Regulation Best Interest (Reg BI)

Regulation Best Interest (Reg BI) is the SEC rule, in force since June 30, 2020, that requires a broker-dealer to act in a retail customer's best interest when recommending a security or investment strategy, without putting its own interests first.

Reg BI has four parts. Disclosure: tell the customer about fees, the scope of the relationship and conflicts, before or at the time of a recommendation. Care: use reasonable diligence, care and skill in making the recommendation. Conflict of interest: keep written policies to identify and address conflicts. Compliance: keep written policies to make sure the firm follows the rule.

It applies when a broker makes a recommendation to a retail customer, meaning a person investing mainly for personal, family or household purposes. The duty attaches to each recommendation, while an investment adviser's fiduciary duty covers the whole advisory relationship.

Reg BI doesn't ban commissions. Most conflicts must be disclosed and managed, but sales contests, quotas, bonuses and non-cash rewards based on selling specific securities within a limited period must be eliminated. It is a different standard from the fiduciary duty investment advisers owe under the Investment Advisers Act.

Looking for an advisor? Browse fee-only advisors by location or specialty.