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07/24/2019

Regulation Best Interest: An Enhanced Standard of Conduct for Broker-Dealers

Regulation Best Interest is comprised of two main pillars - Regulation Best Interest Obligation and Form Client Relationship Summary (CRS).  The package also includes the Standard of Conduct for Investment Advisors, and a new interpretation of “Solely Incidental.”

Regulation Best Interest will require broker-dealers and investment advisors to make recommendations that are in the best interest of the retail client, as well as disclose and/or mitigate any and all potential conflicts of interest the broker-dealer has concerning the recommendation of a financial product. This regulation aims to protect the interests of retail customers and prevent broker-dealers and advisors from placing their own financial interest above the retail customer.

Form CRS will require firms to provide retail customers with information at the beginning of the relationship which will include a disclosure of fees, costs, standard of conduct and conflicts of interest, as well as a clear understanding of the firm’s services, among other things. Form CRS is aimed at reducing common confusion of retail customers over the terms and details of the relationship with their broker-dealer or investment advisor.

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