The Financial Industry Regulatory Authority has released a notice pointing broker-dealers to guidance issued by the Securities and Exchange Commission designed to help BDs comply with the agency's Regulation Best Interest as both regulators continue bringing enforcement actions related to the rule.
In late November, FINRA barred a broker for excessive churning in the accounts of multiple customers, resulting in more than $2.3 million in losses and thereby violating Reg BI.
In its just-released Notice 23-20, FINRA highlights the SEC's series of Staff Bulletins reiterating standards of conduct for broker-dealers and investment advisors regarding:
In mid-November, the SEC charged two Laidlaw brokers with violating Reg BI's care obligation through a series of recommendations to four retail customers.
The recommendations, according to the SEC order, were made by brokers Richard Michalski and Michael Murray without a reasonable basis to believe that the transactions "were not excessive when taken together in light of the retail customer's investment profile, and because the series of recommended transactions placed the financial interest of the registered representatives ahead of the interest of the retail customer," therefore violating the "quantitative prong" of Reg BI's care obligation.
