On December 17th, 2021 the Securities and Exchange Commission (SEC) released their Per the SEC, “firms may wish to review their relationship summaries”. A statement which carries even more weight given the observations found in the filed relationships summaries from the Standards of Conduct Implementation Committee and FINRA.
Recently, the SEC Division of Exams and FINRA have been examining firms to assess compliance with the The SEC expects firms to review their Form CRS to ensure they address:
- Use of technical language, including disclaimers
- Omission of required information
- Reliance on proposed, rather than final instructions
- Lack of specific references to more detailed information
- Shortcomings in descriptions of relationships and services; fees, costs, conflicts, and standard of conduct
- Modification and/or supplementation of disciplinary history disclosures
- Issues with prominently displaying relationships summary on firm website
- Issues with description of affiliate relationships
- Poor design
- Use of marketing language
- Boilerplate
What can you do to stay ahead of enforcement actions? Ask yourself a couple questions:
- First, does your Form CRS include comprehensive, balanced and objective descriptions of service?
- Do you explain fees in a direct and concise manner?
- Do you avoid extraneous language and legal jargon?
With the SEC and FINRA raising concerns about specific disclosure topics required by the Form CRS instructions, and the general requirements for content, format, and website posting, firms need to take action…sooner rather than later.
today to see how we can help guide your compliance strategy, minimize risk, and lower costs.
about the author
Nato Francescato is an NRS® Consultant in the Investment Adviser and Broker-Dealer Services consulting division. He has 15 years of experience in the operational, compliance and financial services industry.
Prior to joining NRS, Nato worked with Scottrade and TD Ameritrade as a Compliance Specialist and Investment Consultant. Nato’s current responsibilities at NRS include registration services, general consulting and audit examinations.
