Broker/dealers throughout the country may be counting the days until June 30, 2020—implementation day for Regulation Best Interest, more than a year after the Securities and Exchange Commission approved it. Throughout the development of the rule, the Division of Trading and Markets, led by Director Brett Redfearn, has been at the forefront, and after June 30, his team will continue to be the overseer, ensuring firms remain in compliance.
Redfearn has had a long and varied career in the financial services industry prior to his appointment as the director of the Division of Trading and Markets in October 2017. He’s previously served as the chairman of SIFMA’s Equity Markets and Trading Committee and was a member of the Security Traders Association’s Market Structure Analysis Committee. Prior to joining the SEC, he worked as the global head of market structure for J.P. Morgan.
In developing Reg BI, the division analyzed antifraud provisions in federal securities laws, FINRA suitability standards and studied the Department of Labor’s vacated fiduciary rule. The division is also taking part in an inter-Divisional Standards of Conduct Implementation Committee announced by SEC Chairman Jay Clayton, which is bringing together the Division of Trading and Markets, Division of Investment Management, Division of Economic and Risk Analysis, the Office of the General Counsel and the Office of Compliance, Inspections and Examinations (OCIE). Their goal is to ensure the Reg BI’s transition into implementation is a smooth one.
Redfearn’s division will work with the OCIE to discern whether firms are in compliance with the rule, and this work will only become more important as Reg BI’s implementation date arrives. In addition to the Division of Trading and Markets, other actors, including the SEC’s Office of Investment Management and FINRA, will be involved in enforcement.
“Some may wonder why this has taken so long. The issue we have been struggling with—and are still concerned about—is getting the calibration right,” Redfearn said during remarks at FINRA’s annual conference in May 2018.
“To enhance the quality of brokerage advice and preserve the brokerage advice model for investors, the Commission needed to act in a way that recognized the range of services and the various types of advice—one-time, episodic, to more frequent—that a broker/dealer may provide its retail customers. It is important to give firms flexibility and a reasonable compliance path to develop systems to incorporate these new obligations.”
Come June 30 of next year, broker/dealers will know whether the compliance path Redfearn has laid out is reasonable or filled with unforeseen obstructions.
