On January 10, 2020, the U.S. Securities and Exchange Commission (“SEC”) published Frequently Asked Questions on Regulation Best Interest. This publication is in addition to the Frequently Asked Questions on Form CRS published on November 26, 2019.
Regulation Best Interest (“Reg BI”) establishes a standard of conduct for broker-dealers and investment advisers and their associated persons. Its compliance date is June 30, 2020.
With less than six months left to comply with Reg BI, firms have been waiting for further guidance from the SEC—in particular, the frequently asked questions (“FAQs”). The just-released FAQs should help firms develop a process to comply with the regulation.
The 13 FAQs cover four areas of concern for compliance with Reg BI:
Providing recommendations is a key element for compliance with Reg BI. The six FAQs and answers in this category address the following areas:
The FAQs questions regarding the Disclosure Obligations address:
The one question in the Care Obligations category addresses what constitutes a “series of transactions.” The FAQs guidance provides information related to the facts and circumstances of these transactions.
The two FAQs questions regarding the Conflict of Interest Obligations address the following topics:
In addition, the SEC stated in the FAQs release that it intends to respond to further questions periodically.
Firms should continue submitting their questions on Reg BI compliance to the SEC. Most importantly, firms should begin their analysis of the Reg BI impact on their business activities as a first step toward developing and implementing the actions needed to achieve compliance.
ACA COMPLIANCE GROUP