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Regulation and Compliance > Federal Regulation > SEC

How Big Firms, Small Firms Are Preparing SEC's Form CRS

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Depending on a firm’s size, preparing Form CRS, the Customer Relationship Summary to be delivered to retail customers under the Securities and Exchange Commission’s advice-standards package, will require a very different approach.

At Wells Fargo Advisors, it’s been a “collaborative effort,” with “a lot of input across business units,” Rema Holland, first vice president, account management strategy at Wells Fargo Advisors, said Wednesday during a panel discussion at the Financial Industry Regulatory Authority’s Regulation Best Interest conference in Washington.

Holland stated that there’s “a lot of information to put in four pages; people are editing each other’s edits” so that Wells Fargo can “agree on [a form] that is brief, educational and understandable.”

Wells Fargo Advisors is on its “third version” of Form CRS, she said, assessing design, accuracy, etc. “We’ve had clients, advisors and prospects work on it.” The firm is targeting the beginning of 2020, she said, to have a form “locked down.”

On the other end of the spectrum, Wendy Lanton, a founding principal of broker-dealer Lantern Investments and Lantern Wealth Advisors, an SEC-registered investment advisor, says she’s the “only one” at her small firm wearing the Form CRS hat.

Lanton’s approach “vastly differs” from Wells Fargo’s, as “there isn’t a committee; it’s just me,” she told the packed room. One recent decision Lanton had to make, she relayed, is whether she needs to prepare one Form CRS or two because “we have an RIA affiliate.”

Alicia Goldin, an attorney at the SEC, stated on the panel that as the recent FAQ on Form CRS released by the agency stated, Form CRS is a “firm-level” document.

Advisors and brokers are required to deliver a two-page Form CRS to customers beginning in July 2020. Dual registrant firms will have to deliver a four-page document.

Form CRS, Goldin explained, is designed to help retail investors “better understand the business models. Form CRS is an important part of achieving that goal. It’s designed to help reduce investor confusion about broker-dealers and investment advisors.”

In crafting the final rule, the SEC “had a few key goals,” Goldin relayed, “accessibility, brevity and readability.”

The brevity of Form CRS, however, is already drawing industry complaints. The SEC opined in its FAQ that advisors and broker-dealers can only use one Form CRS when offering multiple products and services.

The Investment Adviser Association complained that this will “ultimately confuse investors.”

“We are disappointed that SEC staff did not agree to the IAA’s request that advisors be allowed to prepare separate relationship summaries for substantially different types of services they may offer to retail investors,” Gail Bernstein, IAA’s general counsel, told ThinkAdvisor.


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