On June 5, 2019, the Securities and Exchange Commission (“SEC”) finalized Regulation Best Interest (“Reg BI” or the “Final Rule”) under the Securities Exchange Act of 1934 (“Exchange Act”) to establish a new “best interest” standard of conduct for broker-dealers when making a recommendation of any transaction or investment strategy involving securities to a retail customer. The SEC also finalized its interpretation of the fiduciary duty applicable to investment advisers (the “Guidance”) under the Investment Advisers Act of 1940 (“Advisers Act”) and a disclosure form for investment advisers and broker-dealers to provide to retail investors (“Form CRS”). Finally, the SEC issued an interpretation on the scope of the “solely incidental” prong of the broker-dealer exclusion from the Advisers Act.
In finalizing Reg BI and the Guidance, the SEC has more closely aligned the standards of conduct applicable to broker-dealers and investment advisers while noting that it recognizes the fundamental differences between the services each provide. It also stressed a goal of maintain investors’ ability to choose between the two.
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