In the final days before the June 30 deadline for broker-dealers and advisors to comply with the Securities and Exchange Commission’s Regulation Best Interest and filing a Customer Relationship Summary, or Form CRS, firms are rushing to meet the requirements, but many of them will be able to do so on time, according to experts who spoke Wednesday during the Securities Industry and Financial Markets Association webinar “Reg BI – How Firms are Managing Ops Changes.”
Hans Schemmel, director of Pershing’s retirement and insurance-based solutions at BNY Mellon, says he sees “a broad spectrum of preparedness” among Pershing’s advisor clients.
But he was quick to add: “I think the good news is that the industry is moving in” the right “direction, and I think a lot of firms will be prepared” on time. Firms seem to be leaving just the operational aspects of their compliance initiatives for “day two” — the days beyond the June 30 deadline, he told viewers.
“We’ve had a few stragglers coming in” for help, Jean Reilly, managing director of Broadridge’s Wealth Management Consulting Practice, pointed out, noting her company is helping advisors and BDs get ready by, among other things, reviewing disclosures; changing language in documents where necessary; updating policies, procedures and fee models; and adjusting lists of products.
Firms are sending statements by email and mail to meet the deadline, and “we are absolutely seeing firms concentrate on training advisors and getting ready for the first audit,” she said.
Asked what the SEC would start doing June 30 to check for compliance, Lee Thoresen, associate general counsel at RBC Capital Markets, said: “I think what to expect is anybody’s guess.”
But the SEC and Financial Industry Regulatory Authority have been “relatively transparent on what they are expecting,” Thoresen said, and have informed the industry they “want to see a good faith effort to comply with these requirements.” she said.
At her firm, “we’ve taken the time — precious time — in these last few days to go through that list” of requirements by the regulators and “treat it sort of as a mock exam” to make sure it is prepared to produce documents and show how it has complied, Thoresen said.
One of the areas that is “particularly going to be a focus in these early days” is disclosure, including how firms have met the Reg BI disclosure obligation and the Form CRS requirements, Thoresen said.
Meanwhile, “all the firms are scrambling to complete and to coordinate” the delivery of the disclosure requirements “in these next few weeks,” Thoresen said.
The regulators will also want to know “what policies and procedures” firms have put in place and how they intend to supervise to make sure their staffs are in compliance, Thoresen said.
“I think every firm is struggling with the paper delivery aspect of it,” Thoresen said, calling that a “massive undertaking.” At the same time, “we want to make sure that our client experience isn’t over-burdened by receiving these big packages of documents — and certainly not multiple packages of documents,” she noted, adding: “We’re trying to make sure that that initial delivery meets the regulatory requirements, but also does not kill thousands upon thousands of trees and burdens our clients’ mailboxes.”