Login | September 13, 2025
NASAA is watching out for you
JULIE JASON
The Discerning Investor
Published: September 11, 2025
Federal regulators such as the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) watch out for investors. And so does NASAA, the North American Securities Administrators Association -- even though you might not be familiar with it.
NASAA is "the voice of state securities agencies" (see "About Us" -- tinyurl.com/vubr5us7). The SEC is the federal government agency regulating the securities industry, and FINRA oversees member brokerage firms.
Organized in 1919, the nonprofit association's membership includes "67 state, provincial, and territorial securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada, and Mexico."
NASAA members license stockbrokers, investment adviser firms that don't meet the size requirements of SEC regulation (those managing less than $100 million in assets) and securities firms that conduct business in their respective states. NASAA members also enforce state securities laws (tinyurl.com/5ej6tw3y).
A few months ago, NASAA announced that its members voted "to adopt proposed amendments to NASAA's 'Dishonest or Unethical Business Practices of Broker-Dealers and Agents' model rule (Conduct Rule)" (tinyurl.com/3j8ykn9b).
For context, the SEC had adopted Regulation Best Interest in 2019. At the time, the SEC stated that "Reg BI," adopted as a new rule under the Securities Exchange Act of 1934, "enhances the broker-dealer standard of conduct beyond existing suitability obligations, and aligns the standard of conduct with retail customers' reasonable expectations" (tinyurl.com/49e239t3).
As part of Reg BI, the SEC also adopted a rule to prohibit the use of the term "adviser" by a broker-dealer who is not also registered as an investment adviser.
NASAA's new Conduct Rule picks up on the SEC's actions. First, the Conduct Rule "expressly prohibits potentially misleading uses of the titles 'adviser' or 'advisor' by broker-dealer agents." The intention is to prevent "broker-dealers and agents from misleading investors regarding the professional capacity in which their services are provided."
The key here is "licensure." To present as an "adviser," a financial professional must be licensed under investment adviser regulations. A financial professional licensed under broker-dealer regulations is not an adviser. That makes sense, but there is a complication for those who are "dually hatted," meaning they are licensed under both regulatory regimens. An investor who is working with a dually hatted individual needs to understand that the individual can work under either capacity by simply switching hats.
By the way, if "hat-switching" is new to you, let me know if you would like to discuss this topic in a future column (please email me at readers@juliejason.com).
NASAA's amendments also incorporate the SEC's Reg BI, prohibiting "placing the financial or other interest of the broker-dealer or agent ahead of the interest of the retail customer, recommending an investment strategy or the sale or purchase of any security without a reasonable basis to believe that the recommendation is in the best interest of the retail customer based on the customer's investment profile and the potential risks, rewards, and costs associated with the recommendation, or otherwise failing to comply with the obligations set forth in Regulation Best Interest."
The history behind the change sheds light on NASAA's actions.
A 2021 NASAA survey found that little had changed (tinyurl.com/mr3rbb66) since the adoption of Reg BI. The survey, done in the first year following the SEC's compliance deadline for Reg BI, found that "(t)he percentage of broker-dealer firms surveyed that were offering complex, costly, and risky products increased by 11% after Reg BI took effect."
The survey's conclusion: "[S]ecurities regulators will need to see to it that firms do a much better job of providing fair and balanced point-of-sale disclosure regarding fees, costs, and risks, particularly where a firm is recommending the most expensive and riskiest products in the retail market."
The NASAA change marks the latest effort, on a state level, to ensure that investors' "best interests" are served.
Seasoned investment counsel (tinyurl.com/52nus8hz) and award-winning columnist and author, Julie Jason, JD, LLM, promotes financial literacy and investor protection. Read her latest book, "The Discerning Investor: Personal Portfolio Management in Retirement for Lawyers (and Their Clients)" (tinyurl.com/4u7h9pjs), published by the American Bar Association. Write to Julie at readers@juliejason.com. While all questions cannot be answered, each email is read and reviewed and can lead to discussion in a future column.
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