FINRA has issued its first disciplinary action related to Reg BI. The regulatory authority levied a $5,000 fine and a six-month suspension on a broker for allegedly causing their client to pay tens of thousands in commissions on an account of less than $30,000. It is the first time FINRA has taken action against a broker for alleged violations of the SEC's Reg-BI fiduciary rule. Charles V. Malico, who worked for Network 1 Financial Securities at the time of the violation, accepted and consented to the agency’s findings without admission or denial. According to findings, between July 2020 and November 2021, Malico violated Reg BI when he recommended a series of trades in the account of a retail client that was considered excessive based on the customer’s investment profile. Therefore, his actions were not in the client’s best interest. Making matters worse, Malico allegedly recommended that his client buy and sell a security, only to repurchase the same security days or weeks later. FINRA was made aware of the broker’s conduct through a review of a customer-initiated arbitration. The arbitration, which is still pending, stemmed from a Dec. 6, 2021 customer complaint that alleged negligence, breach of fiduciary duty, and negligent supervision. 

Finsum: In its first disciplinary action related to Reg BI, FINRA levied a $5,000 fine and a six-month suspension on a broker for not acting in the best interests of his client.

According to a new PwC survey, eight in 10 investors plan to increase their exposure to ESG strategies over the next two years. PwC’s Asset and Wealth Management Survey, which was part of its Asset and Wealth Management Revolution 2022 report, is a global survey of asset managers and institutional investors. The survey sample included 250 respondents, accounting for a combined asset under management of approximately $50 trillion. The survey also revealed that asset managers are expected to increase their ESG-related assets to $33.9 trillion by 2026, up from $18.4 trillion in 2021. ESG-related assets are expected to grow at a much faster pace than the asset and wealth management market as a whole. ESG assets in the US are expected to more than double from $4.5 trillion in 2021 to $10.5 trillion in 2026, while Europe ESG assets would increase 53% to $19.6 trillion. However, as demand for ESG products rapidly increases, 30% of investors say it’s a struggle to find attractive and adequate ESG opportunities due to a lack of consistent and transparent standards.

Finsum: A recent PWC survey revealed that 80% of investors are expected to increase their exposure to ESG over the next two years, while assets in ESG products are predicted to hit $33.9 trillion by 2026.

When it comes to direct indexing, a little daylight seems to be peeking in.

As investors, young and old, flock to ETFs, you might say direct indexing’s keeping an eye out for its lane, according to blomberg.com.

Two hands on the wheel, of course.

Questions surface about whether investors have an inclination to dive into direct indexing in light of the burgeoning attraction to ETFs, notes new research from Schwab.

If you have an appetite for index funds and ETFs, but greater control over fund holdings and the possibility to outperform, direct indexing just might float your boat, according to schwab.com.

By paring down costs while stepping up access among investors to different segments of the market, index funds and ETFs have put an entirely new face on investing. That said, when it comes to direct investing, contrary to performance historically, make way for the fly in the ointment: when it comes to control over the fund’s individual holdings, control – perhaps of any sort – is nonexistent.

However, times, it seems, have changed. Limited, back in the day, to institutional and high-net-worth investors, today, direct indexing’s available to a wider range of investors. Why? Technological strides, which have coaxed down investment minimums.

Direct indexing, of course, is surging in popularity, according to barrons.com. While Fidelity, Schwab and Vanguard have initiated direct indexing products over the past year or so, direct indexing’s leveraged by only 12% of advisors. Not to pile on – but piling on – a survey showed, when it comes to direct indexing, half of advisors have too clue what it is. 

Um, someone say Wikepedia?

In the uniquely entitled category ‘there’s a first time for everything’, the Financial Industry Regulatory Authority fined a former registered rep $5,000 and issued a six-month suspension, according to thinkadvisor.com. The action was its first disciplinary moved linked to Regulation and Best Interest.

In a pair of knuckle raps, Charles V. Malico not only willfully violated Reg BI’s Care Obligation but FINRA Rule 2010 as well “by recommending a series of transactions in the account of one retail customer that was excessive in light of the customer’s investment profile and therefore was not in that customer’s best interest,” as laid out by FINRA’s order. This occurred from July 2020 through November 2021.

This action represents the regulator’s first Reg BI-related fine, confirmed a FINRA spokesperson. It came on the heels of a review of an enforcement of an arbitration claim.

“Malico frequently recommended that Customer A buy and then sell a security, only to repurchase the same security weeks or even days later,” the settlement states, according to investmmentnews.com.

The previous suitability standard -- governing the conduct of brokers with customers -- was supplanted by Reg Bi.  

It might be a bit brisk north of the border, but at least some fixed income ETFs seem to be hot in Canada, according to moneysense.ca.

In the aftermath of around 20 years of essentially solid returns, as interest rates nudge yields up and drive down prices, bond portfolios are absorbing some body blows. the iShares Core Canadian Universe Bond Index ETF (XBB) – which missed the panel’s picks of best fixed income ETFs for portfolios – still dispenses broad exposure to investment-grade Canadian bonds.

“I’m not committed to bonds at all,” says panellist Yves Rebetez. “People are now seeing the truth in the descriptive ‘return-free risk’ that some have been pointing to for a while. This ‘return-free risk’ is a tongue-in-cheek play on that. Who wants to invest in risk, void of potential returns?”

Opting for cost efficient funds like ETFs in Canada and elsewhere, the variety of them is, well, substantial, according to wealthawesome.com. As last year wound down, there were 1,177 Canadian listed ETFs in Canada.

Canadian ETFS are available in every shape and size. Among that wide range of options, it’s key to buckle down on the best funds.

Most portfolios commonly carry fixed income or bond ETFs – particularly if risk doesn’t float the boast of those investors who are most risk repellant.

Want to talk logic? For a second? A combination of income exchange-traded funds are most, well, logical for a substantial chunk of investors.