by Beth Haddock

I. Important SEC Signal on Conflicts of Interests

On June 5, the SEC announced two major changes with the release of new Regulation Best Interest (“Reg BI”) for broker-dealers (“BDs”) and Commission Interpretation/Standard of Conduct for Investment Advisers (“RIAs”).

A close read of both initiatives reveals that disclosure alone may not adequately address conflicts of interest (“COIs”) under either Reg BI or the fiduciary standard for RIAs. The new efforts to protect retail investors under Reg BI and advisory clients more generally under the Commission Interpretation will compel regulatory compliance programs at both BDs and RIAs to consider adopting a new sustainable governance approach for compliance controls in order to effectively detect, mitigate and/or eliminate COIs. Such reforms can also ensure more fulsome and accurate disclosures and help in discerning when using “may” or “will” appropriately communicates informed notice and securing consent. Continue reading →