Compliance and Regulatory Alerts - 07-16-19

Regulation Best Interest Now Published in Federal Register: What Does This Mean for Your Firm?

The formal publication by the Federal Register on July 12, 2019, of Regulation Best Interest (“Reg BI”) triggers final effective and compliance dates for the rulemaking package.

The Reg BI rule and additional interpretations establish the relationship standards between broker dealers and investment advisers and their retail clients. For broker-dealers, the Reg BI package is intended to “enhance the standard of conduct beyond existing suitability obligations and make clear that a broker-dealer may not put its financial interests ahead of a retail customer when making recommendations."

The rule package also offers interpretive guidance for investment advisers who have fiduciary obligations to investors, requires that both broker-dealers and investment advisers provide a new Client Relationship Summary (“CRS”) to retail investors, and provides an interpretation of the “solely incidental” provision of the Investment Advisers Act. That provision exempts broker-dealers who provide investment advice from registration requirements if the advice is "solely incidental" to the conduct of their business, and if they don't receive "special compensation." (See here for additional detail of the overall package.)  

With its publication in the Federal Register, the interpretive guidance for investment advisers and clarifications of the “solely incidental” exclusion for broker-dealers are in effect. For both investment advisers and broker-dealers, Reg BI and Form CRS will become effective on September 10, 2019, with full compliance required by June 30, 2020, one year from the date of the rulemaking package adoption.

 

Bates Group helps firms navigate the compliance challenges presented by the new Reg BI requirements. Please visit our Reg BI service page or contact:

Robert Lavigne, Managing Director, Bates Compliance Solutions - rlavigne@batesgroup.com

Rory O'Connor, Director, Compliance - roconnor@batesgroup.com

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