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Understanding Regulatory Best Interest (Reg BI) and Form CRS

Understanding Regulatory Best Interest (Reg BI) and Form CRS

TD Ameritrade strives to put the needs of our clients first. With the SEC introducing rules establishing industry-wide recommendation standards, we want to help you understand what these rules mean for you. Simply put, Reg BI for broker-dealers and a related SEC interpretation as to investment advisors establish a common standard as of June 30, 2020 . The standard is that any brokerage firm or registered investment advisor making an investment recommendation to you must be acting in your best interest at the time the recommendation is made and must not place its own financial or other interests ahead of your own.

In addition to Reg BI, the SEC issued a separate release as to a new customer relationship summary known as Form CRS. Under this release, the SEC will require broker-dealers and investment advisors to provide you with their Form CRS  as of June 30, 2020. Reading a Form CRS can help you make more informed decisions about choosing or continuing to work with a broker or advisor.

Learn how TD Ameritrade works to help investors

ResourceDescriptionForm
Form CRSDesigned as a simple, easy-to-understand Customer Relationship Summary, providing you with details of the nature of your relationship with:TD Ameritrade, Inc. (Broker- Dealer/Investment Advisor) (aka Dual Registrant)

TD Ameritrade Investment Management, LLC (Investment Advisor)

TradeWise Advisors, Inc. (Investment Advisor)
Regulation BI DisclosuresRegulation Best Interest Disclosure: Designed to give you a better understanding of how TD Ameritrade works with you in making investment recommendations as to the following:Annuities
Fixed Income Sales and Trading
Retirement Accounts and Rollovers
Solutions ContinuumAn overview of how we can help you invest in the way that makes the most sense for you.TD Ameritrade Solutions Continuum
Annuity ProspectusesImportant information about the carriers we work with and the variable annuities they offer.Great-West
Jackson National
Lincoln
Pacific Life
Transamerica

TD Ameritrade makes investment recommendations as to the following

TD Ameritrade Investment Management, LLC

  • Offers discretionary investment advisory services including asset allocation and fund selection.
  • Provides a range of managed portfolios, known as the Essential Portfolios, the Selective Portfolios and the Personalized Portfolios.
  • Allow you to select the level of ongoing support that suits you best.

AdvisorDirect® referral program from TD Ameritrade Institutional

  • Free consultation to identify your financial goals and investment needs.
  • Identifies a curated list of independent Registered Investment Advisors that may be appropriate for you.
  • Allows for customized investment strategies aligned with your goals.

Fixed Income Products

  • Consultation with our Fixed Income Sales (FIS) team to understand your income goals and needs. Customized recommendations as to:
  •         - Specific fixed income securities or investment vehicles.

        - Fixed income investment strategies, such as bond ladders, may also be suggested for you.

Annuities

  • Sold through The Insurance Agency of TD Ameritrade, LLC, an affiliate of TD Ameritrade.
  • The Agency team gathers information about you and may recommend an annuity for you based upon its knowledge of your situation and needs.
  • Allows you to choose from variable annuities across product types, features and benefits, financial strength and more.

Retirement Accounts and Rollovers

      • Get help deciding about a rollover from your 401(k) or other retirement plan to an Individual Retirement Account (IRA).
      • Or use the following resources to decide on your own:
        Considering a 401(k) Rollover?
        Rollover IRA
        Your Rollover Pocket Guide
        IRA Guide
  • Talk to a Financial Consultant for more information or for a recommendation

FAQs

Do I need to do anything when I receive Form CRS?

No action is needed on your part. All clients will receive this form around the effective date of June 30, 2020 and will also receive the Form CRS in advance of any recommendations.

Has TD Ameritrade put its interests ahead of my own?

For years, TD Ameritrade has been committed to standing on the side of retail investors by empowering them with self-directed tools and educational materials. We have also strived to put our client’s needs first and have advocated for a best interest standard for all retail broker-dealers.

What is Regulation Best Interest (Reg BI)?

