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Summary

ON June 5th 2019, the Securities and Exchange Commission adopted a new rule establishing a standard of conduct for broker-dealers when making a recommendation to a retail customer of any securities transaction or investment strategy involving securities (“Regulation Best Interest”). Regulation Best Interest enhances the broker-dealer standard of conduct beyond existing suitability obligations, and aligns the standard of conduct with retail customers’ reasonable expectations.

Broker-Dealers are now required to:

  • Act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker-dealer ahead of the interests of the retail customer
  • Address conflicts of interest by establishing, maintaining, and enforcing policies and procedures reasonably designed to identify and fully and fairly disclose material facts about conflicts of interest

The standard of conduct established by Regulation Best Interest cannot be satisfied through disclosure alone.

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