rules and regulations

Firms must demonstrate that they’ve made “good faith” efforts to adopt the U.S. Securities and Exchange Commission’s (SEC) new retail investor conduct and disclosure standards, the regulator says.

The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued two risk alerts that set out its expectations when reviewing firms’ compliance with new best interest conduct standards and disclosure requirements. The new provisions are due to take effect on June 30.

The alerts, which were published by the SEC’s compliance division, are intended to provide broker-dealers and investment advisers with advance information about the SEC’s initial examinations for compliance with the new measures that aim to improve the quality and transparency of retail investors’ relationships with industry firms.

These initial examinations will focus on assessing whether firms have “made a good faith effort” to adhere to the new requirements.

“Based on conversations we have had with the industry, we know firms have made substantial progress in implementing these new rules,” said Pete Driscoll, director of OCIE.

“We understand that this implementation will be an iterative process, and our focus will be on firms continuing good faith and reasonable efforts, including taking into account firm-specific effects from disruptions caused by Covid-19,” he said.

Additionally, the SEC said that it’s coordinating with industry self-regulatory organization FINRA to harmonize its compliance exam efforts.