Under federal law, which is excluded from the definition of investment adviser when advising only direct obligations guaranteed by the US or government-sponsored entities?

• A. Advice or reports on securities that are direct obligations guaranteed by the US or by FNMA, GNMA, etc.
• B. Advice on any type of security
• C. Tax advice unrelated to securities
• D. Legal advice about corporate formation

Answer: (A)

The concept being tested is the federal exemption that excludes certain advice from making someone an investment adviser. The Investment Advisers Act does not treat a person as an investment adviser if their advice concerns only direct obligations of the U.S. or securities guaranteed by the U.S. government or by government-sponsored entities like FNMA or GNMA. Because those are government-backed instruments, providing advice or reports on them falls outside the definition of “investment adviser” for federal purposes. The other options don’t fit because they involve advice on securities beyond those specific government-backed obligations, or topics (tax or legal advice) that aren’t considered investment advice about securities under the act. So the statement describing advice on these direct government obligations is the correct one.