Posted on June 27, 2020

IRI: Reg BI is a Substantial Advancement in Consumer Protection and Imposes Significant Compliance Requirements on Industry

WASHINGTON, D.C. – A comprehensive new U.S. Securities and Exchange Commission (SEC) regulation to require financial professionals to act in consumers’ best interest when providing personalized investment advice takes effect June 30.  

The Insured Retirement Institute (IRI) believes that the SEC rule, Regulation Best Interest (Reg BI), will help investors make informed decisions about the type of financial professional to best meet their needs while preserving investors’ choice and access to products and services to achieve their financial goals. IRI has been an industry leader in advocating for adoption of a clear, consistent and workable best interest standard.

“IRI has long supported the principle that financial professionals should act in their client’s best interests when providing personalized investment advice,” said Wayne Chopus, IRI President and CEO. “Reg BI is a substantial advancement in consumer protection compared to the prior rules and includes significant compliance requirements for industry.”

The SEC finalized Reg BI last June and provided one year for financial professionals and firms to develop compliance protocols. The rule applies to broker-dealers and requires that they act in their clients’ best interest when recommending financial products or offer investment advice. Conflicts of interest must not only be disclosed but must be mitigated or eliminated.

SEC Chairman Jay Clayton characterized the new rule as a more stringent and robust regulatory regime that imposes considerable new requirements on financial professionals and firms.

IRI says that Reg BI recognizes and seeks to preserve the important and valuable distinctions between broker-dealers and investment advisers.

“Broker dealers and investment advisors simply have different relationships with their clients, and, as such, investors have different expectations depending on whether they are working with a broker dealer or investment advisor,” Chopus said.

IRI also noted that Reg BI includes substantial enforcement tools through the SEC and FINRA and while it imposes significant compliance requirements on industry, the formulation of the best interest standard under Reg BI provides a clear and straight-forward compliance roadmap.

“Reg BI represents significant change in the regulatory structure affecting the retirement income industry,” Chopus said. “IRI members are committed to the principles in this new structure as the vast majority of financial professionals already act in their clients’ best interest and will continue to serve consumers with products and services that help them achieve their retirement income goals.“

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Contact: Dan Zielinski