In mid-March, the Securities and Exchange Commission said that RIAs with filing deadlines before April 30 can request an extra 45 days to file an amendment to Form ADV or file reports on Form ADV part 1A, though an extension is not guaranteed.
In addition, the request may cause the firm to be treated as a higher-risk firm, since it couldn’t prepare an Annual Amendment on time. Unless absolutely necessary, we are advising firms not to request this extension.
Hopefully, many SEC-registered advisors (who are calendar-year filers) have completed their ADV Annual Amendment filing. If you reviewed and updated your Disclosure Brochure, be sure your service descriptions and related costs and fees are clear and correct and that you have identified and disclosed all conflicts of interest.
Now it is time to focus on the new Form CRS. SEC advisors have until June 30, 2020, to make their initial Form CRS filing. Yes, yet another document.
For some time I have felt that Form ADV is both way too long and complicated, resulting in a disclosure document that is read by few retail investors. Form CRS is intended to be a succinct (no more than two pages for most RIAs) disclosure document relaying important information about a firm to perspective and current individual clients.
Your task with the document is to simply and effectively communicate to your clients. This includes:
- Services you offer as well as the associated costs and fees,
- Legal obligations to your client when you serve them as an advisor,
- Conflicts of interest, which may impact the way you can meet these legal obligations,
- Disciplinary history for your advisory firm or any of your financial professionals,
- An explanation as to how your financial professionals are compensated, and
- A source for your clients should they wish to seek out additional information about your firm or your financial professionals.
The good news is the work you have put into your 2020 annual amended Disclosure Brochure will pay dividends as you flesh out your initial Form CRS.