FINRA will be conducting Regulation Best Interest “preparedness reviews” of its member firms starting in November, according to William St. Louis, the organization’s northeastern regional director for sales practice and senior VP.
The Securities and Exchange Commission’s deadline for complying with the Reg BI rule is June 30, 2020. “Obviously, we want to see where firms stand in advance of [that] compliance date,” St. Louis said at SIFMA's Compliance and Legal Seminar in New York on Oct. 22. His remarks were reported by Financial Advisor IQ, a Financial Times website.
St. Louis said FINRA is “certainly working very closely with the SEC” on its Reg BI examination plan. In particular, FINRA has been having “regular communications” with the SEC’s Trading and Markets Department and Office of Compliance Inspections and Examinations, St. Louis noted. “We’re very likely to have similar exam modules for Reg BI and training for our examiners. We’re also going to compare schedules to make sure that we don't duplicate when we go into firms,” he added. “Some consistency of approach is very important for such a significant rule at the outset.”
It's been a busy month for the Reg BI. Earlier this month, FINRA published on its website a checklist designed to assist member firms in their Reg BI and Form CRS Relationship Summary compliance efforts. The checklist includes a 20-point list addressing everything from updating policies and procedures to identifying and addressing conflicts of interest. The Form CRS section includes an eight-point checklist running the gamut from information that must be included on the form to processes and procedures for updating and delivering the form.
And on Oct. 17, the U.S. House of Representatives approved legislation requiring the SEC to conduct “usability tests” to assess the usefulness of certain disclosure rules to retail investors. Under the bill, those tests would be required before the SEC adopts final rules governing such disclosures and, if the proposed disclosures undergo substantive changes before finalization, an additional usability test would be required.
Since the bill would require testing of existing rules as well as future ones, House Republicans argued during debate over the bill that it was an attempt to delay implementation of the Reg BI rule and the related Form CRS – a charge which House Financial Services Committee Chair Rep. Maxine Waters (D-CA) appeared to acknowledge.
