RIAs vs. Broker-Dealers: Key Regulatory Distinctions for Compliance Teams

RIAs and broker-dealers may offer similar services to clients, but they operate under very different regulatory regimes. For compliance teams, the differences are significant.

Here are several key regulatory distinctions:

• Primary regulator: RIAs are regulated by the SEC or state securities regulators, while broker-dealers are regulated by the SEC and FINRA, with FINRA overseeing examinations, rulemaking, and enforcement.

• Supervision requirements: Broker-dealers must maintain a formal supervisory system under FINRA Rule 3110, including written supervisory procedures and designated principals. RIAs must maintain policies and procedures under the Investment Advisers Act Compliance Rule (206(4)-7) and conduct an annual compliance review.

• Advertising regulation: RIAs follow the SEC Marketing Rule (Rule 206(4)-1) governing testimonials, performance advertising, and endorsements. Broker-dealers follow FINRA communications rules (Rule 2210), which require specific supervision and approval of communications with the public.

• Recordkeeping rules: RIAs must maintain records under Advisers Act Rule 204-2, while broker-dealers follow SEC Rules 17a-3 and 17a-4, which impose detailed requirements on transaction records, communications, and retention periods.

Understanding these regulatory frameworks is critical for firms operating advisory, brokerage, or hybrid models.

ICS helps firms review compliance structures to ensure their regulatory obligations align with their business activities.

ICS advises financial institutions navigating regulatory changes of this type. If your firm needs to assess the impact of this development on your compliance program, contact us to discuss.