Reg BI Enforcements Are Looming. Is Your BD Ready?

  • Heightened Enforcement of Regulation Best Interest
  • Where Your BD Stands on Policies & Procedures 
  • SEC’s Low Hanging Fruit and Beyond 

It’s time to start preparing as the Securities and Exchange Commission (SEC) is looking to ramp up the enforcement of Regulation Best Interest (Reg BI) after being quiet about it since the retail investment advice rule went into effect. That fact has had some folks concerned about whether their broker-dealer is out in front of this developing situation or not. And if the latter, it may be a sign that you should also be looking more closely at the current home of your business.

Reg BI imposes a heightened best interest standard on broker-dealers when recommending securities transactions or investment strategies. The rule is still relatively new but is likely to have an oncoming surge of enforcement. Additionally, the SEC has already indicated that regulated firms may not be getting the new rule quite right while others have simply failed to comply at all since the rule was introduced in 2020. Knowing where your broker-dealer stands is a big deal.

Over the course of 2020 and 2021, the SEC’s Division of Examinations (Exams) began initial rounds of Reg BI examinations, and, as of May 2021, they began issuing requests for information on Reg BI compliance. With the increased focus on compliance, many are expecting the surge of enforcement to start with those that have not taken the proper step to implement new or improve current procedures and policies to comply with Reg BI. 

After hitting the low hanging fruit, the SEC enforcement will likely turn their focus to conduct where the application of Reg BI is more ambiguous. For example, they may challenge whether a broker-dealer has acted consistently with the duty of care, especially as it pertains to alternative investment products. 

With the SEC doubling down on the Reg BI rule soon, now may be the time to take a look at the actions that your broker-dealer is taking to stay compliant with the rule. While the penalty for failure to comply is still fairly unknown due to a lack of enforcement thus far, that is not a reason to have fallen behind on this new rule. 

You should be working with a broker-dealer that has your best interests at the forefront of their actions. A group that anticipates issues, like Reg BI, that may arise, develops an action plan to resolve the issue and executes that plan to keep you within the guidelines. If that sounds like your present situation, then it might be time to consider a new home for your business — especially if you feel your current broker-dealer hasn’t and isn’t taking the necessary steps. 

With 3xEquity, we always have your best interests at the forefront of our actions. We are here to help you find a new and better home for your business — both quickly and easily. It all starts by entering your practice data, and, in just a few days, you can get multiple offers from top national and regional broker-dealers. Remember, we do all the work and you stay 100% anonymous until you want to pursue an offer. We’ll even help you weed through the offers to best understand their terms and ensure you end up in a place that makes sense for your business. 

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