On June 5, 2019, the Securities and Exchange Commission (SEC) adopted Regulation Best Interest (Reg BI) and Form CRS, as well as amendments to its forms and rules, under the Securities Exchange Act of 1934,
Any brokerage firm or registered investment advisor making an investment recommendation to you must be acting in your best interest at the time the recommendation is made and must not place its own financial or other interests ahead of the retail customer. In addition, the SEC requires broker dealers and investment advisors to provide you with their Form CRS. Understanding Form CRS can help you make more informed decisions about choosing or continuing to work with a broker or advisor. We want you to know that NexTrend Securities, Inc. has been a SEC and FINRA registered broker dealer since 1997, we strive to put the needs of our clients and prospective clients first. Please review our Form CRS and Reg BI Disclosure.
FAQs - Form CRS and Regulation Best Interests
Reg BI is a rule issued by the SEC that requires broker dealers and their associated persons to act in the best interest of the retail customer at the time an investment recommendation is made, without placing the financial or other interest of the broker-dealer ahead of the interests of the retail customer. The rule also requires broker dealers to identify potential conflicts of interest and financial incentives the broker dealer may have in making recommendations to their customers.
This higher standard of conduct applies when recommending:
· Securities transactions; or
· Investment strategies involving securities, including account types; or
· Opening IRA or brokerage account; or
· Rolling over assets from one account type to another
Reg BI was initiated by the SEC to establish a new and higher conduct standard for broker dealers when they are making investment recommendations to their retail customers.
Yes, Reg BI will require all brokerage firms that provide recommendations to retail investors to act in the investors’ best interest when making the recommendations. In addition, both brokerage firms and investment advisors are required to provide a new disclosure to retail investors, the Form CRS (Customer Relationship Summary).
Reg BI applies when a broker dealer is making a recommendation as to any type of retail brokerage account for retail investors as well as to investment advisory accounts.
Yes. Reg BI applies only to broker dealers. Investment advisors are subject to their own requirements under the Investment Advisers Act of 1940. But the Form CRS requirements apply to both brokers and investment advisors.
Reg BI applies to investment recommendations made to new customers, prospective customers, and existing customers.
As defined in Regulation Best Interest, a “retail customer” is a natural person, or the legal representative of such natural person, who:
· receives a recommendation of any securities transaction or investment strategy involving securities from a broker, dealer or a natural person who is an associated person of a broker or dealer; and
· uses the recommendation primarily for personal, family, or household purposes.
The Financial Industry Regulatory Authority (FINRA), will examine firms and enforce compliance with Reg BI based upon the SEC guidance. FINRA works with SEC to ensure consistency in examining broker dealers and their associated persons for compliance with Reg BI.
Form CRS requires broker dealers and registered investment advisors to deliver, to retail clients and prospects a relationship summary disclosing certain information about the firm(s). The broker dealer Form CRS can be no longer than 2 pages. There are five (5) specific sections on Form CRS which include:
· Introduction: clearly indicates that brokerage (broker dealer) and investment advisory services and fees differ; and that it is important for a retail investor to understand the difference between a broker dealer and investments advisor and their services and fees.
· Relationship and Services – Describes the relationship and services offered, including a discussion of whether the firm provides account monitoring services, potential investment authority, any limitations on offerings and account minimums.
· Fees, Costs, Conflicts, Standard of Conduct – Firms must provide detailed descriptions about the fees and costs that their retail investors will pay, their conflicts of interest, and applicable standard of conduct in making investment recommendations to retail investors.
· Disciplinary History – The firm must provide disclosures of disciplinary information regarding the firm and its financial professionals.
· Where to find additional information – The firm must provide instructions regarding where a retail investor can find more information about the firm and the services it offers.
If you are working with a broker dealer, you must receive Form CRS before or at the earliest of:
a recommendation of an account type, a securities transaction, or an investment strategy involving securities; the placing an order for you; or the opening of a brokerage account for you. If you are working with an investment advisor, you must receive Form CRS before or at the time you and your advisor enter into an investment advisory relationship.
To educate you on our offerings, services, fees, and costs and to provide you with information you need to help ask questions, and initiate a conversation with us and our representatives. The disclosure is intended to be in simple English, be easy to understand, and help facilitate a conversation between you and our financial representative.
NexTrend Securities strives to put customer needs first. We believe these new rules will help strengthen the relationship we have with our clients, by facilitating more open and straightforward dialogue between you, your registered representative and our Firm.
This website page is designed to provide you with information about your relationship with NexTrend Securities under Reg BI and Form CRS. You will see Form CRS, Reg BI disclosures and additional details relating to the new regulations. Please see Investor.gov/CRS and Regulation Best Interest for additional information.