The SEC has proposed new rules under the Exchange Act concerning a broker-dealer’s duty of best execution. Under proposed Regulation Best Execution, the current regulatory framework for the duty of best execution would be enhanced by requiring detailed policies and procedures for all broker-dealers.
The proposed Regulation Best Execution would:
introduce a best execution standard for brokers, dealers, government securities brokers, government securities dealers, and municipal securities dealers (collectively referred to as broker-dealers)
exempt “introducing brokers” from certain requirements if they establish, maintain, and enforce specified policies and procedures
require broker-dealers to establish, maintain, and enforce written policies and procedures reasonably designed to comply with the best execution standard
require more robust policies and procedures for broker-dealers that engage in certain conflicted transactions for or with a retail customer
require broker-dealers to assess the execution quality of their customer transactions at least quarterly
require broker-dealers to evaluate their best execution policies and procedures at least annually and present a report detailing the results to their boards of directors or equivalent governing bodies
The SEC is also proposing to amend Rule 17a-4 under the Exchange Act to include record preservation requirements for broker-dealers pertaining to records made under proposed Regulation Best Execution.
Interested parties may submit feedback through March 31, 2023, or until 60 days following the date of publication of the proposing release in the Federal Register, whichever is later.