It is therefore important that firms and their financial professionals review their business models and relationships with investors to address conflicts of interest specific to them. The staff believes that identifying and addressing conflicts should not be merely a “check-the-box” exercise, but a robust, ongoing process that is tailored to each conflict. Under Reg BI and the IA fiduciary standard, a conflict of interest is an interest that might incline a broker-dealer or investment adviser -consciously or unconsciously -to make a recommendation or render advice that is not disinterested. Importantly, both Regulation Best Interest (“Reg BI”) for broker-dealers and the fiduciary standard for investment advisers under the Investment Advisers Act of 1940 (the “IA fiduciary standard”) are drawn from key fiduciary principles that include an obligation to act in a retail investor’s best interest and not to place their own interests ahead of the investor’s interest. Background: The following is a staff bulletin styled as questions and answers reiterating the standards of conduct for broker-dealers and investment advisers in identifying and addressing conflicts of interest.
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