January 06, 2022

Jim Lundy Considers Expected Reg BI Enforcement Actions in 2022 With ThinkAdvisor

ThinkAdvisor reported that the Securities and Exchange Commission (SEC) would be active this year in levying enforcement actions related to Regulation Best Interest (Reg BI). SEC and regulatory enforcement defense partner Jim Lundy explained what he expects from the SEC and its chair in 2022.

Lundy said he expects to “start to see the first Reg BI enforcement actions” this year. Exams taking place in late 2021 “were particularly focused and detailed,” he continued, and “it is reasonable to presume that the Division of Examinations has been looking for and will continue to look for good candidates to refer to the Division of Enforcement.”

Based on the enforcement division’s history, “the first enforcement actions will likely involve settlements and cases designed to send messages to the industry,” Lundy further noted. Keep in mind, he added, “that for violations of Reg BI that the Division of Enforcement need not establish scienter. That means that negligence-based violative conduct will be sufficient.”

Over the past five years or so, Lundy concluded, “the number of negligence-based cases (as opposed to scienter-based cases) has greatly increased. That is a trend that we should expect to continue” under SEC Chair Gary Gensler.

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