The Securities and Exchange Commission will begin examining firms for compliance with Regulation Best Interest and the customer relationship summary, Form CRS, in July, according to John Polise, associate director of the Broker-Dealer and Exchange group within the agency’s Office of Compliance Inspections and Examinations.
During a recent Reg BI virtual panel held by the Financial Industry Regulatory Authority, Polise said firms should prepare for some standalone Reg BI and Form CRS exams as well as regular exams that incorporate Reg BI and Form CRS oversight.
The compliance date for Reg BI and Form CRS is June 30.
“One could imagine a focus on sales practice or suitability and then having a [Reg] BI component in that as well,” Polise said.
To start, the SEC will conduct “phase exams so that our examiners can become conversant with what they’re seeing and report back to the commission on any issues or themes,” Polise said, “and then gradually over the course of the year and next year getting more [Reg] BI exclusive exams done.”
Bari Havlik, head of exams at FINRA, stated on a separate virtual panel held Tuesday, that FINRA examiners’ initial Reg BI exam approach, “which we’ll be working very closely with the SEC on, is what the SEC has communicated in the last few months: first six months of Reg BI we’ll be looking at how firms approach implementing policies, procedures and controls to comply with Reg BI and working with the SEC to provide further guidance to the industry.”
In 2021, FINRA will begin to “take a harder line approach to looking for compliance,” Havlik continued.