Regulation Best Interest (Reg BI) Care Obligation and Fee Evaluation
Under SEC Regulation Best Interest (Reg BI), which statement accurately describes the representative's obligation regarding the cost of a recommended security?
Under Reg BI's Care Obligation, cost must always be evaluated, but the rule does NOT require recommending the cheapest option if another product offers superior features, performance, or fit aligned with the client's best interest.
Complete Analysis & Legal Rationale
Reg BI requires representatives to understand the potential risks, rewards, and costs of recommendations. While cost cannot be ignored, lower cost alone does not automatically make an investment suitable if quality or investment objectives differ.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Accurately states SEC guidance on Reg BI Care Obligation regarding cost evaluation.
Lowest cost is not mandated; quality, strategy, and client goals are also relevant.
Cost evaluation is mandatory for all retail recommendations, regardless of customer inquiry.
Proprietary products face heightened conflict-of-interest disclosures under Reg BI.
Official Standard: Governs Care, Disclosure, Conflict of Interest, and Compliance Obligations for retail recommendations.