• Only 35% of broker-dealer firms surveyed that recommended complex, costly, and risky products after Reg BI took effect had taken steps to reduce the financial reward associated with these products by capping agent sales credits.
• No more than 4% of broker-dealer firms surveyed had enhanced their investor profile forms to more carefully match investors with products after Reg BI took effect.
• Three percent of broker-dealer firms took a step backward from their prior suitability procedures by dropping customer education, longevity risk and tolerance for alternative products from their investor profile forms.
“Some firms are headed in the right direction, but Reg BI has a long way to go to close the investor protection gap separating broker-dealers from investment advisers when it comes to conflicted advice,” said Andrea Seidt, chair of NASAA’s Regulation Best Interest Implementation Committee and Ohio securities commissioner.
Seidt said NASAA members have met with the Securities and Exchange Commission, which created Reg BI, and are hopeful that the agency will increase firms’ guidance.
“We think it’s very important that securities regulators coordinate and get on the same page and don’t send mixed messages,” Seidt told Financial Advisor magazine.
“We believe that a lot can be done in terms of supplemental and interpretative guidance. I don’t think it’s necessary to reform or revise the rule,” she added.
Asked if the findings could lead to increased state enforcemnt action, Seidt said, “We don’t anticipate states to take early enforcement action. I think firms are still learning and there needs to be clearer guidance. I think we owe them that before bringing enforcement."