SEC Staff Statement on Form CRS Disclosures
The SEC’s December 17, 2021 Staff Statement Regarding Form CRS Disclosures essentially tells the industry that there are mistakes everywhere. The SEC cites failures to follow format requirements, to provide required information, and to limit information to what is required by the instructions. In other words, many firms did not follow the instructions carefully enough, or did not understand what the SEC was trying to do.
The SEC “observed relationship summaries that omitted required information, modified prescribed language, or failed to follow the prescribed order or formatting requirements because firms appeared to rely on the proposed instructions to Form CRS (or portions thereof), rather than the adopted final instructions to Form CRS.” You may recall that the SEC published sample templates at the time of the proposed rule publication, but did not subsequently update those templates. Numerous Form CRS disclosure documents have been out there based on the proposed rule. That’s how confused some firms were.
In the new Statement, the SEC seemingly runs through all of the instructions to point out errors everywhere. “Some firms referred to themselves as ‘fiduciaries’ or stated that they are subject to a ‘fiduciary duty’ when describing the applicable standard of conduct instead of using the prescribed language in Item 3 of the form”, wrote the SEC Staff, as an example of what the SEC called “Shortcomings.”
We all may also recall when the New York Times published its observations that firms did not have correct answers to disciplinary questions, and then the SEC issued a Joint Statement Regarding the New FAQs on Form CRS (Oct. 8, 2020) highlighting the failure of many firms to fail to report required disclosures.
If you need a Form CRS, Form ADV, Form PF, or Form 13H reviewed and/or filed, contact our Compliance Services Team at firstname.lastname@example.org.
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