# Reg BI and the fiduciary duty: two standards of conduct, side by side

URL: https://www.financialadvsr.com/guides/reg-bi-vs-fiduciary-duty
Updated: 2026-10-10
Publisher: Financial ADVSR (https://www.financialadvsr.com)

Regulation Best Interest is the SEC's standard of conduct for broker-dealers: since June 30, 2020, a broker must act in a retail customer's best interest at the time it makes a recommendation, satisfied through disclosure, care, conflict-of-interest and compliance obligations. The fiduciary duty applies to investment advisers under the Investment Advisers Act; the SEC described it in 2019 as a duty of care and a duty of loyalty that covers the whole advisory relationship. Both standards say the professional may not put its own interests first, but Reg BI attaches to individual recommendations while the adviser's duty is generally ongoing.

Key points:
- The SEC adopted Regulation Best Interest, Form CRS and an interpretation of the adviser fiduciary duty as one package on June 5, 2019, with a compliance date of June 30, 2020.
- Reg BI's general best-interest obligation is met by satisfying four component obligations: disclosure, care, conflict of interest and compliance.
- The SEC's 2019 interpretation describes the Advisers Act fiduciary duty as a duty of care plus a duty of loyalty, and says it restates existing law rather than creating new obligations.
- Form CRS is limited to two pages for a standalone broker-dealer or adviser and four pages for a dual registrant.
- The SEC filed its first Reg BI enforcement case, against Western International Securities and five brokers, in June 2022; FINRA's first Reg BI-related action followed in October 2022.
- Eversheds Sutherland counted 47 FINRA Reg BI actions in 2025, including 23 against firms that drew about $4.2 million in fines.
- The DOL's 2024 Retirement Security Rule was vacated by two Texas federal courts in March 2026, and the department reinstated the 1975 five-part test for investment advice fiduciaries.

## What is the fiduciary duty for investment advisers?

Investment advisers owe their clients a fiduciary duty under the Investment Advisers Act of 1940. The duty is not spelled out in a single rule; it grew out of the statute's antifraud provisions and court decisions. On June 5, 2019, the SEC issued a formal interpretation of the standard of conduct for investment advisers alongside Regulation Best Interest.

In that interpretation, the SEC describes the fiduciary duty as having two parts. The duty of care requires an adviser to give advice that is in the client's best interest, including advice suited to the client's objectives, and to seek best execution of client trades. The duty of loyalty requires an adviser not to place its own interests ahead of the client's, and to either eliminate conflicts of interest or make full and fair disclosure of them so the client can give informed consent. According to law firm summaries of the release, the SEC said the best-interest principle runs through both duties.

The SEC said the interpretation highlights existing principles and does not create new obligations, according to a Ropes & Gray summary of the release. It applies to any firm or person that meets the definition of investment adviser under the Advisers Act, whether registered with the SEC, registered with a state or exempt from registration.

## What does Regulation Best Interest require of brokers?

Regulation Best Interest (Exchange Act Rule 15l-1) applies to broker-dealers and their associated persons when they recommend a securities transaction or an investment strategy to a retail customer. It requires the broker to act in the customer's best interest at the time of the recommendation, without placing the broker's financial or other interest ahead of the customer's.

The general obligation is satisfied through four component obligations. Under the disclosure obligation, the broker must disclose in writing, before or at the time of the recommendation, the material facts about the relationship, including its capacity, fees and conflicts. The care obligation requires reasonable diligence, care and skill in making the recommendation. The conflict of interest obligation requires written policies and procedures to identify and address conflicts, and the compliance obligation requires written policies and procedures reasonably designed to achieve compliance with the rule as a whole. According to Willkie Farr & Gallagher, the compliance obligation should include controls, remediation, training and periodic testing.

The SEC set June 30, 2020, as the compliance date for both Reg BI and Form CRS, according to the SEC's June 2019 press release announcing the package.

## How do Reg BI and the fiduciary duty actually differ?

The biggest practical difference is timing. Reg BI's obligations attach at the moment a broker makes a recommendation, and the rule does not impose a duty to monitor an account afterward unless the broker agrees to provide monitoring. An adviser's fiduciary duty, by contrast, applies to the entire advisory relationship. The Investment Adviser Association has told the SEC that the duty cannot be turned on and off or waived, even when the relationship is limited in scope.

The two standards also handle conflicts differently. Reg BI does not require brokers to deliver conflict-free recommendations, but it does require them to disclose material conflicts and to maintain written policies and procedures to identify and address them. An adviser's duty of loyalty is principles-based: conflicts must be eliminated or fully and fairly disclosed so that the client can consent.

There are also differences in naming. In adopting Reg BI, the SEC said it presumes that a broker-dealer that is not also a registered investment adviser violates the disclosure obligation if it uses the terms adviser or advisor in its name or title, according to InvestmentNews. A 2020 SEC staff FAQ said a broker-dealer that is also a state-registered adviser may use those terms.

