August 26, 2019

Fred Reish Comments on the New Obligations for Broker-Dealers Under Reg BI

The publication noted Reg BI’s mandate of broker-dealers having to weigh cost when making recommendations to retail clients, a departure from prior rules.

Reish emphasized the significance of these new requirements.

"There's no doubt now. The SEC literally said it [cost] has to be considered in every recommendation," said Reish. "That's millions [of recommendations] every year. That strikes me as a pretty big deal."

InvestmentNews also reported that while industry experts say many broker-dealers had considered cost under former suitability rules for brokers, many believe brokerage firms will have to adapt their systems and processes to account for the new standard.

"The final regulation, which is an enhancement from the proposal, explicitly requires the broker-dealer to consider the costs of the recommendation," the SEC said in a news release accompanying the final rule.

While that doesn't mean a broker must recommend the lowest-cost product every time, or even that cost will be the predominant factor each time, it does mean cost has to be considered, Reish noted.

He added that the regulation has broad implications for brokerage firms, from their training and supervision of brokers, to the range of investment products they offer on their platforms and the software they use to evaluate mutual funds, annuities and other investment products.

Full Article

Related Industries

Related Topics

The Faegre Baker Daniels website uses cookies to make your browsing experience as useful as possible. In order to have the full site experience, keep cookies enabled on your web browser. By browsing our site with cookies enabled, you are agreeing to their use. Review Faegre Baker Daniels' cookies information for more details.