On April 2, 2020, the Securities and Exchange Commission (“SEC”) issued a public statement titled “Investors Remain Front of Mind at the SEC: Approach to Allocation of Resources, Oversight and Rulemaking; Implementation of Regulation Best Interest and Form CRS.” Among the topics covered in the statement, the SEC addressed the June 30, 2020 implementation deadline for Regulation Best Interest (“Reg BI”) and Form CRS in light of the challenges raised by the COVID-19 pandemic.
Specifically, SEC Chairman Jay Clayton stressed the importance, given the financial uncertainties caused by the pandemic, for broker-dealers and investment advisers to continue to place their customers above their own interests. With that precept in mind, the SEC determined that the June 30, 2020 compliance date for Reg BI, Form CRS, and other related regulations is still appropriate and will remain in place.
With that decision in mind, Chairman Clayton instructed broker-dealers and investment advisers to continue their good-faith efforts to comply with the June 30, 2020 deadline. Firms having difficulty meeting the deadline because of COVID-19-related business disruptions should contact the SEC.
After the implementation date, SEC examiners will focus on firms’ efforts to develop compliance systems, policies, and procedures for Reg BI, Form CRS, and related regulations and on working with firms to resolve any compliance questions in these areas.
At the end of the public statement, the SEC lists the following resources “to assist firms in understanding the new requirements and working toward implementation”:
- A dedicated SEC mailbox (IABDquestions@sec.gov) for submitting questions
- The Reg BI Small Entity Compliance Guide
- SEC staff answers to frequently asked questions on Reg BI – see Reg BI FAQs
- A dedicated page for relevant materials such as releases, comment letters, speeches, press releases, and transcripts – see Regulation Best Interest, Form CRS and Related Interpretations
Reg BI and Form CRS Exams
On April 7, 2020, the SEC Office of Compliance Inspections and Examinations (“OCIE”) issued two risk alerts:
- Examinations that Focus on Compliance with Regulation Best Interest
- Examinations that Focus on Compliance with Form CRS
OCIE will conduct Reg BI exams after the compliance date and will focus on whether firms have developed and implemented policies and procedures for compliance with Reg BI. In addition, the alerts summarize the areas that OCIE will review, including the documents that it will request.
Regarding Form CRS, OCIE will assess firms’ efforts to provide disclosure information in the Form CRS. The exams will also focus on whether firms made a good faith effort to implement Form CRS.
With fewer than three months until the implementation date, firms should be moving forward with their Reg BI and Form CRS compliance efforts. As Chairman Clayton emphasized, the SEC’s exams after June 30, 2020 will focus on firms’ good-faith efforts in this area. And again, any firms running into problems complying with Reg BI and Form CRS should contact the SEC promptly.
How ACA Can Help
ACA can help you understand the compliance and operational issues presented by Reg BI as they relate to your retail business and help you comply with the regulation. Visit our Regulation Best Interest Resources page to find out more about our services.
For More Information
For more information, please contact your ACA consultant or Dee Stafford.