SEC Chair Clayton Confirms Reg. BI Implementation Date

In a public statement confirming the upcoming June 30, 2020 implementation date for Regulation Best Interest ("Reg. BI"), SEC Chair Jay Clayton asserted that the "effects of the COVID-19 pandemic weigh substantially in favor of implementing the Reg BI and Form CRS requirements as soon as practicable."

Mr. Clayton expressed concern that, during periods of volatility, Main Street investors are being marketed investment products that may not be in their best interest, such as those that (i) are in response to the effects of COVID-19, (ii) leverage exposure and risk through a mix of options, futures or other derivatives, and (iii) have complex structures. He also pointed out that many Main Street investors may be experiencing an increased need for cash and liquidity during this period.

To increase investor protection and comply with Reg. BI, Mr. Clayton urged firms to take additional care with regard to:

• investment recommendations concerning withdrawals or transfers of assets from an account such as a 401(k) plan;

• investment recommendations on complex or risky products, including those that are (i) significantly leveraged and dependent upon derivatives strategies to increase returns and (ii) focused on investments in markets with low liquidity and high volatility;

• COVID-19-related product investments; and

• special purpose acquisition corporations ("SPACs") which often have risk associated with complex compensation structures.