This is general information about federal rules, not legal advice. Firms should consult the rule text and counsel for how the standards apply to their business.

## What is Form CRS?

Form CRS, the client relationship summary, is a short plain-English disclosure that SEC-registered broker-dealers and investment advisers must give retail investors. It was adopted in the same 2019 package as Reg BI and carries the same June 30, 2020, compliance date.

The form must describe the firm's relationships and services, its fees and costs, its conflicts of interest and standard of conduct, whether the firm or its professionals have reportable legal or disciplinary history, and how to get more information. It includes prescribed conversation starters, questions a retail investor can ask the professional, and points readers to the SEC's investor education site at Investor.gov/CRS, according to the SEC's Form CRS adopting release.

A standalone broker-dealer or adviser's relationship summary is limited to two pages in paper or electronic format, while a dual registrant's combined summary may run four pages. Advisers generally deliver it before or at the time they enter into an advisory contract; broker-dealers deliver it before or at the earliest of a recommendation, an order or the opening of an account. Advisers file it as Part 3 of Form ADV, and broker-dealers file it through FINRA's CRD system.

## How do dual registrants handle both standards?

A dual registrant is a firm registered both as a broker-dealer and as an investment adviser that offers both kinds of services to retail investors. Such a firm, and representatives licensed on both sides, owe Reg BI duties when acting as a broker and the fiduciary duty when acting as an adviser, so the capacity in which the professional is acting matters for each recommendation.

For Form CRS, the SEC encourages dual registrants to prepare a single combined summary of up to four pages, though they may provide separate brokerage and advisory summaries if both are delivered at the same time and with equal prominence, according to an Insured Retirement Institute overview. Firms that offer one type of service only to institutional clients are not treated as dual registrants for Form CRS purposes.

Regulators have focused on how dual registrants choose account types for clients. The SEC Division of Examinations' fiscal 2026 priorities, released in November 2025, said examiners would keep heightened scrutiny on dual registrants and advisers with affiliated broker-dealers, including whether recommending an advisory account rather than a brokerage account is in the client's best interest, according to a summary by Sidley Austin. The priorities also listed account and rollover recommendations, complex products and Form CRS accuracy.

## How has Reg BI been enforced?

The SEC brought its first Reg BI enforcement case on June 15, 2022, suing Western International Securities and five of its registered representatives in federal court in California. The SEC alleged they recommended about $13.3 million of unrated GWG Holdings L Bonds to retail customers between July 2020 and April 2021 without a reasonable basis to believe the bonds were in those customers' best interest, and that the firm's written procedures merely restated Reg BI rather than giving tailored guidance. In July 2024, the SEC announced proposed settlements under which the firm agreed to a $160,000 civil penalty and disgorgement of $34,468 plus interest, and each representative agreed to a $12,500 penalty, subject to court approval, according to an SEC litigation release.

FINRA's first Reg BI-related disciplinary action came in October 2022 against a former Network 1 Financial Securities broker, Charles Malico, over excessive trading in one customer's account from July 2020 to November 2021. He was fined $5,000 and suspended for six months, and settled without admitting or denying the findings, according to ThinkAdvisor.

Reg BI has since become a steady part of FINRA's caseload. Eversheds Sutherland's 2025 sanctions study counted 47 FINRA Reg BI actions in 2025: 23 against firms, with fines of about $4.2 million, and 24 against individuals, with fines of about $140,000 in total. Reg BI ranked fifth among enforcement areas by fines, according to Quest CE's coverage of the study.

## Where does the DOL fiduciary rule stand for retirement accounts?

Retirement accounts covered by ERISA and the Internal Revenue Code add a separate layer: the Department of Labor decides when someone giving investment advice to a plan or IRA is a fiduciary. For decades the test has been a five-part regulation from 1975, under which advice is fiduciary only if all five conditions are met, including that it is given on a regular basis and serves as a primary basis for investment decisions.

The DOL has tried to broaden that definition three times. A package of rules issued in April 2016, including the Best Interest Contract Exemption, was vacated in a 2-1 decision by the U.S. Court of Appeals for the Fifth Circuit on March 15, 2018. In December 2020 the DOL adopted Prohibited Transaction Exemption 2020-02, an exemption for investment advice fiduciaries. In April 2024 the DOL finalized the Retirement Security Rule, with amendments to PTE 2020-02 and PTE 84-24, but federal courts in the Eastern and Northern Districts of Texas stayed it in July 2024 before it took effect.

After the DOL dropped its appeals to the Fifth Circuit in late 2025, final judgments vacating the 2024 rule and its exemption amendments were entered on March 12, 2026, in the Eastern District of Texas and March 17, 2026, in the Northern District of Texas, according to a DOL notice in the Federal Register. The department then reinstated the 1975 five-part test and republished PTE 2020-02 as originally issued in 2020, without a comment period, according to Arnold & Porter. As of 2026, that leaves the 1975 test as the governing definition for retirement accounts.

