June 2, 2021
The moment that brokers have been dreading for months has finally arrived. That moment is the point in time when the Biden administration would inevitably start a much stricter regulatory regime for Reg BI. Well that has just happened. Until recently, Reg BI was mostly a good faith exercise, with broker-dealers expected to make best efforts to comply with the rule. However, it was open to broad interpretation and not formally enforced. In the last several days, all that has changed. Broker-dealers have started to receive SEC requests to defend recommendations their reps made to clients and how they conform with the rule. According to a former SEC enforcement attorney, “What we are already seeing in these regulator requests is that they are typically focused on … sampling firms’ data and transactions”.
FINSUM + Magnifi: Essentially, the SEC is looking at transaction patterns and trying to find problems. For example, consistent recommendations of high fee products. And the journey begins…
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