Q1: The Countdown Begins
We're Here to Get You on Track.
In June 2019, the Securities and Exchange Commission (SEC) implemented new regulations that required all SEC- registered Investment Advisers (IAs) and Broker-Dealers (BDs) with retail clients to create new Form ADV, Part 3- which is known as Form CRS.
With the compliance deadline for Form CRS quickly approaching, many firms have more questions about the regulation and comprehensive services the Core Compliance team can offer to assist your firm meets the deadline.
But to Answer Your Question: What is Form CRS?
New Form CRS, is an additional section or part of Form ADV that IAs and BDs will need to file by June 30, 2020.
While new Form CRS is limited to only two pages, unless your firm is dually registered, then you get 3 pages, the SEC is requiring firms to pack a lot of disclosures into those pages, AND that disclosure must be concise and in plain English.
The form is set up similar[ly] to Form ADV Part 2A in that certain items need to be addressed. But for Form CRS, there are 5 items, and they include:
- Item 1: The introduction. This sections covers company information, including the name, the registration status, and that brokerage and investment advisory services and fees differ and it’s important for the retail investor to understand the differences.
- Item 2: Relationship and Services. In this section firms need include a description of services, and that must address monitoring of accounts, investment authority, limited investment offerings, and account minimums along with other requirements that are pertaining to retail accounts.
- Item 3: Fees, Costs, Conflicts and Standards of Conduct. Here firms need to describe both your principal and other fees and costs associated with the services offered, and that are applicable to retail accounts. You need to talk about the firm's standard of conduct and give examples of how the firm makes money and the associated conflicts.
- Item 4: Disciplinary History. This section actually speaks for itself, but you’ll also have to direct the reader to visit the SEC Investor.gov[/CRS] website, and direct them to the search tool for researching financial professionals.
- Item 5: Additional Information. In this [section] you need to outline where retail investors can find additional information about your firm and the services, [and] also provide a telephone number where the investors can request current information and also request a copy of Form CRS.
Each of these sections, except for the introduction section, also must include specific "questions" that are geared to start a conversation about that section’s topic.
To stay abreast of Form CRS, the team at Core Compliance has answered some of the industry's concerns about the new regulation and can be found below.
Important Things Your Firm Should Consider:
- Handout: "What's Required and How We Can Help"
- Risk Management Update: "Forms ADV and CRS - Important Things You Need to Know"
- From the Core Compliance Blog: "Summary of Requirements for the SEC's New Form CRS"
- From the Core Compliance Blog: "SEC Publishes Frequently Asked Questions on Form CRS"
- From the CCO Buzz: "Episode 55: Form CRS"
If you have any questions, concerns or need assistance filing Forms ADV and/or CRS contact the Core Compliance team. We can provide your firm and employees with guidance in drafting and filing Form CRS to ensure a seamless process toward compliance with this new regulatory disclosure. Contact us at 619-278-0020 for assistance from one of our experts.