Representing financial professionals, financial institutions and investors in investment loss, employment and disclosure matters, and in regulatory investigations nationwide.

Reg B1 claims among FINRA’s list of most cited violations

On Behalf of | Jul 26, 2022 | FINRA Compliance

The Financial Industry Regulatory Authority’s list of top arbitration categories now includes Regulation Best Interest (Reg B1) claims for the first time, according to a report by Financial Advisor.

The Securities and Exchange Commission adopted Reg B1 establishing a “best interest” standard of conduct for broker-dealers when making recommendations to their customers about securities transactions or investment strategies.

According to a report by FINRA, 37 investors had filed Reg B1 claims as of the end of May. That elevated Reg B1 to 14th on the authority’s list of top arbitration disputes.

The number one category, with 485 claims, was breach of fiduciary duty. That was followed by negligence, failure to supervise, breach of contract, misrepresentation, and suitability.

The SEC adopted Reg B1 in 2019 under the Securities Exchange Act of 1934, saying the rule would make it clear that a broker-dealer may not put its financial interests ahead of the interests of a retail customer when making recommendations.

In June, the SEC filed its first Reg B1 civic claim, charging Western International Securities and five of its brokers with violating Best Interest Obligations when they recommended and sold $13.3 million of L Bonds, an unrated debt security, from July 2020 to April 2021.

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 us at (888) 655 6002 or through our online contact form.