Reg BI vs Fiduciary Duty: What Dual-Registrants Need to Know in 2026

TL;DR — Regulation Best Interest (Reg BI) is the standard of conduct that broker-dealers must meet when making recommendations of securities transactions or investment strategies to retail customers. It became effective on 30 June 2020 as part of the package that also produced Form CRS. The fiduciary duty under the Investment Advisers Act of 1940 is the standard of conduct investment advisers owe their clients — codified in case law and the SEC's 2019 interpretive release. For dual-registrants — firms registered as both broker-dealers and advisers — both standards apply, but to different activities. The supervisory programme that survives a wealth-management examination treats the two standards as complementary, documents which standard applied to which recommendation, and produces evidence the firm can defend. This guide explains the two standards, the four Reg BI obligations, the interplay between them, the enforcement to date, and the supervisory architecture that holds up under exam.

Table of contents

• The two standards, explained
• A short history
• The four Reg BI obligations
• The fiduciary duty under the Advisers Act
• Dual-registrants: when which standard applies
• Form CRS as the bridge
• Recent enforcement: what the SEC has cited
• Building a supervisory programme for both standards
• How Sedric helps document conformance
• FAQ

The two standards, explained

Regulation Best Interest requires a broker-dealer, when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer, to act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker-dealer ahead of the interest of the retail customer. The standard is articulated through four specific obligations — Disclosure, Care, Conflict of Interest, and Compliance — each with its own operational implications.

The fiduciary duty under the Investment Advisers Act is the standard of conduct an SEC-registered investment adviser owes its client. It has two principal components: a duty of care and a duty of loyalty. Together they require the adviser to act in the client's best interest at all times, to avoid conflicts of interest where possible and to disclose them fully where unavoidable, to provide advice that meets the client's investment profile, and to seek best execution of transactions.

The two standards differ on several material dimensions: when they apply (Reg BI at the time of a recommendation; fiduciary duty throughout the entire adviser-client relationship), to what they apply (Reg BI to specific recommendations; fiduciary duty to the relationship as a whole), and how they are evidenced (Reg BI through a documented per-recommendation framework; fiduciary duty through ongoing programme and relationship documentation).

Both standards are designed to require the financial professional to act in the customer's best interest. Neither permits self-dealing or undisclosed conflict-driven recommendations. The differences are about scope, structure, and the regulatory regime that supervises them — not about whether a customer's interest must come first.

A short history

The fiduciary duty for investment advisers is a long-standing standard rooted in the Investment Advisers Act of 1940 and the Supreme Court's 1963 SEC v. Capital Gains Research Bureau decision. The SEC has long taken the position that an adviser owes its clients a fiduciary duty. The 2019 interpretive release on the standard of conduct restated this and articulated the duty of care and duty of loyalty framework that practitioners now use.

For broker-dealers, the standard of conduct prior to Reg BI was the suitability standard — a recommendation had to be "suitable" for the customer based on the customer's investment profile. Suitability had been articulated through FINRA Rule 2111 and successor rules, and through case law. It was a meaningfully lower bar than fiduciary; suitable recommendations did not have to be the best recommendations the broker-dealer could make, and conflicts of interest could remain in the background as long as the recommendation cleared the suitability threshold.

Reg BI was adopted by the SEC on 5 June 2019 as part of a four-part rulemaking that included the Adviser Standard Interpretation, Form CRS, and the "Solely Incidental" interpretation. The compliance date was 30 June 2020.

The rulemaking's framing was straightforward: retail customers receiving advice on securities transactions from a broker-dealer would now be entitled to a "best interest" standard, while customers receiving advice from an investment adviser would continue to be entitled to a fiduciary standard. Both standards would be more protective than the prior suitability regime for broker-dealers. Form CRS would help retail investors understand which standard applied to which type of professional.

The four Reg BI obligations

Reg BI articulates the best-interest standard through four specific obligations. A broker-dealer satisfies Reg BI only when all four are met for a given recommendation.

The Disclosure Obligation

Prior to or at the time of a recommendation, the broker-dealer must provide the retail customer with full and fair written disclosure of all material facts relating to the scope and terms of the relationship and the conflicts of interest associated with the recommendation. The disclosure must cover, at minimum: the type of account, the services, the fees and costs the customer will pay, the types of investments the broker-dealer recommends, conflicts of interest, and disciplinary history (with reference to public sources). Form CRS provides the foundational layer of disclosure; the firm typically supplements with additional written disclosure where the recommendation context requires.

