SEC Staff Highlight 2021 Focus of Reg BI Examinations

SEC staff intend to expand the scope of future Reg BI examinations and conduct enhanced transaction testing.

In a public statement, Division of Examinations staff explained that it assessed the initial Reg BI examinations and, as a result, will expand the scope of examinations in 2021 to focus on specific requirements that, among other things, "go beyond suitability standards and require broker-dealers to have a reasonable basis to believe that recommendations are in retail customers’ best interests." Further, staff said it "intends to conduct enhanced transaction testing designed to examine whether broker-dealers have implemented effectively their written policies and procedures."

The Division said it would examine for:

• changes to product offerings, such as the discontinuance of higher cost products when lower cost products are available;

• whether firms have considered costs in making recommendations to clients; and

• firm processes relating to the recommendation of complex products.