Tuesday, December 29, 2020
ACA ALERT: SEC PUBLISHES FAQs FOR REGULATION BEST INTEREST

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:

  • Recommendations – six questions
  • Disclosure Obligations – four questions
  • Care Obligations – one question
  • Conflict of Interest Obligations – two questions

Providing recommendations is a key element for compliance with Reg BI. The six FAQs and answers in this category address the following areas:

  • Account types
  • What constitutes a recommendation – “call to action”
  • Communications relating to recommendations

The FAQs questions regarding the Disclosure Obligations address:

  • the time and method of disclosure delivery
  • the fact that providing Form CRS alone does not necessarily meet all of the Reg BI disclosure requirements

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:

  • An indication of conflicts other than sales contests, sales quotas, bonuses, and non-cash compensation that would require to be eliminated
  • Potential conflict mitigation methods
  • A discussion indicating whether a “one size fits all” approach to mitigation addresses conflicts

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

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Debates com referências do mundo jurídico e de Compliance. Um papo dinâmico conduzido por Nicole Dyskant com foco em inovações, desafios e insights.



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