On April 7, 2020, the Office of Compliance Inspections and Examinations (OCIE) of the United States Securities and Exchange Commission released two Risk Alerts to address upcoming compliance expectations for the new Form CRS and Regulation Best Interest requirements. OCIE acknowledges that the COVID-19 pandemic has created unusual issues for firms but will continue to conduct examinations as usual. Below is a summary of what you should know.
- After the compliance date, OCIE will begin examining firms for their implementation of Form CRS and its related rules.
- When examining firms, OCIE may review whether a firm has properly filed Form CRS, its processes for distributing the Form to investors, and its policies and procedures for delivery of the Form.
- Under certain circumstances, like upon the opening of a new account, OCIE may evaluate whether the firm is properly distributing Form CRS to existing retail investors.
- The timely distribution of Form CRS to new retail investors will be examined.
- The Form itself may be reviewed to assess whether all information is adequate and accurate and to ensure formatting requirements are met.
- OCIE will evaluate policies and procedures for maintaining accurate Form CRS disclosures, recordkeeping practices, and distribution of the Form to clients.
- After the compliance date, OCIE will begin examining broker-dealers for their implementation of Reg BI.
- Firms will be assessed on whether they meet obligations described under Reg BI.
- Examinations of disclosure obligations will evaluate whether the broker-dealer provides retail customers with full and fair disclosures, in writing.
- Examinations of care obligations will focus on whether broker-dealers are exercising diligence, care, and skill when making recommendations to customers. Staff may make document requests to confirm their findings.
- Examinations of conflict of interest obligations will evaluate how broker-dealers’ policies and procedures identify, assess, and resolve conflicts of interest.
- Examinations of compliance obligations may consist of document requests in order to review a firm’s policies and procedures and how they are written to establish, maintain, and enforce Reg BI.
WHAT DOES THIS MEAN FOR ME?
If your firm is subject to the new requirements of Form CRS or Reg BI, it is imperative that you are prepared to be examined on these regulations. Although the SEC is taking COVID-19 related difficulties into account, it is recommended your firm make efforts to comply with regulatory requirements as it would under normal circumstances. If you have questions about Form CRS or Reg BI, the SEC can be reached at IABDQuestions@sec.gov.
Fairview is here to help your firm navigate the regulatory environment during this challenging time. We are available to assist with Form CRS and Reg BI compliance. Reach out to Fairview directly for more information.