Skip to content

Subscribe to Asset Servicing & Fintech Insights

Discover more information in our monthly publication, the AXIS newsletter, including industry trends, product innovation, Fintech and more from our team of experts.

SEC Adopts Regulation Best Interest

The Securities and Exchange Commission recently adopted a new regulation that calls for brokers-dealers to act in the best interest of their retail clients.

Market Trends: SEC Adopts Regulation Best Interest

On Wednesday, June 5, the Securities and Exchange Commission voted to adopt Regulation Best Interest (Reg BI), a new rule that goes beyond current suitability standards by requiring broker-dealers to act in the best interest of their retail customers and to put the interests of the customer ahead of their own financial interests. The 771-page adopting release discusses component obligations of Disclosure, Care, Conflict of Interest and Compliance, each of which are necessary to meet the General Obligation. Reg BI will become effective 60 days following the publication of the rule in the Federal Register, and includes a transition period until June 30, 2020 for compliance.

Also adopted was the new Form CRS Relationship Summary, which requires registered investment advisers and broker-dealers to provide customers with “simple, easy-to-understand information about the nature of their relationship with their financial professional.” The 524-page adopting release outlines requirements for the length, format and standardized headings to be used in the form, as well as changes to Form ADV, which will now include a “Part 3” related to the Relationship Summary. Like Reg BI, the rule allows for a transition period until June 30, 2020 for compliance.

Concurrently, the SEC also issued two interpretations regarding the “solely incidental” prong of the broker-dealer exclusion under the Investment Adviser’s Act of 1940, and standards of conduct/fiduciary duty of Advisers under the Act. Both interpretations, issued to address many of the questions raised during the public comment period, will be effective upon publication to the Federal Register.

Additional information and the full text of the adopting releases and interpretations can be found on the SEC’s website.

Lisa Shea portrait

Lisa Shea

Manager, Fund Governance Solutions
Lisa Shea is a Senior Vice President and Manager in Northern Trust’s North American Fund Governance Solutions group. Lisa focuses on supporting asset manager clients in regulatory and distribution matters. With over 20 years' experience working with various registered and unregistered fund structures, Lisa’s practical knowledge of how US funds are governed, sold and serviced provides clients with consultative support to help them navigate the evolving marketplace. Lisa joined Northern Trust in 2001.

Confidentiality Notice:  This communication is confidential, may be privileged, and is meant only for the intended recipient.  If you are not the intended recipient, please notify the sender as soon as possible.  All materials contained in this presentation, including the description of Northern Trust, its systems, processes and pricing methodology, are proprietary information of Northern Trust. In consideration of acceptance of these materials, the recipient agrees that it will keep all such materials strictly confidential and that it will not, without the prior written consent of Northern Trust, distribute such materials or any part thereof to any person outside the recipient’s organization or to any individual within the recipient’s organization who is not directly involved in reviewing this presentation, unless required to do so by applicable law.  If the recipient is a consultant acting on behalf of a third party client, the recipient may share such materials with its client if it includes a copy of these restrictions with such materials.  In such event, the client agrees to comply with these restrictions in consideration of its accepting such materials.

© 2022 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability as an Illinois corporation under number 0014019. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation. This material is directed to professional clients only and is not intended for retail clients. For Asia-Pacific markets, it is directed to expert, institutional, professional and wholesale clients or investors only and should not be relied upon by retail clients or investors. For legal and regulatory information about our offices and legal entities, visit northerntrust.com/disclosures. The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group or individual. The following information is provided to comply with local disclosure requirements: The Northern Trust Company, London Branch, Northern Trust Global Investments Limited, Northern Trust Securities LLP and Northern Trust Investor Services Limited, 50 Bank Street, London E14 5NT. Northern Trust Global Services SE, 10 rue du Château d’Eau, L-3364 Leudelange, Grand-Duché de Luxembourg, incorporated with limited liability in Luxembourg at the RCS under number B232281; authorised by the ECB and subject to the prudential supervision of the ECB and the CSSF; Northern Trust Global Services SE UK Branch, UK establishment number BR023423 and UK office at 50 Bank Street, London E14 5NT; Northern Trust Global Services SE Sweden Bankfilial, Ingmar Bergmans gata 4, 1st Floor, 114 34 Stockholm, Sweden, registered with the Swedish Companies Registration Office (Sw. Bolagsverket) with registration number 516405-3786 and the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) with institution number 11654; Northern Trust Global Services SE Netherlands Branch, Viñoly 7th floor, Claude Debussylaan 18 A, 1082 MD Amsterdam; Northern Trust Global Services SE Abu Dhabi Branch, registration Number 000000519 licenced by ADGM under FSRA #160018; Northern Trust Global Services SE Norway Branch, org. no. 925 952 567 (Foretaksregisteret) [VAT if applicable], address Third Floor, Haakon VIIs gate 6 0161 Oslo, is a Norwegian branch of Northern Trust Global Services SE supervised by Finanstilsynet. Northern Trust Global Services SE Leudelange, Luxembourg, Zweigniederlassung Basel is a branch of Northern Trust Global Services SE. The Branch has its registered office at Grosspeter Tower, Grosspeteranlage 29, 4052 Basel, Switzerland, and is authorised and regulated by the Swiss Financial Market Supervisory Authority FINMA. The Northern Trust Company Saudi Arabia, PO Box 7508, Level 20, Kingdom Tower, Al Urubah Road, Olaya District, Riyadh, Kingdom of Saudi Arabia 11214-9597, a Saudi Joint Stock Company – capital 52 million SAR. Regulated and Authorised by the Capital Market Authority License #12163-26 CR 1010366439. Northern Trust (Guernsey) Limited (2651)/Northern Trust Fiduciary Services (Guernsey) Limited (29806)/Northern Trust International Fund Administration Services (Guernsey) Limited (15532) are licensed by the Guernsey Financial Services Commission. Registered Office: Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3DA. Northern Trust International Fund Administration Services (Ireland) Limited (160579)/Northern Trust Fiduciary Services (Ireland) Limited (161386),  Registered Office: Georges Court, 54-62 Townsend Street, Dublin 2, D02 R156, Ireland.