SEC Clarifies When Use of 'Advisor' Violates Reg BI

Broker-dealers, the agency continues, "may use these terms when they are acting in a role specifically defined by federal statute that does not entail providing investment advisory services to retail customers, for example, as a municipal advisor, commodity trading advisor, or advisor to a special entity."

A broker-dealer that provides advice in other capacities outside the context of investment advice to a retail customer may in its discretion use the terms "adviser" and "advisor."

The SEC explains that in most instances, however, when a broker-dealer uses the terms in its name or title in the context of providing investment advice to a retail customer without also being an RIA, it will be presumed to violate Reg BI's disclosure obligation.

Broker-dealers with an affiliated RIA are also prohibited from using the names, but a broker-dealer that is also a state-registered advisor can use the terms.

In the SEC's view, a state-registered investment advisor would be considered to be "registered as an investment advisor" for purposes of this presumption, the agency states.