It appears the SEC may be bringing more enforcement cases against wealth managers in regards to their compliance with Regulation Best Interest, the two-year-old rule that establishes a "best interest" standard of conduct for broker-dealers and associated persons. Enforcement Director Gurbir Grewal told lawmakers at a hearing on July 19th that investigators are now reviewing referrals from the regulator’s examinations of advisory firms. Wall Street’s top regulator made firms’ compliance with the rule a formal priority for this year. The Enforcement Division has requested 125 additional employee positions next year. During the hearing, which occurred a month after the SEC’s first case under Reg BI, Congresswomen Maxine Waters, who is chairwoman of the House Financial Services Committee, pressed Grewal on how brokerages have changed their practices under the rule and stated that she “can’t imagine only one firm or a handful of brokers” is violating the rule.
Finsum: Based on testimony from a recent congressional hearing, the SEC is reviewing referrals from the regulator’s examinations of advisory firms which could lead to more Reg BI enforcement cases.