According to FINRA, Alexander Investment Services Co. was censured, fined $25,000, and required to comply with certain undertakings for failing to establish adequate policies and procedures for Regulation Best Interest (Reg BI) compliance.

Regulation Best Interest, which took effect in June 2020, requires broker-dealers and their associated persons to act in the best interest of retail customers when making securities recommendations. It represents one of the most significant investor protection rules in recent years.

Alexander Investment Services' written policies and procedures contained no provisions specifically relating to the obligations set forth in Reg BI. While the firm eventually updated its policies and procedures, these updates discussed Reg BI only in general terms without addressing conflicts of interest or the regulation's specific requirements for acting in the best interest of retail customers.

The firm's written supervisory procedures also failed to designate the principal responsible for Reg BI compliance, detail the supervisory steps and reviews that should be undertaken by that principal, specify the frequency of those reviews, or describe how such reviews should be conducted or evidenced.

This failure to implement meaningful Reg BI compliance procedures meant that the firm lacked a framework for ensuring its registered representatives were meeting their obligations to retail customers.

For investors, this case underscores the importance of understanding Reg BI and the protections it provides. Under this regulation, broker-dealers must consider reasonably available alternatives, cannot place their interests ahead of customers' interests, and must disclose material facts about conflicts of interest. Investors should not hesitate to ask their broker how they are compensated and whether there are any conflicts of interest related to their recommendations.

If you believe a broker has not acted in your best interest, you can file a complaint with FINRA.