October 15, 2019

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FINRA Issues Regulatory Notice Reminding Members of the SEC’s Adoption of a Best Interest Standard of Conduct

On August 7, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 19-26, reminding members of the Securities and Exchange Commission’s (SEC) adoption of a “best interest” standard of conduct for broker-dealers and a relationship summary (Form CRS) delivery obligation.

Regulation Best Interest (Reg BI), adopted by the SEC on June 5, 2019, establishes a “best interest” standard of conduct for broker-dealers and associated persons making a recommendation of any securities transaction or investment strategy involving securities to a retail customer. Other new rules and forms were adopted that will require broker-dealers and investment advisers to provide a Form CRS to retail investors. Firms must comply with Reg BI and the Form CRS delivery obligation by June 30, 2020.

In connection with the new rules, a staff committee with representatives from the SEC’s Division of Investment Management, Division of Trading and Markets, Division of Economic and Risk Analysis, Office of Compliance Inspections and Examinations and Office of the General Counsel was established to assist firms with planning for implementation. Firms may send any questions by email to IABDQuestions@sec.gov. In addition, FINRA will produce written and online content and hold in-person meetings and workshops to assist firms with their implementation efforts. A webpage is also available for members to obtain information about the new rules.

The Notice is available here.

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About this Author

Susan Light, Katten Law Firm, Finance Law Attorney, New York
Partner

Susan Light focuses her practice on financial services regulatory matters. She counsels broker-dealers, hedge funds, investment banks and financial services clients on enforcement issues involving the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), other self-regulatory organizations (SROs) and state and federal regulatory authorities. She has particular experience related to sales practice issues, financial and operational issues, anti-money laundering, crowdfunding, cybersecurity, and cryptocurrencies.

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212-940-8599
Michael T. Foley, Katten, Lawyer, Finance, FINRA, Chicago
Special Counsel

Michael Foley represents broker-dealers, investment advisers and other financial services industry participants with respect to a broad spectrum of legal and regulatory matters arising under the federal securities laws.

Michael has nearly 20 years of experience in private practice and in-house at both a large, full-service broker-dealer and at an online discount broker-dealer, advising broker-dealers and other financial institutions regarding compliance with the federal securities and commodities laws, and with the regulations of the US Securities and Exchange Commission, the US Commodity Futures Trading Commission and financial industry self-regulatory organizations. 

312-902-5452
Associate

Adam Haft is an associate in the Financial Services practice.

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New York

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