Reg BI says brokers should act in the best interest of their retail customers, but are they? Sarah Hutchins and Corri Hopkins of Parker Poe dig into the details of the SEC’s first Reg BI enforcement action and consumer claims to reveal where advisers are still being tripped up.
Broker-dealers face increasing risks tied to a 2019 regulation that had previously flown under the radar: Regulation Best Interest — Reg BI for short. Both the SEC and the Financial Industry Regulatory Authority (FINRA) took their first disciplinary actions to enforce the regulation last year. In addition, the number of claims customers filed alleging a Reg BI violation surged last year, increasing faster than any other type of FINRA arbitration claim.
As regulators and individual investors become increasingly familiar with Reg BI, broker firms should ensure they are following best practices under the new standards. That includes establishing policies and procedures to satisfy Reg BI’s disclosure requirements, conducting annual mandatory employee training related to Reg BI and reevaluating broker compensation models to eliminate conflicts of interest.
What is Reg BI?
Reg BI is an SEC regulation that imposes upon brokers the obligation to act in the “best interest” of their retail customers and to avoid putting their own…
