Use of the title ‘advisor’ or ‘adviser’ without the required certification are now expressly prohibited by the North American Securities Administrators Association’s Conduct Rule.
The changes to NASAA’s Dishonest or Unethical Business Practices of Broker-Dealers and Agents model rule were proposed in November 2024 and members of the association have voted to adopt the update which aligns it more closely with the SEC’s Reg BI.
NASAA is concerned that the use of advisor/adviser titles can create confusion among investors, who may mistakenly believe that they are receiving fiduciary advice when that is not the case. The goal is to reduce the "blurring" between broker-dealers and investment advisers, and to provide more clarity to investors.
The update, adopted Monday, includes more robust retail investor protection through the incorporation of the reg BI best interest duty of care provisions.
“I want to thank the members of NASAA’s Broker-Dealer Section Committee and Market and Regulatory Policy and Review Project Group for their work on the amendments to the model rule,” said NASAA President Leslie Van Buskirk. “We look forward to working with our fellow NASAA members to implement these updated standards.”
When the changes were proposed, NASAA noted a 2021 report that found that 7% of Reg BI firms were using the term ‘adviser’ without the correct registration. More recently, questions have been raised about the enforcement of Reg BI by Finra.
Following adoption of the SEC’s Reg BI in 2019, brokers who were not dually registered as investment advisors have been prohibited from calling themselves ‘advisor’ or ‘adviser’. The change responded to a growing trend among broker firms that were marketing themselves as financial advisors where they were advising on wealth management but not putting clients into advisory accounts.
The NASAA Broker-Dealer Section Committee and Market and Regulatory Policy and Review Project Group requested membership approval for the amendments to the Conduct Rule. These changes will ensure that the Conduct Rule defines and clarifies various obligations or components of this new conduct standard for purposes of state interpretation and enforcement.
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