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Sunday, October 24, 2021

The New SEC Enforcement Director: Gurbir Grewal

Within a month of Gurbir Grewal stepping into his new role as the SEC enforcement director, he has already begun to ruffle a few feathers – by fining 27 firms for failing to file the Customer Relationship Summary (CRS) with the SEC. The CRS was put into place a year prior to Grewal’s instatement this July. Its goal was – and is – to help clients and customers decide whether to do business with a firm based on an outline of the firm’s fees, services, and potential conflicts of interest. The summary was to be filed and posted on the firm’s website before July 30th, 2020.

Entering a new position and shaking things up in a short amount of time is nothing new to Gurbir Grewal. Grewal began his political career as chief of the Economic Crimes Unit at the U.S. Attorney’s Office in New Jersey – giving him a solid understanding of the impact legislation can have on an economy. After several years of Grewal leading his crime unit, he was appointed Prosecutor of Bergen County, New Jersey in 2016 – taking his first big step towards being a real changemaker. After a quick and successful two-year stint helping Bergen County fight local issues; Grewal progressed to the position of attorney General for the state of New Jersey. As the attorney general Grewal never backed down from a challenge – refusing to be cowed by ExxonMobil he said, “We’re sending a strong message to polluters that no matter how big you are, or how powerful you are, or how long you’ve been getting away with contaminating your state’s natural resources, we are going to hold you accountable in court.”

Within two years, his profile elevated high enough for him to be nominated, to his current position, as the SEC enforcement director. He brings along with him a remarkable ability to take down offenders fast and efficiently – within his remit of course.

 Grewal is now in charge of enforcing the punishments that pertain to offenders of the SEC’s rules and regulations. After seeing Grewal’s rule on the CRS documentation infractions, resulting in $910,092 in fees, and it being part of the SEC regulatory package that’s focal point is Regulation Best Interest – it is only a matter of time until Grewal implements his action towards firms not compliant with the standards and rules that make up Regulation Best Interest. That being said, let’s remind ourselves of what makes a firm compliant with Regulation Best Interest:

Best interest obligation. A broker, dealer, or a natural person who is an associated person of a broker or dealer, when making a recommendation of any securities transaction or investment strategy involving securities (including account recommendations) to a retail customer, shall act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker, dealer, or natural person who is an associated person of a broker or dealer making the recommendation ahead of the interest of the retail customer.

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The Best Interest Obligation is composed of four parts – a Disclosure obligation, a Care obligation, a Conflict-of-Interest obligation, and a Compliance obligation. To find out what those four obligations are in more detail you can review them here: Electronic Code of Federal Regulations (eCFR)

 

These obligations should be well documented, and will be under the watchful eye of Gurbir Grewal – who waits for no one. It would be in everyone’s best interest whether they are a broker, dealer, or an associate person of a broker or dealer to ensure that their rollovers, fees, and reasoning are well documented. For the individuals whose documentation system is somewhat lacking – there are options out there. Here at RiXtrema, we provide software that streamlines the documentation process to be compliant with Regulation Best Interest (RegBi Optimizer).

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