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Form ADV Part 1A Item 6A(2) · Answer type: yn · Item 6 - Other Business Activities
Item 6A(2) asks whether the investment advisory firm itself is actively engaged as a registered representative of a broker-dealer: meaning the adviser firm is licensed to sell securities products through an affiliated or third-party broker-dealer, typically earning commissions on sales.
A registered representative (commonly called an "RR") is an individual or entity licensed to sell securities products like stocks, bonds, mutual funds, variable annuities, or other investment products through a broker-dealer. When an investment adviser firm also acts as a registered representative, they can earn both advisory fees for ongoing investment advice and sales commissions for selling financial products.
This arrangement creates potential conflicts because the firm might have incentives to recommend financial products that generate sales commissions rather than solely focusing on what's best for the client's investment objectives. The firm might also favor certain product providers that offer higher commission payouts or better sales incentives.
A firm that both provides fee-based investment advice and also sells commissioned financial products like mutual funds or insurance would mark Yes. A firm that only provides investment advisory services without selling any commissioned products would mark No.
Yes
The adviser firm acts as a registered representative, meaning they can sell securities products for commissions in addition to providing fee-based investment advice. This dual role requires disclosure of potential conflicts and careful management of competing incentives between advisory duties and product sales.
No
The firm does not act as a registered representative and focuses solely on providing investment advisory services. However, individual employees of the firm might still hold registered representative licenses with other broker-dealers, which would be disclosed separately in employee count disclosures.
6A(2) - Registered representative of a broker-dealer (Yes / No).
This checkbox is part of Item 6A, which covers other business activities that the investment adviser firm engages in beyond providing pure investment advisory services.
When an adviser firm also acts as a registered representative, they face conflicts between their fiduciary duty to act in clients' best interests and their sales incentives to generate commission revenue. A Yes answer means you should carefully evaluate their compensation structure and sales practices.
The dual role can create subtle conflicts where the firm might recommend products that generate commissions rather than lower-cost alternatives, suggest more frequent transactions to increase sales opportunities, or favor investment products from companies that provide better sales support or higher payouts.
A Yes does not tell you what products the firm sells for commissions, which broker-dealers they work with, how their commission income compares to their advisory fees, or whether they have policies to prioritize your interests over their sales incentives.
Check Item 5E(5) for reported commission compensation. Then request the product and commission schedule used for recommendations to advisory clients, and compare those terms with the advisory agreement.
Yes
The firm reports acting as a registered representative. On the firm's Best Investors ADV panel, review their Item 5E compensation structure to see both advisory and commission-based income sources, check 6A(1) to see if they also operate as a broker-dealer, and examine their 5B(2) employee count to understand how many staff are involved in product sales activities.
Also review any Item 8 brokerage disclosures about product recommendations and sales practices. Ask the firm directly about their specific product sales activities and how they manage conflicts between advisory and sales functions.
No
The firm does not report registered representative activities for itself. However, check 5B(2) to see if individual employees are registered representatives of other broker-dealers, which could still create conflicts. Also review 6A(1) to see if the firm operates as a broker-dealer directly.
Look at their 5E compensation structure to understand their revenue sources, which should focus primarily on advisory fees if they're not engaged in product sales activities.