State securities regulators adopted rule amendments barring potentially misleading uses of the titles “adviser” or “advisor” by broker-dealer agents, unless the broker is also registered as an advisor.
The amendments to the North American Securities Administrators Association's Dishonest or Unethical Business Practices of Broker-Dealers and Agents model rule were released for public comment on Nov. 4, 2024. They update NASAA's rule to more closely align with the Securities and Exchange Commission’s adoption of Regulation Best Interest.
The amendments also incorporate Reg BI's duty of care on investment recommendations to retail customers into the rule.
“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 in a statement Tuesday. “We look forward to working with our fellow NASAA members to implement these updated standards.”
NASAA develops model rules, but adoption by individual jurisdictions is not mandatory, and states can implement them through legislation or regulation.
The amendments adopted by NASAA on Monday "can serve as a model for every state—whether they’ve previously adopted the NASAA model Business Practices Rule (or something akin to) or they’ve written their rules entirely differently than our model," a NASAA spokesperson said.
Industry Objections
The Insured Retirement Institute told NASAA in its comment letter that IRI members "have concerns that the proposed language does not fully align with Reg BI, since Reg BI also permits individuals who are registered as, or supervised persons of an investment advisor to use the title 'advisor' or 'adviser.'”
IRI said that "a provision that incorporates Reg BI ... would be sufficient to address any retail customer confusion due to use of these titles, since any improper use of 'Adviser' or 'Advisor' would be a violation of the capacity disclosure requirement under the Disclosure Obligation in Reg BI."
The annuity trade group requested that NASAA consider this alternative approach instead.
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