Law / United States

Regulation Best Interest, standard of conduct for broker-dealers

17 CFR 240.15l-1

In force since 30 Jun 2020.

An AI sector rules rule binding private bodies.

Enforcement body

Securities and Exchange Commission

Instrument type

a regulation made under an act

Obligation class

Disclosure, Governance

Audit expectation

none

As of 10 October 2026.

What it requires

• It reaches you if you are a broker, a dealer, or a natural person who is an associated person of a broker or dealer and you make a recommendation of any securities transaction or investment strategy involving securities (including account recommendations) to a retail customer, meaning a natural person (or that person's legal representative) who uses the recommendation primarily for personal, family, or household purposes: act in the best interest of the retail customer at the time the recommendation is made, without placing your financial or other interest ahead of the interest of the retail customer (Rule 15l-1(a)(1)).
• Provide the retail customer, prior to or at the time of the recommendation, in writing, full and fair disclosure of all material facts relating to the scope and terms of the relationship (that you act as a broker, dealer, or associated person with respect to the recommendation, the material fees and costs that apply, and the type and scope of services, including any material limitations on what may be recommended) and of all material facts relating to conflicts of interest associated with the recommendation (Rule 15l-1(a)(2)(i)).
• In making the recommendation, exercise reasonable diligence, care, and skill to understand the potential risks, rewards, and costs associated with it and have a reasonable basis to believe that it could be in the best interest of at least some retail customers (Rule 15l-1(a)(2)(ii)(A)).
• Have a reasonable basis to believe that 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 associated with the recommendation, and that it does not place your financial or other interest ahead of the customer's interest (Rule 15l-1(a)(2)(ii)(B)).
• Have a reasonable basis to believe that a series of recommended transactions, even if in the retail customer's best interest when viewed in isolation, is not excessive and is in the retail customer's best interest when taken together in light of the customer's investment profile (Rule 15l-1(a)(2)(ii)(C)).
• If you are a broker or dealer, 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, and to identify and mitigate those that create an incentive for an associated person to place the interest of the broker, dealer, or associated person ahead of the interest of the retail customer (Rule 15l-1(a)(2)(iii)(A) and (B)).
• Identify and disclose any material limitations placed on the securities or investment strategies that may be recommended to a retail customer and any conflicts of interest associated with those limitations, and prevent them from causing recommendations that place the interest of the broker, dealer, or associated person ahead of the retail customer's interest (Rule 15l-1(a)(2)(iii)(C)).
• Identify and eliminate any sales contests, sales quotas, bonuses, and non-cash compensation that are based on the sales of specific securities or specific types of securities within a limited period of time (Rule 15l-1(a)(2)(iii)(D)).
• Establish, maintain, and enforce, in addition to those policies and procedures, written policies and procedures reasonably designed to achieve compliance with Regulation Best Interest (Rule 15l-1(a)(2)(iv)).

When LexLint raises it

When your app profile says your app provides financial services or makes high-risk automated decisions.

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