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Few regulations have reshaped how financial professionals serve their clients quite like Reg BI. Adopted by the SEC in 2019 and fully effective since June 2020, it raised the bar well beyond the old “suitability” standard that had guided broker-dealers for decades.
Today, in 2026, regulators are watching more closely than ever. In fact, FINRA examinations are uncovering compliance gaps, enforcement actions are increasing, and retail investors are becoming more informed about the protections they deserve.
This guide breaks down the four core obligations under Regulation Best Interest, walks through practical compliance steps, highlights what FINRA is currently scrutinizing, and explains why getting this right is more than just avoiding penalties.
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What Is Reg BI and Why Does It Matter?
Regulation Best Interest — commonly called Reg BI — is an SEC rule under Exchange Act Rule 15l-1. It applies to broker-dealers and their associated persons whenever they make recommendations to retail customers involving securities transactions, investment strategies, or account types.
Before Reg BI, broker-dealers only needed to recommend “suitable” products. Unfortunately, that standard left significant room for recommendations driven by commissions or incentives rather than client outcomes. Reg BI closed that gap by requiring recommendations to be genuinely in the client’s best interest.
Importantly, Reg BI does not impose a full fiduciary duty — that standard still applies separately to registered investment advisers under the Investment Advisers Act. Nevertheless, it significantly narrows the gap between broker-dealer conduct and fiduciary-level accountability.
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The Four Core Obligations Every Broker-Dealer Must Know
Reg BI organizes compliance around four distinct obligations. Essentially, each one targets a specific area where client interests could be compromised without proper safeguards in place.
1. The Disclosure Obligation
Broker-dealers must provide retail customers with a written disclosure before or at the time of any recommendation. This document must cover the scope and terms of the relationship, all material conflicts of interest, and whether the firm is acting as a broker-dealer or investment adviser.
To be clear, this obligation is tightly connected to Form CRS — the Customer Relationship Summary. According to FINRA’s guidance on Regulation Best Interest, Form CRS must be delivered to retail investors at the beginning of the relationship and updated whenever material changes occur.
2. The Care Obligation
The care obligation requires firms to exercise reasonable diligence, care, and skill before making any recommendation. This means actually understanding the product being recommended and how it fits each specific client.
Factors that must be considered include the client’s financial situation, investment objectives, risk tolerance, and existing portfolio. Beyond that, firms must also evaluate reasonably available alternatives and assess whether costs are justified given the recommendation.
3. The Conflict of Interest Obligation
This obligation requires firms to identify, disclose, and mitigate — or fully eliminate — conflicts of interest that could influence recommendations. Common conflicts include sales contests tied to specific products, revenue-sharing arrangements, and differential compensation structures.
Firms must have written policies and procedures specifically designed to manage these conflicts. However, simply disclosing a conflict is not always enough — mitigation steps are expected, particularly when a conflict could meaningfully affect the advice given.
4. The Compliance Obligation
The fourth obligation ties everything together. Firms must establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with all three other obligations.
Ultimately, senior management accountability is critical here. FINRA examinations frequently focus on whether compliance frameworks are genuinely operational — not just documented on paper — and whether leadership is actively supporting them.
Form CRS: More Than Just a Formality
Form CRS is the primary disclosure tool under Reg BI, and regulators treat it seriously. It must clearly explain the types of services offered, the fees clients will pay, existing conflicts of interest, and any legal or disciplinary history of the firm or advisor.
According to FINRA’s 2025 Annual Regulatory Oversight Report, Form CRS deficiencies remain among the top examination findings. Specifically, the most frequently cited issues include:
- Failing to deliver Form CRS in a timely manner
- Including inaccurate or misleading content in the form
- Not updating the form when material changes occur
- Failing to post Form CRS on the firm’s public website
These are not minor oversights. In reality, each one signals a breakdown in the disclosure process that directly affects whether clients can make informed decisions about their financial relationships.
What FINRA Is Watching in 2025–2026
Regulators have moved well past the initial implementation phase of Reg BI. As a result, examinations today are more targeted, and FINRA is zeroing in on specific compliance failures rather than general readiness assessments.
