Brokerages Make Progress but Still Fall Short on Reg BI Compliance: State Regulators
Brokerages are doing a better job of complying with the U.S. Securities and Exchange Commission's Regulation Best Interest (Reg BI) but they have more work to do, according to the latest iteration of a Reg BI study by the North American Securities Administrators Association. The study found brokers are enhancing their policies and procedures to meet Reg BI obligations but are also falling short on key aspects of compliance, such as offering customers reasonably available alternatives to recommendations and mitigating conflicts of interest. Brokers selling complex products are imposing restrictions based on the age, net worth and risk profiles of customers, the study found, and are using tools to compare the costs of those investments with reasonably available alternatives. But they are still giving incentives to their registered representatives to sell complex products and not putting in place measures to curb potential conflicts of interest. Firms also are ignoring lower-cost and lower-risk investments when recommending complex products.
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