Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: November 8, 2019
The Firm
201-896-4100 info@sh-law.comRegulation Best Interest (Reg BI) took effect on September 10, 2019, with a compliance effective date of June 30, 2020. Given the breadth of the changes required under Reg BI, advisory and brokerage firms should begin their preparations for compliance now.
To assist regulated entities, both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) recently published ‘guidance notices’. These notices provide a useful starting place for firms to begin their analysis of what new policies and procedures will need to be implemented or revise existing ones to comply with Reg BI and Form CRS.
Reg BI establishes a new “best interest” (“BI”) standard of conduct under the Securities Exchange Act of 1934 (Exchange Act) for broker-dealers and their associated persons when making a recommendation of any securities transaction or investment strategy involving securities (including account recommendations) to a retail customer. Under this standard, a broker-dealer and its associated persons must act in the “BI” of the retail customer at the time the recommendation is made, without putting the financial or other interests of the firm ahead of the retail customer.
A broker-dealer discharges this BI duty by complying with four specific obligations:
Both investment advisers and broker-dealers will be required to provide retail investors a form summarizing their relationship. This standardized, short-form, known as Form CRS (Customer/Client Relationship Summary), is intended to inform retail investors about: (i) the types of client and customer relationships and services the firm offers; (ii) the fees, costs, conflicts of interest, and required standard of conduct associated with those relationships and services; (iii) whether the firm and its financial professionals currently have reportable legal or disciplinary history; and (iv) how to obtain additional information about the firm.
On September 9, the SEC published a Small Entity Compliance Guide for Regulation Best Interest. The compliance guide is divided into 11 questions and answers about the new rule. Topics include what recommendations are covered; who is considered a retail customer; and what each of the new obligations requires.
The SEC also published a Small Entity Compliance Guide for the Form CRS Relationship Summary and Amendments to Form ADV. The guide is divided into 13 questions and answers. The guide addresses the compliance requirements for Form CRS and amended Form ADV, including formatting, updating, and filing the required relationship summary.
FINRA has also issued its own guidance in the form of a Reg BI “checklist” to help broker-dealers comply with Reg BI. The Regulation Best Interest and Form CRS Checklist (Checklist) distills Reg BI and Form CRS into a more easily-digestible format. FINRA’s 20 Reg BI Checklist items are:
By June 30, 2020, registered broker-dealers must begin complying with Regulation Best Interest. In addition, broker-dealers and investment advisers registered with the SEC will be required to prepare, deliver, and file Form CRS.
If you have any questions or if you would like to discuss the matter further, please contact me, Paul A. Lieberman, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]
Author: Dan Brecher
Ongoing economic uncertainty is forcing many companies to make tough decisions, which includes lowering staff levels. The legal landscape on both the state and federal level also continues to evolve, especially with significant changes to the priorities of the Equal Employment Opportunity Commission (“EEOC”) under the Trump Administration. Terminating an employee is one of the […]
Author: Angela A. Turiano
While filing annual reports may seem like a nuisance, failing to do so can have significant ramifications. These include fines, reputational harm, and interruption of your business operations. In basic terms, “admin dissolution for annual report” means that a company is dissolved by the government. This happens because it failed to submit its annual report […]
Author: Dan Brecher
Antitrust laws are designed to ensure that businesses compete fairly. There are three federal antitrust laws that businesses must navigate. These include the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. States also have their own antitrust regimes. These may vary from federal regulations. Understanding antitrust litigation helps businesses navigate these complex […]
Author: Robert E. Levy
If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]
Author: Christopher D. Warren
Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]
Author: Dan Brecher
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!