BD & IA Disclosure Duties

Overview

In addition to making disclosures to the state administrator and/or the Securities and Exchange Commission (SEC) during the registration process, broker-dealers and investment advisers must also make ongoing disclosures to their clients. This chapter covers three categories of ongoing disclosures:

• Broker-dealer disclosures
• Investment adviser disclosures
• General disclosures

Broker-dealer disclosures

Fees broker-dealers may charge outside of commissions, markups, and markdowns are disclosed in fee schedules that must be made available to customers. The North American Securities Administrators Association (NASAA) provides a model fee disclosure template that many broker-dealers use. Firms commonly provide this information in account applications and on their websites.

Agents representing broker-dealers must create an order ticket for each order they place. The order ticket creates a historical record of the trade.

🔑 Required order ticket details

Definitions

Supervisory review

• After an order ticket is submitted, the agent’s supervisor must review it “promptly,” which typically means by the end of the day.
• When an agent places orders for customers, the supervisor (often called the principal) reviews the ticket to confirm the order was entered correctly.
• If there’s an error, the principal can update the order ticket. ⚠️ Even if the agent notices the mistake first, any changes to the ticket must be approved by the principal.

Unsuitable customer-initiated orders

• Agents may also encounter situations where a customer wants to place an unsuitable order. For example, a retired customer with limited resources may insist on buying a very risky stock. Financial professionals must explain the risks involved.
• ⚠️ However, if the customer still insists on placing the order, the order must be entered. The customer ultimately controls their own securities transactions.
• It’s a best practice for agents to document the discussion. Firms maintain files on each customer that include transaction history and notes from prior interactions. If a customer’s expectations are unrealistic and the trade results in significant losses, detailed notes can help address questions about what was discussed and disclosed.
• 📌 If the trade resulted from a recommendation, the firm could be held liable if the recommendation was unsuitable.

Investment adviser disclosures

The most important disclosures made by an investment adviser are typically presented in the brochure. This disclosure package has three key parts:

The purpose of these documents is to help clients understand the person they’re trusting with their money. They describe the firm’s products and services and provide background information on the firm and its investment adviser representatives (IARs). If an adviser has a disciplinary history, or employs an IAR with a criminal record, that information can be found in the brochure materials.

Promoters for state-registered advisers

NASAA rules also regulate promoters — people compensated for bringing clients to an adviser. Older material calls them solicitors, and you may still see that term, but amendments NASAA adopted on May 4, 2026 retired it in favor of “promoter.”

The change folded paid solicitation into the same framework that governs testimonials and endorsements.

An endorsement is any statement by someone other than a current client that indicates approval or support of the adviser, or that solicits or refers a prospective client to it.

A paid referral is therefore an endorsement, and it carries the same conditions as any other endorsement.

In practical terms, a promoter is anyone compensated for connecting prospective clients with an investment adviser. A promoter might be an employee of the adviser, or a third party. For example, someone with a marketing background might network locally and refer potential clients to an adviser.

Definitions

This arrangement is legal and ethical as long as required procedures are followed and disclosures are made.

🔑 A promoter soliciting for a state-registered adviser must:

🔑 Statutory disqualifications (covered in a previous chapter) include:

• Denial, suspension, or revocation by any securities regulator
• Any felony or securities-related misdemeanor conviction in the past 10 years
• Any injunction or other court-related order prohibiting work in the securities industry
• Filing a registration application with inaccurate or false information
• Willfully violating a securities act (e.g. Uniform Securities Act, Investment Advisers Act of 1940)

🔑 The written agreement must describe:

• The scope of the solicitation activities the promoter will be engaged in
• The terms of the promoter’s compensation for those activities

🔑 Disclosures at the time a referral is made

At the time a referral is made, the promoter (or the adviser, on the promoter’s behalf) must clearly and prominently disclose:

• Whether the promoter is a current client or investor, or someone other than a current client or investor
• That cash or non-cash compensation was provided for the referral
• Any material conflicts of interest arising from the promoter’s relationship with the adviser
• The material terms of the compensation arrangement, including a description of the compensation provided or to be provided

The adviser must also have a reasonable basis for believing the endorsement complies with the rule. The adviser still delivers its own Form ADV Part 2A to the client directly.

Sidenote: What changed from the old solicitor’s brochure rule

Older solicitor rules required the solicitor to deliver a separate solicitor’s brochure alongside the adviser’s Form ADV Part 2A, and to obtain a signed receipt from the prospective client acknowledging both were received. NASAA’s May 4, 2026 amendments eliminated both requirements. The adviser now keeps records of the promoter disclosures above, documentation of its reasonable basis for believing the endorsement complies, and a list of its affiliated persons — but no separate brochure or signed receipt is required.

