CRS Relationship Summary ("Form CRS")

September 16th | 2019

What is it?

On June 5, 2019, the SEC adopted a package of rules and interpretations regarding the standard of conduct applicable to broker-dealers providing retail investment advice and the fiduciary duty applicable to SEC-registered investment advisers. These topics were covered in four separate SEC releases, which cover: (1) Regulation Best Interest; (2) Form CRS Relationship Summary; (3) an interpretation of the fiduciary duty applicable to SEC-registered investment advisers; and (4) an interpretation of what “solely incidental” means for broker-dealers.

Our last post covered Reg. BI, so this one focuses on Form CRS Relationship Summary (“Form CRS”), which requires registered investment advisers and registered broker-dealers (together, “firms”) provide a brief relationship summary to retail investors. Form CRS relationship summary, which is just referred to as the relationship summary in the official instructions, is intended to inform retail investors about: the types of client and customer relationships and services the firm offers; the fees, costs, conflicts of interest, and required standard of conduct associated with those relationships and services; whether the firm and its financial professionals currently have reportable legal or disciplinary history; and how to obtain additional information about the firm.

What do I have to do?

The instructions for Form CRS set forth the requirements of the summary content, which include, among other things, that the summary be factual, limited to two pages, and written in plain English. Firms are required to deliver a relationship summary to retail investors at or before various triggering events (e.g., recommending a stock, opening an account, etc.), and file them via the appropriate process, which means Form ADV, Part 3 (Form CRS) via IARD for investment advisers, and Form CRS via Web CRD for broker-dealers. Dual registrants and firms with affiliates that also provide retail investment services have flexibility to prepare a combined summary, or summaries for each entity, provided that the approach taken achieves the purpose of the rule. If a firm does not have any retail investors to whom a relationship summary must be delivered, the firm is not required to prepare or file one.

When is the deadline to comply?

Broker dealers and investment advisers will be able file their initial Form CRS relationship summary as early as May 1, 2020 but must file no later than June 30, 2020. In addition, this initial Form CRS relationship summary must be delivered to all existing retail investor clients on an initial, one-time basis within 30 days after the date the firm is first required to file its summary. Form CRS dovetails with Reg. BI in many ways, so with some thoughtful design in revising policies and procedures, there are efficiencies that can be achieved in revising policies and procedures to become compliant with the new rules.

Can Titan Regulatory and Advisory help me?

Of course! For more information about Reg. BI, Form CRS, and what you need to do to, reach out to us at Titan and learn why your business should #TradeUpToTitan

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