Investment advisers are a newish profession, dating to the 1920s. They were not regulated at the federal level until 1940. The Investment Advisers Act of 1940 (Advisers Act)1 was the last of the New Deal federal securities laws triggered by the 1929 stock market crash and the Great Depression. It probably was also the least important and the least considered of these statutes. It was passed on Aug. 22, 1940, at a time when the government was deciding whether to enter World War II. There were no headlines about the Advisers Act on that day. Rather, the news was about a British coastal convoy which came under fire from German cross-channel guns for the first time and a secret scheme by the U.S. government to send U.S. warships to Britain.
The Advisers Act was a by-product of a five-part report the Securities and Exchange Commission (SEC) provided to Congress between 1939 and 1941 on Investment Trusts and Investment Companies.2 One of the Investment Trust Study’s supplemental reports, titled “Investment Counsel, Investment Management, Investment Supervisory and Investment Advisory Services,” highlighted the SEC’s concerns with the investment adviser industry.