Sidenote: Solicitation of impersonal advisory services

Sidenote: No nominal-fee or de minimis exemption at the state level

• Under the SEC’s marketing rule, a promoter for a federal-covered adviser is excused from the written-agreement requirement when their compensation is de minimis ($1,000 or less, or the non-cash equivalent, over the preceding 12 months).
• ⚠️ NASAA’s rule has no such exemption. Compensation of any amount, cash or non-cash, brings the arrangement inside the framework — so even an accountant paid a $200 finder’s fee for referring a client to a state-registered adviser must follow the promoter rules above.
• Sharing assets under management (AUM) fees with a third party falls inside the framework as well.
• The only exemptions NASAA’s rule provides are for uncompensated testimonials and endorsements, and for the adviser’s own affiliates (who remain subject to the ineligible-person bar).

Solicitors for federal-covered advisers

Before 2020, solicitor rules for federal-covered advisers were largely similar to state rules. In 2020, the SEC adopted a new rule that simplified how solicitors are regulated. You’ll notice some overlap with the state requirements.

The solicitor must disclose:

• If they’re a client of the adviser
• If they’re being compensated and, if so, how much
• Any conflicts of interest related to their relationship with the adviser

Additional rules that must be followed:

• A written agreement must exist between the adviser and solicitor*
• The solicitor may not be subject to any statutory disqualification

*Essentially the same items that must be in the agreement between a state-registered adviser and their solicitor (discussed above) are the same here.

The solicitor may not*:

• Make an untrue, inaccurate, or misleading statement
• Discuss potential benefits without discussing potential risks
• Reference the adviser’s recommendations in a way that is not fair and balanced
• Present the adviser’s performance in a way that is not fair and balanced

*📌 Although these prohibitions are specifically for solicitors of federal-covered advisers, you can assume the same applies at the state level.

⚠️ Two major state-rule items NOT included at the federal level

Sidenote: De minimis fees

If a promoter is collecting a “de minimis” (small) fee for their services, the SEC does not require a written agreement between the adviser and solicitor. 🔑 De minimis fees are defined specifically as $1,000 or less.

Access person disclosures

Securities rules and regulations have increasingly emphasized transparency in investment advice. One key concern is whether an IAR’s personal holdings could influence recommendations to clients. For example, suppose an IAR owns stock in a thinly traded company. If the IAR knows that additional demand could raise the market price, they might recommend the stock to multiple clients — even when it isn’t appropriate for those clients. That creates a clear conflict.

Rules for both federal-covered and state-registered advisers are designed to reduce this risk. Employees of advisers (typically IARs) who have access to certain nonpublic information must regularly disclose their personal securities holdings to their compliance departments.

Definitions

To support transparency, regulators require access persons to disclose their personal holdings and transactions to their employing firms. This allows compliance staff to compare client recommendations with the access person’s personal trading activity.

🔑 Access persons must file two types of reports

🔑 Three exceptions to the holdings and transaction reporting requirements

No filing is required for:

Key points

Broker-dealer disclosures

• Fee schedules must be disclosed to customers (NASAA model template often used)
• Order tickets required for every trade; must include customer ID, account type, long/short, security ID, quantity, order type, date/time, solicited/unsolicited, discretionary status
• Principal/supervisor must promptly review tickets; only principal can approve changes
• Unsuitable customer-initiated orders must still be executed after risks are explained; document discussions to limit liability

Investment adviser disclosures — the brochure

• Three parts: Form ADV Part 2A (brochure), Part 2A Appendix 1 (wrap fee brochure), Part 2B (brochure supplement)
• Discloses firm background, services, and disciplinary history of firm/IARs

Promoters for state-registered advisers

• “Promoter” replaces older term “solicitor” (NASAA rule change effective May 4, 2026)
• Endorsement = any statement (paid or not) by a non-client indicating support or referring prospects
• Requirements: register as IAR, not be an ineligible person (statutory disqualification within 10 years), maintain written agreement with adviser detailing scope/compensation
• At time of referral, must disclose: client status, compensation received, conflicts of interest, compensation terms
• No de minimis exemption at state level (any compensation amount triggers rule)
• Old rule’s separate solicitor’s brochure and signed receipt requirement eliminated
• Impersonal advisory service solicitation (e.g., newsletters) doesn’t require IAR registration

Solicitors for federal-covered advisers (SEC rule, 2020)

• Must disclose: client status, compensation amount, conflicts of interest
• Written agreement required (unless de minimis fee ≤$1,000)
• Solicitor cannot be subject to statutory disqualification
• Prohibited from: false/misleading statements, discussing benefits without risks, unbalanced references to recommendations or performance
• No IAR registration required; no separate brochure delivery requirement (adviser delivers brochure directly)

Access person disclosures

• Access person: supervised person with access to nonpublic client trading info, fund holdings, or recommendations
• Must file holdings reports: initial within 10 days of becoming access person (info current within 45 days prior), then annually
• Must file transaction reports: within 30 days after quarter-end, detailing trade date, security, transaction type, price, broker/dealer
• Exceptions: no filing needed for accounts with no control (e.g., third-party trustee), automatic investment plans (e.g., dividend reinvestment), or transactions adviser already has direct access to

Sources

Primary/official references for the material in this chapter. Every link was fetched and returned HTTP 200 on 2026-08-15.