May 30, 2020

May 30, 2020

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The SEC Opts Not to Extend Reg BI and Form CRS Compliance Deadline

Securities and Exchange Commission (the Commission) Chairman Jay Clayton today addressed the much anticipated delay to the compliance deadline for Regulation Best Interest (Reg BI), Form CRS and the related transparency obligations in the new regulation by stating there will be NO DELAY of the June 30, 2020 deadline because of the Covid-19 pandemic.¹ In the Chairman’s public statement, found here, Clayton said the interests of “long term Main Street investors” has not changed because of Covid-19. The Commission and Staff see Reg BI as a “key component” in a broad set of rules crafted to “enhance the quality and transparency of retail investors’ relationships with broker-dealers and investment advisers.” In deciding not to extend the deadline, Chairman Clayton noted that the Commission and its Staff have interacted “extensively” with broker dealers, registered investment advisers, FINRA, and other “regulatory partners” since the adoption of Reg BI. From these conversations and collaborations, the Commission and Staff concluded the “substantial majority” of retail market participants have made “considerable progress in (1) adjusting their business practices, (2) supplementing and modifying their policies and procedures, and (3) otherwise aligning their operations and preparing for the requirements of Reg BI and the obligation to file and begin delivering Form CRS.”

Maintaining the June 30, 2020 compliance deadline also supports the Commission’s overarching emphasis on keeping “Main Street” investors and market integrity at the fore. In short, the Commission concluded that “. . . because the continued implementation of these conduct and transparency initiatives, individually and collectively, will significantly benefit Main Street investors — we believe that the June 30, 2020 compliance date for Reg BI and other requirements, including the requirement to file and begin delivering Form CRS, remains appropriate.”

Clayton also stated that the Staff in the Office of Compliance Inspections and Examinations will be issuing two Risk Alerts in the coming days to provide additional information regarding the scope and content of initial examinations for Reg BI and Form CRS.

Any investment advisor or BD firm that has not updated its policies and procedures should devote immediate attention to doing so, even while also heeding the pandemic work-from-home directives of federal, state, and local governments. Apart from acceptable written supervisory procedures (WSP), broker-dealers and advisory firms must also have in place their operational and supervisory systems designed to comply with Reg. BI.

For a listing of the key components a firm should have in place, please consult these prior posts in Winstead’s Securities Litigation & Enforcement Blog here and here.


¹ See Regulation Best Interest, Exchange Act Release No. 86031 (June 5, 2019) (adopting rule 15l-1 under the Exchange Act), available here.

© 2020 Winstead PC.

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About this Author

John Kincade, Winstead, Shareholder; Co-Chair, Securities Litigation & Enforcement
Shareholder

John Kincade is Co-Chair of Winstead’s Securities Litigation & Enforcement Practice Group. He practices at all levels of federal and state securities litigation, arbitration and regulatory enforcement disputes. He represents a wide range of financial services clients including brokers/dealers, investment advisers, banks, and their registered persons in complex, high stakes FINRA arbitrations, FINRA Enforcement proceedings and investigations, and SEC and State enforcement matters. He also advises privately held and publicly traded companies and their officers and directors in federal...

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Jamie Lacy Associate Winstead Securities Litigation & Enforcement Business Litigation Governmental & Internal Investigations White-Collar Defense
Associate

Jamie Lacy is an associate in Winstead’s Securities Litigation & Enforcement, White-Collar Defense, and Business Litigation Practice Groups.  Jamie represents public and private companies, hedge funds, private equity funds, asset managers, broker-dealers, registered investment advisers, officers and directors, registered persons, and other institutions in government investigations, securities law enforcement and litigation, and FINRA arbitrations.  In addition, she counsels clients in regulatory and enforcement matters before the SEC, FINRA, Texas State Securities Board and other state securities regulators, as well as other regulatory and law enforcement agencies.  

Prior to joining Winstead, Jamie represented commercial sureties in complex litigation involving bond disputes.  Jamie also served as an extern for the SEC where she worked on various investigations and enforcement matters, including insider trading, EB-5 fraud, municipal bond fraud, and violations of the FCPA.  Additionally, Jamie twice served as an extern for FINRA in their Member Regulation and Enforcement Departments.

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