According to FINRA, MD Global Partners, LLC was censured and fined $40,000 for willfully violating Regulation Best Interest (Reg BI) and failing to make timely private placement filings.

The New York firm's Reg BI violations were particularly notable because they continued for more than two years after the regulation took effect. Despite being aware of Reg BI's June 30, 2020 implementation date, the firm's written supervisory procedures contained no provisions related to Reg BI compliance until December 2022.

Even after updating its procedures, the firm failed to detail the supervisory steps principals should undertake to ensure Reg BI compliance, including how frequently reviews should occur or how they should be documented.

Reg BI requires broker-dealers to act in the best interest of retail customers when making recommendations. This includes providing full disclosure of material facts, exercising reasonable care to ensure recommendations are in customers' best interests, and addressing conflicts of interest. Without proper procedures, a firm cannot reasonably supervise whether its representatives are meeting these obligations.

The firm also failed to timely file required documents with FINRA for private placement offerings. Instead of filing within the required 15 calendar days of first sale, the firm's filings ranged from one month to almost a year and a half late, with one offering never filed at all.

Additionally, for five consecutive years, the firm failed to prepare required annual compliance reports and certifications of its compliance and supervisory processes.

For investors, this case underscores that Reg BI creates enforceable obligations, and regulators are taking action against firms that fail to implement proper compliance systems. When firms lack adequate Reg BI procedures, customers may not receive the full protections the regulation was designed to provide.