Plan Sponsors and the New SEC Rule on Best Interest

The SEC’s new standard of conduct rules have implications for Plan Sponsors under certain situations. It’s important for Plan Sponsors to understand when compliance is required.

“On June 5, 2019, the US Securities and Exchange Commission (SEC) adopted its Regulation Best Interest (Rule 15l-1 under the Securities Exchange Act of 1934), a rule that requires a broker-dealer registered with the SEC to act in the best interest of its retail customers when making a recommendation of any securities transaction or investment strategy involving securities.”

In most situations a company sponsored qualified plan will not be considered a retail customer.  Therefore, Plan Sponsors will not have to request and the Plan’s financial advisor will not have to provide the documents required by the new regulation.

However, as outlined in the report from Eversheds Sutherland available below, advisors and Plan Sponsors need to be aware of the circumstances when the interactions with the Plan fall within the scope of Regulation BI and require both compliance with Regulation BI and, in connection with the formation of the retail investor relationship, delivery of Form CRS.