Published on Feb 23rd, 2024 |

$2.2 Million Reg BI Violation | SEC Releases

SEC Releases


Broker Dealer was charged $2.2 Million on February 16th for failures to comply with Regulation Best Interest (“Reg BI”).

Reg BI continues to be an enhanced focus for the SEC during investigations.

When Firms are making recommendations, especially involving retail customers, regulators expect that these recommendations will put the interests of the customer first.

What Happened?

What Happened?

  • After opening an IRA with this Firm, retail customers were offered a pre-selected list of investments that were affiliated with the Firm.
  • There also existed an option for a larger pool of securities for the customer to invest in, and there were lower-cost share classes of the same Funds available with that option.
  • The Firm made higher fees from the customers that invested through the pre-selected list.
  • Disclosures to customers investing in the IRA omitted that lower-priced equivalent share classes were available outside of the list.
  • Approximately 5,894 retail customers paid almost $936,714 in higher mutual fund expenses.

Vigilant's Conclusion

Vigilant’s Conclusion

Compliance departments for Broker Dealers should evaluate their policies and procedures to ensure that their business methods are properly supervised for conflicts of interest.

When writing disclosures, it is important to assess whether all material information is available for the customer to make the best decision. Even greater care should be taken when retail customers are involved.

For any further questions about Reg BI, or how your compliance department can limit its regulatory risk, reach out to us today.

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