Investor protection framework has been a key focus area for regulators for a long time. While the Securities and Exchange Commission’s (SEC) fiduciary rule governs the financial advisors, the brokers have been regulated by the Financial Industry Regulatory Authority (FINRA) Rule 2111 (Suitability). The Department of Labor (DOL) fiduciary rule tried to create a common framework for the governance for brokers and advisors, but the rule was revoked following stiff opposition from brokers and industry groups. In June 2019, the SEC passed the Regulation Best Interest (REG BI), which establishes that broker-dealers and financial advisors need to work in the best interest of the consumer and to eliminate conditions that further a firm’s interest over a client’s interest.
This white paper will try to assess how the regulations will impact the industry, brokers, and the various systems and applications.