Reg BI is a rule issued by the SEC that requires broker-dealers and their associated persons to act in the best interest of the retail customer at the time an investment recommendation is made, without placing the financial or other interest of the broker-dealer ahead of the interests of the retail customer. This higher standard of conduct applies when recommending:

 

    • Securities transactions; or
    • Investment strategies involving securities, including account types; or
    • Opening IRA or brokerage account; or
    • Rolling over assets from one account type to another

The rule also requires broker-dealers to identify potential conflicts of interest and financial incentives the broker-dealer may have in making these types of recommendations.

Why is this regulation being implemented?

Reg BI was issued by the SEC to establish a new and higher conduct standard for broker-dealers when they are making investment recommendations.

Will all brokerage firms now be required to follow Reg BI?

Reg BI will require all brokerage firms that provide recommendations to retail investors to act in the investors’ best interest when making the recommendations. In addition, both brokerage firms and investment advisors will be required to provide a new disclosure to retail investors, the Form CRS (Customer Relationship Summary).

When does Reg BI go into effect?

Reg BI goes into effect on June 30, 2020.

What types of accounts does Reg BI address?

Reg BI applies when broker-dealers are making a recommendation as to any type of retail brokerage account for retail investors as well as to investment advisory accounts.

Does Reg BI apply differently to brokerage services versus investment advisory services?

Yes. Reg BI itself applies only to broker-dealers. Investment advisors are subject to their own requirements under the Investment Advisers Act of 1940. But the Form CRS requirements apply to both brokers and investment advisors.

Does Reg BI apply just to new customers or existing clients as well?

Reg BI will apply to investment recommendations made to prospective customers, new customers and existing clients for TD Ameritrade.

Who is considered a retail customer, according to Reg BI?

As defined in Regulation Best Interest, a “retail customer” is a natural person, or the legal representative of such natural person, who:

  • receives a recommendation of any securities transaction or investment strategy involving securities from a broker, dealer or a natural person who is an associated person of a broker or dealer; and
  • uses the recommendation primarily for personal, family, or household purposes.

How will Reg BI be enforced?

As with other SEC rules, the Financial Industry Regulatory Authority (FINRA), will examine for and enforce compliance with Reg BI based upon SEC guidance. FINRA will work with SEC staff to ensure consistency in examining broker-dealers and their associated persons for compliance with Reg BI. The SEC Office of Compliance Inspections and Examinations also will be involved in enforcement.

What is the Form CRS (Customer Relationship Summary) rule?

A rule requiring broker-dealers and registered investment advisors to deliver, to retail clients and prospects a brief relationship summary disclosing certain information about the firm(s). The Form CRS requires 5 specific sections:

  • Introduction: clearly indicates that brokerage and investment advisory services and fees differ; and that it is important for a retail investor to understand the difference between the services and fees.
  • Relationship & Services - describes the relationship and services offered, including a discussion of whether the firm provides account monitoring services, potential investment authority, any limitations on offerings and account minimums.
  • Fees, Costs, Conflicts, Standard of Conduct - Firms must provide detailed descriptions about the fees and costs that their retail investors will pay, their conflicts of interest, and applicable standard of conduct in making investment recommendations to retail investors.
  • Disciplinary History - Firm must provide disclosures of disciplinary information regarding the firm and its financial professionals.
  • Where to find additional information - firm must provide instructions regarding where a retail investor can find more information about the firm and the services it offers.

If you are working with an investment advisor, as of June 30, 2020 you must receive a Form CRS before or at the time you and your advisor enter into an investment advisory relationship.

If you are working with a broker-dealer, you must receive the Form CRS before or at the earliest of: a recommendation of an account type, a securities transaction, or an investment strategy involving securities; the placing an order for you; or the opening of a brokerage account for you.

What is the goal of Form CRS?

To educate you on our offerings, services, fees, and costs and to provide you with information you need to help ask questions, and initiate a conversation with us and our representatives. The disclosure is intended to be in simple English, be easy to understand, and help facilitate a conversation between you and our financial representative.

Will this impact how I work with TD Ameritrade?

At TD Ameritrade, we strive to put your needs first. We believe the new rules will help strengthen the relationship we have with our clients, by facilitating more open and straightforward dialogue between you and TD Ameritrade.

Where can I get additional information about Reg BI?

This site is designed to provide you with information about your relationship with TDA, TDAIM and TradeWise under Reg BI and Form CRS. You’ll find a number of different resources including applicable Forms CRS, and additional disclosures and details on Reg BI.

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