SEC seen as likely to step up enforcement of Reg BI

On Behalf of | Jan 7, 2022 | Securities and Compliance

The Securities and Exchange Commission is considered likely to begin stronger enforcement of its Regulation Best Interest rule, according to a report by Financial Advisor.

The report details a blog posted by Kurt Wolfe of Quinn Emanuel’s SEC Enforcement Practice, who cited indications that SEC officials intend to take vigorous action to make sure financial professionals are complying with Reg BI.

The rule establishes a “best interest” standard of conduct for broker-dealers and associated persons when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities.

The regulation was adopted in June 2019 under the Securities Exchange Act of 1934, and broker-dealers were required to begin complying with it on June 30, 2020. At a congressional hearing in October, SEC Chair Gary Gensler reiterated his commitment to implementation of the rule, saying “I think that it’s important that this rule lives up to its potential – that ‘best interest’ really does mean best interest. So, working with our examination staff, working with our division of corporate finance, we’ve just hired an excellent person who’s a senior advisor to me directly, is to ensure that the retail public gets the best.”

Wolfe said examiners at the SEC began asking for information on Reg BI compliance last spring, which he said would lead to increased referrals to the commission’s Division of Enforcement.
He added that he expects Reg BI enforcement actions to come in two phases, beginning with penalties for firms that have not implemented policies and procedures to comply with the rule.

The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. If your firm is facing an investigation from a regulatory agency, please contact our Chicago-based securities investigation firm by calling (312) 291-4600 or through our online contact form.

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