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FINRA reports suggest the need for Reg BI compliance

On Behalf of | Mar 8, 2022 | FINRA |

The Financial Industry Regulatory Authority, or FINRA, is a self-regulatory organization in the United States that regulates the practices of investment brokerage firms. FINRA has released reports that brokerage firms are not following Regulation Best Interest compliance rules. They are failing to identify conflicts of interest, failing to disclose fees and engaging in other problems. Pennsylvania investors and dealers are advised to pay more attention to Reg BI compliance reports for 2022.

Reg BI compliance

Reg BI was established by the Securities Exchange Act of 1934 to regulate securities transactions involving investment advisors, brokers and dealers. They are required to provide Form CRS, which is a relationship summary that provides a detailed outline of the investment, to their clients. Additionally, investment advisors and broker-dealers are required to create, maintain and enforce written policies and procedures that meet Reg BI compliance requirements.

Problems with compliance

FINRA is discovering that more brokerages are failing to meet Reg BI compliance. The organization claimed in a new report that brokers are failing to follow standards of conduct and resolve conflicts of interest between themselves and their clients. Investment firms are not making recommendations that are best suited for the customers’ investment needs, and their professionals are not fully explaining the potential risks, costs and benefits.

Managing firms and investors in the financial industry

Investment firms are required by law to follow Reg BI policies and procedures. They have to provide investment advice in the best interests of their clients. The FINRA report is released annually to outline their priorities and work as a compliance guide for industry professionals. The overall purpose is to prevent investors from financial fraud and exploitation.


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