question archive DIRECTIONS: As our global economy expands, the significance of laws and governmental regulations for businesses, industries, and consumers may also develop
DIRECTIONS: As our global economy expands, the significance of laws and governmental regulations for businesses, industries, and consumers may also develop
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DIRECTIONS:
As our global economy expands, the significance of laws and governmental regulations for businesses, industries, and consumers may also develop. Review the information available on the U.S. Securities and Exchange Commission (SEC) website and use it to inform your discussion.
U.S. Securities and Exchange Commission
Initial Post
Select one or two laws or regulations you found on the SEC website that you think may be subject to change in the next five to ten years. Summarize the law(s) or regulation(s) and explain why you think they might change.
Reply Post
Respond to one classmate’s post. What are your impressions of the law(s) or regulation(s) presented? What findings or conclusions do you raise based on this content?
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Regulation Best Interest
Regulation BI is a 2019 SEC rule (under Security and Exchange of Act 1934) that requires broker-dealers to only recommend products that are of interest to the client and disclose any conflict of interest why the broker is selling the products. This rule was passed in 3 to 1 vote in June 2019, and the SEC chairman in a press release stated that the intention of this Regulation is to improve on the current “suitability” of the broker-dealer relationship with consumers and make it clearer that a broker-dealer may no longer put their interests first when making recommendations to clients (O’Brien, 2019). In requirements to suitability standards as stated by FINRA, the broker-dealer could only ask the client on the suitability of the assets, “Is this investment suitable/appropriate for my client?” (SEC, 2021). in the new Regulation BI, they do not only as on the suitability of the investment but also if the investment will serve the interests of the client. Regulation BI is an improvement of the Fiduciary rule in the US Department of Labor.
Most of the critics state that Regulation BI was a weak replacement of the Fiduciary rule in the department of labor. This is indeed true since it doesn’t add much value, especially when it comes to the future dynamics of the US market. Broker-dealers’ responsibilities in the market have regularly changed in the past two decades, and they will still change in the future. Their responsibilities have changed from just executing the stocks of clients to sharing a lot of advice with the investors. The US market is changing, and the middle class is making a lot of investments, but this Regulation appears to be more suitable only for the large corporations but less effective for small-scale investors. As individual investors continue to grow in the US, regulation BI will be less effective in the market for the next two or three decades.
Outline
- Regulation BI is a 2019 SEC rule (under Security and Exchange of Act 1934) that requires broker-dealers to only recommend products that are of interest to the client and disclose any conflict of interest why the broker is selling the products.
- In requirements to suitability standards as stated by FINRA, the broker-dealer could only ask the client on the suitability of the assets, “Is this investment suitable/appropriate for my client?” (SEC, 2021).
- Most of the critics state that Regulation BI was a weak replacement of the Fiduciary rule in the department of labor.
- As individual investors continue to grow in the US, regulation BI will be less effective in the market for the next two or three decades.
