Understanding Common Financial Advisor Regulations

Financial advisors operate in one of the most highly regulated corners of the financial industry, and for good reason. Clients trust advisors with their savings, retirement plans and long-term goals, often sharing deeply personal financial details along the way. Understanding the rules that govern financial advice isn’t just about avoiding penalties; it’s about building credibility and protecting clients.

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Who Sets Financial Advisor Regulations?

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Agency (FINRA) are the organizations that primarily handle financial advisor regulation at the national level. SEC regulations apply to investment advisors. Under the Investment Advisers Act of 1940, investment advisors include:

Money managers
Investment consultants
Financial planners

Section 202(a)(11) of the Advisers Act defines an investment advisor as any firm or person that engages in the business of providing financial advice about securities in exchange for compensation. Investment advisors are required to register with the SEC or their state regulatory agency, depending on their assets under management. Examples of investment advisors include asset managers, investment managers or investment counselors, portfolio managers and wealth managers.

FINRA, meanwhile, regulates broker-dealers, capital acquisition portals and funding portals, which are crowdfunding intermediaries. Certified financial planners, meanwhile, must meet standards set by the CFP Board in addition to any federal or state regulations that may apply.

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SEC Financial Advisor Regulations

A financial advisor reviewing industry regulations.

The SEC sets the rules for when investment advisors must register, how the registration process works and the ongoing requirements they’re expected to meet to maintain their registration status. Advisors are required to register with the SEC when they manage $110 million or more in client assets. Advisors who manage more than $100 million but less than $110 million in client assets may choose to register with the SEC or their state regulatory board.

SEC regulations specify the steps that you’ll need to take to register. To become an RIA, you must do two things at a minimum:

Complete the Series 65 exam if you don’t have Series 7 and Series 66 licenses
File Form ADV

Obtaining additional certifications or professional designations is optional, but it could be worthwhile if you’d like to niche down or specialize in offering certain types of services.

Once you’re registered with the SEC, there are additional regulations that apply regarding marketing. SEC marketing rules prohibit advisors from engaging in certain activities, which include:

Making untrue statements of material facts or omitting facts which result in misleading statements
Stating factual information that you’re unable to substantiate
Touting the benefits of an investment without providing a balanced view of its risks or limitations
Presenting information that’s likely to mislead investors
Including or excluding performance results in a biased manner
Failing to properly disclose affiliate relationships in which someone receives compensation for promoting the advisor’s business
Failing to properly disclose the use of third-party ratings in advertisements

In addition to these rules, registered investment advisors are subject to compliance regulations. Compliance guidelines require advisors to:

Follow a fiduciary standard in dispensing advice and managing client assets
Adopt and enforce a written code of ethics
Implement written policies and procedures that are designed to prevent any violations of rules set by the Investment Advisers Act
Instituting proper measures for recordkeeping
Designating a chief compliance officer to oversee the drafting and enforcement of policies and procedures
Conducting annual reviews of policies and procedures

In short, there are quite a few financial advisor regulations to be cognizant of if you’re required to register with the SEC or choose to do so in lieu of state registration.

FINRA Rules and Regulations

FINRA rules do not apply to registered investment advisors unless an RIA firm’s line of business also extends to broker-dealer services. In that case, it would be subject to FINRA regulations along with SEC or state regulatory guidelines, depending on the firm’s registration status. The primary purpose of FINRA regulation is to protect investors in their interactions with broker-dealers.

There is one thing FINRA does that’s specifically related to investment advisor regulation. It operates the Investment Adviser Registration Depository (IARD), which is where advisors must go to file Form ADV. This document is required for registration, and it includes three parts:

Part 1 covers information about the investment advisor’s business, including who owns it, the number of clients it services, how many employees it has, its affiliations and business practices
Part 2 details business practices in more detail, including how the advisor sets their fees, any existing conflicts of interest and relevant disciplinary information. This part, known as the brochure, must be shared with advisory clients.
Part 3 offers a summary of the types of services the advisor offers, along with the fees clients will pay for those services and any conflicts of interest that may exist.

Investment advisors are required to file this form when they initially register and update it annually.

Why Do Financial Advisor Regulations Exist?

Financial advisor regulations exist primarily to protect investors and maintain trust in the financial system. Because advisors often guide clients through complex, high-stakes decisions involving retirement savings, investments and long-term planning, regulators aim to ensure that advice is honest, transparent and aligned with clients’ best interests. These rules help reduce the risk of fraud, conflicts of interest and misleading practices.

Regulations also promote consistency and accountability across the industry. By setting standards for disclosures, record-keeping and professional conduct, regulators create a framework that clients can rely on regardless of which firm they work with. This oversight helps level the playing field, supports fair competition and reinforces confidence in financial advice as a profession.

The Investment Advisers Act was passed to address perceived abuses within the financial services system that were believed to have contributed to the 1929 stock market crash and the economic depression that followed. Additional legislation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, exists to extend protections into other areas of the financial services industry.

Bottom Line

A financial advisor reading new regulations and guidelines for the industry.

Understanding common financial advisor regulations is essential for operating a compliant, trustworthy and sustainable practice. Regulatory requirements govern everything from disclosures and record-keeping to advertising and client communications, and missteps can lead to serious consequences. Staying informed and proactive helps advisors protect clients, reduce risk and maintain credibility.

Tips for Growing Your Advisory Business

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If your marketing plan includes creating social media content, it may be wise to refresh yourself on SEC marketing rules. For example, if you partner with a blogger or social media influencer to promote your brand and you’re paying them a fee to do so, you’ll need to clearly disclose that in the content and they will as well. Failure to do so could result in fines or other penalties. Running all marketing materials through a compliance officer can help minimize the risk of violating any SEC rules.