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Top 10 Reg BI checklist

Estimated initial cost of Form CRS for RIAs 8/14/19

In early summer, advisors received more than 1,300 pages of regulatory information when the SEC adopted Regulation Best Interest and new Form CRS. In those pages, the agency issued interpretations of an advisor’s fiduciary responsibilities and the “solely incidental” exception to advisor registration for broker-dealers.

To help advisors grapple with information overload, here are the 10 most important requirements for financial advisors:

Best interest
Instead of ensuring that a recommendation is merely suitable, broker-dealers must act in the best interest of retail customers when making a securities transaction recommendation or an investment strategy.
Broker-dealer disclosure
Broker-dealers must disclose material facts (think fees/costs, services, conflicts, discipline) to retail customers at or before any recommendation is made.
Policies and procedures
Broker-dealers must adopt and implement written policies and procedures that address conflicts of interest (including proprietary products, sales contests, and non-cash compensation) and ensure compliance with Regulation Best Interest, which would include training, reviews and testing.
Form CRS
At or before entering into a relationship with a retail client, both investment advisors and broker-dealers must deliver new Form CRS, which must be filed with the SEC. The form includes information about the firm’s regulatory status and obligations, fees/costs and services.
Use of 'advisor'
Broker-dealers will be restricted in their use of the term “advisor” or “adviser.”
Due diligence
Advisors will need to conduct a greater amount of due diligence on retail clients as compared to institutional clients.
Account monitoring
An advisor must continually monitor a retail client’s investment profile and situation to ensure that advice continues in the best interest of the client.
Conflicts disclosure
An advisor must include specific disclosures about applicable conflicts of interest and not merely describe conflicts as hypothetical or possible.
Investment discretion
Absent limiting circumstances, a broker-dealer with investment discretion must register as an investment advisor.
Monitoring compensation
Receiving compensation to provide ongoing account monitoring would require investment advisor registration.