Almost everything an adviser communicates is regulated. Some facts must reach the client in writing before any advice is given. Some claims may never be made at all. Nearly every business message must be kept and reviewed.
Each state adopts its own version of the Uniform Securities Act (USA), the 1956 Act as amended. The state securities regulator that enforces it is called the Administrator. The North American Securities Administrators Association (NASAA) writes model rules, which bind a state only after the state adopts them. Advisers registered with the Securities and Exchange Commission (SEC) follow the Investment Advisers Act of 1940 and SEC rules instead.
USA Section 102 is the Act's antifraud section for advisers. NASAA Model Rule 102(a)(4)-1, written under it, starts by calling an adviser a fiduciary who must act primarily for the client's benefit. It then lists unethical practices by lettered paragraph. Rules and figures in this lesson are current as of 2026-10-23.
A client can't weigh an adviser's fees and conflicts after signing, so the disclosure comes first. Form ADV is the adviser's registration form.
Common mistakes
- SEC advisers and the 48-hour rule: the 48-hour and five-business-day options are state-only.
- A brochure every year: annual delivery within 120 days is owed only after material changes.
- Item 18 on dollars alone: prepayment must exceed $500 (state) or $1,200 (SEC) and run six or more months ahead. A $600 quarterly bill fails the time test.
Bottom line
- State advisers deliver Part 2A and Part 2B either 48 hours before signing or at signing with a five-business-day cancellation right.
- SEC advisers deliver the brochure before or at signing, and annual delivery within 120 days follows only material changes.
- Form CRS goes to retail investors from SEC-registered advisers and broker-dealers, in two pages or four for dual registrants.
- Every adviser discloses material conflicts in writing before advising.
Exam shortcut
Start every stem by asking whether the adviser is state or federally registered. That one fact settles brochure timing, the Item 18 threshold and whether Form CRS applies. Next, scan any client-facing wording. "State-approved," "certified by the state," "can't lose" and "guaranteed returns" all signal a violation. The exception is "guaranteed" when it describes a real payment guarantee. For "is it an advertisement," count the audience first.
The full lesson (about 4,821 words, 32 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- D36
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