Reg BI Fails to Eliminate Conflicts of Interest, According to State Regulators

Posted on November 10th, 2021 at 2:47 PM
Reg BI Fails to Eliminate Conflicts of Interest, According to State Regulators

From the Desk of Jim Eccleston at Eccleston Law:

According to a recent study by state regulators, most brokerage firms continue to reflect conflicts of interest when recommending investments to retail clients despite revisions to Regulation Best Interest (Reg BI) more than a year ago. 

The study, completed by the North American Securities Administrators Association (NASAA), surveyed 443 brokerage firms pertaining to how they’ve adjusted internal policies in order to adhere to Reg BI. Brokers are restricted from putting personal financial interests ahead of client interests under Reg BI, which was approved by the Securities and Exchange Commission (SEC) in June 2020. According to the NASAA study, brokerages increased their offerings of “complex, costly and risky products” by 11% after Reg BI became effective. Furthermore, 65% of brokerage firms “are not discussing lower-cost or lower-risk products with their customers when they recommend these products”, according to NASAA. 

NASAA began its two-part review of Reg BI by publishing its first study in 2020, which examined common industry practices among 225 brokerage firms prior to Reg BI. The second report reviewed whether any progress has been made by the 225 brokerage firms, which oversee at least 77.5 million client accounts, since the adoption of Reg BI. 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: eccleston, eccleston law, NASAA, sec

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