08.10.18
Suitability vs. SEC Reg BI: Here's the Difference, According to FINRA's Cook
by: Melanie Waddell
While FINRA's suitability rule “implicitly requires a broker-dealer's recommendations to be consistent with customers' best interests,” the SEC's proposed Regulation Best Interest (Reg BI) for brokers “explicitly establishes the customer's best interest as an overarching standard of care” for broker-dealers, according to Robert Cook, FINRA's president and CEO. In an August 3 letter to Senate democrats, Cook also said the SEC's advice standards proposals, including Reg BI, extend in “certain significant areas” the requirements for broker-dealers under current FINRA rules, including the suitability rule. The SEC proposals clarify the rules that apply to broker-dealers, Cook wrote. As to Reg BI enforcement, Cook said that a broker-dealer that is not complying with Reg BI or other portions of the proposal, if adopted, “could be subject to an enforcement action by FINRA and the SEC.”
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