What Regulation Best Interest: The Broker-Dealer Standard of Conduct requires
The Securities and Exchange Commission (SEC) is adopting Regulation Best Interest, a new rule under the Securities Exchange Act of 1934 that establishes a standard of conduct for broker-dealers and their associated persons when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities. This regulation enhances the broker-dealer standard of conduct beyond existing suitability obligations and aligns the standard with retail customers’ reasonable expectations. The core obligation 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. The General Obligation is satisfied only if the broker-dealer complies with four specified component obligations: (1) a Disclosure Obligation, requiring written disclosure of material facts about the relationship and recommendation; (2) a Care Obligation, requiring the exercise of reasonable diligence, care, and skill; (3) a Conflict of Interest Obligation, requiring the establishment of policies and procedures to address, and in some cases mitigate or eliminate, conflicts of interest; and (4) a Compliance Obligation, requiring policies and procedures to achieve compliance with the regulation as a whole. The standard of conduct established by Regulation Best Interest cannot be satisfied through disclosure alone and draws from key principles underlying fiduciary obligations.
Pillar: Banking & Global Finance · Authority: Securities and Exchange Commission · Version: 1.0.0 · Last updated:
Primary source: https://www.sec.gov/rules/final/2019/34-86031.pdf
SHA-256 integrity: fc09280b3daddda332f497c4c4055931032c95f650f6fb6428673300b9bb2e20
Primary Citations — 8 traced to source
- Rule 15l-1, General Obligation: When making a recommendation, a broker-dealer must act in the retail customer's best interest and cannot place its own interests ahead of the customer's interests.
- Section I, Introduction: The standard of conduct established by Regulation Best Interest cannot be satisfied through disclosure alone.
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