Financial Regulation in United States


United States

In the United States, the Financial Industry Regulatory Authority (FINRA) regulates and oversees the activities of brokerage firms, and their registered representatives. The Securities and Exchange Commission (SEC) regulates investment advisers and their investment adviser representatives. Insurance companies, insurance agencies and insurance producers are regulated by state authorities. Investment Advisors may be registered with state regulatory agencies, the Securities and Exchange Commission, or pursuant to certain exemptions, remain unregistered.

Fiduciary standard

The anti-fraud provisions of the Investment Advisers Act of 1940 and most state laws impose a duty on IAs to act as fiduciaries in dealings with their clients. This means the adviser must hold the client's interest above its own in all matters. The Securities and Exchange Commission (SEC) has said that an adviser has a duty to.


  • Make reasonable investment recommendations independent of outside influences
  • Select broker-dealers based on their ability to provide the best execution of trades for accounts where the adviser has authority to select the broker-dealer.
  • Make recommendations based on a reasonable inquiry into a client's investment objectives, financial situation, and other factors
  • Always place client interests ahead of its own.


Since the financial crisis in 2008, there has been great debate regarding the fiduciary standard and to which advisors it should apply. In July 2010, The Dodd—Frank Wall Street Reform and Consumer Protection Act mandated increased consumer protection measures, including enhanced disclosures and authorized the SEC to extend the fiduciary duty to include brokers rather than only advisors regulated by the 1940 Act. As of March 2013, the SEC has yet to extend the fiduciary duty to all brokers and advisors regardless of their designation. Opposition to the fiduciary standard maintains that the higher standard of fiduciary duty, vs the lower standard of suitability, would be too costly to implement and reduce choice for consumers.


A Registered Investment Advisor (RIA) refers to an IA that is registered with the SEC or a state's securities agency and typically provides investment advice to a retail investor or registered investment company such as a mutual fund, or exchange-traded fund. Registration does not signify that the SEC has passed on the merit of a particular IA. Regulation is fragmented in that some registered investment advisors are regulated by the individual states, while others are regulated federally by the SEC.

An Unregistered Investment Adviser refers to an IA that is not registered with the SEC or a state's securities agency and typically provides investment advice to private pools of capital. Such an investment pool is commonly known as a hedge fund or a private equity fund.


Contact us or