With the coronavirus disrupting the normal operations of the broker-dealer industry, there is cause to wonder if firms could get a reprieve from the June 30 compliance deadline set for the SEC’s Regulation Best Interest.
After all, the SEC and Finra, which will have exam oversight for Reg BI, previously have provided broker-dealers and RIAs some relief, including flexibility in meeting regulatory filing deadlines.
Carlo di Florio, global chief services officer at ACA Compliance, says the SEC and Finra are likely “monitoring very closely” the impact work-from-home arrangements may have on broker-dealer firms’ ability to comply with Reg BI.
An ex-director of the SEC’s Office of Compliance Inspections and Examinations unit and a former risk and strategy officer at Finra, di Florio believes firms would need to speak up if they need an extension. Specifically, the SEC and Finra would need to know if particular issues, like technology, are impeding compliance preparations.
“The SEC and Finra will consider whether some very targeted relief is appropriate, or whether some broader extension is appropriate,” he says.
Since the SEC and Finra have been proactive with Reg BI guidance, the absence of guidance now amid the coronavirus pandemic suggests they expect the firms’ business continuity plans to account for any disruptions, according to di Florio.
Stephen Murphy, managing director for broker-dealer consulting at Portland, Maine-headquartered consulting firm Foreside Financial, believes the coronavirus pandemic could impact some firms’ ability to implement Reg BI. But he hasn’t seen an “overwhelming wave” of firms seeking an extension of the deadline.
Murphy believes compliance departments would be able to “tick the boxes” and meet the rule requirements, but would do better if they had more time. And the quality of compliance is something the SEC would likely assess before making a decision.
Going by the SEC’s past actions, Murphy says the regulator “would rather delay an implementation to get it right rather than just dogmatically adhere to a deadline.”
Murphy believes the SEC and Finra “will take in the information that they’re privy to, give a thoughtful analysis, and come up with a decision that they can defend.”
Meanwhile, Kestra Financial is proceeding with the June 30 compliance deadline in mind.
“We are working under the assumption that deadlines are not moving. With that, some sort of a delay may be helpful for the broader industry considering there is significant market disruption,” says James Poer, the firm’s president and CEO.
The SEC and Finra declined to comment for this story.
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