## Questions

**Is Regulation Best Interest a fiduciary standard?** No. The SEC adopted Reg BI as a separate standard for broker-dealers and did not call it a fiduciary duty. It requires brokers to act in a retail customer's best interest when making a recommendation, but it does not require conflict-free advice or ongoing account monitoring.

**When did Reg BI take effect?** The SEC adopted Reg BI on June 5, 2019, and firms had to comply by June 30, 2020. Form CRS had the same compliance date.

**What are the four obligations of Reg BI?** Disclosure, care, conflict of interest and compliance. A broker satisfies the general best-interest obligation only by meeting all four.

**What are the two parts of an adviser's fiduciary duty?** According to the SEC's 2019 interpretation, a duty of care and a duty of loyalty. The duty of care covers suitable advice and best execution, and the duty of loyalty requires the adviser to eliminate conflicts or fully and fairly disclose them.

**How long can Form CRS be?** Two pages for a broker-dealer or investment adviser, and four pages for a dual registrant's combined relationship summary, in paper or electronic format.

**Is the DOL fiduciary rule in effect in 2026?** The 2024 Retirement Security Rule is not. Texas federal courts vacated it in March 2026, and the DOL reinstated its 1975 five-part test for investment advice fiduciaries along with the original 2020 version of PTE 2020-02.

Sources:
- SEC: SEC Adopts Rules and Interpretations to Enhance Protections and Preserve Choice for Retail Investors in Their Relationships With Financial Professionals (Press Release 2019-89) (https://www.sec.gov/news/press-release/2019-89)
- Ropes & Gray: SEC Releases Final Interpretation on Adviser Conduct Standard and Fiduciary Duty (https://www.ropesgray.com/en/insights/alerts/2019/06/sec-releases-final-interpretation-on-adviser-conduct-standard-and-fiduciary-duty)
- Willkie Farr & Gallagher: SEC Adopts Regulation Best Interest (https://willkie.com/publications/2019/06/sec-adopts-regulation-best-interest)
- Investment Adviser Association: Remarks at SEC Investor Advisory Committee Meeting on Regulation Best Interest and Form CRS (https://www.investmentadviser.org/resources/remarks-at-sec-investor-advisory-committee-meeting-on-regulation-best-interest-and-form-crs/)
- InvestmentNews: Reg BI limits brokers' use of title 'adviser' or 'advisor' (https://www.investmentnews.com/regulation-legal-compliance/reg-bi-limits-brokers-use-of-title-adviser-or-advisor/79885)
- Insured Retirement Institute: Overview of Form CRS (https://www.irionline.org/wp-content/uploads/2022/01/overview-of-form-crs.pdf)
- SEC: Form CRS Relationship Summary; Amendments to Form ADV (Release No. 34-86032) (https://www.SEC.gov/files/rules/final/2019/34-86032.pdf)
- Sidley Austin: US SEC Division of Examinations Announces 2026 Exam Priorities (https://www.sidley.com/ja/insights/newsupdates/2025/11/us-sec-division-of-examination-announces-2026-exam-priorities)
- SEC: Litigation Release: Western International Securities, et al. (https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26065)
- ThinkAdvisor: FINRA Levies First Reg BI-Related Fine (https://www.thinkadvisor.com/2022/10/12/finra-levies-first-reg-bi-related-fine)
- Quest CE: FINRA Enforcement Trends Shift in 2025 Sanctions Study (https://www.questce.com/finra-enforcement-trends-shift-in-2025-sanctions-study/)
- Mintz: Fifth Circuit Court of Appeals Invalidates the 2016 Final Department of Labor Fiduciary Rule and Related Prohibited Transaction Exemptions (https://www.mintz.com/2018/04/fifth-circuit-court-of-appeals-invalidates-the-2016-final-department-of-labor-fiduciary-rule-and-related-prohibited-transaction-exemptions/)
- Sidley Austin: ERISA Fiduciary Advice Rule Wars: Texas Courts Strike Back (https://www.sidley.com/ja/insights/newsupdates/2024/07/erisa-fiduciary-advice-rule-wars-texas-courts-strike-back)
- Federal Register: Retirement Security Rule: Definition of an Investment Advice Fiduciary: Notice of Court Vacatur (https://www.federalregister.gov/documents/2026/03/20/2026-05492/retirement-security-rule-definition-of-an-investment-advice-fiduciary-notice-of-court-vacatur)
- Arnold & Porter: DOL Reinstates Historic "Five-Part" Fiduciary Test (https://www.arnoldporter.com/en/perspectives/advisories/2026/03/dol-reinstates-historic-five-part-fiduciary-test)