The Care Obligation

The broker-dealer must exercise reasonable diligence, care, and skill to (i) understand the potential risks, rewards, and costs of each recommendation; (ii) have a reasonable basis to believe the recommendation could be in the best interest of at least some retail customers; (iii) have a reasonable basis to believe the recommendation is in the best interest of the particular retail customer based on that customer's investment profile and the potential risks, rewards, and costs; and (iv) consider reasonably available alternatives. The fourth element is the operational difference from suitability: a recommendation can be suitable but not in the best interest if a reasonably available alternative would meet the customer's needs more efficiently or at lower cost.

The Conflict of Interest Obligation

The broker-dealer must establish, maintain, and enforce written policies and procedures reasonably designed to identify and at a minimum disclose, or eliminate, all conflicts of interest associated with recommendations. Some categories of conflict require elimination — the rule specifically prohibits incentive structures within a defined limited time period that are designed to influence specific recommendations of certain types of securities (sales contests, sales quotas, bonuses tied to specific securities recommendations within a limited period). Most conflicts can be mitigated and disclosed rather than eliminated, but the policy framework must be in place.

The Compliance Obligation

The broker-dealer must establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI in its entirety. This is the framework requirement — the firm must have a Reg BI programme, not just point-in-time conformance with each obligation. The compliance obligation is the supervisory hook examiners use to assess whether the firm's overall posture is defensible.

The four obligations are designed to operate together. A recommendation that fails any of the four fails Reg BI. The supervisory programme must document conformance with each obligation for each recommendation it captures, or operate a sampling-based programme that produces a defensible evidence base across the firm's recommendation activity.

The fiduciary duty under the Advisers Act

The fiduciary duty an investment adviser owes its clients is the principal-and-agent duty rooted in the Advisers Act and a long line of judicial and regulatory authority. It has two components.

The duty of care

The duty to provide advice and to monitor the investment in a manner the adviser reasonably believes is in the best interest of the client, based on the client's investment profile. The adviser must seek best execution of transactions and must provide advice over the course of the relationship, not just at inception. The duty extends to the investment profile work itself — the adviser must understand the client's situation sufficiently to advise on it.

The duty of loyalty

The duty to put the client's interest ahead of the adviser's own and to make full and fair disclosure of all material facts relating to the advisory relationship — particularly conflicts of interest. Some conflicts can be addressed through disclosure and informed consent; some are sufficiently intractable that the adviser must avoid the underlying activity. The adviser may not use the client's information to the adviser's own advantage, and may not make undisclosed personal trades that conflict with client interests.

The fiduciary duty applies continuously throughout the relationship, not just at the time of a specific recommendation. The duty applies to all activity within the advisory relationship — investment selection, account monitoring, fee setting, custody decisions, brokerage selection, communications with the client. There is no equivalent of Reg BI's "at the time of a recommendation" framing in the fiduciary duty; the duty is simply present at all times.

Dual-registrants: when which standard applies

For dual-registrants — firms registered as both broker-dealers and advisers — the standard of conduct depends on the capacity in which the recommendation is made.

When the firm's representative is acting as a broker-dealer (typically: a brokerage account, transaction-based compensation, an order-execution context), Reg BI applies to the recommendation. When the firm's representative is acting as an investment adviser (typically: an advisory account, fee-based compensation, an ongoing advisory relationship), the fiduciary duty applies.

The capacity is not always clean. The SEC's 2019 release on the "Solely Incidental" interpretation addresses where the lines between adviser and broker-dealer activity lie — particularly in dually registered representatives' work with retail customers. The release emphasises that advisory-style activity by a representative acting as a broker-dealer remains "solely incidental" to brokerage only when it is incidental in fact, not in label.

The practical implications:

• The firm's compensation model, account-type structure, and supervisory framework should make the capacity in which each representative is acting clear and documented at the time of each recommendation.
• Recommendations that involve moving assets between brokerage and advisory accounts trigger both standards — Reg BI on the brokerage side and fiduciary duty on the advisory side, with the rollover or transfer recommendation itself analysed under whichever standard applies to the recipient account.
• Form CRS for dual-registrants must describe both relationships and the differences between them, which is why dual-registrant Form CRS is four pages rather than two.
• Supervisory documentation should capture the capacity in which each recommendation is made and the applicable standard.

The "what capacity" determination is itself a supervisory focus. Examiners routinely test whether the firm's documentation aligns with the activity — whether the customer in fact knew which capacity applied, whether the compensation followed the capacity, and whether the supervisory review was conducted under the correct framework.

Form CRS as the bridge

Form CRS is the bridge between Reg BI and the fiduciary duty in the disclosure layer. For broker-dealers, Form CRS provides the foundational Reg BI Disclosure Obligation content; for advisers, Form CRS provides the foundational fiduciary-duty disclosure layer; for dual-registrants, Form CRS describes both relationships side by side.

Form CRS itself does not satisfy the entire Disclosure Obligation under Reg BI; specific recommendations may require supplemental disclosure. But Form CRS establishes the relationship-level context and the conversation starters that, in practice, frame how subsequent recommendation-level disclosures are received.

