IRI STATEMENT ON SECURITIES AND EXCHANGE COMMISSION’S ANTICIPATED ACTION ON REGULATION BEST INTEREST

Posted on June 4, 2019

The Securities and Exchange Commission will announce and vote on its Regulation Best Interest (Reg BI) at a June 5 open meeting. The text of the regulation is not expected to be available until after the meeting. IRI will carefully review the final rule in detail when it is available. Until then, IRI offers several preliminary observations based upon the Commission’s proposed regulation.

  • Reg BI will be a substantial advancement in consumer/investor protection compared to existing law
    • Reg BI will create new requirements for broker-dealers beyond current rules, to include:
      • Acting in their client’s best interest
      • Disclosing conflicts of interest
      • Mitigating or eliminating conflicts
  • Reg BI will impose significant new regulatory implementation burdens on companies and advisors
    • Reg BI will require companies to evaluate and potentially make significant investments in systems, policies, procedures and training to ensure compliance with new regulations.
    • Additional state regulation is forthcoming as the National Association of Insurance Commissioners (NAIC) advances a parallel regulatory effort to update its current model state law.
  • Reg BI will rely on rigorous SEC and FINRA enforcement mechanisms to protect consumers.
    • Reg BI will have substantial enforcement teeth including investigatory powers and civil and criminal penalties to ensure compliance with SEC and FINRA regulations.

“IRI has long supported the principle that financial professionals should be required to act in their clients’ best interest,” said Jason Berkowitz, IRI Chief Legal and Regulatory Officer. “IRI will review and evaluate this extensive new regulation and will work with the Commission to advance toward a new era of enhanced investor protection.”