The FINRA Annual Conference once again proved to be an exciting opportunity to reconnect with the compliance community and InvestorCOM clients. This year’s event was marked by in-depth discussions on the evolving regulatory landscape, with a particular focus on Regulation Best Interest (Reg BI) and the Department of Labor (DOL) Fiduciary Rules. The consensus among experts was clear: as these regulations continue to evolve, technology will be the linchpin in ensuring compliance. 

Key Takeaways from the Conference 

The panelists, including Jim Wrona, Ted Luecke, Jen Szaro, Evan Charkes, and Mike Manly from FINRA, highlighted several critical areas of focus for Reg BI exams. One primary emphasis was on account recommendations, which must be in the best interest of investors. The regulators will scrutinize IRA rollovers, differentiating between mere educational information and actionable recommendations. 

Ted Luecke urged firms to view account recommendations as an assessment of how account features align with the client’s needs and desires. This involves considering factors like the investment profile, strategy, decision-making authority, monitoring needs, and costs. On the other hand, Evan Charkes emphasized the importance of documenting the rationale for rollover decisions using tools like cost comparisons and client playback letters to ensure transparency and consistency. 

Addressing Reasonably Available Alternatives (RAA) 

A significant portion of the discussion revolved around Reasonably Available Alternatives (RAA). Firms are expected to analyze the costs associated with RAA, maintain consistency across their workforce, and provide comprehensive training for representatives. This involves developing a robust framework that includes due diligence of the products and clear policies and procedures. It’s crucial that firms can demonstrate their process and how they supervise adherence to it. 

The complexity of products was another area of concern. Ensuring due diligence around complex products is essential, and the individuals conducting this due diligence must be qualified and experienced. Adequate training and supervision are vital to ensure that representatives understand the costs, risks, and characteristics of these products. If clients’ objectives can be met without resorting to complex, risky products, firms are expected to pursue these safer alternatives. 

Form CRS and Accurate Reporting 

Another critical area discussed was Form CRS and the accurate reporting of disciplinary issues. Many firms have either misconstrued or provided inaccurate information in their CRS forms. Peggy Ho pointed out that the initial focus of examinations was on Form CRS, without much attention to costs and RAA. Moving forward, there is a strong emphasis on training, education, and the provision of tools to ensure that advisors understand their responsibilities and document their actions appropriately. 

The Role of Technology 

The consensus at the conference was that technology will play a crucial role in navigating these regulatory requirements. For firms like Commonwealth, significant investments have been made in training and providing the necessary tools for advisors. This includes ensuring that teams are well-versed in the documentation process and have access to a wealth of collateral to support their work. 

Wendy Lanton highlighted the challenges faced by smaller firms, which often lack the technological resources of their larger counterparts. Many of their processes are manual and time-consuming, underscoring the importance of training and diligent supervision. The overarching theme was clear: regardless of firm size, training, and accurate documentation are paramount. 

Conclusion 

The FINRA Annual Conference underscored the complexities and challenges of adhering to Reg BI and DOL Fiduciary Rules. As these regulations continue to evolve, the adoption of technology will be crucial in ensuring compliance. Firms must invest in training, develop robust policies and procedures, and leverage technological solutions to meet regulatory requirements effectively. Reconnecting with the compliance community and sharing insights at the conference was invaluable, reaffirming our collective commitment to protecting investors and maintaining the integrity of the financial markets.