By Robert R. Boeche, Partner; and Sarah Larsen, Securities Regulation and Compliance J.D.  of Shustak Reynolds & Partners, P.C. posted on Friday, May 9, 2025.

In early April 2025, NASAA amended its model rules for Dishonest or Unethical Business Practices of Broker-Dealers and Agents (“Conduct Rule”) to limit use of the term “advisor” or “adviser” in title, purported credential, or professional designation of a broker dealer, without additionally being licensed as an investment adviser or investment adviser representative. [1] The Conduct Rule amendment is intended to encourage cohesion between federal and state regulations[2].

Background

SEC’s Regulation Best Interest (“Reg BI”) was implemented in June 2020, to establish a “best interest” standard of conduct for broker dealers and their associated persons, which restricted the term “advisor” or “adviser” from broker dealers acting solely in their broker dealer capacity. [3] The SEC later elaborated on the restriction in its Frequently Asked Questions on REG BI, that use of the term “advisor” or “adviser” in name or title causes confusion for retail clients because it “creates a presumption the broker dealer is acting in an investment advisory role” and consequently in the client’s best interest.[4] Broker dealers who are dually registered as an RIA or IAR, municipal advisor, commodity trading advisor, or advisor to a special entity may continue use “adviser” or “advisor” so long as they make full and fair disclosure of material facts relating to the scope and term of the relationship.[5]

NASAA Conduct Rule Effects

While NASAA itself does not have enforcement powers, we can expect its amendment to the Conduct Rule to encourage states to take action. The amendment closely follows the “advisor/adviser” restriction in Reg BI, and is aimed to boost investor protection, create uniformity across federal and state regulations, and provide clarity on obligations and components of conduct.[6]

Implementing NASAA’s Conduct Rule

If you have questions about whether your marketing materials, supervisory procedures, or operating procedures comply with the Reg BI, or you want to be proactive in anticipation of implementation of the Conduct Rule, reach out and we can review your documents. With offices in San Diego, Irvine, Los Angeles, San Francisco, and New York, Shustak Reynolds & Partners, P.C. represents investment advisers, broker-dealers, registered representatives, and high-net-worth investors across the country. We are prepared to help our clients understand and navigate these changes with strategic advice and robust legal representation. Contact Shustak Reynolds & Partners, P.C. today for a confidential consultation.

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