• Customer-specific suitability requires that a broker, based on a particular customer’s investment profile, has a reasonable basis to believe that the recommendation is suitable for that customer. The broker must attempt to obtain and analyze a broad array of customer-specific factors to support this determination.
• Quantitative suitability requires a broker with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation, is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile.
Compare that to Reg BI:
• understand the potential risks and rewards associated with the recommendation, and have a reasonable basis to believe that the recommendation would be in the best interest of at least some retail customers,
• have a reasonable basis to believe that the recommendation is in the best interest of a particular retail customer based on that retail customer’s investment profile and the potential risks and rewards associated with the recommendation; and
• have a reasonable basis to believe that a series of recommended transactions, even if in the retail customer’s best interest when viewed in isolation, is not excessive and is in the retail customer’s best interest when taken together in light of the retail customer’s investment profile.
I see no difference in the substance of the requirements. The only difference is the rebranding of “suitability” to “best interest.” This is an enormous step in the wrong direction.
What Is A Fiduciary?
If there is a plain English, layman’s definition of the role of a fiduciary, it is to act in another’s best interest. To call a non-fiduciary role a “best interest” role is horribly misleading.
Advisors are fiduciaries. Registered reps are not. The Commission acknowledges this and deserves some credit for proposing to ban the use of the title “financial advisor” by persons not registered as an advisor or IAR. That change is long overdue. I hope they add “financial planner” to that and it is enforced soon.