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The North American Securities Administrators Association (NASAA) has released the initial results of a benchmarking initiative designed to assess the effectiveness of the U.S. Securities and Exchange Commission’s (SEC) new best interest rules — known as Regulation Best Interest, or Reg BI.

Before the best interest rules took effect in July, brokerage firms tended to operate riskier businesses than fiduciary advisers. Regulators are hoping to see that change now.

To assess the state of pre-Reg BI industry practices, regulators examined more than 2,000 firms in the first quarter of 2020.

“The examinations found notable differences between broker-dealers operating under a suitability standard and investment advisers operating under fiduciary duties,” NASAA said in a release.

Among other things, the regulators found that “investment advisers generally took more conservative investment approaches overall, avoiding higher cost, riskier, and complex products.”

These kinds of firms also had more robust due diligence, disclosure and conflict management practices, NASAA said.

The regulators also found that most firms don’t sell complex, risky products such as private offerings, variable annuities and leveraged or inverse ETFs. Among firms that do offer these risky products, broker-dealers were much more likely to recommend them.

Regulators will conduct follow-up exams next year to assess how things have changed following the implementation of Reg BI.

“Both broker-dealers and investment advisers have a significant opportunity to improve under Regulation Best Interest in order to better serve the interests of their retail clients,” said Andrea Seidt, chair of NASAA’s Regulation Best Interest Implementation Committee and Ohio Securities Commissioner.

“We are closely watching the industry’s early implementation of the SEC’s Regulation Best Interest with an eye toward determining whether the rule benefits investors as intended,” Seidt added.