SEC Issues New Warning on Reg BI Compliance Failures

Broker-dealers, according to the SEC, are relying “heavily on surveillance systems that existed before the effective date” of Reg BI “without considering whether those systems needed modification.”

For example, broker-dealers “did not consider whether existing surveillance systems were reasonably designed to prevent violations from occurring, to detect violations that have occurred, and to correct promptly any violations that have occurred with respect to new obligations regarding recommendations of rollovers, account recommendations, and implicit hold recommendations based on monitoring the customer’s account (if the firm has agreed to such monitoring),” the SEC said.

The agency also found conflict of interest failures, which included broker-dealers not having written policies and procedures on how conflicts are to be identified or addressed, as well as failures to disclose information on website postings.

Other failures involved registered reps acting in multiple roles, and the failure to disclose that these “multiple relationships require disclosures of capacity and may require additional disclosure of conflicts.”