FINRA Releases Resources for Regulation Best Interest

October 16, 2019 by ACA Compliance Group


On October 8, 2019, the Financial Industry Regulatory Authority (“FINRA”) released a new Reg BI and Form CRS Checklist (“Checklist”) to help firms determine whether their supervisory systems are in compliance with Regulation Best Interest (“Reg BI”) and the Form CRS Relationship Summary (“Form CRS”). Both were approved earlier this year by the U.S. Securities and Exchange Commission (“SEC”).

What is Regulation Best Interest?

The SEC adopted Reg BI (Rule 15l-1 under the Securities Exchange Act of 1934) on June 5, 2019. Reg BI establishes a standard of conduct for broker-dealers and their associated persons with regard to recommending securities transactions or investment strategies, as well as account types, in the best interest of retail customers.

Reg BI is comprised of the following four obligations that firms must satisfy to be in compliance: • Disclosure Obligation • Care Obligation • Conflict of Interest Obligation • Compliance Obligation

Regulator Resources

The Checklist describes key differences between FINRA rules and Reg BI. In addition, it provides compliance guidance in the form of 20 questions pertaining to Reg BI and eight questions related to Form CRS. The Reg BI questions and their answers primarily provide insight into the policies and procedures that should be in place to meet the four obligations and so achieve compliance with Reg BI. The eight questions and answers that focus on Form CRS provide information on its content, delivery, updating, and recordkeeping.

On its Reg BI webpage, FINRA reminds firms to direct any questions regarding the interpretation of Reg BI to the SEC.

Along with its publication of the Checklist, FINRA has devoted a page on its website to Reg BI and Form CRS that includes links to the four regulations released on June 5, 2019. The website also notes that the agency will work with the SEC to ensure consistency in their Reg BI compliance examinations and that FINRA will be reviewing its rules, including suitability, going forward to determine if any changes are needed with regard to Reg BI.

Please note that FINRA will also host a one-day Reg BI Conference on December 18, 2019, in Washington, D.C.

Previously, on September 9, 2019, the SEC published a Small Entity Compliance Guide for Regulation Best Interest and a Small Entity Compliance Guide for the Form CRS Relationship Summary and Amendments to Form ADV. Similar to the FINRA Checklist these guides provide information regarding Reg BI and Form CRS in a question and answer format.

Firms are expected to comply with Reg BI by June 30, 2020.

ACA Resources

For more information about the requirements of Reg BI and what it means for broker-dealers, please watch our on-demand webcast.

ACA offers a number of services to help you comply with Reg BI. Click here to find out more about these services.

For More Information

Please contact your ACA consultant or Dee Stafford at (561) 628-5288 with any questions about Reg BI or Form CRS.