Why Not Delaying Reg BI Is the Right Thing for Investors
Written by Jasmin Sethi for SCA client, Morningstar.
Though this timeline will be a challenge for the industry, we agree with the SEC’s decision.
The SEC has confirmed that it will not delay the compliance date of Regulation Best Interest past June 30 in light of the coronavirus pandemic. We support the Commission’s decision and think it will benefit both ordinary investors and firms.
Will Remote Work Make it More Difficult to Implement Reg BI Systems?
One reason broker/dealers hoped to delay the compliance date is that Regulation Best Interest, or Reg BI, involves adding new systems that may be more difficult to implement with many employees working from home. Some firms may be changing their investment menus, putting new models into place to support and vet recommendations, and documenting their processes. However, they’ve expressed concern that it may not be possible to implement these effectively under the current conditions.
Recognizing these concerns, the Commission has made a statement that it will focus on whether firms have made “a good faith effort to implement policies and procedures necessary to comply with Reg BI, while also providing an opportunity to work with firms on compliance and other questions.”
Because in-person meetings are also on hold during the pandemic, it may be even more important for broker/dealers to have useful website disclosures regarding conflicts of interest and an electronic Form CRS explaining their services and fees available for customers.
