Reg BI Information Overload: The Countdown to June 2020 Continues with Planned Reg BI Stress Tests, Checklists and FAQS Courtesy of FINRA and the SEC

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.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

About the Author: Sandra D. Grannum

Sandra Dawn Grannum concentrates her practice on securities, broker/dealer arbitration, litigation, mediation and regulatory defense. She is co-chair of the Commercial Litigation Team.

Sandy has tried complex multimillion-dollar arbitrations before FINRA, AAA and JAMS across the country. She has represented brokerage firms, banks, clearing firms, and associated persons in over 60 arbitrations before the NASD and FINRA which have been tried through award. In addition, she has successfully pursued cases in state and federal courts and in adversarial proceedings before bankruptcy courts.

About the Author: Jamie L. Helman

Jamie L. Helman concentrates her practice on securities, broker-dealer arbitration, litigation, mediation, employment matters, and regulatory defense. She has experience first-chairing FINRA arbitrations, defended on-the-record testimony of broker-dealer employees before FINRA, and is presently involved in the representation of broker-dealers in several pending FINRA cases as well as regulatory matters.

About the Author: Edward J. Scarillo

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