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Investment Accounts

SEC Regulation Best Interest and Form CRS: What You Need to Know

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Choosing an investment professional who looks out for your best interests might seem daunting at first, but it doesn’t have to be. The Securities and Exchange Commission (SEC) has rules that are designed to help you better understand and navigate your relationships with investment professionals and to receive investment recommendations that are in your best interest. Here’s what you need to know.

What Is Regulation Best Interest?

Regulation Best Interest, or Reg BI, imposes a "best interest" standard of conduct on broker-dealers and their investment professionals when they make a recommendation to a retail customer of any securities transaction, or investment strategy involving securities. This means that when making a recommendation to a retail customer, a broker-dealer must act in the retail customer's best interests and not place its own interests ahead of the customer's interests. This includes recommendations of types of accounts, such as individual retirement arrangement (IRA) rollovers, as well as recommendations to open broker-dealer or investment advisory accounts.

To meet the Reg BI standard of conduct, broker-dealers must comply with certain component obligations that include making important disclosures to customers about the services they provide and fees they charge, and identifying and managing conflicts of interest that might compromise their obligations to customers. To learn more, visit FINRA’s Regulation Best Interest webpage.

What Is Form CRS?

Another rule requires broker-dealers and registered investment advisers (RIAs) to provide Form CRS, a brief relationship summary, to retail investors. The relationship summary contains important information about the firm, including key disclosures that can help you decide if a firm is right for you. It also provides a standardized way for investors to compare information about different firms.

The relationship summary provides customers with information about:

  • the types of services the firm offers;
  • the fees, costs, conflicts of interest, and required standard of conduct associated with those services;
  • whether the firm and its investment professionals have reportable legal or disciplinary history; and
  • how to get more information about the firm.

The relationship summary also includes questions to help begin a discussion with an investment professional about the relationship, including their services, fees, costs, conflicts and disciplinary information. 

When Will I Receive a Relationship Summary?

You’ll receive a relationship summary at the outset of your relationship with a broker-dealer or RIA, and at certain other times once you have an existing relationship. For example, you’ll receive a relationship summary if your firm recommends that you roll over assets from a retirement account into a new or existing account or investment.

You can expect to receive a firm’s relationship summary in paper or electronic form, depending on how you’ve chosen to receive disclosures from your firm, and it’s also available on the firm’s public website. In addition, you can search for a firm’s relationship summary and find more information about a firm or an individual, including their background and disciplinary history, using FINRA's BrokerCheck.