NASAA recently announced proposed amendments that aim to prohibit the use of “advisor” or “adviser” titles by brokers. The regulatory coalition is attempting to curtail the use of the titles by individuals that lack the investment adviser licensure. The new amendment is a part of NASAA’s response to the SEC’s 2019 Regulation Best Interest rule.

The purpose of the amendment is to attempt to clarify confusion in relation to the nature of the fiduciary duty of a broker. NASAA noted the use of “advisor” or “adviser” by unlicensed brokers “can create confusion by suggesting a fiduciary duty that isn’t legally required in all broker-client relationships.”

In support of its proposal, NASAA cited a report published in 2021 where it was found seven percent of Regulation BI firms were using the term “adviser” without proper registration. NASAA announced that its members have observed firms continue to allow the use of the term “adviser” even when a firm or its agents do not hold the proper licensure or are not registered as an investment advisor. In instances when a jurisdiction allows the use of “advisor” and “adviser” without licensure under specific circumstances, the NASAA concluded the title will be allowed when it is permitted by applicable law.

If this rule comes into existence, broker dealers and registered representatives will need to review all marketing materials to make sure that the representatives are complying. We can foresee substantial regulatory enforcement arising out of improper use of the title, as well as it being fertile grounds for cross examination in litigation.