The MSRB proposed several rule changes to align its rules with the SEC's Regulation Best Interest ("Reg BI").
The MSRB-proposed rule changes would revise:
- Rule G-19 ("Suitability of Recommendations and Transactions") to limit its applicability (to those matters when Reg BI is not applicable);
- Rule G-48 ("Transactions with Sophisticated Municipal Market Professionals") to clarify that relief from conducting a customer-specific suitability analysis when making a recommendation to a Sophisticated Municipal Market Professional (or "SMMP") is only available for recommendations subject to MSRB Rule G-19; and
- Rule G-20 ("Gifts, Gratuities, Non-Cash Compensations and Expenses of Issuance") to align permissible non-cash compensation with related requirements under Reg BI.
Additionally, the proposal would mandate all broker-dealers to maintain books and records consistent with Reg BI and related Form CRS requirements.
The MSRB's proposed rule changes are consistent with those recently proposed by FINRA. See FINRA Proposes Rule Changes to Conform to Reg BI.
The effective dates for the proposed rule changes would be the same as those of Reg BI.
Commentary
The MSRB proposal aligning its rules with Regulation Best Interest is analogous to recently proposed FINRA rules. In both cases, the SEC's takeover of much of the regulation on suitability substantially diminishes the role of the self-regulatory organizations as conduct arbiters.
Originally published 1 May 2020
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