A more thorough explanation:

Definition: The idea that a broker-dealer must be held to a high standard of conduct because by engaging in the securities business, the broker-dealer implicitly represents to the world that the conduct of all its employees will be fair and meet professional norms.

For example, if a broker-dealer hangs out a shingle advertising their services, they are representing themselves as experts in the securities industry. As a result, they are held to a higher standard of care in making recommendations to their customers and dealing with their accounts.

The shingle theory is an extension of the common law doctrine of "holding out." This means that when brokers hold themselves out as experts in investments or securities of a particular issuer, they are held to a higher standard of care in their conduct.