Regulation Best Interest: The Broker-Dealer Standard of Conduct

The Securities and Exchange Commission adopts new rule 17 CFR 240.15l-1, known as Regulation Best Interest, establishing a standard of conduct for broker-dealers and their associated persons when making recommendations to retail customers. This rule enhances existing suitability obligations by requiring broker-dealers to act in the best interest of the retail customer at the time of the recommendation, without placing the firm's financial interests ahead of the customer's. The standard comprises four component obligations: a Disclosure Obligation requiring written disclosure of material facts about the relationship and costs; a Care Obligation mandating reasonable diligence, care, and skill; a Conflict of Interest Obligation requiring policies to identify, disclose, mitigate, or eliminate material conflicts; and a Compliance Obligation for policies ensuring adherence to the regulation. The rule also amends rules 17 CFR 240.17a-3 and 17 CFR 240.17a-4 to impose new record-making and recordkeeping requirements. The compliance date is determined in Section II.E of the release, with the rule becoming effective on September 10, 2019.

SEC published 7 documents in the last 30 days — get each new one by email the day it lands.

Conformed to Federal Register version
SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 240
Release No. 34-86031; File No. S7-07-18
RIN 3235-AM35
Regulation Best Interest: The Broker-Dealer Standard of Conduct AGENCY: Securities and Exchange Commission. ACTION: Final rule. SUMMARY: The Securities and Exchange Commission (the “Commission”) is adopting a new rule under the Securities Exchange Act of 1934 (“Exchange Act”), establishing a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer (unless otherwise indicated, together referred to as “broker-dealer”) when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities (“Regulation Best Interest”). Regulation Best Interest enhances the brokerdealer standard of conduct beyond existing suitability obligations, and aligns the standard of conduct with retail customers’ reasonable expectations by requiring broker-dealers, among other things, to: act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker-dealer ahead of the interests of the retail customer; and address conflicts of interest by establishing, maintaining, and enforcing policies and procedures reasonably designed to identify and fully and fairly disclose material facts about conflicts of interest, and in instances where we have determined that disclosure is insufficient to reasonably address the conflict, to mitigate or, in certain instances, eliminate the conflict. The standard of conduct established by Regulation Best Interest cannot be satisfied through disclosure alone. The standard of conduct draws from key principles underlying

Read the rest free, and get an email when SEC publishes again

Email me when SEC publishes something newOne email per publication, same day. Sign in below to keep reading.

Lineage: In force

amendssupersedesissued underrefers toproposed or not in RegAlertarrows run from the older text to the one that changes it

Source: Securities and Exchange Commission — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works