The Securities and Exchange Commission on Tuesday Released two risk alerts detailing the scope and content of exams for compliance with Regulation Best Interest and the Customer Relationship Summary form.
SEC Chairman Jay Clayton announced Thursday that the agency would not extend the June 30 compliance date for Reg BI and Form CRS.
The agency believes firms with account relationships comprising “a substantial majority of retail investor assets have made considerable progress” in adjusting their business practices, supplementing and modifying their policies and procedures, and otherwise aligning their operations and preparing for compliance with Reg BI and Form CRS, Clayton said in a statement.
Initial Reg BI exams will focus on assessing whether broker-dealers have made a good-faith effort to implement policies and procedures reasonably designed to comply and that are effective, the Reg BI Risk Alert explains.
Form CRS exams will assess whether firms have made a good-faith effort to implement the form, “including reviewing the filing and posting of a firm’s relationship summary as well as its process for delivering the relationship summary to existing and new retail investors,” the Form CRS Risk Alert says.
After the June 30 compliance date, OCIE exams to assess implementation of Reg BI “will likely occur during the first year after the compliance date” and are designed primarily to evaluate whether firms have established policies and procedures reasonably designed to achieve compliance, the Reg BI alert explains.
OCIE will also evaluate whether firms have made reasonable progress in implementing those policies and procedures as necessary or appropriate.
Initial Form CRS exams after June 30 may include an assessment of firms’ delivery and filing, content, formatting, updates and recordkeeping measures.
“Regulation Best Interest and Form CRS are critical to the protection of Main Street investors, and we feel it is important to share our plans for initial examinations to help firms assess their preparedness as the June 30, 2020 compliance date nears,” said Pete Driscoll, director of OCIE, in a statement. “Based on conversations we have had with the industry, we know firms have made substantial progress in implementing these new rules.”
Implementation, Driscoll said, “will be an iterative process, and our focus will be on firms continuing good-faith and reasonable efforts, including taking into account firm-specific effects from disruptions caused by COVID-19.”
John Polise, OCIE’s national director for the Broker-Dealer and Exchange program, added that “OCIE has been working closely with both FINRA and SEC staff to ensure that we harmonize our examination efforts for Regulation Best Interest across our examination programs.”
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