As Reg BI Enforcement Ramps Up, Wrap Programs Are in Crosshairs
Both Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) have brought their first Regulation Best Interest (Reg BI) enforcements this fall. They are pledging to zero in on firms that don't address and mitigate conflicts of interest and ensure all-in investment costs are reasonable for clients, given their profiles and goals. "Anything that would be a violation of the old suitability standard is now going to be a violation under the Reg BI standard,” said Robert Cook, president and CEO of FINRA. At the ALI-CLE Life Insurance Products Conference in earlier this month, he warned firms that there are more Reg BI enforcement cases in the pipeline and said FINRA exams will “continue to evolve in terms of expectations and the depth of what we’re looking for.” The SEC, meanwhile, zeroed in on advisors that offer pricey wrap fee programs to clients who don’t actively trade and aren’t receiving annual reviews when it brought enforcements against two registered investment advisors in August and September.
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