Informed decision

 

Your broker is required to tell you all material information in a "Full and Fair" manner and make it sufficiently specific that you understand any conflicts they may have so that you make and they receive "informed decision."

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One reason Reg BI was passed was because retail customers weren't being given enough information. They were told part of the story and found out later about "the fine print"-and by then the money was partially gone or locked up. Reg BI fixed that issue and now a firm can only do business with you if you give them an informed decision. 

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Retail customers are not securities attorneys.  You don’t have to ask any questions. Retail customers don’t have to dig through 700 pages of legal documents. Retail customers get email/mail from multiple companies every week.  You don't have to worry that your wealth manager is pulling a fast one. You don't have to turn every phone call into a 3 hour meeting and analyze every word. Your broker is responsible for telling you anything  important and making sure you understand it.

 

The industry can no longer play "gotcha" Reg BI upgraded disclosure from "reasonably disclose" to "Full and Fair"-  and required the industry to only process an order when it was an "informed decision."  

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The only vote that matters is yours!

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If you think they misled you, they misled you. The standard of who determines if it was an informed decision is the retail customer. If you think it wasn’t fair for them to gain your trust by telling you half the story on the phone or while having coffee, it wasn't. If you find out there was a catch and you weren't told about it and you think the catch is "important.", it is.

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If they told you there is "no fee" or didn't tell you how much they were making and you find out later and you think they were conflicted, they were. The only vote that matters is YOURS, the retail customer.

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Regulation Best Interest also explicitly requires that disclosures be “full and fair,” and thus that a broker-dealer must provide sufficient  information to enable a retail customer to make an informed decision with regard to a recommendation… By explicitly requiring that broker-dealers provide sufficient information to enable retail investors to make an informed decision with regard  to a recommendation, Regulation Best Interest imposes a minimum standard on disclosures  (page 552 of rule)

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The Disclosure Obligation requires the disclosure of all material facts related to the scope and terms of the relationship with the retail customer. The standard for materiality for purposes of the Disclosure Obligation is consistent with the one the Supreme Court articulated in Basic v. Levinson. Specifically, a fact is material if there is “a substantial likelihood that a reasonable shareholder would consider it important.”   In the context of Regulation Best Interest, the standard is the retail customer, .  (page 132 of rule) (ALL is highlighted in the rule)  

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