Applicable Standard of Care

What this video covers

• Why the standard of care escalates as the relationship becomes more trust-based, from suitability to best interest to fiduciary duty to prudent investor
• How broker-dealers split between suitability for institutional customers and Regulation Best Interest (Reg BI) for retail customers, including the June 30, 2020 effective date
• The four component obligations of Reg BI: disclosure (including Form CRS), care, conflict of interest, and compliance
• Why Reg BI explicitly requires cost consideration while basic Financial Industry Regulatory Authority (FINRA) suitability does not
• When suitability and best interest standards attach to recommendations versus when an unsolicited trade triggers no standard at all
• Why Reg BI is not a fiduciary standard: it applies only at the point of recommendation, not as an ongoing duty of loyalty
• The five fundamental rules of the Uniform Prudent Investor Act (UPIA): overall portfolio standard, diversification, risk-return balance, permitted delegation, and cost management