“That being said, in these contexts, if you are in the realm of making a recommendation subject to Reg BI, you have to be very mindful of delivery issues and how you’re going to get enough information to make that recommendation to the retail customer,” she added.
Surprisingly, as many as half of the broker-dealers at the Finra conference admitted in an impromptu request for hands that they are not yet working to implement the 1,000-plus pages of new regulation that are filled with enforcement and litigation landmines.
That is not the case for Bank of America or LPL Financial, whose executives spoke on a panel with Wrona and Westerberg.
Michelle Kelley, senior vice president and associate general counsel at LPL, said the firm is building cost calculations and the rationale for choosing one product over another into their order-taking systems.
The focus is on documenting decisions “if questioned later that show we’ve looked at reasonable alternatives. We’ve focused on higher-risk products and included these rationales in our order-taking process,” Kelley said.
Westerberg said Reg BI also requires firms to take a hard look at compensation practices, stepping up oversight where needed and even “clawing back [charges to customers] if you find abuses.”
Evan Charkes, managing director and associate general counsel for Bank of America, said the company is building out automation and even recording conversations that reps have with customers, even to the point of asking the customer to read back their rationale and answers to questions about why they have chosen a fee-based advisory account over a brokerage account.