Regulation Best Interest

Regulation Best Interest, adopted by the SEC in 2019, requires broker-dealers and their representatives to act in a retail customer’s best interest when making a recommendation, and not to place their own interests ahead of the customer’s.

What it replaced

The older suitability standard, which required a recommendation to be suitable but did not require the customer’s interest to come first.

Four obligations

Disclosure of the relationship, services, fees, and conflicts. Care in forming the recommendation. Conflict of interest policies to identify and address conflicts. Compliance policies covering the whole thing.

How it differs from fiduciary duty

Regulation Best Interest attaches at the point of a recommendation. An investment advisor’s fiduciary duty applies to the whole relationship, continuously.

The standards have moved closer together. When each applies has not converged.

Form CRS

The rule came with a short relationship summary that both broker-dealers and advisors must deliver, describing services, fees, conflicts, and disciplinary history in a fixed format so a retail investor can compare firms.

Why it matters to an advisor

Because clients will ask about the difference, and because dually registered firms operate under both depending on the capacity they are acting in.