My Regulation Best Interest
Reg BI was passed by President Trump (MAGA) in 2020.
Many people don’t know how it protects them.
It is very possible you were sold an investment in a
brokerage account against Reg BI and you have recourse!-
Take a look!
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."
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.
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."
The only vote that matters is yours!
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.
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.
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)
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)
Any risk associated with the recommendation has to be disclosed "full and fair"- in Evergreen fund, where the risk of a GATE is glossed over, that is regulatory issue. No one is using the terms "reasonably disclose" anymore. It has to be told to the customer in a way they can process it, and the broker can only take the order when they know they have an informed decision.
Also we conclude that the basis for a broker-dealer’s recommendations as a general matter (i.e., what might commonly be described as the firm’s investment approach, philosophy, or strategy) and the risks associated with a broker-dealer’s recommendations in standardized (as opposed to individualized) terms are material facts relating to the scope and terms of the relationship that should be disclosed. (page 37 of rule)
Reg BI states the obvious: If a person gets paid more to sell product A, he has an incentive to sell product A, if he gets paid 3%, that is a small incentive, if he gets paid 10%, that is a large incentive: The brokers have decided not to tell customers how much the make.
The receipt of higher compensation for recommending some products rather than others, whether received by the broker-dealer, the associated person, or both, is a fundamental and powerful incentive to favor one product over another. While we are requiring firms to establish policies and procedures reasonably designed to mitigate the conflicts of interest that create an incentive for financial professionals to place the interest of the professional or brokerdealer ahead of the interest of the retail customer, we believe also that full and fair disclosure of the material facts concerning conflicts raised by variable compensation schemes is of particularly critical importance for an investor seeking to evaluate a recommendation under such circumstances (page 209)
The FINRA 2026 regulatory oversight report specifically talk to this specific issue.
Firms are required to tell the customers about any payments they get from the product provider.
Failure to Comply With Disclosure Obligation:
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Not providing retail customers with “full and fair” disclosures of ALL material facts related to the scope and terms of their relationship with these retail customers or related to conflicts of interest that are associated with the recommendation, including: (ALL is highlighted in rule)
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material fees received as a result of recommendations made (e.g., revenue sharing, or other payments received from product providers or issuers
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Reg BI discusses a churning risk-
It also includes a requirement under the Care Obligation to specifically address the risk that a broker dealer’s transaction-based recommendations and compensation could result in a series of recommendations that are not in the best interest or a retail customer—a “churning” risk unique to the broker-dealer model of providing recommendations and resulting transaction-based compensation. Page 61
Reg BI changes how products are created.
Regulation Best Interest may reduce the attractiveness of certain products to broker-dealers due to the Care Obligation (e.g., the emphasis on the need to consider cost, among other things) and the Conflict of Interest Obligation (e.g., addressing conflicts of interest, including product menu limitations) and/or may reduce retail customers’ aggregate demand for certain products due to the Disclosure Obligation (e.g., due to a reduction in any information asymmetry with respect to fees).
To the extent that Regulation Best Interest produces these effects on certain products, the affected product sponsors may react by lowering the fees that they charge retail customers on these products to be more competitive, or by repackaging these products into new products that are more competitively priced. The increased competition generated by the lower fees for affected products may further incentivize other product sponsors (i.e., those not directly affected by Regulation Best Interest) to lower their fees as well. (Page 611)
Reg BI has no case law_- DJT needs to decide it.
From JPM Reit prospectus 6/25/26 (page 74 of 364)
This standard is different, and may be more restrictive, than the quantitative suitability standards we require for an investment in our shares and enhances the broker-dealer standard of conduct beyond previously existing suitability obligations. Investments such as our common stock may be subject to greater scrutiny under
Regulation Best Interest than under the prior suitability obligation. Regulation Best Interest became effective on
June 30, 2020, and because no administrative or case law exists regarding the interpretation of its requirements, the
full scope of its impact to sales of our shares remains uncertain and subject to evolving regulatory guidance.