The Securities and Exchange Commission’s Regulation Best Interest as well as the Form CRS requirements apply to accredited investors, according to updated FAQ guidance issued by the agency on Tuesday.
In its updated FAQ on Reg BI, the Divisions of Investment Management and Trading and Markets state that Reg BI does apply to limited purpose broker-dealers that make recommendations of private offerings to accredited investors.
The division heads stated that Reg BI applies in this case “if that accredited investor is a ‘retail customer’ as defined in the rule.”
The definition of “retail customer,” the agency says, “does not exclude high-net-worth natural persons and natural persons that are accredited investors.”
Whether a broker-dealer engages in limited activity does not dictate whether or not Regulation Best Interest applies.” Reg BI “applies to broker-dealers that make recommendations of any securities transaction or investment strategy involving securities to retail customers,” according to the FAQ.
RIAs and BDs must apply Reg BI and send Form CRS to accredited investors “because the definition of retail investor does not exclude high-net-worth natural persons and accredited investors,” Cipperman Compliance Services said in commenting on the updated FAQs.
The other FAQ addresses delivery of Form CRS for dually registered firms.