Accordingly, in many cases, both Reg BI and the Advisers Act apply as you assess an account type recommendation for current and prospective retail investors. In addition, the antifraud provisions of the Advisers Act apply to investment advisers in connection with current and prospective clients. The standard you must follow depends on the capacity in which you are acting ( i.e., broker-dealer, investment adviser, or both). The staff believes that, unless you obtain and evaluate sufficient information about a retail investor, you will not have the ability to form a reasonable basis to believe your account recommendations are in the retail investor’s best interest.
Dually licensed financial professionals’ obligations when recommending accounts to prospective retail investors.This staff bulletin is designed to assist firms and their financial professionals with considering reasonably available alternatives and cost, addressing conflicts of interest, and adopting and implementing reasonably designed policies and procedures when making account recommendations. Selection of an account type is a consequential decision for retail investors and is associated with potentially significant conflicts of interest and raises particular issues for financial professionals operating within dually registered or affiliated firms, as well as dually licensed financial professionals. This staff bulletin provides staff views on how broker-dealers, investment advisers, and their associated persons can satisfy their obligations to retail investors when making account recommendations. In addition, the staff has made available other resources, including a variety of staff FAQs addressing compliance with Form CRS, Reg BI and the IA fiduciary standard, risk alerts, and other statements highlighting relevant compliance practices and staff observations. This staff bulletin should be read in conjunction with, among other sources, the specific Commission releases discussing Reg BI and the IA fiduciary standard.
Although the specific application of Reg BI and the IA fiduciary standard may differ in some respects and be triggered at different times, in the staff’s view, they generally yield substantially similar results in terms of the ultimate responsibilities owed to retail investors. Both Regulation Best Interest (“Reg BI”) for broker-dealers and the fiduciary standard for investment advisers under the Investment Advisers Act (the “IA fiduciary standard”) are drawn from key fiduciary principles that include an obligation to act in the retail investor’s best interest and not to place their own interests ahead of the investor’s interest. Introduction: The following is a staff bulletin styled as questions and answers reiterating the standards of conduct for broker-dealers and investment advisers when they are making account recommendations to retail investors.
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