In April 2018, the SEC proposed new rules under the Investment Advisers Act of 1940 and the Securities Exchange Act of 1934 that would require registered investment advisers and registered broker-dealers to provide a brief customer- or client-relationship summary in a new short-form disclosure document: Form CRS. According to the SEC, Form CRS is intended to provide retail investors with simple, easy-to-understand information about the nature of their relationships with each investment professional and would supplement other, more detailed disclosures. In his December 11, 2018, testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs, SEC Chair Jay Clayton stated that the staff of the Division of Trading and Markets and the Division of Investment Management are reviewing more than 6,000 comment letters received on the proposed Form CRS and the other rule proposals issued the same day – including proposed Regulation Best Interest for broker-dealers and the proposed interpretation of a standard of conduct for investment advisers – as part of their efforts to develop final rule recommendations on these topics. Thus, SEC-registered investment advisers and broker-dealers should begin to think about how they would comply with these new regulations once final rules are issued. This two-part series analyzes the proposed Form CRS requirements; discusses various issues the form raises; and provides insight from lawyers and compliance professionals on the proposal. The first article
provides an overview of the proposed Form CRS and its key requirements. The second article
discusses whether the form is likely to achieve the SEC’s stated goal and explores potential issues it raises for SEC-registered investment advisers. For more on Form CRS and the SEC’s proposed interpretation of a standard of conduct for investment advisers, see “SEC Investor Advisory Committee Seeks to Clarify Proposed ‘Best Interest’ Standard to Ensure a Uniform Fiduciary Standard for Advisers and Broker-Dealers
” (Dec. 13, 2018); and “SEC Emphasizes Investment Adviser Fiduciary Duty and Proposes Enhanced Adviser Regulation
” (May 10, 2018).