As the countdown to the June 30, 2020, date for compliance with Reg BI inches forward, FINRA and the SEC are providing a potpourri of support and information to help firms ensure compliance.
FINRA EFFORTS: FINRA’s northeast regional director announced in late October that FINRA will perform “preparedness reviews” of broker-dealers to determine firms’ readiness to comply with Reg BI. At its November Senior Investor Conference, FINRA President and CEO Robert Cook confirmed FINRA’s intention to perform these “stress tests.” FINRA has emphasized that its intent is not to be punitive and fine firms for compliance violations. Rather, FINRA insists its primary goal is to assist firms in successfully implementing the nearly 1,000 pages of Reg BI’s regulations.
Along these lines, FINRA has set up a Reg BI checklist that includes 20 questions, such as whether the firm (1) considers all elements of care, skill and costs when making recommendations or (2) considers reasonably available alternatives or (3) has policies and procedures to identify the firm’s conflicts of interest.
FINRA also published a checklist to ensure compliance with Form CRS, including whether the firm is (1) delivering a Form CRS to each new retail investor, (2) creating and publishing a relationship summary that is accessible on their website or (3) maintaining a process for filing and subsequently updating Form CRS. FINRA also has a webpage dedicated to educating firms on Reg BI. This includes a podcast, news release section and regulatory notice.
SEC EFFORTS: The SEC provided recent guidance on complying with Form CRS by way of FAQs that cover questions concerning Form CRS’s Relationship Summary format and its delivery requirements. These FAQs come on the heels of a plethora of other resources the SEC is providing, including commission interpretations, compliance guides and the release of Chairman Clayton’s July 8, 2019, speech that provides an overview of Reg BI’s mechanics and perceived misconceptions.
Suffice to say there is a myriad of resources from both FINRA and the SEC designed to assist firms in their compliance with Reg BI. This is the time to organize your efforts.