§ 78C-2. Definitions. - North Carolina Statutes

§ 78C‑2.  Definitions.

When used in this Chapter, thedefinitions of G.S. 78A‑2 shall apply along with the following, unlessthe context otherwise requires:

(1)        "Investmentadviser" means any person who, for compensation, engages in the businessof advising others, either directly or through publications or writings, as tothe value of securities or as to the advisability of investing in, purchasing,or selling securities, or who, for compensation and as part of a regularbusiness, issues or promulgates analyses or reports concerning securities."Investment adviser" also includes financial planners and otherpersons who, as an integral component of other financially related services,provide the foregoing investment advisory services to others for compensationand as a part of a business or who hold themselves out as providing theforegoing investment advisory services to others for compensation."Investment adviser" does not include:

a.         An investmentadviser representative or a person excluded from the definition of investmentadviser representative pursuant to G.S. 78C‑2(3)c.

b.         A bank, savingsinstitution, or trust company.

c.         A lawyer,accountant, engineer, or teacher whose performance of any such services issolely incidental to the practice of his profession.

d.         A dealer or itssalesman whose performance of these services is solely incidental to theconduct of its business as a dealer and who receives no special compensationfor them.

e.         A publisher of anynewspaper, news column, newsletter, news magazine, or business or financialpublication or service, whether communicated in hard copy form, or byelectronic means, or otherwise, that does not consist of the rendering ofadvice on the basis of the specific investment situation of each client.

f.          A person solely byvirtue of such person's services to or on behalf of any "businessdevelopment company" as defined in Section 202(a)(22) of the InvestmentAdvisers Act of 1940 provided the business development company is not an"investment company" by reason of Section 3(c)(1) of the InvestmentCompany Act of 1940, as both acts were in effect on June 1, 1988.

g.         A personalrepresentative of a decedent's estate, guardian, conservator, receiver,attorney in fact, trustee in bankruptcy, trustee of a testamentary trust, or atrustee of an inter vivos trust, not otherwise engaged in providing investmentadvisory services, and the performance of these services is not a part of aplan or scheme to evade registration or the substantive requirements of thisChapter.

h.         A licensed realestate agent or broker whose only compensation is a commission on real estatesold.

i.          An individual orcompany primarily engaged in acting as a business broker whose onlycompensation is a commission on the sale of a business.

j.          An individual who,as an employee, officer or director of, or general partner in, another personand in the course of performance of his duties as such, provides investmentadvice to such other person, or to entities that are affiliates of such otherperson, or to employee benefit plans of such other person or its affiliatedentities, or, with respect to such employee benefit plans, to employees of suchother person or its affiliated entities.

k.         Repealed by SessionLaws 2003‑413, s. 16, effective August 14, 2003.

l.          An employee of aperson described in subdivision b., e., f., g., h., or j. of G.S. 78C‑2(1)acting on behalf of such person within the scope of his employment.

l 1.       An investmentadviser who is covered under federal law as defined in subdivision (4) of this section.

m.        Such other personsnot within the intent of this subsection as the Administrator may by rule ororder designate.

(2)        "InvestmentAdvisers Act of 1940" means the federal statute of that name as amendedbefore or after the effective date of this Chapter.

(3)        "Investmentadviser representative" means, with respect to any investment adviserregistered under this Chapter, any partner, officer, director (or a personoccupying a similar status or performing similar functions) or other individualemployed by or associated with an investment adviser, except clerical orministerial personnel, who:

a.         Makes anyrecommendations or otherwise renders advice regarding securities directly toclients,

b.         Manages accounts orportfolios of clients,

c.         Determines whichrecommendations or advice regarding securities should be given; provided,however if there are more than five such persons employed by or associated withan investment adviser, who do not otherwise come within the meaning of G.S. 78C‑2(3)a., b., d., or e., then only the direct supervisors of such persons are deemedto be investment adviser representatives under G.S. 78C‑2(3) c.,

d.         Solicits, offers ornegotiates for the sale of or sells investment advisory services, unless suchperson is a dealer or salesman registered under Chapter 78A of the GeneralStatutes and the person would not be an investment adviser representativeexcept for the performance of the activities described in G.S. 78C‑2(3)d., or

e.         Directly supervisesinvestment adviser representatives as defined in G.S. 78C‑2(3) a., b., c.(unless such investment adviser representatives are already required toregister due to their role as supervisors by operation of G.S. 78C‑2(3)c.), or d. in the performance of the foregoing activities.

Notwithstandingthis subdivision, the term "investment adviser representative" asused in this Chapter and as applied to a person who is employed by, orassociated with, an investment adviser covered under federal law only includesan individual who (i) has a "place of business" in the State, as thatterm is defined in rules or regulations adopted or promulgated under section203A of the Investment Advisers Act of 1940 by the United States Securities andExchange Commission and (ii) either:

a.         Is an"investment adviser representative" as that term is defined in rulesor regulations adopted or promulgated under section 203A of the InvestmentAdvisers Act of 1940 by the United States Securities and Exchange Commission;or

b.         Is not a"supervised person" as that term is defined in rules or regulationsadopted or promulgated under the Investment Advisers Act of 1940 by the UnitedStates Securities and Exchange Commission and who solicits, offers, ornegotiates for the sale of, or who sells, investment advisory services onbehalf of an adviser covered under federal law.

(4)        "Investmentadviser covered under federal law" means any adviser who is registeredwith the Securities and Exchange Commission under section 203 of the InvestmentAdvisers Act of 1940 (15 U.S.C. § 80b‑3).

(5)        "Person"means an individual, a corporation, a partnership, an association, a joint‑stockcompany, a trust where the interests of the beneficiaries are evidenced by asecurity, an unincorporated organization, a government, or a politicalsubdivision of a government. (1987 (Reg. Sess., 1988), c. 1098, s. 1; 1989, c. 770,s. 12(a)‑(c); 1997‑419, s. 14; 1997‑462, s. 6; 2001‑273,s. 1; 2003‑413, s. 16.)