Chicago partner Jim Lundy was quoted in a Wealth Management article titled “Planning for Form CRS.” In June 2019, the Securities and Exchange Commission (SEC) adopted the Regulation Best Interest (Reg BI), which has sparked much media attention, and the Form CRS Relationship Summary. However, it is imperative for advisers to work on Form CRS, as it poses several challenges and will take effect along with Reg BI on June 30, 2020.
Jim advised on the layering concept of the Form CRS, which encourages linked references that create a layered approach to disclosure. However, Jim cautioned that using links can create compliance and supervisory challenges. If firms decide to embed links, Jim suggested, “I think what some more sophisticated firms may do is create their own links to link into the form, like ‘here is a general description of our standard of conduct obligation; for more information please see this.’”
Jim also discussed how to avoid potential issues such as why firms should not view Form CRS as a marketing document, despite the Form ADV brochure description. The self-reporting initiative regarding share class has also made it clear that the brochure and disclosures are not marketing documents and are in fact legal disclosure documents with requirements that need to be followed. Additionally, Jim advised beginning work early on Form CRS and said, “It’s in the future, but when you look to that future and you work backward, what we’re telling clients is ‘let’s get to work now. Let’s get to the right point by the effective date so you’re not behind the curve and you don’t put yourself unknowingly on a path that exposes you for those types of findings or a potential enforcement investigation.’”