The Securities and Exchange Commission has set June 5, 2019, as the date it will vote on “Regulation Best Interest—Standard of Conduct for Broker-Dealers” commonly called Reg BI.
The announcement was made on the SEC’s website under its open meeting agenda.
Reg BI is a proposed rule under the Securities Exchange Act of 1934 that would establish a standard of conduct for broker-dealers when making investment recommendations.
The proposed standard of conduct is to act in the best interest of the retail customer at the time a recommendation is made without placing the financial or other interest of the broker-dealer ahead of the interest of the retail customer.
“The Commission will consider whether to adopt a new rule to establish a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when making a recommendation to a retail customer of any securities transaction or investment strategy involving securities,” it said, noting it will be supervised by the Division of Trading and Markets.
Criticism
Fiduciary proponents have criticized the SEC’s proposal, believing it to be a watered-down version of a more stringent Department of Labor version, which announced that it will revisit the topic in December.
“It won’t be applicable immediately, though,” according to Fred Reish, an ERISA attorney and expert with legal powerhouse Drinker Biddle. “You’ll have a delayed implementation date anywhere from six to 12 months.”
June 5 will be a busy day for the SEC, as it will consider several other related provisions as well.
- Form CRS Relationship Summary will require registered investment advisers and registered broker-dealers to provide a brief relationship summary to retail investors.
- Standard of Conduct for Investment Advisers will consider whether to publish a commission interpretation of the standard of conduct for investment advisers.
- Lastly, an interpretation of “Solely Incidental” advice when related to brokerage services will consider whether to publish a Commission interpretation of the solely incidental prong of section 202(a)(11)(C) of the Investment Advisers Act of 1940.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
