SEC Releases Final Reg BI Staff Bulletin Addressing Duty of Care

Posted on April 27th, 2023 at 1:45 PM
SEC Releases Final Reg BI Staff Bulletin Addressing Duty of Care

From the desk of Jim Eccleston at Eccleston Law 

The Securities and Exchange Commission (SEC) recently published a final staff bulletin on Regulation Best Interest (Reg BI), this time highlighting the “duty of care”, with the goal of definitively outlining financial advisors’ ethical responsibilities. 

The guidance, which is not a new regulation, follows two previous Reg BI staff bulletins on account recommendations and managing conflicts of interest. According to the bulletin, financial advisors have a duty to fully understand the “potential risks, rewards, and costs associated with a product, investment strategy, account type or series of transactions.” Specifically, understanding an investment involves evaluating its objectives, costs, characteristics, risk, expected returns, and potential losses. Financial advisors also are required to have “a reasonable understanding of the specific retail investor’s investment profile, which generally includes the retail investor’s financial situation (including current income) and needs; investments; assets and debts; marital status; tax status; age; investment time horizon; liquidity needs; risk tolerance; and any other information the retail investor may disclose”, according to the SEC.

Finally, adhering to Reg BI’s duty of care requires financial advisors to record a list of “reasonably available alternatives” to recommended investments. While financial advisors will not be responsible for considering every conceivable option, the breadth of alternatives “will depend on the facts and circumstances, including but not limited to the nature of the firm’s business, the retail investor’s investment profile, the scope of its relationships with its customers and clients and the reasonable availability of alternative investments or investment strategies”, the SEC noted.

 

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

 

Tags: eccleston, eccleston law

Return to Archive

TESTIMONIALS

Previous
Next

I just received this letter from the CFP Board. Thank you, Thank you, THANK YOU!

David Y

LATEST NEWS AND ARTICLES

September 5, 2025
Merrill Lynch Advisor Faces FINRA Disciplinary Action for Refusing to Cooperate with Investigation

The Financial Industry Regulatory Authority (FINRA) has initiated disciplinary proceedings against former Merrill Lynch broker Ali F. Chehab of Portland, Oregon. According to ThinkAdvisor, FINRA alleges that he refused to cooperate in an investigation into potential misconduct, including unauthorized trading and material misrepresentati...

September 4, 2025
Wells Fargo Ties $2,000 Bonus to Non-Solicitation Clause, Raising Advisor Concerns

Wells Fargo & Co. recently issued a $2,000 bank-wide award to its 215,000 employees, following the Federal Reserve’s June decision to lift its asset growth restrictions.

September 3, 2025
Kansas City Advisory Firms Agree to $25.5 Million Settlement Over No-Poach Allegations

Mariner Wealth Advisors, along with two other Kansas City-area firms, has agreed to a $25.5 million class action settlement over allegations that they illegally agreed not to solicit each other’s advisors.