The Financial Industry Regulatory Authority has created a Regulation Best Interest webpage to help broker-dealers comply with the Securities and Exchange Commission’s rule, and is urging broker-dealers to submit questions to the securities regulator about Reg BI and the agency’s customer relationship summary, Form CRS, to IABDQuestions@sec.gov.
In Regulatory Notice 19-26, issued Wednesday, FINRA also states that it will produce written and online content to assist firms, as appropriate, and that the broker-dealer self-regulator plans to hold in-person meetings and workshops to assist firms with their implementation efforts.
These initiatives, FINRA states, will be announced via “various communication channels, including website announcements and emails to firms.”
A staff committee with representatives from the SEC’s Division of Investment Management, Division of Trading and Markets, Division of Economic and Risk Analysis, Office of Compliance Inspections and Examinations and Office of the General Counsel was set up to assist firms with planning for implementation of the new rules.
Firms “were encouraged to actively engage with this committee as questions arise in planning for implementation,” the Notice states, and can do so via IABDQuestions@sec.gov.
FINRA will be the enforcer of Reg BI.
FINRA’s Reg BI webpage also states that FINRA will review its “rules to see whether changes are needed to align FINRA rules with the SEC’s rulemaking,” and that any proposed changes will be filed with the SEC for public comment and available on FINRA’s website.
Jim Lundy, a partner in Drinker Biddle & Reath’s Chicago office, told ThinkAdvisor on Thursday that while FINRA’s “notice advising its members to contact the SEC and to work with FINRA is a positive, it’s unclear, and even unclear in the Notice and on the FINRA website, whether or not FINRA will, in fact, finalize rules that will fall under Reg BI.”
In the meantime, Lundy continued, FINRA has “been very clear they plan to work with the SEC and member firms to get into compliance and educate their staff on exams and how it [Reg BI] will be enforced.”
Added Lundy: “What’s unclear is if FINRA will finalize rules and examine and enforce for those rules as well.” He said FINRA could issue a rule before or after Reg BI’s effective date, which is June 30, 2020.
FINRA CEO Robert Cook said in early May that Reg BI implementation will be a heavy lift, and that the new rule “may have implications for our rulebook.”
Because FINRA is “the front line examiner” of broker-dealers, the regulator will need to “make sure that our examiners are well-trained and understand the requirements of the rule design,“ Cook said during his Q&A remarks in early May.
Unlike other SEC rules that FINRA examiners must interpret, Reg BI “is going to be in the order of magnitude that’s going to be quite different” than other SEC rules, Cook added. “We’re going to have to work closely with the SEC to make sure we’re examining it as intended for.”
— Check out State Fiduciary Rules on a ‘Collision Course’ With Reg BI: Lawyers on ThinkAdvisor.