Managing Client Recommendations in line with Reg BI with GRACE


The SEC’s latest regulation, the Regulation Best Interest (Reg BI) is now in effect with firms having to bring their operations into compliance from June 30, 2020, with SEC examination notices now going out.  In this short article we will focus on the requirements how to manage client recommendations in line with the Reg BI expectations, and how La Meer’s GRACE platform provides a full solution for this, and all of the regulation requirements.

As a short reminder, Reg BI mandates four Compliance Obligations:

  • Disclosure Obligation: required before, and at the time of recommendation acceptance, and if there are any changes in conditions due to new conflicts or changes.
  • Duty of Care Obligation: the exercising reasonable due diligence, care and skill in making recommendations.
  • Conflict of interest Obligation: establishing policies and procedures to identify and address conflict of interest.
  • Compliance Obligation: establishing policies and procedure to monitor compliance with Reg BI.

The Client Recommendations Management Life Cycle

Reg BI defines how brokers interact with, and provide recommendations to their retail customers, to ensure they put customers’ interests before their own. 

Reg BI’s scope concentrates on retail customers, and recommendations. Brokers must first review to whom and how they provide services to determine whether they’re subject to Reg BI. Even if a broker has only one retail customer and provides one recommendation, he must comply with the Reg BI.


Reg BI obligations start during the client prospecting phase, as soon as a potential retail customer is solicited, and encouraged to either open an account, or to transact in securities and the retail customer uses this recommendation, even if the individual person is not yet a client.  The broker must create, file, and distribute a Form CRS, and create the supplemental disclosures outlining both the broker’s capacity, fees, services and conflicts of interest.

La Meer’s GRACE platform enables you to gather the all the preliminary data on the customer, generate and distribute relevant disclosures to them. The associated person or client relationship manager can select the relevant disclosures needed from the curated disclosures repository for the type of customer, and at a click of a button send the client a notification by email – the client can click on a link, opening the document and acknowledge receipt – all creating an audit trail that can be used an examination time.

Client Objectives and Risk Profile

Account type recommendations are a new requirement for brokers that are subject to Reg BI. Accordingly, brokers will need to gather information regarding the customer’s investment objectives, and investment profile, prior to being able to determine whether any recommendation is in their best interest.

GRACE enables firms to set up flexible risk questionnaires for different client profiles and allows the associated person to answer questions with or based on their knowledge of the client, and their objectives, to arrive at a client classification and a client risk score. This profile can be used to pick the relevant Model Portfolio, along with the suitable products and their risk characteristic information, to allow the associated person to create the suitable portfolio for the client.

Client Portfolio creation and sharing with Client and Compliance

The associated person or client relationship manager can build the portfolio making notes on each of the choices made, as well as the alternates and their risk notes, based on client’s preferences and restrictions which can be sent to the client for their review and approval. Thru the client portal the client to see their suggested portfolio, and is able to agree or disagree on the choices of products, as well as recording their own notes that can allow restructuring of the portfolio by the associated persons.  All these interactions can be shared with compliance to perform their suitability review, and all the notes on all the client, and associated person interaction.  Easy to use workflows and email alerts within GRACE provide a robust process for keeping books and records of all interactions.

Account Opening

All relevant disclosures for the client can be shared as per the clients choices of account types, products, fee structures, conflicts, form ADVs, and risks for account opening, along with the account opening forms and any other material that is required for the client of the particular client type.

The client can interact with the organization through the secure client portal to share documents that are needed for account opening, and KYC and compliance management can interact and record the status of their due diligence process to ensure associate persons, and clients are duly kept informed.

Trade Monitoring Portfolio Review and Oversight

All interactions with the client surrounding subsequent changes will be tracked in GRACE. Trades that were performed on behalf of the clients can be monitored for deviations from objectives, churn and other violations by compliance.

Portfolios of clients can be quickly analyzed and compared against their planned and committed portfolio to identify any products that may have been sold to the client in violation of the agreed characteristics.

Products whose risk characteristics have changed over a period of time as a result of market volatility and market characteristics can be analyzed for each client type, and suggestions for changes can be made as a part of the ongoing client life cycle.

GRACE has everything you need in one place

La Meer’s GRACE platform has all the functionality you need to create, review, approve and distribute policies and procedures required by the Regulation Best Interest, have an auditable record that staff have read and attested their understanding of their obligations.  GRACE’s training module allows the organization to manage and monitor participation in e-learning training for both staff and Associated Persons, testing and validating the knowledge of everyone concerned.  Regulatory examinations are easily taken care of when all the required information is in one place, and a firm can demonstrate that it has taken its obligations seriously and really is acting in the best interests of its clients!

GRACE for Regulation Best Interest

Whatever stage you are at with your Regulation Best Interest implementation, the GRACE for Regulation Best Interest solution can help you.  We cover all key areas:

  • Form CRS And Disclosures Management
  • Policies and Procedures, Attestation and Training
  • Client Relationship and Recommendations Management
  • Client Portal
  • Client Risk Profile Management and Classification
  • Product Suitability and Governance
  • Portfolio Oversight Management
  • Advisor and Registered Rep Supervision
  • Conflicts of Interest Monitoring

The modular nature of the GRACE platform allows our clients to implement (and pay for) only the modules or functionality they need, so if you are having a challenge with one particular area of the regulation we can help, and quickly add the next pieces when you are ready without the need for additional vendors or integration costs.  The GRACE platform is 21st century technology, cloud-based, web, tablet and mobile-enabled allowing advisors, clients and compliance officers to interact whenever and wherever they are – essential in working from home or with a distributed workforce.  The solution is intuitive and easy to use, empowering staff to work in a compliant way, without unnecessary or complex overheads.

If you are working on your whole solution for day two and beyond we would be like to speak with you to understand the challenges you are having, and to discuss with you how GRACE might help you in easing your Regulation Best Interest demands.