While there's been a dearth of enforcement actions brought by the Securities and Exchange Commission related to Regulation Best Interest, more inquiries by the securities regulator are likely on tap, according to the law firm Gibson Dunn.
In a recent alert, the firm states that the SEC thus far "has seemed content" to leave enforcement to the Financial Industry Regulatory Authority, which has settled roughly 30 Reg BI enforcement matters since 2020, when Reg BI took effect.
Gibson Dunn goes on to review two SEC enforcement actions taken this year for "ordinary conflict of interest concerns," which the law firm said "are indicative of a more active SEC Reg BI enforcement regime moving forward" — particularly aimed at dually registered firms.
Rina Hussain, associate director of the SEC's broker-dealer exam program, said at the recent SEC Speaks conference held by the Practising Law Institute that Reg BI will continue to be an exam priority for the SEC in 2025 — with likely areas of focus to be on complex or illiquid products.
Recent SEC Actions
Earlier this year, the SEC ordered TIAA-CREF Individual & Institutional Services, a unit of the Teachers Insurance and Annuity Association of America, to pay over $2.2 million to settle charges that it failed to comply with Reg BI in connection with recommendations it made to retail clients to open a TIAA individual retirement account.
The administrative cease-and-desist order against dually registered TIAA was tied to Reg BI disclosure, care and compliance violations "for recommending to retail clients its 'core menu funds' that 'earned higher fees' without disclosing "substantially equivalent, lower-cost share classes of affiliated funds," Gibson Dunn states.
