Reg BI Four new requirementsunder Reg BI—the Disclosure, Care, Conflict of Interest, andCompliance Obligations–will have to be met irrespective of whethera broker-dealer offers the on going monitoring of a retail client'sassets.

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The Securities and Exchange Commission's new conduct standardsfor broker-dealers, clarifying rule on investment advisors' fiduciary obligations, and newdisclosure requirements that go into effect June 30 of 2020 willimpact nearly all aspects of the investment and retirement servicesindustry, according to attorneys with Drinker, Biddle, andReath.

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"It's a very aggressive schedule" for implementation, saidSandra Dawn Grannum, co-chair of the firm's Commercial LitigationTeam, in a webinar. "There is no reason to believe thatimplementation of the rules will be put off."

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Related: How SEC Chair Clayton answered 7 criticisms of RegBI, IA fiduciary guidance

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The sheer scale of the new rules, particularly Regulation Best Interest, which requiresbroker-dealers to put their retail clients' investment interestsahead of brokers' profit motives, will leave firms scrambling toimplement new practices and compliance oversight in the next 11months.

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"My gut level feeling for broker-dealers is you are alreadybehind schedule," said Fred Reish, chair of Drinker Biddle'sFinancial Services ERISA Team and chair of the Retirement IncomeTeam. "There is so much there, it's going to be really hard to getin compliance."

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Recommendations on annuities, or a third-party moneymanager—routine acts under the existing suitability standard forbrokers—are two examples Reish sited that will potentially confoundfirms that will need to implement new policies, software thatsupports compliance with Reg BI, and firm-wide training for sellersof securities and annuities.

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Broker-dealers will be beholden to the four new requirementsunder Reg BI—the Disclosure, Care, Conflict of Interest, andCompliance Obligations. Those requirements will have to be metirrespective of whether a broker-dealer offers the ongoingmonitoring of a retail client's assets.

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"Broker-dealers may not have been formally monitoring accounts,but may have been informally monitoring them," said Reish. "Somebroker-dealers are now considering monitoring as part of thecontractual obligations."

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Registered Investment Advisers too will have compliancechallenges, despite the SEC's Investment Adviser Interpretationrule that governs fiduciaries being less onerous than Reg BI.

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"RIAs still have to pay attention," said Reish. "If yourecommend an IRA transfer, and that results in a benefit to theRIA, there is a conflict of interest. Where is that disclosed? Inthe Form ADV?"

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James Lundy, a partner in the firm and member of its SEC &Regulatory Enforcement Team, noted that fiduciaries already operateunder a duty to monitor their clients' assets.

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"That is an active duty," he said of RIAs' obligations. "Butwith wrap accounts, monitoring may not be active. We are seeingexaminers reassess whether it is appropriate for clients to be inwrap accounts if they are not active. Firms should look closely atthat."

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Some critics of Reg BI have suggested that dual-registeredbroker dealers will be able to side-step compliance by simplyshifting to their "RIA hat" when selling securities to retailinvestors.

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But Reish suggested it would not be that simple.

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"What about dual registrants? They will have to give both (CRS)disclosures, look at both types of accounts, and recommend the bestinterest account from one or the other. You can't just say you arean RIA," said Reish.

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Under the SEC's final rules, the Form CRS relationship summarywill have to include information about the services being offered,fees and costs, conflicts of interest, the legal standard ofconduct the firm member is operating under, and whether the firmand its representatives have any disciplinary history.

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Form CRS applies to both broker-dealers and investment advisers,and cannot be longer than two pages. Dual registrants can give fourpages of Form CRS disclosures. Firms can link to additionaldisclosure papers, and they will have to also link to the SEC'sinvestor education website.

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"There are 60 pages of instruction on how to complete a two-pageform," noted Grannum. "It will be a challenge."

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For firms that risk falling behind the eight ball over theensuing 11 months, one ironic Hail Mary could come from HouseDemocrats who generally regard broker-dealers with ajaundiced eye.

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House Financial Services Committee Chairwoman Maxine Waters,D-CA, was successfully able to attach an amendment to recentappropriations legislation that would defund the SEC's ability toenforce Reg BI.

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But that will likely not survive in the Senate, said BradCampbell, a partner in the firm's Employee Benefits and ExecutiveCompensation Group.

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"I don't think the SEC will be hindered from enforcing itsrules," said Campbell, who noted that the defunding measure couldpossibly survive as Congress scrambles to pass legislation fundingthe government for the next fiscal year. "It's a credible threat,but I doubt it will happen in the final analysis."

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Reish was less circumspect on Rep. Waters' defunding measuresurviving in the Upper Chamber. "The odds of it getting through theSenate are nil," he said.

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The bottom line for broker-dealers and RIAs: Delay is not anavailable option.

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"This is huge," added Reish. "The first thing a firm should dois sit down with your attorneys. My general view is that peopledon't realize how much has to be done, and how short one yearis."

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.