InvestmentNews reports that although the SEC approved its advice reform regulatory package this past June, brokerages won’t know the impact of Reg BI until its enforcement begins.

The SEC established the principle — brokers must not place their own interests ahead of their clients' interests — but didn't fill in the details. The industry publication noted that there is an expectation that no one will know what Reg BI really means until the SEC says so through exams and enforcement.

Los Angeles partner Fred Reish weighed in on the issue and told InvestmentNews that, “Experience with SEC examinations is going to tell us whether Reg BI is a significantly higher standard than suitability.” He added, “The problem is not just that it's a principles-based standard, it's a vague principles-based standard.”

The best way for brokerages to stay out of trouble is to recommend investment products with care, skill and diligence and then document it, according to Reish.

“It’s really the strength of the process and focusing on what's right for the investor,” he added.

Source: InvestmentNews
Leave Drinker Biddle to Learn More