Since before Dodd-Frank became law in 2010, the Financial Services Institute (FSI) has been deeply involved in the mission of defining a consistent standard of care that clarifies financial professionals’ responsibilities across the full spectrum of business models while also safeguarding the interests of Main Street American investors.
The SEC’s Regulation Best Interest (Reg BI) represents a profound and positive step toward that goal. Now that the rule has officially taken effect, investors and financial professionals can move forward with confidence that they are working together under a transparent regulatory framework.
For members of the independent financial services industry, preparing for Reg BI has been a complex endeavor, made even more challenging by the Covid-19 pandemic. On behalf of our members, though, FSI can unequivocally state that we and the firms and advisors we represent are committed to making Reg BI a success.
We are pleased to have played a key role in helping translate our industry’s commitment into action in the lead-up to the new regulation’s implementation. The moment the rule was finalized, we marshalled our resources and brought members together to identify and prepare for potential operational hurdles in the Reg BI implementation process.
Driving Crucial Tactical Dialogue On The Reg BI Rollout
We started with a series of in-person educational events, including dedicated Reg BI workshops at our member gatherings and conferences. We also devoted substantial time to Reg BI-related issues at broader advocacy-focused events, such as our annual Capitol Hill Day in Washington, D.C.
Our members utilized these sessions to quickly zero in on key challenges and promising solutions in areas including the following:
• How to supervise offerings that until now have not been subject to a suitability standard, such as 401(k) plans and IRAs;
• Managing incremental supervisory responsibilities for broker-dealers regarding affiliated advisors with their own RIAs; and
• How to repurpose systems and procedures developed in preparation for the Department of Labor’s original (and now-defunct) fiduciary rule to help with Reg BI compliance.
While safety concerns surrounding Covid-19 have since made in-person gatherings untenable, these initial events played a key role in helping many of our members get a jump start on developing their implementation plans. They also formed the foundation for a crucial dialogue between our members and third-party compliance experts, such as regulatory attorneys, which has continued virtually since the broad shift to working from home.
Conveying Members’ Concerns Through Ongoing Discussions With Regulators
The vital discussions we facilitated with and between our members also served another crucial function: Informing our ongoing dialogue with the SEC and Finra regarding issues that continued to come up throughout the Reg BI implementation process.
As one key example, our rapport with firms across the industry helped us take a proactive stance in asking regulators to factor in the unavoidable obstacles created by Covid-19 with regards to training and other issues.
Reg BI’s core obligations—care, disclosure and conflicts of interest—require home office staff and advisors to go through extensive training to understand the full scope of their responsibilities, including those under Form CRS. With in-person training becoming untenable during the pandemic, firms were forced to shift to virtual training options.