U.S. brokers are improving their disclosure and other policies under new best interest rules, but they remain tied to the concept of suitability, rather than raising their conduct standards, according to a new report from the North American Securities Administrators Association (NASAA).

The umbrella group of state and provincial regulators published a report detailing the results of the latest round of reviews to examine compliance with the rules adopted by the U.S. Securities and Exchange Commission (SEC) starting in 2019, known as regulation best interest (Reg BI).

In its report, NASAA said that “firms have made progress updating their policies and procedures in light of [Reg BI] but more work remains to be done, particularly with respect to considerations of reasonably available alternatives and conflict mitigation.”

Specifically, the reviews found that firms have updated their investor forms and enhanced their policies and procedures; imposed product-specific restrictions on the sale of risky products, such as leveraged and inverse ETFs, non-traded REITs and private placements; and devoted significant effort to complying with the rules’ disclosure obligations.

However, it also found that firms are still “ignoring common lower-cost and lower-risk products” when recommending risky products and using financial incentives to sell risky products, and have not enhanced point-of-sale disclosure.

The review also found that firms “are still relying heavily on suitability policies and strategies that predated Reg BI. Efforts to address the standard of care concepts established by Reg BI remain perfunctory.”

“In short, more work needs to be done to truly elevate the standard of care for retail customers,” the report concluded.

The report also includes recommended best practices for complying with Reg BI.

At the same time, NASAA published proposed revisions to its model conduct rule to reflect the effects of Reg BI and other industry developments. That proposal is out for comment for 90 days.

“States will continue to conduct broker-dealer exams that include a focus on complex, costly and risky products and enforce Reg BI concepts,” said Clinton Edgar, chair of the NASAA Broker-Dealer Operations Project Group and deputy securities commissioner with the Texas State Securities Board, in a release.