Regulation Best Interest and Form CRS

Updated: Sep 4, 2019

July 2nd | 2019

On June 5, 2019, the SEC adopted Regulation Best Interest ("Reg BI") and Form CRS in a 3-1 vote.

Reg BI imposes new requirements on broker-dealers to act in the best interests of their retail customers when recommending any securities transactions or investment strategies. Reg BI goes beyond prior suitability obligations, and requires a broker-dealer to put a retail customer’s financial interests ahead of its own. In the accompanying release, there are upwards of 700 pages modifying disclosure, care, and conflict of interest requirements for broker-dealers.

Form CRS requires registered investment advisers and broker-dealers to provide retail investors with a summary describing the nature of the relationship between retail investors and the firm. Formatted as a set of questions that firms provide written responses to, Form CRS is intended to elicit standardized information from firms that should assist retail investors in making more direct comparisons between different service providers, and to ultimately make more meaningful, informed investing decisions. Responses to Form CRS are restricted to two pages (four pages for dual registrants) and should be in plain English.

Investment advisers and broker-dealers should carefully consider whether they are subject to Reg BI and Form CRS obligations and, if so, ensure that they are in compliance no later than June 30, 2020.

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