Does your firm offer multiple services? Sorry, only one customer relationship summary allowed, the Securities and Exchange Commission said last week in a list of Frequently Asked Questions.
The SEC’s Division of Investment Management and Division of Trading Markets published a list of the four most frequently asked questions regarding Form CRS, which firms will need to be following by June 2020 as part of the SEC’s adoption of a four-part rulemaking package last June.
The short list of questions primarily focused on two themes – delivery and formatting the document. Advisors who haven’t scanned through the question will want to look at the first question and its response, especially the dual registrants.
The question asks, can firms deliver multiple relationship summaries – one for each service offered?
The answer is no, only one summary can be delivered:
“If a broker-dealer offers a range of brokerage services to retail investors, including, for example, self-directed, full-service, and employer-sponsored retirement plan options, the broker-dealer would be required to prepare a single relationship summary describing all of the firm’s different services. To the extent a dually registered firm prepares a single relationship summary addressing both brokerage and investment advisory services (rather than two separate relationship summaries), the firm must summarize all of the principal brokerage and investment advisory relationships and services the firm offers to retail investors.”
The rest of the questions dealt with the formatting and delivery of Form CRS. One of the more confusing responses attempts to explain to advisors how they can create machine-readable headings.
Despite the convoluted explanation for headings and the decree that only one summary is allowed, the four questions didn’t cause any controversy or raise any new concerns for advisors among experts.
Larry J. Rybka, chairman and CEO of Valmark Financial Group said. “There’s nothing in this question and answer that is surprising to us.”
As the FinServ industry preps for Regulation Best Interest and the included rules to take effect, the SEC has touted the new Form CRS as a short and understandable document for investors and advisors.
In November, SEC Chairman Jay Clayton said at a Fordham University conference on financial fraud that “one of the things we’ve done in our Standards and Conduct rulemaking is requiring this form for broker-dealers and investment advisors that says, ‘customer, here’s how I make my money, here are my conflicts, here’s where to go.’”
Clayton added, “This is the first time they’re in very short, plain language. People have to step up for what they’re actually doing. So, to the extent that states use that as part of their enforcement inspection mechanisms, I love it.”
With Form CRS and the rest of the Reg BI rules set to take effect in seven months, advisors will want to keep a close eye on this list of FAQs to see if it grows.
Cassie Miller is a contributing writer for AdvisorNews. She has spent nearly two years covering Finserv topics. She also has an extensive background in magazine writing, editing and design.