registration requirement: investment advisers whose clients all reside in the same state as the adviser's business office and who do not provide advice on securities listed on national exchanges; investment advisers whose clients are solely insurance companies; and certain investment advisers who manage solely private funds holding less than $100 million from U.S. investors.

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