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Keeping up with the regulators: How to build an effective compliance programme to satisfy the Best Interest care obligation

Author

Listed:
  • Nicolas, Stephanie

    (Partner, WilmerHale, USA)

  • Nathanson, Joshua

    (Associate, WilmerHale, USA)

Abstract

Over the past couple of years, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have significantly increased their Regulation Best Interest (Reg BI) enforcement efforts. Broker-dealers will need to act fast, as the pace of enforcement picks up and regulators issue guidance regarding their expectations for broker-dealers and their associated persons. This paper is intended for legal and compliance professionals designing a Reg BI compliance programme. It draws from recent SEC and FINRA guidance and enforcement actions, and it highlights some practical issues as well as potential solutions. The paper begins by discussing the differences between Reg BI and the Advisers Act fiduciary standard. It then provides some general considerations regarding the scope and application of Reg BI. The paper continues with an analysis of recent guidance and enforcement actions related to the care obligation, which has been a focus for both the SEC and FINRA. Finally, the paper concludes with some commentary on Reg BI issues related to the use of artificial intelligence by broker-dealers.

Suggested Citation

  • Nicolas, Stephanie & Nathanson, Joshua, 2024. "Keeping up with the regulators: How to build an effective compliance programme to satisfy the Best Interest care obligation," Journal of Financial Compliance, Henry Stewart Publications, vol. 8(2), pages 131-143, December.
    • Handle: RePEc:aza:jfc000:y:2024:v:8:i:2:p:131-143
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    More about this item

    Keywords

    Regulation Best Interest; broker-dealers; investment recommendations; artificial intelligence; Securities and Exchange Commission; FINRA;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K2 - Law and Economics - - Regulation and Business Law

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