Requires registered person, when recommending a securities transaction or investment strategy, to act in the retail customer’s best interest and not place his or her own interests ahead of the retail customer’s interests.
This is satisfied through documentation of:
- Disclosure Obligation (through form CRS) – the capacity the rep is acting in, the fees and costs that apply, the type and scope of services provided
Care Obligation –
- Understand the potential risks, rewards and cost associated with the recommendation and have a reasonable basis to believe the recommendation could be in the best interest of at least some customers.
- Have a reasonable basis to believe the recommendation is in the best interest of a particular retail customer based on that customer’s investment profile, and the potential risks, rewards and costs associated with the recommendation and does not place the financial or other interest of the rep or broker-dealer ahead of that of the customer.
- Have a reasonable basis to believe that a series of recommended transactions is not excessive and is in the retail customer’s best interest when taken together in light of the retail customer’s investment profile and does not place the financial or other interest of the broker, dealer, or such associated natural person making the series of recommendations ahead of the interest of the retail customer
The Leaders Group has to satisfy
- Conflict of Interest Obligation – must establish, maintain and enforce written policies and procedures reasonable designed to:
- Identify and disclose or eliminate all conflicts of interest associated with recommendations
- Identify and mitigate any conflicts of interest associated with recommendations that create an incentive for associated persons to place the firm’s interests or their interests ahead of the customer’s
- Identify and disclose any material limitations placed on securities or investment strategies involving securities that may be recommended and associated conflicts of interest
- Prevent such limitations and associated conflicts of interest from causing the BD or rep from making recommendations that place its/their interest ahead of the customer’s
- Identify and eliminate any sales contests, sales quotas, bonuses, and non-cash compensation that are based on specific products or types of products within a limited time period.
- Compliance Obligation – must establish, maintain and enforce written policies and procedures reasonable designed to achieve compliance with Regulation Best Interest
Form CRS Relationship Summary must be delivered to customers at the earliest of:
- A recommendation
- Placing an order
- Opening of a brokerage account
- Form CRS must be posted on the firm website and sent to existing customers within 60 days of an amendment
The form must be filed with the CRD no later than June 30, 2020. A broker-dealer must record the date the form is provided and those records must be kept for 6 years.