Brokers: Pay Attention to Reg BI Obligations

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As a broker, if you were not aware of Regulation Best Interest (Reg BI) before, you certainly should be now. The SEC recently charged broker-dealer firm Western International Securities Inc. for violating Reg BI obligations after it sold over $13 million of L bonds to retirees and investors.

The SEC complaint stated that the investors Western International Securities sold these funds to investors that were on a fixed income, despite the fact that these bonds were very high risk. The broker-dealer violated Reg BI because it did not demonstrate diligence, care, and skill to understand the risks, rewards, and costs associated with L bonds, and also because they recommended L Bonds to at least seven particular customers without a reasonable basis to believe the bonds were in the customers’ best interests.

Christopher Warren, Managing Partner at Scarinci Hollenbeck, LLC states, “Regulation Best Interest (as well as Form CRS) is touted by FINRA as a quasi-fiduciary standard centered on suitability issues that require strict attention to a customer’s risk tolerance and investment obligations.  A broker-dealer should require all prospective clients to complete a thorough investor questionnaire that has been prepared and reviewed by a securities regulatory attorney for compliance, as well as prophylactic purposes.”

If you are a broker-dealer, or professional advisor working with public investors, you must make it a priority to keep an investor’s best interest in mind. If you are under investigation by FINRA for violating Reg BI or suitability standards, you should seek experienced counsel to prepare a proper defense, as well as counsel in preparing your compliance obligations. Contact the attorneys at Scarinci Hollenbeck, LLC at (866) 954-7687 or email to schedule your consultation.



Scarinci Hollenbeck, LLC defends individuals and companies in all types of litigation. Our team has decades of experience in all types of litigation, white collar defense, securities litigation, and financial services enforcement proceedings.