SEC Regulation Best Interest Does Not Have Your Best Interests At Heart

David John Marotta

On June 5th, 2019, the Securities and Exchange Commission (SEC) released their final draft of Reg BI, or “Best Interest” as it is called.

Regulation Best Interest: The Broker-Dealer Standard of Conduct” requires broker-dealers to act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker-dealer ahead of the interests of the retail customer. This is called the “General Obligation.”

The General Obligation is satisfied only if the broker-dealer complies with four specified component obligations. Those obligations are:

1. Disclosure Obligation

The Disclosure Obligation requires broker-dealers to fully and fairly disclose material facts about conflicts of interest.

Unfortunately, studies suggest that disclosures often have the opposite effect that they were intended to have.


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