On June 5, 2019, the Securities and Exchange Commission (SEC) voted to adopt a package of rules and interpretations “designed to enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers.” U.S. Securities and Exchange Commission, SEC Adopts Rules and Interpretations to Enhance Protections in Their Relationships With Financial Professionals (June 5, 2019). Regulation Best Interest (Reg BI) went into effect on Sept. 10, 2019, with a compliance date of June 30, 2020.
The SEC was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to study the feasibility of adopting a fiduciary standard for registered securities representatives. Currently, registered investment advisers are held to a fiduciary standard by the SEC, whereas registered representatives are governed by a suitability standard implemented by the Financial Industry Regulatory Authority (FINRA), which issues their licenses. Investor advocates complained that the dual standards would be confusing to customers, especially since many advisers are dually registered as both registered representatives and IARs.
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