SEC now requires one Form CRS for RIAs and broker-dealers

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Form CRS is perhaps the most contentious regulation stemming from the SEC’s advice standards package (which includes Regulation Best Interest). Now RIAs and broker-dealers alike must use one form for disclosing client-advisor relationships — even if firms offer multiple products and services — according to updated FAQs released by the SEC.

The Customer Relationship Summary, prepared jointly by the commission’s Division of Investment Management and the Division of Trading and Markets, adopted in June and posted in November, will require firms to provide retail customers with descriptions of relationships, including fees, services, standard of conduct and firm information.

It should be noted, however, that a dual registrant can prepare a separate Form CRS for its advisory and broker-dealer services. The FAQs also clarify that private fund sponsors need not deliver a Form CRS to retail investors in the funds.

Also noteworthy is that the delivery of the Form CRS can be included with other document delivery so long as it is “the first among any documents delivered … at that time” or is “presented prominently in the electronic medium.” A main component — and a key rationale for its existence, according to the SEC — is that its configuration allows for comparability among RIAs and BDs in a manner distinct from other mandated disclosures.

Our take? It's time to start drafting. Call your lawyers and compliance pros to craft the Form CRS before the experts fill up their dance cards. After all, there are approximately 13,000 registered investment advisers and over 3,000 broker-dealers out there, most of whom have to prepare a Form CRS.

(With additional writing by Mark DeAngelis, chief compliance officer of Cipperman Compliance Services)

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SEC SEC regulations RIAs Broker dealers Regulation Best Interest Compliance Client communications Client strategies