Reg BI Brings New Scrutiny to Products, Distributor Partnerships
The SEC rule is vague about the line between sufficient mitigation of conflicts and the point at which disclosure is necessary, says Jasmin Sethi, founder and CEO of Sethi Clarity Advisors, a public policy consulting firm that has worked on behalf of clients including BlackRock and Morningstar.
For one thing, they will need to build systems that can collect and retain records that demonstrate how brokers weighed various considerations — including risks, rewards and costs — before recommending a product or strategy to clients, Sethi says.
“That should be justified, so they can prepare for any exams or investigations that may occur before an enforcement action,” she says.
“I can imagine a business saying, we think you should work with us on the advice side so we can manage your whole portfolio,” Sethi says.