December 22, 2020

Jim Lundy Shares Comments With ThinkAdvisor on SEC Ramping Up Reg BI Exams in January

In ThinkAdvisor’s article titled “SEC to Ramp Up Reg BI Exams in January,” partner Jim Lundy shared his comments on the Securities and Exchange Commission’s (SEC’s) Regulation Best Interest (Reg BI) Exams.

According to the publication, the SEC’s Division of Examinations plans to ramp up oversight of brokers’ compliance with Reg BI exams starting in January, including recommendations on rollovers. After assessing the results of its initial Reg BI exams and six months since the compliance date kicked in, the Division of Examinations will begin its “next phase” by conducting more focused exams.

Lundy stated that “the more focused, follow-up Reg BI Exams are going to prioritize product costs – and more specifically firms’ assessments and alterations of product offerings, how personnel identify and assess product costs, and the documentation surrounding these efforts.”

Regarding the latter, Lundy continued, “We have been advising the importance of reasonable documentation when higher-cost products are recommended so that firms are positioned as well as possible to withstand SEC scrutiny of whether the recommendations are in the customers’ best interests.”

The focused exams “will be delving deeper into firms’ rollover practices and recommendations of complex products,” Lundy added. “Firms with business models that significantly involve these areas should be prepared for visits from [SEC] examination teams.”

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