3 Take-Aways from SIFMA’s Reg BI Forum

David T. Ackerman, Subject Matter Expert, Communications Compliance Line of Business
3 Take-Aways from SIFMA’s Reg BI Forum

As most wealth management firms know, by June 30, 2020 broker-dealers registered in the United States must comply with Regulation Best Interest. The new standard requires broker-dealers interacting with retail clients to, among other things, document and prove compliance with disclosure, monitoring, and care obligations. In an ongoing effort to inform the industry of implementation and compliance considerations, SIFMA recently hosted the Regulation Best Interest Vendor Forum in New York. I was privileged to sit on a panel during this event.

Titled “Documenting Best Interest, Supervision and Surveillance,” our panel shared views on how firms can tackle documenting whether recommendations are made in a client’s best interest. The discussion focused on various areas, ranging from fintech tools and training programs to process changes – all based on collective experience and anecdotal evidence shared by dozens of firms. During the panel Q&A and throughout the forum, I had the opportunity to engage with representatives from many firms who are ramping up for Reg BI. Here are my 3 top of mind take-aways from those discussions.

  1. Firms must take Regulation Best Interest seriously, and many are not

It struck me that many firms appear to be in discovery mode. Approximately 30% of attendees were asking questions related to understanding basic steps their firms should take to comply with Reg BI. With less than 160 days remaining until Reg BI goes into effect, this was surprising and somewhat alarming. It’s important for firms to note that no delay or grace period will likely be applied to this regulation.

Let’s face it, many firms are still experiencing the sting of the DOL Fiduciary rule and all the preparation that took place under the now defunct regulation. Combine DOL distress with information fatigue, and this behavior is not particularly surprising and somewhat understandable considering the circumstances. All of that aside, SEC Chairman Jay Clayton has repeatedly stated that Reg BI is a high priority for the SEC. Although judicial challenges receive a lot of media attention, many legal experts consider them likely to fail. Come June 30th, this expansive new regulation will be in effect and become the highest priority of the most powerful financial regulator in the world. Taking a laissez faire approach to Reg BI compliance is highly ill-advised, bordering on dangerous.

  1. Firms need a different approach

Utilizing outdated, legacy technology with some process changes will be a difficult sell to an examiner looking for heightened supervision. Time and again regulators, such as the SEC and FINRA, are asking questions about the technology in use to improve consistency and stability. Therefore, when change management committees are discussing process changes to the organization, firms should incorporate conversations on technology and areas where automation can be exponentially valuable.

Broker-Dealers further along in their preparation seemed most concerned with monitoring off-line communications, proving the ’best recommendation,’ demonstrating the best available product, and reporting. These areas are ripe for technological enhancement. Firms should look beyond simply new internal workflow processes, and invest in a turnkey, purpose-built platform. For complete coverage, firms should confirm this includes next generation communications surveillance, trade surveillance, suitability surveillance, and case management. Ensuring a solution is holistic not just in name, but in practice is vital to integrating all capabilities required for an effective compliance program now and in the future.

  1. Managing reps across multiple channels and regions is a key challenge

The topic of geographic coverage came up in almost all conversations. At some point in a discussion, someone would ask, “How do we determine if reps in disparate locations gave the best alternative solution to the customer?” This is not an easy thing to solve, and even more difficult to surveil in any consistent way. Most firms have multiple regions and multiple channels of communication they use to interact with their retail clients. Many legacy solutions only monitor emails using decades old lexicon technology. This limits an analyst’s ability to link all recommendations and disclosures together, let alone analyze them uniformly in any competent basis.

Firm’s should look for a modernized, open, agnostic solution that provides a single platform for monitoring broker-dealer communications across channels and physical locations, including email (with or without attachments) and voice. Furthermore, since many client conversations still happen face-to-face, any Reg BI solution must allow 2nd line to incorporate meeting notes inputted into the customer relationship management solution, such as Salesforce™. Firms that can address multiple communication channels and locales quickly and effectively will allow registered reps to service their clients more effectively and ultimately gain a competitive advantage.


In sum, I offer a strong word of caution – process changes alone are highly unlikely to deflect increased scrutiny. For firms with a large global footprint or with limited compliance resources, technology will be an essential piece to answering the Reg BI challenge. Give special consideration to purpose-built solutions specifically designed to address new Reg BI challenges and how they will amplify compliance efficacy. Firms should unquestionably do their due diligence when considering 3rd party solutions, but they should concurrently act with a sense of urgency as timelines for implementing new technology will be a factor. Explore the advantages of incorporating a single, cloud based holistic platform to streamline workflows and reduce overall costs. Come June 30th, firms that use their time to revamp inadequate or underperforming compliance programs will find themselves at a distinct advantage amongst their lagging competitors and ultimately better suited for the challenges of the future.

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