What is Regulation Best Interest?

Definition

Regulation Best Interest sets the standard of conduct for broker-dealers when they recommend securities or investment strategies to retail customers. The SEC adopted it together with Form CRS and interpretations under the Advisers Act to enhance and clarify the standards of conduct for broker-dealers and investment advisers.

It includes obligations on disclosure, care, conflicts of interest and compliance.

Why it matters for advisors

If AI helps produce recommendations (portfolio suggestions, product comparisons, next-best-action prompts), the broker-dealer is still responsible for meeting Reg BI. The SEC's fiscal 2026 exam priorities include retail sales practices and Reg BI for broker-dealers, and say reviews of automated tools and AI will look at whether algorithms lead to advice consistent with investors' investment profiles.

The SEC's 2023 proposal on predictive data analytics conflicts was withdrawn in 2025, so existing standards like Reg BI are what apply.

Keep records of how the tool was tested and how reps are told to use it. If an examiner asks why a recommendation was in the customer's best interest, "the tool suggested it" needs to be backed by the rep's own reasoning.

Example

A broker-dealer tests whether an AI tool's product suggestions line up with clients' recorded risk tolerance before letting reps use it in conversations.

Watch out for

"The tool suggested it" isn't a defense. The rep and the firm own the recommendation.