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August 12, 2020 at 02:48 PM
A broker-dealer that is also a registered investment advisor can use or distribute marketing materials that describe the firm’s financial professionals as “financial advisors,” “advisers” or “advisors,” the Securities and Exchange Commission stated in recently updated frequently asked questions guidance on Regulation Best Interest.
The agency clarified on Aug. 4 five questions relating to dually registered firms’ use of the term “advisor” and “adviser” regarding Reg BI compliance.
The first question asked: Can my firm’s financial professionals, including those who are not also supervised persons of an investment adviser, use or distribute firm materials that generally describe our firm’s financial professionals as “financial advisors” or by another general title using the term “adviser” or “advisor” (e.g., “Our financial advisors…” or “Talk to your financial advisor about…”)?
The SEC’s response:
Generally, yes.
When a dually registered broker-dealer uses or distributes firm material, “such as marketing material that generally refers to financial professionals using the terms ‘advisers’ or ‘advisors,’ such language, by itself, would not presumptively violate the capacity disclosure requirement” under Reg BI’s Disclosure Obligation. This would be the case whether or not the financial professional using the firm’s materials is also a supervised person of an investment adviser.
However, the FAQ highlights that in order to satisfy the Reg BI disclosure obligation when making a recommendation, broker-dealers “must make full and fair disclosure of all material facts relating to the scope and terms of the relationship with a retail customer, including the capacity in which they are acting with respect to the recommendation. This obligation applies to both the broker-dealer and to associated persons of the broker-dealer.”
