NASAA Reg BI Examination Summary and Financial Professional Resources

Tuesday, November 3rd, 2020 and is filed under AI Insight News

NASAA’s Reg BI Implementation Committee conducted an examination initiative to evaluate key industry changes as financial firms seek to comply with the SEC’s Regulation Best Interest requirements.

NASAA – Phase 1 National Exam Initiative 2020

NASAA recently published a report on Phase One of this initiative. The top 10 priority areas included:

  • Variations in the types of products sold
  • Policies, procedures, and practices related to the sale of alternative investments or complex products types
  • Cost comparison due diligence and disclosure practices

 NASAA’s report states, “[Prior to Reg BI], few firms had policies and procedures governing specific product sales (26%) or used tools to assist agents/representatives and investors in comparing investment opportunities (19%).

Top 10 BD Products Top 10 IA Products
1. Mutual funds (66%) Mutual funds (77%)
2. Equities (60%) Equities (77%)
3. Debt/Fixed income (57%) Debt/Fixed income (67%)
4. Standard ETFs (52%) Standard ETFs (67%)
5. Municipal funds (50%) Listed REITs (39%)
6. Variable annuities (49%) No-load products (37%)
7. Listed REITs (44%) Municipal funds (33%)
8. Options (44%) Options (23%)
9. No-load products (38%) Variable annuities (15%)
10. UITs (37%) Leveraged- or inverse-ETFs (15%)

Chart Source: NASAA Reg BI National Examination Initiative Phase One


Sales of complex products

“NASAA has focused much of its Reg BI examination focus on complex and high-risk products, namely, private securities, variable annuities, non-traded REITs, and leverage- or inverse-ETFs, due to investor confusion and harm emanating from these products.”

Products All firms combined BD IA
Private securities 7% 21% 3%
Variable annuities 14% 42% 5%
Non-traded REITs 6% 18% 2%
Leveraged- or Inverse-ETFs 9% 15% 7%

Chart Source: NASAA Reg BI National Examination Initiative Phase One


What’s Next?

NASAA will conduct a second examination initiative in 2021 to continue their evaluation of key industry changes.


Have you reviewed your policies for non-traditional ETFs?

Wednesday, November 20th, 2019 and is filed under AI Insight News

Considerations when working with non-traditional ETFs

North American Securities Administrators Association (NASAA) recently released a report recommending that broker dealers review policies and procedures for non-traditional exchange traded funds (ETFs).

“The NASAA report recommends tailored supervisory procedures be established for firms that allow leveraged and/or inverse ETF transactions. Further, that the supervisory procedures address the heightened and specific risks associated with these complex products.”

Click here to download the full report.

Be proactive to fully understand non-traditional ETFs

Leveraged ETFs are investment vehicles for sophisticated investors who are looking to gain short-term magnified exposure to the markets. However, it’s important to clearly understand that their unique characteristics come with inherent risk. Take AI Insight’s CE course, Introduction to Leveraged and Inverse ETFs, to help you understand the composition of leveraged ETFs, mechanics of how they operate, and risks associated with them. This course is eligible for 1 CE credit toward the CFP® and other designations.