The Securities and Exchange Commission has published responses to questions about Form CRS, the Customer Relationship Survey.
Actually, the responses were prepared by the staff of the Division of Investment Management and the Division of Trading and Markets, and they represent the views of that staff. The posting on the SEC website explains that “they are not a rule, regulation, or statement of the Securities and Exchange Commission,” that the SEC “has neither approved nor disapproved its content, and that those responses … like all staff guidance, have no legal force or effect: they do not alter or amend applicable law, and they create no new or additional obligations for any person.”
Nonetheless, the responses do provide some helpful insights on the relationship summary format and delivery requirements.
Format
Specifically, one question posed asks whether a firm that offers three types of services to investors (such as say a wrap fee program, advice to participants in a 401(k) plan, and discretionary asset management for high net worth clients) could prepare and deliver three different relationship summaries, one for each type of service that it offers.
Basically, the answer is “no” – each broker-dealer or investment adviser must only prepare one relationship summary summarizing all of the principal relationships and services it offers to retail investors.
Delivery
Another question focuses on whether a firm could satisfy its relationship summary delivery requirement with respect to its existing retail investor clients or customers by including the relationship summary with the mailing of its June 2020 quarterly account statements (e.g., within one week after June 30, 2020).
The short answer? Yes. In the staff’s view, a firm may deliver the relationship summary separately, in a bulk delivery to clients, or as part of the delivery of information that the firm already provides (such as the annual Form ADV update, account statements or other periodic reports). The response points out that a firm must initially deliver its relationship summary to each of its existing clients and customers who are retail investors within 30 days after the date by which it is first required to electronically file its relationship summary with the SEC.
Pooled ‘Call’
The FAQs also deal with the creation of machine readable headings to comply with General Instruction 7.A.(i) to Form CRS, and whether a relationship summary has to be delivered to pooled investment vehicle client (such as a hedge funds, private equity funds and venture capital funds), which has investors that include natural persons who may be “retail investors” as defined in Form CRS. With regard to the latter, the staff response was that those types would not meet the definition of retail investor – and a CRS would not have to be delivered to them.
The CRS was part of a package of new standards approved by the SEC earlier this year. You can read more about the CRS here, and the Form CRS can be found here.
