Broker-Dealer Settles Reg BI and Form CRS Violations
Commentary by Glen Barrentine
A broker-dealer settled FINRA charges for failing to establish and enforce written policies and procedures reasonably designed to achieve compliance with Regulation Best Interest ("Reg BI") and Form CRS.
According to the AWC, the firm's "training on Reg BI to its representatives was inadequate as it focused on suitability rather than the requirements of Reg BI." FINRA also said that the firm's procedures "acknowledged that the firm was required to deliver Form CRS to all retail customers," but it did not prescribe any specific procedures for preparing, filing, or updating Form CRS.
FINRA determined that the firm violated Exchange Act Rule 151-1(a)(1) ("Regulation Best Interest"), MSRB Rule G-27 ("Supervision") and FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade").
To settle the charges, the firm agreed to (i) a censure and (ii) pay a $35,000 fine.
Commentary
Procedures covering how a firm and its associated persons are required to comply with regulatory requirements and how this compliance will be monitored and overseen are at the heart of any firm's compliance and supervisory program. Procedures should be sufficiently detailed such that it is clear who is subject to the procedures; when such requirements apply; what is required to be done; and how such compliance is documented.