The Securities and Exchange Commission’s exam division will begin probing broker-dealers in January about their Regulation Best Interest compliance status, according to Pete Driscoll, head of the agency’s Office of Compliance Inspections and Examinations.
Speaking on a panel at the Financial Industry Regulatory Authority’s Regulation Best Interest conference in Washington on Wednesday, Driscoll said that OCIE has done “some targeted outreach to various brokers” to gauge how their Reg BI compliance is progressing.
In January, as part of the agency’s regular broker-dealer exams, “We’ll start having a series of questions to talk with firms about: How’s implementation going? What questions do you have?” Driscoll told attendees in a packed session.
Driscoll also shared that OCIE is working on a Risk Alert, as well as on a “sample request list that we intend to publish publicly to give you all a feel for what our initial exams are going to look like. You’ll see exams that only address the Reg BI implementation,” as well as exams that target “certain scope areas and then look at Reg BI implementation around those scope areas.”
Expect a “blend of different types of exams,” he explained. After a year, OCIE will publish exam results “to give people best practices.”
In terms of compliance, firms are now “really focused initially on identifying those conflicts,” looking at their product lines, drafting Form CRS – and questions that arise with that — reviewing policies and procedures, as well as asking: “How do we build a compliance program once we’ve identified those conflicts,” Driscoll relayed.
Some firms also have formed Reg BI steering committees and project teams “to ensure that they meet the timelines comes July 1,” he pointed out. Compliance-program complexities depend on the “size of firms and how complex their models are,” Driscoll said.
“We’re seeing positive movement … and people really trying to get it right,” he added.