Initial examinations of the Securities and Exchange Commission's best-interest standard and Form CRS, which are part of a broader package of rules and interpretations that take effect June 30, will be less onerous because of the disruptions caused by coronavirus outbreak.
The SEC's office of compliance inspections and examinations issued two risk alerts Tuesday, providing broker-dealers and investment advisers with advance information about the expected scope and content of the initial examinations for compliance with Regulation Best Interest and Form CRS.
For the package's centerpiece best-interest standard, commonly known as Reg BI, initial examinations will assess broker-dealers have made a "good faith effort to implement policies and procedures reasonably designed to comply" with the regulation. Reg BI aims to compel brokers to put clients' financial interests ahead of their own and requires them to mitigate financial conflicts.
Similarly, for those subject to Form CRS, which necessitates that firms disclose to retail investors the nature and scope of their services, the types of fees customers would incur, the conflicts of interest faced by the firm and the firm's disciplinary history, examinations will assess whether they have made "a good faith effort" to implement the regulation.
"Regulation Best Interest and Form CRS are critical to the protection of Main Street investors, and we feel it is important to share our plans for initial examinations to help firms assess their preparedness as the June 30, 2020 compliance date nears," said Pete Driscoll, director of OCIE, in a news release.
