On Dec. 14, 2022, the Securities and Exchange Commission (SEC) proposed the Regulation Best Execution rule. This would be the first SEC-mandated best execution rule and would impact brokers, dealers, government securities brokers, government securities dealers and municipal securities dealers.
“I am pleased to support this proposal because, if adopted, it would help ensure that brokers have policies and procedures in place to uphold one of their most important obligations: to seek best execution when trading securities, whether equities, fixed income, options, crypto security tokens, or other securities,” said SEC Chair Gary Gensler. “I believe a best execution standard is too important, too central to the SEC’s mandate to protect investors, not to have on the books as Commission rule text.”
As stated in the SEC fact sheet, the proposed Regulation Best Execution rule would:
- Establish a best execution standard for broker-dealers.
- 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 engaged in certain conflicted transactions for or with a retail customer.
- Require broker-dealers to review the execution quality of their customer transactions at least quarterly.
- Exempt broker-dealers which qualify as “introducing brokers” from certain requirements if they establish, maintain and enforce specified policies and procedures.
- Require broker-dealers to review their best execution policies and procedures at least annually and present a report detailing the results of such review to their boards of directors or equivalent governing bodies.
The comment period for the proposed rule ends Mar. 31, 2023.
