Under SEC Regulation Best Interest (Reg BI), broker-dealers and financial advisors must place the best interests of their customers (retail investors) ahead of their own.
Reg BI includes a variety of new rules and obligations, but the most tangible is a paperwork requirement: Form CRS.
What is Form CRS?
Form CRS is a relationship summary disclosure form (“CRS” stands for customer or client relationship summary).
As part of their disclosure obligations under Reg BI, broker-dealers and financial advisors are now required to share versions of Form CRS with retail investors.
For a more in-depth explanation, see Electronic Delivery & Storage of Form CRS: The Key to Simpler Reg BI Compliance.
What is the purpose of Form CRS?
According to the SEC, the main purpose of Form CRS is to provide retail investors with “simple, easy-to-understand information about the nature of their relationship with their financial professional,” in order to help them compare services between firms and make more informed decisions.
What must be included in Form CRS?
Specific requirements vary based on the services provided by the firm, but at a minimum, Form CRS must include:
- Firm registration information (including whether the firm is registered as a broker-dealer, investment advisor, or both)
- A description of all services offered by the firm
- Information regarding fees and costs (including principal fees and costs, custodian fees, account maintenance fees, and others)
- Information regarding conflicts of interest
- A summary of the firm and advisor’s disciplinary history
- “Conversation starters” for customers to ask their advisor or point of contact
View complete SEC Form CRS instructions
When do firms have to send Form CRS?
Firms must deliver Form CRS to customers and prospective customers before or at the earliest of:
- Entering into a new investment advisory contract
- Opening a new account
- Making recommendations regarding investment products, strategies, or account changes, including retirement rollover
Firms must also provide Form CRS upon client request, and whenever amendments or updates are made to the content of Form CRS.
How can I learn more about Form CRS?
If you still have questions about Form CRS, here are a few helpful resources:
- Full Form CRS guidelines from the SEC
- Form CRS summary and FAQ from the SEC
- Reg BI and Form CRS checklist from FINRA
Additionally, small firms may send implementation questions to the newly established inter-divisional Standards of Conduct Implementation Committee at IABDQuestions@sec.gov.
