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, linked below, 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.
- SEC Release for Regulation Best Interest: The Broker-Dealer Standard of Conduct
- SEC Release for Form CRS Relationship Summary; Amendments to Form ADV
- Form CRS Instructions
- Commission Interpretation Regarding Standard of Conduct for Investment Advisers
- Commission Interpretation Regarding the Solely Incidental Prong of the Broker-Dealer Exclusion from the Definition of Investment Adviser
- SEC Regulation Best Interest – A Small Entity Compliance Guide
- Form CRS Relationship Summary – A Small Entity Compliance Guide
Firms may send any questions that arise in planning for Reg BI and Form CRS implementation to the SEC at [email protected]
FINRA will assist members with their implementation of Reg BI and Form CRS in various ways, such as by providing resources to assist firms in their implementation efforts. In addition, FINRA is hosting in-person meetings and educational events to assist with these efforts.
As with other SEC rules, FINRA will examine for and enforce compliance with Reg BI and, in doing so, FINRA will adhere to SEC guidance and interpretations. FINRA staff expects to work with SEC staff to ensure consistency in examining broker-dealers and their associated persons for compliance with Reg BI. In addition, FINRA will review FINRA rules to see whether changes are needed to align FINRA rules with the SEC’s rulemaking. Any proposed changes to FINRA rules will be filed with the SEC for public comment and available on FINRA’s website.
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.
Regulation BI Conference
FINRA’s Regulation Best Interest Conference is a one-day event designed to bring regulators, executives and industry practitioners together to learn more about Regulation Best Interest (Reg BI).
Other events/programs featuring Reg BI discussions
- FINRA Small Firm Report (The SEC’s Regulation Best Interest) | October 8, 2019
- 2019 FINRA Small Firm Conference (SOLD OUT)| October 23-24, 2019 | Santa Monica, CA
- 2019 FINRA Advertising Regulation Conference | October 24-25, 2019 | Washington, DC
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;
- Joseph P. Savage, Vice President and Counsel, Office of Regulatory Analysis, at (240) 386-4534; or
- Angela C. Goelzer, Vice President and Counsel, Office of Regulatory Analysis, at (202) 728-8120.
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