SEC Adopts Regulation Best Interest to Clarify Broker-dealer Expectations

Published On July 1, 2019

The US Securities and Exchange Commission (SEC) has announced plans to adopt new rules that will enhance the transparency of retail investors’ relationships with advisers and broker-dealers. The new rules will ensure that legal requirements and mandated disclosures are brought in line with investor expectations.

In particular, the new rules include a Regulation Best Interest, which is designed to clarify the standards expected of broker-dealers and investment advisers. Moreover, it aims to help retail investors to better understand and compare services, and make informed choices that are relevant to their circumstances.

Following implementation, broker dealers will be obliged to act in the best interest of their retail customers when making a recommendation of a transaction or investment strategy involving securities. It will make clear that broker dealers are not entitled to put their own financial interests ahead of the interests of a retail customer.

Regulation Best Interest and Form CRS will become effective 60 days after they are published in the Federal Register, and will include a transition period until June 30, 2020 to give firms sufficient time to come into compliance.