Regulation Best Interest
The SEC standard requiring broker-dealers to act in a retail customer's best interest when recommending securities or account types, built on four obligations: disclosure, care, conflict-of-interest, and compliance — plus delivery of the Form CRS relationship summary.
The exam loves to test the trigger: Reg BI attaches only to a recommendation to a retail customer, never to self-directed or unsolicited orders, and never to institutional accounts. Watch for the classic “without placing the firm’s interest ahead of the customer’s” phrasing, and know that a recommendation to roll over a 401(k) or select an account type counts. A favorite trap pairs the four obligations — disclosure, care, conflict-of-interest, compliance — and asks which one absorbs suitability; the answer is always Care.
Distinguish the related ideas. Churning is the quantitative limb of the care obligation gone wrong (excessive trading plus broker control), so a churning fact pattern can be reframed as a Care violation. Don’t confuse Reg BI with the adviser fiduciary standard or with CIP/account-opening, which is identity-driven and not recommendation-based. A memory hook: “BI = Best Interest, Brokers Included” — it lifted broker-dealers above the old suitability bar (FINRA Rule 2111).
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