The broker-dealer standard of conduct has swiftly evolved in recent years, with regulators moving beyond mere “suitability” obligations in favor of a far stricter standard. Firms and their reps must now be able to demonstrate they are acting in the “best interest” of the investor and be boldly transparent about any conflicts of interest that might arise from sales activities.
The Securities and Exchange Commission first adopted its Regulation Best Interest (Reg BI) rules in 2019 to improve the quality and transparency of retail investors’ relationships with broker-dealers, bringing its legal and disclosure requirements more closely in line with “reasonable investor expectations.” The agency then gave firms time to fine-tune their compliance tools. In a January 30 risk alert, the SEC put firms on notice that recent retail-focused examinations of broker-dealer compliance practices revealed various “deficiencies and weaknesses” that could erode investor trust in the financial system.
As the agency’s enforcement push ramps up, broker-dealers are finding that digital-first solutions that automate Reg BI disclosure activity give them a leg up. Technology also makes it easy to get prior permission from customers to send disclosures electronically, keeping reps on the right side of FINRA’s August 3, 2022 regulatory notice about e-signatures.
Client-facing representatives affiliated with WealthForge not only have this very technology at their fingertips, they are also supported with an array of digital prospect forms and compliance resources available via a user-friendly compliance portal. Our back-office technology makes processing alternative investments easier for our affiliated reps by automating:
- Secure management of prospective client information
- Documentation of client consent to electronic delivery
- Distribution of Form CRS and individual firm and rep Reg BI disclosures
- Version control tracking of updated disclosure documents
- Prompts designed to assure reps that their clients are current on disclosures
The firm maintains records of all disclosure activities and can instantly generate detailed reports should regulators come calling. And our dedicated Investor Services Team, which reviews every investment as it comes through, stands ready to answer any questions or provide guidance on how to interact with WealthForge communications.
WealthForge technology streamlines the complex process of subscribing to alternative investments, enabling faster order entry, reduced investment processing time, timely and accurate commission payments, and nearly error-free processing. That it also offers solutions for staying on the right side of Reg BI and other important regulatory requirements is a value-added bonus for the broker-dealer representatives affiliated with WealthForge.
Developing an automated Reg BI workflow tool within our back office system reflects both our commitment to technology-forward solutions and the seriousness with which we take our own regulatory responsibilities. These commitments give our sponsor clients confidence in our regulatory focus—in both our role as a managing broker-dealer and the supervisory role we play for our retail engagements.
The SEC has indicated it intends to continue its Reg BI examinations and both it and FINRA have already begun doling out sanctions against financial professionals for violating best interest rules.
Schedule a brief call with a member of our team to learn more about the benefits of our Reg BI workflow tools and how working with us can save you time and money.
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Alex Pauliukonis: Mar 26, 2024 2:36:14 PM
John Rickman