The interplay matters operationally. A firm that updates its compensation model in a way that creates a new conflict of interest must consider the implications for both Form CRS (which requires amendment within 30 days of material inaccuracy) and the firm's Reg BI conflict-of-interest disclosure framework. The two layers must be kept in sync. See the dedicated Form CRS pillar for the full Form CRS framework.

Recent enforcement: what the SEC has cited

Reg BI enforcement has built through 2023 and 2024, with several patterns visible in the settled orders.

The Care Obligation cases

The largest body of settled Reg BI orders has been built around the Care Obligation, particularly the "consider reasonably available alternatives" element. Settled orders have addressed cases where broker-dealers recommended complex or high-cost products to retail customers without documented consideration of less complex or lower-cost alternatives that would have served the same investment objective.

Disclosure Obligation cases

Settled actions have addressed cases where firms made recommendations involving share-class selection, mutual-fund A vs C share selection, or proprietary product preferences, without the full disclosure of conflicts and the costs that Reg BI requires. The 12b-1 fee disclosure cases that began under the prior regime have continued into the Reg BI era.

Conflict of Interest Obligation cases

Settled actions have cited cases where firms had compensation structures or sales contests that were not adequately mitigated or eliminated as Reg BI requires. The "sales contests within a limited time period" prohibition has been a particular focus in retail-broker contexts.

Compliance Obligation cases

Settled actions have cited cases where the firm's overall Reg BI programme — written policies and procedures, surveillance, training, supervisory review — was inadequate to detect or address the conduct in question. The compliance obligation is the supervisory hook the Commission uses to address firm-level conduct rather than specific representative conduct.

Form CRS interplay

Multiple Reg BI cases have surfaced Form CRS issues — most commonly, mismatches between the disclosures in Form CRS and the firm's actual conduct, or Form CRS that failed to clearly describe a dual-registered structure that the firm in fact operated under.

The throughline of Reg BI enforcement is that the supervisory framework — the Compliance Obligation — is doing the work for the SEC. Firms with weak Reg BI programmes have produced findings on the substantive obligations because the supervisory layer wasn't catching the conduct. Firms with stronger programmes have caught their own issues, addressed them, and produced evidence to that effect.

Building a supervisory programme for both standards

A wealth-management compliance programme that works for both Reg BI and the fiduciary duty has five operational pillars.

1. Capacity documentation at every recommendation

Every recommendation should be tagged with the capacity in which the representative is acting (broker-dealer or adviser), the applicable standard of conduct (Reg BI or fiduciary), and the relevant account context (brokerage or advisory). The tag drives downstream supervisory review and produces the audit trail examiners check.

2. Care Obligation documentation: alternatives considered

For Reg BI recommendations, the representative should document the reasonably available alternatives considered and the basis for selecting the recommended option. This is the obligation element where settled orders have most often found the documentation insufficient. A defensible documentation pattern is product- and recommendation-type specific.

3. Conflict-of-interest framework

The firm's written policies and procedures must identify the categories of conflict the firm operates with (compensation differentials between products, proprietary product preferences, payment for order flow, revenue-sharing arrangements, sales contests that meet the prohibition criteria, supervisory-tier compensation), and specify whether each is eliminated, mitigated, or disclosed-with-mitigation. The framework should be tested at the supervisory review layer.

4. Form CRS synchronisation

Form CRS must accurately describe the firm's current relationship model, fees, conflicts, and disciplinary history. Material changes trigger the 30-day amendment clock. The supervisory programme must capture the events that trigger Form CRS implications.

5. Communications surveillance over recommendations

The firm's communications archive — captured and supervised under Rule 17a-4 and the firm's supervisory rule programme — provides the evidence base for recommendation conformance. A recommendation made in writing or recorded voice produces a record the surveillance layer can review. Communications surveillance integration with the recommendation-tagging system is the architectural shift that produces audit-ready evidence at scale.

The five pillars work together. Capacity documentation drives standard-of-conduct application; alternatives documentation evidences the Care Obligation; the conflict framework operationalises the Conflict Obligation; Form CRS provides the disclosure layer; and communications surveillance produces the supervisory evidence under the Compliance Obligation.

How Sedric helps document conformance

Sedric integrates Reg BI and fiduciary supervisory documentation into the firm's broader compliance programme. The platform reads captured communications, reviews them against the firm's policy library (which includes Reg BI and fiduciary-duty rule libraries), and produces the supervisory evidence the firm needs.

Communications review against both standards. The platform identifies recommendation language in client communications and tags it with the capacity the representative was acting in and the applicable standard. Flags are routed to the right supervisor.

Care Obligation surveillance. When a recommendation is captured in communications, the platform identifies the absence of documented alternatives consideration or the absence of cost discussion, flagging the gap before it becomes an exam finding.

