Meeting the Regulation Best Interest Obligations

With a target date of June 2020, Regulation BI is the most significant change to suitability regulation in the past 20 years. It now requires that broker-dealers act in the "best interest" of their retail customers, fundamentally altering the investor protection process. For Broker-Dealers to satisfy the Best Interest criteria, the general obligation requires that a broker-dealer "shall act in the best interest of the retail customers at the time the recommendation is made without placing the financial or other interest of the broker-dealer ahead of the interest of the retail customer".

The best interest obligation is satisfied via a four-prong test. A broker-dealer must satisfy all four obligations:

  1. the disclosure obligation,
  2. the care obligation,
  3. the conflict of interest obligation, and
  4. a compliance obligation.

Meeting the Best Interest Obligations

For compliance organizations, to meet several aspects of these detailed requirements, it can be distilled down to a few key questions:

  • How do you identify Recommendations?
  • How do you identify Disclosures, both written and oral updates?
  • How do you identify recommendations which are not in the client’s Best Interest?

As Firms continue to put together their strategies on ensuring Reg BI compliance, it requires a detailed look at how processes are handled today. Existing suitability and communications surveillance technology is typically managed separately and marrying the two together can require expensive integrations or laborious manual intervention, likely to not occur in real time.

Introducing Reg BI Surveillance

NICE Actimize Reg BI Surveillance automatically identifies related communications, in any modality from voice to text, while creating an alert on the recommendation if the conversation is aggressive or pushy, and detecting associated risks with cost and suitability models. For each alert, the solution will automatically search and display all transactions, disclosures and recommendation conversations to allow for a complete understanding of what happened.

The Power of Reg BI Surveillance

The NICE Actimize Reg BI Surveillance solution combines the value of market leading Communication Surveillance and Sales Practices & Suitability solutions with integrated case management and automated workflows to create the first comprehensive Reg BI Surveillance solution.

Using Natural Language Processing and Machine Learning, the Reg BI Surveillance solution surveils 100% of all brokerdealer conversations while automatically identifying disclosure and recommendation conversations and analyzing them with communication models that search for aggression, confusion and hesitation when discussing products, across all types of communications modalities, like voice, email, chat and more. At the same time, Reg BI Surveillance efficiently and accurately reviews transactions, using a vast variety of Out of the Box models and focused on the costs and effects to the client, to detect prohibited sales practices or recommendations which are not in the best interest of the client.

All data and alerts flow into the ActOne Case Manager, automatically correlating the data sources to provide a single alert, when appropriate, enriched with detailed communications and transaction data. This enables compliance analysts to more efficiently manage the investigation process and determine the appropriate actions for high risk activities. ActOne also features enhanced visualization of alerts and activity, so analysts can easily understand the chain of actions and demonstrate proof of compliance to internal auditors and to regulators that the data has been properly captures, identified, reviewed, investigated and acted on appropriately.