Disclosures

In addition to making disclosures to the state administrator during the registration process, broker-dealers and investment advisers must also make ongoing disclosures to their clients. This chapter covers three categories of client disclosures:

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

Broker-dealer disclosures

In the previous chapter, we covered the various fees broker-dealers may charge outside of commissions, markups, and markdowns. Those fees are disclosed in fee schedules that must be made available to customers.

The North American Securities Administrators Association (NASAA) offers a model fee disclosure template that many broker-dealers use. Broker-dealers typically provide this information in account applications and on their websites.

Investment adviser disclosures

An investment adviser’s most important disclosures are typically presented in the brochure. Here are the three key parts of that disclosure package:

• Form ADV Part 2A - The brochure
• Form ADV Part 2A Appendix 1 - The wrap fee program brochure
• Form ADV Part 2B - The brochure supplement

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

Promoters for state-registered advisers

NASAA rules also regulate promoters, formerly called solicitors. Amendments NASAA adopted on May 4, 2026 folded paid solicitation into the rules governing testimonials and endorsements: a paid referral is now treated as an endorsement, a 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.

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

Definitions

Prospective client

A person a financial professional aims to sign as a client.

This arrangement is permitted as long as required procedures are followed and disclosures are made. Under the rules for promoters of state-registered advisers, the promoter must:

• Be registered as an IAR
• Not be an ineligible person
• Maintain a written agreement with the adviser

Be registered as an IAR
The promoter must be registered as an IAR of the firm for which they are soliciting business.

Not be an ineligible person
Promoters are treated like other securities professionals. If a promoter is an ineligible person - someone with a disqualifying event in their past - they can’t solicit on behalf of an adviser. We covered these disqualifying events in a previous chapter. A person has a disqualifying event if they are:

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

Maintain a written agreement with the adviser
The rule requires a written agreement between the adviser and the promoter. The adviser must keep this agreement in its records, and the state administrator may request it. The agreement must describe:

• The promotional activities the promoter will be engaged in
• The terms of the promoter’s compensation

At the time a referral is made, the promoter 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

The adviser must have a reasonable basis for believing this disclosure complies with the rule, and it still delivers its own Form ADV Part 2A to the client directly.

Sidenote

What the 2026 amendments removed

Two requirements that older material treats as central to state solicitor rules no longer exist:

• The separate solicitor’s brochure, delivered by the solicitor alongside the adviser’s Form ADV Part 2A
• The signed receipt from the prospective client acknowledging that both brochures were received

Both lived in NASAA’s recordkeeping rule, Model Rule 203(a)-2(a)(15), and both were deleted on May 4, 2026. The amended paragraph now asks the adviser to keep records of the promoter disclosures, documentation of its reasonable basis for believing the endorsement complies, and a list of its affiliated persons. The word “solicitor” doesn’t appear in the amended rule at all.

Sidenote

Solicitation of impersonal advisory services

The promoter is not required to register as an IAR if they only solicit impersonal advisory services. For example, a solicitor attempts to sell an adviser’s newsletter that includes market commentary and general recommendations (nothing specific to any one client).

Sidenote

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

Unlike the SEC’s rule for federal-covered advisers (discussed next), NASAA’s rule has no nominal-fee or de minimis exemption. Compensation of any amount - cash or non-cash - brings the arrangement inside the framework; a $1,000 “de minimis compensation” threshold is defined in the rule but isn’t referenced by any operative provision, so it exempts no one.

So an accountant who refers a client to an adviser for a $200 finder’s fee is still subject to the written agreement and ineligible-person requirements at the state level, even though the same arrangement could qualify for the SEC’s de minimis exemption federally. Sharing in asset under management (AUM) fees with a third party is further inside the framework still.

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 Securities and Exchange Commission (SEC) adopted a new rule that simplified how solicitors are regulated.

The solicitor must disclose the following:

• 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

Additionally, these rules 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.

Last, 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.

Compared with the state solicitor rule, there are two major omissions for federal-covered advisers. First, federal-covered solicitors are not required to be registered as IARs. Second, there is no brochure delivery requirement for promoters. Because the adviser must provide the brochure to the client, the SEC viewed a separate delivery requirement for the solicitor as redundant.

Instead, the promoter must make the required disclosures at the time of solicitation. The SEC rule says the disclosures must be made “clearly and prominently,” but it does not explicitly require that they be in writing.

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 to be in place between the adviser and solicitor. De minimis fees are defined specifically as $1,000 or less.

Access person disclosures

Securities rules have increasingly emphasized transparency around 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. Because additional demand could push up the market price, the IAR recommends the stock to multiple clients - even if it isn’t fully suitable. That conflict is exactly what regulators want firms to detect and prevent.

Rules for both federal-covered and state-registered advisers require certain employees to disclose personal securities holdings and transactions to their firm’s compliance department. This helps compliance staff compare client recommendations with the employee’s personal trading activity.

These disclosure rules apply only to access persons.

Definitions

Access person

Any supervised person of an investment advisor who:

• Has access to non-public information regarding any client’s purchase or sale of securities
• Has access to non-public information regarding the portfolio holdings of any reportable fund (e.g. a mutual fund)
• Is involved in making securities recommendations to clients, or who has access to such recommendations that are non-public

In practice, most (if not all) IARs of a registered adviser qualify as access persons because they can view client accounts, portfolio holdings, and nonpublic recommendation details.

Access persons must regularly file two types of reports with their firm:

• Holdings reports
• Transaction reports

Holdings reports
A holdings report provides a snapshot of an access person’s personal portfolio. It must include:

• Securities owned by the access person
• Name of broker, dealer, or bank where the portfolio is held
• The date the holdings report is submitted

Holdings reports must be filed:

• No later than 10 days after the person becomes an access person, and the information must be current as of a date no more than 45 days prior to the date the person becomes an access person
• At least once each 12-month period thereafter on a date selected by the investment adviser, and the information must be current as of a date no more than 45 days prior to the date the report was submitted

Transaction reports
Transaction reports disclose personal securities transactions. They must include:

• Date of the transaction
• Security traded and any relevant details (e.g. number of shares)
• Nature of the transaction (e.g. buy, sale, short sale)
• Price the security was traded at
• Name of the broker, dealer, or bank performing the transaction
• The date the transaction report was filed

Transaction reports must be filed no later than 30 days after the end of the quarter in which the transactions occurred.

There are three exceptions to the holdings and transaction report requirements. No filing is required for:

• Activity in which the access person had no direct or indirect control over
  • For example, the access person is a beneficiary of a trust account owning and trading securities, which is managed by a separate third-party trustee
• Transactions related to an automatic investment plan
  • For example, dividends received from a mutual fund that are automatically reinvested
• Transactions the adviser has direct access to
  • For example, an IAR maintains an account with their employing adviser’s affiliated broker-dealer (the adviser can access this account at any time)