Conflict surveillance. When a recommendation involves a product category with known conflicts (e.g. proprietary product, A-share recommendation, complex product), the platform surfaces it for supervisory review.

Form CRS synchronisation. Marketing-activity and service-offering changes captured elsewhere in the platform flag downstream Form CRS implications and route to the amendment workflow.

Audit-ready export. The supervisory evidence — flagged communications, decision logs, override reasoning, and outcomes — is exportable in the form Reg BI examiners and IA examiners request.

Frequently asked questions

Does Reg BI apply to investment advisers?

No. Reg BI applies to broker-dealers when making recommendations to retail customers. Investment advisers are governed by the fiduciary duty under the Advisers Act. Dual-registrants apply both standards based on the capacity in which each recommendation is made.

Does Reg BI apply to recommendations to institutional customers?

No. Reg BI applies to retail customers — natural persons or their legal representatives acting for personal, family, or household purposes. Recommendations to institutional customers are governed by FINRA's suitability rule and related obligations, not Reg BI.

What is the difference between "best interest" under Reg BI and the fiduciary duty?

The substantive standards have substantial overlap; both require the customer's interest to come first. The differences are in scope (recommendation-specific vs relationship-wide), timing (at the time of recommendation vs continuous), and the regulatory framework articulating each. The SEC has been clear that Reg BI is not the same as the fiduciary duty but that Reg BI is informed by fiduciary principles.

How is Reg BI different from the prior suitability rule?

Suitability required the recommendation to be appropriate for the customer based on the investment profile. Reg BI adds: a more rigorous best-interest standard, the four-obligation framework, the requirement to consider reasonably available alternatives, an enhanced conflict-of-interest framework, and the firm-level Compliance Obligation. Reg BI is a meaningfully higher bar than suitability.

What is a "recommendation" under Reg BI?

The Commission has retained the traditional broker-dealer interpretation of "recommendation" — a communication that reasonably could be viewed as a "call to action" to the customer to engage in a securities transaction or investment strategy. Educational materials and information that does not call for action are generally not recommendations. The fact pattern matters.

Do we need to document every recommendation?

The firm must have policies and procedures reasonably designed to achieve compliance, and a supervisory programme that produces evidence of compliance. The level of per-recommendation documentation that meets that standard varies by recommendation type. Higher-risk, more complex, or larger-value recommendations typically require more detailed documentation; routine recommendations can often be addressed through a documented framework that covers categories of recommendation rather than each one individually.

How does Reg BI interact with the Marketing Rule for dual-registrants?

The Marketing Rule (SEC Rule 206(4)-1) governs the adviser's marketing communications. FINRA Rule 2210 governs broker-dealer communications with the public. Reg BI governs the standard of conduct for broker-dealer recommendations. Dual-registrants comply with all three. In practice the rules overlap considerably in content standards but differ in technical requirements. The Marketing Rule pillar covers the Marketing Rule in full.

What's the role of Form CRS in Reg BI compliance?

Form CRS provides foundational disclosure content for the Reg BI Disclosure Obligation. It does not satisfy the entire obligation — specific recommendations may require supplemental disclosure — but it establishes the relationship-level disclosure that Reg BI Disclosure Obligation builds on.

Does Reg BI apply to retirement-account recommendations?

Reg BI applies to recommendations of securities transactions and investment strategies, regardless of account type. Retirement-account recommendations are also subject to DOL fiduciary requirements under separate authority. Firms that recommend to retirement accounts must satisfy both regimes.

How does the SEC examine Reg BI compliance?

SEC examiners request the firm's Reg BI policies and procedures, the supervisory programme documentation, samples of recommendations and the supporting documentation, the firm's Form CRS and any amendments, and the firm's conflict-of-interest inventory and mitigation/elimination/disclosure framework. The examination tests whether the substantive obligations are met and whether the supervisory programme produces evidence to that effect.

Operationalising both standards?

Sedric is the supervisory-documentation layer for dual-registrants and wealth managers. We help firms tag recommendations with the capacity and standard, document conformance with Reg BI's four obligations, synchronise Form CRS with the firm's activity, and produce the audit trail an SEC or FINRA examination expects.

Book a working session with our team. We'll walk through your current programme, your communications archive, your recommendation documentation, and your Form CRS process, and show you the audit export your firm would produce.

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Related reading

• Form CRS: the complete 2026 compliance guide — the disclosure layer that bridges Reg BI and fiduciary regimes.
• SEC Marketing Rule: the complete 2026 guide for RIAs — the marketing-side standard for advisers and dual-registrants.
• Communications compliance for RIAs and wealth managers — the supervisory infrastructure that produces Reg BI and fiduciary-duty evidence.