SEC Clarifies Use of 'Advisor,' 'Adviser' by Dually Registered Firms

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."

Additional disclosures to identify capacity "may be necessary for the firm and the financial professional using such materials when making a recommendation," the SEC said.

For example, "in a situation where such firm materials are used by a financial professional who is not also a supervised person of an investment adviser, additional disclosures would be necessary to identify the capacity in which the financial professional is acting when making the recommendation," the SEC explained.

Similarly, a financial professional "who is not also a supervised person of an investment adviser would not be permitted to use his or her own materials that refer to himself or herself as an 'adviser' or 'advisor' notwithstanding his or her firm's registration status."

The FAQ reiterates that a broker-dealer that's not also a registered investment advisor may not use the terms "adviser" or "advisor" in "doing business as" marketing or in marketing the firm's name.

However, a broker-dealer — whether standalone or dually registered as an investment advisor — can use or distribute issuer-prepared marketing and disclosure materials, such as a prospectus, that describe financial professionals collectively as "financial advisors," "adviser" or "advisor," the SEC said.

— Related on ThinkAdvisor:

• SEC Releases Updated FAQ on Form CRS
• SEC Clarifies When Use of 'Advisor' Violates Reg BI
• FINRA Legal Chief Clarifies Suitability Rule Status After Reg BI