Under federal law, which entity is excluded from the definition of investment adviser?

• A. Any bank as defined in the Bank Holding Company Act of 1956
• B. A broker-dealer whose performance is incidental to the conduct of its business and receives no special compensation
• C. A newspaper publisher providing general commentary
• D. A hedge fund manager whose advice is tailored to specific clients

Answer: (A)

The key idea is that banks are expressly kept outside the definition of an investment adviser. Under federal law, banks (as defined in the Bank Holding Company Act of 1956) are regulated as banking institutions and perform banking activities rather than investment advisory services for a fee. Because of this, they are excluded from needing to register as investment advisers.

Think of it this way: the Investment Advisers Act creates exemptions for certain entities that are governed by other regulators and whose primary functions aren’t providing investment advice for compensation. A bank fits that exemption clearly, which is why it’s the best answer here. The other scenarios can be excluded in some cases (for example, broker-dealers with incidental advice or publishers of general commentary), but the bank exclusion is the most direct and widely recognized example under federal law.