4 Must-Know Sections of the New SEC Reg BI Guidance

Sections Referencing Employee Training Programs

The staff bulletin “referred to the use of employee training in multiple sections regarding how an advisor can be sure to understand the products and investment strategies they recommend,” Lynch said. “Firms should make sure their training programs are well documented, attendance is tracked, and advisors that miss training attend make-up sessions or participate in documented online training.”

Question 13: Relying on “Most Appropriate” Options

This question “makes it very clear that making the best recommendation from a limited menu of available options will not meet the care obligation,” Lynch warned. “In this case, no recommendation may be made if the ‘most appropriate’ is not in the client’s best interest. Firms may be forced to broaden their offerings now based upon this very clear response from staff.”

More firms, Lynch added, “may go the open-architecture route.”

Special Considerations for Dual Registrants

The last two questions for dual registrants “are helpful as advisors sometimes get confused as to which hat they are wearing and when,” Lynch pointed out. The SEC staff “made it clear that the type of account for which the recommendation is made becomes a determining factor.”

Also, she said, “the type of account to be opened in the case of a new client or relationship — BD or RIA — is another factor dual registrant advisors should consider when making recommendations to clients. The duty of care extends to the account type, not just the recommendation itself.”