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Form CRS “Client Relationship Summary”

This month the Securities Exchange Commission published a proposal (IA-4888) for additional regulations for Broker/Dealers and Investment Advisers. Over the next few weeks, we will break this down so it can be more easily digested and not so frustrating for you. It feels like there’s a constant stream of new regulations and amendments that we must deal with, but with a little guidance, we can find simple solutions to these complex problems.

IA-4888 was published this month with the goal of establishing Form CRS guidance, amendments to Form ADV, and clarifying the required disclosures in retail communications and restrictions on the use of certain titles. At first glance, it may seem like that this is an added burden placed on an already highly regulated industry. However, the proposal seems logical and can be beneficial to your clients and help mitigate any uncomfortable future conversations with an upset client.

The Form CRS “Client Relationship Summary” is a document that is proposed to help simplify the disclosures of the firm. You may be thinking, “Didn’t we do that back in 2010 with the ADV Part 2?” The problem is that clients are already bombarded with forms and disclosures they just throw in the mail pile to collect dust. When was the last time a client read a mutual fund prospectus in its entirety? The Form CRS puts all the information pertinent to the client in a simple format that they can easily understand. This is important. Being former regulators, we’ve handled hundreds of complaints and several successful administrative actions simply because the client did not understand what they were getting into. The silver lining is that this can be viewed as a mitigating standard for your compliance risk.

The Form CRS as proposed will be another part of the ADV, a part 3 (we now have a trilogy). Yes, the Form ADV is growing and growing and growing adding to the requirements under IA 204-5. To convolute the matter, even more, Broker/Dealers need to provide this same documentation under Rule 17-a4. However, we should keep in mind that this is a simple solution, and with some assistance will not be but a hiccup on the road.

Some of the key points that need to be included on this proposed form are the following:

  • Types of relationship that the IA has

  • Investment Advisory Account Services

  • Standard of conduct

  • Summary of fees and costs

  • Comparison fees and costs

  • Conflicts of interest

  • Legal and Disciplinary events

  • Moreover, a “key questions to ask” section.

Note that this is only in the proposal stage. Next week we will dive into the granular version of the Form CRS. Moreover, in the following weeks, we will look at the other implications of IA-4888.

For more information about our services, contact us by calling us at 1-833-RIACCIO, emailing us at, or by clicking here to schedule a free consultation.

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