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An SEC rule requiring broker-dealers to act in the best interest of retail customers when making a recommendation, going beyond the previous suitability standard.
Implemented in June 2020, Reg BI requires brokers to disclose conflicts of interest, exercise due diligence in making recommendations, and avoid placing their financial interests ahead of the customer's. While an improvement over the prior suitability standard, Reg BI is considered by consumer advocates to fall short of a true fiduciary standard because it allows commissions and does not require the broker to recommend the lowest-cost option. Under Reg BI, brokers must provide a Form CRS (Customer Relationship Summary) disclosing fees, conflicts, and the standard of conduct. Understanding the difference between fiduciary advisors and Reg BI-governed brokers is important for investors choosing a financial professional.