Thought Leadership Report: Enforcement and Litigation Risks
The US Securities and Exchange Commission’s (SEC) comprehensive rulemaking package involving the standards of conduct applicable to broker-dealers, investment advisors and their associated persons pose new enforcement and litigation risks. Specifically, under Regulation Best Interest (Reg BI), broker-dealers will be subject to an enhanced standard of conduct. In addition, the SEC’s Interpretation Regarding Standard of Conduct for Investment Advisors and Interpretation Regarding the Solely Incidental Prong of the Broker-Dealer Exclusion from the Definition of Investment Advisor provide guidance for complying with the Investment Advisers Act of 1940 (Advisers Act) and address various requirements and prohibitions under this statute. Finally, the Form CRS Relationship Summary imposes new disclosure obligations on broker dealers and investment advisors.
This article provides a high-level overview of how the SEC enforces the federal securities laws and the rules thereunder, and the enforcement and litigation risks presented by the rulemaking package.