SEC Regulation Best Interest (Reg BI)
On June 5, 2019, the SEC adopted Regulation Best Interest (Reg BI) under the Securities Exchange Act of 1934. Reg BI establishes a “best interest” standard of conduct for broker-dealers and associated persons when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities, including recommendations of types of accounts.
As part of the rulemaking package, the SEC also adopted new rules and forms to require broker-dealers and investment advisers to provide a brief relationship summary, Form CRS, to retail investors. In addition, the SEC published interpretations concerning investment advisers’ standard of conduct under the Investment Advisers Act of 1940, and the “solely incidental” prong of the broker-dealer exclusion from the Advisers Act.
Firms must comply with Reg BI and Form CRS by June 30, 2020. The Advisers Act interpretive releases were effective on July 12, 2019.
Reg BI and Form CRS Checklist
FINRA is providing a Reg BI and Form CRS Checklist to help members with their assessment and implementation of necessary changes to their policies, procedures and compliance programs in light of Reg BI and Form CRS. This checklist outlines the major requirements of the rules and notes key differences between FINRA rules and SEC’s Reg BI and Form CRS.
Filing Form CRS
Firms that are required to file the Form CRS must do so by June 30, 2020, though they are permitted to begin filing now. Firms must file electronically using Web CRD® (for broker-dealers) or IARD (for dually registered firms). For information related to the filing process, please see FINRA’s quick reference guides for filing of Form CRS through Web CRD® and through IARD, and the SEC’s Form CRS FAQs.
Reg BI Preparedness Reviews Report
As part of FINRA’s continuing efforts to assist members with the implementation of Reg BI and Form CRS, FINRA has published a new report highlighting common practices FINRA observed during reviews that began in late 2019 and through ongoing conversations with firms of all sizes about their preparedness initiatives. The report is meant to help FINRA member firms assess their efforts against their peers.
Regulation BI Conference
FINRA’s Regulation Best Interest Conference, held on December 18, 2019, in Washington, DC, was a one-day event designed to bring regulators, executives and industry practitioners together to learn more about Regulation Best Interest (Reg BI). View the full conference video and read about conference highlights.
On-demand Events/Programs featuring Reg BI Discussions
- Virtual Conference Panel: Regulation Best Interest: Compliance Inspections and Examinations | Released May 12, 2020
- Virtual Conference Panel: Regulation Best Interest and Form CRS: Where Are We Now | Released May 6, 2020
- Podcast: Regulation Best Interest: Preparing for a New Standard of Conduct | Released October 15, 2019
- FINRA Small Firm Conference Call (The SEC’s Regulation Best Interest) | Recorded October 8, 2019
- 2019 FINRA Advertising Regulation Conference (Plenary Session: Regulation Best Interest and Current Developments) | Recorded October 24, 2019 – Session Available On Demand
Frequently Asked Questions
FINRA has published a new FAQ to address whether firms are required to re-file with FINRA retail communications that eliminate references to "adviser" or "advisor" in order to comply with the SEC’s Regulation Best Interest.
FINRA Staff Contacts
- James S. Wrona, Vice President and Associate General Counsel, Office of General Counsel (OGC), at (202) 728-8270;
- Meredith Cordisco, Associate General Counsel, OGC, at (202) 728-8018; or
- Joseph P. Savage, Vice President and Counsel, Office of Regulatory Analysis, at (240) 386-4534.
17 CFR 240.15l-1
Regulation Best Interest
17 CFR 240.17a-3
Records to Be Made by Certain Exchange Members, Brokers and Dealers
17 CFR 240.17a-4
Records to Be Preserved by Certain Exchange Members, Brokers and Dealers
17 CFR 240.17a-14
Form CRS, for Preparation, Filing and Delivery of Form CRS
17 CFR 249.641
Form CRS, Relationship Summary for Brokers and Dealers Providing Services to Retail Investors, Pursuant to §240.17a-14 of This Chapter
- Capital Market Insights
FINRA hosted a Regulation Best Interest (Reg BI) conference on Dec.18, 2019 in Washington, D.C. for firms to discuss best practices and approaches. Approximately 500 compliance officers and other industry participants attended the one-day event focused on assisting firms as they gear up for the June 30, 2020 compliance date for the SEC’s Reg BI and Form CRS.January 08, 2020
- PodcastSoon brokerage firms will have to comply with a new standard of conduct when working with retail clients with the implementation of Regulation Best Interest. What is the new standard? What will firms need to do to comply? Tune in to learn more from FINRA’s Chief Legal Officer.October 15, 2019