Investment Adviser Registration

Operations manager Delphine Ashcombe is setting up electronic filing for a new advisory firm and its representatives. Which statement correctly describes the systems involved?

1. A.Form ADV is filed through the CRD, and Form U4 is filed through IARD.This reverses the two systems.
2. B.Both Form ADV and Form U4 are filed directly with the SEC's EDGAR system.EDGAR is for issuer filings, not adviser or representative registration.
3. C.Form ADV is filed through IARD, while representatives register by filing Form U4 through the CRD system.Correct. IARD carries the firm's Form ADV; the CRD infrastructure carries Form U4, U5 and Form BD.
4. D.State-registered advisers file on paper with the Administrator; only SEC registrants use IARD.State-registered advisers file Form ADV electronically through IARD as well.

Why: Form ADV, whether filed with the SEC or with a state, is submitted electronically through the Investment Adviser Registration Depository (IARD). Broker-dealer and registered-representative filings, including Form BD, Form U4 and Form U5, run through the Central Registration Depository (CRD). Investment adviser representatives are registered by filing a Form U4, and both systems are operated by FINRA on behalf of the regulators.

Certified public accountant Idalia Ferraro prepares comprehensive financial plans for a separate, stated planning fee. The plans recommend specific allocations among securities. Regarding investment adviser registration, Ferraro:

1. A.Must register, because the advice is not solely incidental to her accounting practice and she receives special compensation for itBoth conditions of the accountant exclusion fail. Securities allocation advice is the core deliverable rather than an incidental byproduct, and the separate planning fee constitutes special compensation for that advice.
2. B.Is excluded, because certified public accountants are enumerated among the professions exempt from the definitionThe enumeration identifies who may qualify, not who automatically does. The exclusion is conditional, and naming the profession does not satisfy the incidental-advice and no-special-compensation requirements.
3. C.Is excluded, because she recommends allocations among categories rather than specific individual securitiesAdvice about securities includes advice about allocating among them, and the scenario states the plans recommend specific allocations among securities. The level of granularity does not remove the activity from the definition.
4. D.Must register only if she also exercises discretion over client accounts or takes custody of client assetsDiscretion and custody affect financial and safeguarding requirements once someone is an adviser. Neither is an element of whether a person meets the definition in the first place.

Why: The accountant exclusion requires that the advice be solely incidental to the practice of accounting and that no special compensation be received for it. Ferraro fails both prongs: securities allocation recommendations are the substance of the planning engagement rather than incidental to accounting work, and the separate stated planning fee is exactly the special compensation the exclusion denies. Holding a professional license does not preserve an exclusion once its conditions are broken.