SEC Examinations that Focus on Compliance with Form CRS Requirements
Form CRS and its related rules (“Form CRS”) require SEC-registered broker-dealers and investment advisers to deliver to retail investors a brief customer or client relationship summary (relationship summary) that provides information about the firm. The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) has issued a Risk Alert to provide firms with information about the scope and content of its initial examinations for compliance with Form CRS requirements. After the June 30, 2020 compliance date, the OCIE staff will begin examinations to assess compliance with Form CRS requirements. Initial examinations will focus on assessing whether firms have made a good faith effort to comply with those requirements. Examples of the areas the staff may focus on are discussed below.
Filing and Delivery
The staff may:
- review whether the firm has filed its relationship summary and whether the relationship summary is posted on the firm’s website, if any;
- evaluate the process for delivering the relationship summary to existing and new retail investors; and
- review policies and procedures to assess whether they address the required relationship summary delivery processes and dates.
In particular, the staff may review records of the dates that each relationship summary was provided to validate whether the firm has complied with all of the delivery requirements relating to new and existing retail investors.
The staff may review a firm’s relationship summary to determine:
- how the firm describes the relationships and services it offers, including statements regarding account monitoring and investment authority;
- how the firm describes its fees and costs;
- how the firm describes the manner in which its financial professionals are compensated and the conflicts of interest that such compensation creates;
- how the firm describes its conflicts of interest; and
- whether the firm accurately discloses the existence of legal or disciplinary history.
Formatting and Updates
The staff may review the firm’s relationship summary to assess whether (i) it is formatted in accordance with the Form CRS instructions, and (ii) the relationship summary updates comply with the Form CRS instructions pertaining to (A) the timing of such updates, and (B) how changes to the relationship summary must be communicated.
Oyster Can Help:
OCIE encourages firms to assess their implementation plans for compliance with Form CRS requirements. Oyster Consulting has the knowledge and experience to support your efforts to comply with Form CRS requirements. To receive assistance with the preparation of policies and procedures or disclosure documents or to receive training to ensure you understand the impact of the Form CRS requirements, please give us a call at (804) 965-5400 or complete our contact form and one of our Relationship Mangers will be happy to help you.