According to FINRA, Long Island Financial Group, Inc. was censured and fined $35,000 for failing to have adequate written policies, procedures, and supervisory systems to comply with Regulation Best Interest (Reg BI) and Form CRS requirements.

The firm's written policies and procedures made no reference at all to Reg BI, the SEC's comprehensive standard of conduct for broker-dealers. The firm later adopted procedures that included general background information about Reg BI but still contained no actual procedures to prevent, detect, or correct violations, or to otherwise achieve compliance with the rule. This meant the firm lacked any meaningful framework for ensuring its representatives acted in customers' best interests when making recommendations.

Similarly, the firm failed to establish adequate procedures for its obligations under Exchange Act Rule 17a-14 to prepare, file, and deliver its Customer Relationship Summary (Form CRS). The firm initially made no reference to Form CRS in its procedures, then briefly used procedures with general background information but no actual guidance on preparation, filing, and distribution, and then reverted to procedures with no Form CRS reference at all.

Regulation Best Interest, which became effective in June 2020, requires broker-dealers to act in the best interest of retail customers when making recommendations. It represents a significant enhancement of the standard of care broker-dealers owe their customers. Form CRS is a brief, standardized disclosure document designed to help retail investors understand the services and fees of their financial professional and firm, including key differences between brokerage and advisory services.

These requirements are fundamental to investor protection in the modern regulatory landscape. For investors, this case demonstrates that not all firms were prepared for these important regulatory changes. The complete absence of meaningful policies and procedures meant the firm had no systematic way to ensure compliance. Investors should feel confident that their broker-dealer has robust systems to ensure recommendations are in their best interest—and this case shows what happens when firms fail to implement such systems.