{"id":5842,"date":"2020-01-06T10:56:00","date_gmt":"2020-01-06T15:56:00","guid":{"rendered":"https:\/\/rixtrema.com\/blog\/?p=5842"},"modified":"2020-11-11T15:45:09","modified_gmt":"2020-11-11T20:45:09","slug":"what-is-best-interest-anyway","status":"publish","type":"post","link":"https:\/\/rixtrema.com\/blog\/what-is-best-interest-anyway\/","title":{"rendered":"What is the Best Interest, Anyway?"},"content":{"rendered":"\n
  1. The devil\u2019s in the details.<\/a><\/li>
  2. DOL\u2019s Fiduciary Rule Standard<\/a><\/li>
  3. Reg-BI expands on FINRA\u2019s Suitability Standard<\/a><\/li>
  4. Best Interest according to a financial lawyer<\/a><\/li><\/ol>\n\n\n\n

    The devil\u2019s in the details.<\/strong><\/h2>\n\n\n\n

    Many of the terms used in Reg-BI, like \u201cBest Interest\u201d are <\/span>not explicitly defined<\/span><\/a> within the 1300 pages (guess they ran out of the room). In general, the new standard is met when a recommendation contains the five-component obligations: Care, Disclosure, Conflict of Interest, Compliance, and Recordkeeping. Still, while there is not much within the regulatory documents, we must look to what inspired the regulation to understand what the SEC means when using the term.<\/span><\/p>\n\n\n\n

    Best interest and meeting compliance with Reg-BI will be defined by court cases from violations and lawsuits and will constantly evolve.<\/p><\/blockquote>\n\n\n\n

    If it sounds like a pretty vague and subjective concept after all, perhaps it is designed to be that way. After all, Reg-BI intends to address and update an entire industry. With the new regulation causing many brokers to enter into the \u201cfiduciary\u201d realm, this is something a lot of people are going to consider. Well, there\u2019s a short answer and a long answer. The short answer is the SEC decides what best interest means. <\/span><\/p>\n


    It can not be stated enough; the conditions and circumstances surrounding the facts of each payment and recommendation will affect whether the SEC considers it a violation of the Reg-BI obligations. Fund expenses are a critical but only one consideration of a best-interest recommendation. <\/span>Simply recommending the lowest-cost security or investment strategy does not necessarily satisfy the Care Obligation.<\/b><\/p>\n\n\n\n

    DOL\u2019s Fiduciary Rule Standard<\/strong><\/h2>\n\n\n\n

    Reg-BI is the replacement for the Department of Labor\u2019s Fiduciary Rule, nixed in 2017. There are many similarities between the regulations and the DOL certainly inspired parts of Reg-BI. By the DOL\u2019s language, for instance, a fiduciary’s obligation to carry out its duties is done so \u201cprudently\u201d when they follow a \u201cprocedurally prudent\u201d process by: <\/span><\/p>\n