According to InvestmentNews, some have become convinced Regulation Best Interest (Reg BI) is a significant step up from brokers’ previous suitability standard, while others remain skeptical. Benefits and executive compensation partner Fred Reish weighed in on the fervent discussion.
Reg BI is about establishing the right process for delivering investment advice, and that may not have immediately sunk in with brokerages that focus on sales, said Reish. “[Reg BI] is improving the disclosures and the quality of services, but it is slower than the SEC might have anticipated,” he added. “There’s a culture clash between the standard of care and the culture of some organizations. That’s why it will take a while to fully integrate for all broker-dealers. It has to get into the fabric of the culture.”
With Reg BI now in force, a disclosure document called the client relationship summary (CRS) continues to cause dismay. The U.S. Securities and Exchange Commission conducted several enforcement cases against firms that missed CRS deadlines and also released guidance warning firms that the document can be dense and inaccurate. “I’ve been surprised at how much work it’s taken for organizations to make changes to be in compliance with the principles-based best interest standard in Reg BI,” Reish said.
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