The rule is targeted specifically at retail customers and encompasses both the firm and its staff when these are making recommendations of any:

• securities transaction
• investment strategy involving securities

The obligation to place the interest of the retail customer ahead of that of the firm or associated person can be satisfied if the following obligations are met:

• Disclosure obligation
• Care obligation
• Conflict of interest obligation
• Compliance obligation

Disclosure obligation

Provide the customer in writing full and fair disclosure of:

• all material facts relating to the scope and terms of the relationship with the customer including:
  • the fact that the broker or associated person is acting in that capacity
  • material fees that apply to transactions, holdings and accounts
  • type and scope of services provided including any material limitations on
    • securities
    • investment strategies invovling securities
• all material facts relating to conflicts of interest

Care obligation

When making the recommendation exercise reasonable diligence, care, and skill to:

• understand the potential risks, rewards and costs and have a reasonable basis to believe that the recommendation could be in the best interest of at least some customers
• Have a reasonable basis to believe that the recommendation is in the best interest of a particular customer given an assessment of their investment profile and the potential risks, rewards and costs associated with the recommendation
• Have a reasonable basis to believe that a series of recommended transactions (individually in the best interest of the customer) is not excessive when taken together

Whether a recommendation or advice satisfies the care obligations is an objective evaluation, turning on the facts and circumstances of the particular recommendation or advice and the investment profile of that retail investor at the time the recommendation is made or when the advice is provided.

Conflict of interest obligation

Establish, maintain, and enforce written policies and procedures reasonably designed to:

• identify at at a minimum disclose or eliminate conflicts of interest associated with recommendations
• identify and mitigate any conflicts of interest that would create an incentive for an associated person to place their interests ahead of that of the customer
• identify and disclose any material limitations on the securities or investment strategies and any conflicts of interest associated with these
• prevent such limitations and associated conflicts of interest from leading to recommendations that place the interest of the associated person ahead of that of the customer
• identify and eliminate any sales incentives (contests, quotas, bonuses, non-cash compensation) based on the sales of specific securities or types of securities within a limited time period

Compliance obligation

Establish, maintain and enforce written policies and procedures reasonable designed to achieve compliance with Reg BI.