The table below illustrates the key areas FINRA is prioritizing during examinations, alongside the most common deficiencies being cited:
| Examination Focus Area | Common Deficiency Found |
|---|---|
| Form CRS Delivery | Late or missing delivery to retail clients |
| Conflict of Interest Policies | Undocumented or unmitigated conflicts |
| Care Obligation Documentation | No evidence of alternative product consideration |
| Compliance Program Structure | Policies exist but are not actively enforced |
| Senior Management Oversight | Lack of accountability at the leadership level |
Beyond examinations, enforcement trends show that regulators are pursuing cases where conflicts of interest were inadequately disclosed or where cost considerations were ignored entirely in favor of higher-commission products.
Practical Compliance Steps for Broker-Dealers in 2026
Meeting Reg BI obligations is not a one-time project — it requires an ongoing, structured approach embedded into daily operations. The following steps reflect what compliance-forward firms are doing right now.
Build and Maintain a Robust Conflicts Inventory
Start by mapping every potential source of conflict within your firm’s compensation structure, product shelf, and third-party relationships. Document each conflict, assess its severity, and assign a mitigation or disclosure strategy to each one.
This inventory should be reviewed at least annually and updated whenever new products, partnerships, or compensation structures are introduced.
As highlighted in KPMG’s analysis of SEC Regulation Best Interest, firms that treat conflict management as a living process — rather than a compliance checkbox — tend to perform significantly better during examinations.
Strengthen Your Recommendation Documentation
Every recommendation made to a retail customer should be supported by documented reasoning. Record the rationale for each suggestion, including what alternatives were considered and why the chosen product aligns with the client’s specific profile.
In the long run, this documentation protects both the client and the firm. It demonstrates that the care obligation was genuinely satisfied — not assumed.
Keep Form CRS Current and Accessible
Assign a specific team member or compliance officer to own Form CRS updates. Establish a review schedule tied to any material change in services, fees, or disciplinary history. Verify that the form is posted publicly and delivered properly at the start of each new client relationship.
Invest in Compliance Training
Training should go beyond annual check-the-box sessions. Front-line advisors and associated persons need to understand not just the rules, but the reasoning behind them. Role-specific scenarios, regular refreshers, and leadership-modeled accountability all reinforce a genuine compliance culture.
Why Compliance Builds a Competitive Advantage
There is a tendency to view regulatory compliance as a cost center — a burden that consumes resources without generating revenue. But that framing misses a significant opportunity.
Retail investors today are more educated about their rights and more willing to move their assets when they feel underserved. Consequently, firms that visibly operate in their clients’ best interests — backed by documented processes and transparent disclosures — build the kind of trust that translates directly into retention and referrals.
Client trust is a business asset. Reg BI, when embraced rather than merely tolerated, becomes a framework for demonstrating that asset publicly and consistently.
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Looking Ahead: Regulatory Developments to Monitor
The regulatory environment surrounding Reg BI continues to evolve. In 2026, firms should monitor developments at both the SEC and FINRA levels, as interpretive guidance and enforcement priorities continue to shift.
Staying current on regulatory updates — including any amendments to Form CRS requirements or new examination priorities — requires dedicated monitoring. Indeed, building that into your compliance calendar now prevents gaps from forming later.
Keeping Clients First, Every Step of the Way
Reg BI introduced a fundamentally higher standard of conduct for broker-dealers — one built around genuine client outcomes rather than minimum thresholds.
The four core obligations — disclosure, care, conflict management, and compliance infrastructure — work together to create a framework that protects retail investors at every stage of the advisory relationship.
On top of that, FINRA’s 2025 oversight findings make clear that surface-level compliance is no longer acceptable. Firms must demonstrate that their policies are operational, their conflicts are managed, and their disclosures are accurate and timely.
The firms that invest in getting this right are not just avoiding regulatory risk — they are building something more durable: a reputation for putting clients first, consistently and verifiably.
Watch this short video to learn how to comply with SEC Regulation Best Interest (Reg BI) and protect your clients.
Frequently Asked Questions
What are some consequences of failing to comply with Reg BI obligations?
How can firms effectively manage conflicts of interest under Reg BI?
What role does ongoing training play in Reg BI compliance?
Why is Form CRS important for client relationships?
How can firms demonstrate their commitment to client interests?
