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Overcoming Compliance Challenges

Findings From the Latest SEC Roundtable Deliver Actionable Insights for Forward-Looking Firms.

A positive action

Chairman Jay Clayton opened the roundtable reaffirming the SEC’s conviction that holding firm on the June 30th compliance date was the right choice. He cited the best-interest benefits the regulation has brought about to Main Street investors as they face pandemic-related uncertainties. Per Chairman Clayton, findings thus far lead the SEC to “believe that firms, generally, are meeting their compliance obligations.”

Specific feedback

The roundtable comprised presentations from Chairman Clayton, staff from the SEC’s Office of Compliance Inspections and Examinations (OCIE), the Division of Trading and Markets, the Division of Investment Management and FINRA. It offered assessments of where firms have been doing a good job on compliance and where improvements are warranted.

A few of these findings include:

  • Policies and Procedures: Generally, firms have shown good faith efforts to implement written policies and procedures. However, some firms’ policies and procedures simply restated the standards while others provided evidence of various processes on how registered reps can comply. As a standard, policies should provide guidance instead of simply restating the rules. Firms should also pay careful attention to the FAQs, including all updates and incorporate them into the policies and procedures.
  • Systems evaluations: While the rule builds on existing suitability requirements, it also adds new obligations. Firms should ensure their systems can effectively support these new requirements and meet ongoing compliance obligations. For example, existing policies and procedures should be robust to not only identify conflicts in the Reg BI regulation; but also to mitigate and in some cases eliminate conflicts. The same process should be considered for Reg BI disclosure and care component requirements. Disclosures should not exceed an 8th grade reading level. Firms should also consider adopting the best practice of documenting recommendations. While this is not a requirement, it does provide evidence of supervision.
  • Compliance obligation: FINRA reviews are still ongoing but some concerns have emerged regarding firm procedures. One observation noted was that in some cases procedures have been developed but not properly observed. This is apparent in the lack of consistency around testing of procedures and recordkeeping requirements. Compliance with existing SEC guidance on electronic delivery, particularly Evidence of Delivery is essential.
  • Disciplinary actions: There was considerable discussion regarding a number of firms’ failure to acknowledge and adequately disclose on Form CRS whether or not a firm’s representatives have disciplinary events.

The full webcast offers many other insights. The SEC also continues to accept and add to their Reg BI FAQs.

A new administration

As we write this post, the election has been called and the transition to the new administration is underway. In fact, the Department of Labor’s proposed fiduciary rule is already under review by the new administration. It is possible that the rule could be quickly approved. However, the time before it would go into effect could result in solicitation of additional comments or other delays. We will continue to monitor this process.

For more on Reg BI and how Broadridge can help, visit us at

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