Emma Liggett
89 Geo. Wash. L. Rev. 1016
In the wake of recent scandals pervading the financial industry, Congress and federal securities regulators have attempted to rein in the abuse of discretion by those in positions to mismanage funds. Recent legislative and regulatory actions show an effort to incentivize compliant behavior and set standards of conduct. The most recent attempt is seen in the Securities and Exchange Commission’s (“SEC”) Regulation Best Interest standard for broker- dealers. This rule, however, like the other relevant laws affecting brokerdealers, is toothless in that the provision mandating compliance with the regulation requires only implementing reasonable methods of doing so. Rather than specify procedures that broker dealers must implement to comply with the rule, the SEC leaves the discretion of how to comply with Regulation Best Interest with the very actors it seeks to regulate. In doing so, the SEC is taking greater precaution to protect the broker-dealer business model than investors. This Note studies the ineffectiveness of weak compliance mandates such as that in Regulation Best Interest and proposes a solution in the form of the United Kingdom’s Senior Managers and Certification Regime, which prescribes specific formal requirements for regulated entities in order to ensure accountability among those who are most capable of causing harm to the financial industry—senior managers and executives. The SEC should issue an amendment to the Regulation Best Interest Compliance Obligation incorporating these more specific and prescriptive compliance mandates.
