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May 21, 2021 at 09:18 AM
What You Need to Know
- SEC has employed its quantitative analytics unit to be involved in Reg BI exams and will look closely at trade data.
- Areas of focus include rollovers, fees and complex products.
- Best interest means best interest, SEC Chairman Gensler said.
Phase 2 Regulation Best Interest exams are still in the “early stages,” but “these are much more in-depth exams,” Pete Driscoll, director of the Securities and Exchange Commission’s Division of Examinations, said Thursday.
Speaking at the Financial Industry Regulatory Authority’s virtual annual conference, Driscoll said that the Phase 2 Reg BI exams are “looking at a lot of the trading, a lot of the recommendations” being made.
“We’ve employed our quantitative analytics unit to be involved in these exams,” Driscoll said. “We will continue to focus on policies and procedures and the effectiveness as well as the alternation of firm product offerings. We’ll also evaluate how firms are considering costs in a recommendation.”
The Customer Relationship Summary, or Form CRS, and Reg BI are a “huge part of what our broker-dealer program” is working on, Driscoll relayed.
In terms of looking at firm processes, the SEC is examining “supervision personnel and how their personnel make recommendations to new customers. We’ll look at firms that have recommended a rollover from an employee benefit plan,” Driscoll said.
“A lot of metrics we’re pulling from a trading perspective — account turnover, fees, new fees, old fees, conversions of different types of accounts — looking at the recommendations for different types of complex products,” Driscoll said. “Those are areas we are focused on and a lot of that will be through the trade data.”
Also, firms may want to take a risk-based approach to Reg BI compliance, Driscoll recommended.
