What You Need to Know
- The March Reg BI guidance focused on account recommendations.
- SEC staff is considering additional bulletins, Gensler said.
The Securities and Exchange Commission is mulling more guidance related to Regulation Best Interest, including when recommending rollovers, SEC Chairman Gary Gensler said Tuesday.
SEC “staff is considering additional bulletins that would further provide their views” on each of the three points that were addressed in the agency’s March guidance regarding Reg BI, Gensler said at the North American Securities Administrators Association’s public policy conference in Washington.
Gensler reiterated that he has asked the Divisions of Investment Management, Trading and Markets, Examinations and Enforcement “to help ensure that investment professionals live up” to Reg BI obligations.
The March Reg BI guidance, focused on account recommendations, including rollovers, and zeroed in on “three core points,” Gensler said.
First, “brokers and advisors need to prevent their own interests from inappropriately influencing their recommendations and advice. If they can’t do that, they have decisions to make — eliminate the conflict, don’t give the advice, or find some other way to ensure that they don’t put their interests ahead of the retail investor’s interests,” Gensler said.
Second, “in order to offer recommendations and advice in the best interest of the investor, brokers and advisers need to consider reasonably available alternatives,” he relayed. “This needs to be a meaningful evaluation.”
Third, “as part of that analysis, brokers and advisers need to consider costs and risks to investors,” Gensler stated. “While it is true that they don’t always have to recommend the lowest-cost option, they must have a reasonable basis to believe a higher-cost recommendation nonetheless is in the investor’s best interests.”
Gensler went on to state that brokers and advisors “have a critical role to play” in Reg BI compliance.