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Compliance and Regulatory Alerts  |  02-28-22

SEC Targets More Firms for Form CRS Failings: Is Your Firm Next?

In a press release touting twelve additional enforcement actions against firms for failing to provide complete information on, file, or deliver client relationship summaries (Form CRS) to retail investors, the SEC announced settlements against six investment advisers and six broker-dealers. This is the second time the SEC chose to make such an enforcement announcement on Form CRS (the last was in late July 2021). The agency remarked that it has now settled 42 cases against financial firms for Form CRS violations. That message underscores the agency’s intention to hold firms accountable for making these disclosures. 

The recent cases follow compliance examinations which revealed the failings. The investment advisers settled alleged violations of Advisers Act Section 204 (“Reports”) and Adviser Act Rules 204-1 (“Amendments to Form ADV”) and 204-5 (“Delivery of Form CRS”). The broker-dealers settled alleged violations of Securities Exchange Act Section 17(a)(1) (“Records and Reports Rules and Regulations”) and Rule 17a-14 (“Preparation, filing and delivery of Form CRS”). The cases were settled without admitting or denying the findings, however, each firm agreed to be censured, to cease and desist from further violations and to pay civil penalties ranging from $10,000 to nearly $100,000.

The enforcement announcement follows the issuance of recent SEC guidance on Form CRS disclosure (see Bates post). That guidance reflected yet another effort by the agency to urge IAs and BDs to pay more attention to the Form if the relationship summary is to fulfill its intended purpose of providing meaningful accessible information upon which investors can make reasoned choices as to financial professionals.

How Bates Can Help

The Bates Compliance team helps BD, IA and hybrid firms meet their Form CRS and Reg. BI compliance obligations, including further defining conflicts, determining your disclosure approach and mitigating risk to your firm. We develop, review and update Form CRS and also support firms with Form CRS gap analyses, risk assessments, consistency reviews, and training. For a full list of services, visit our Reg BI and Form CRS resource page.

To learn more about Reg BI and Form CRS compliance consulting support, including how your firm can improve its compliance, please contact us directly:

Rhonda Davis, Managing Director, Bates Compliance – or 713-410-3978

Rory O'Connor, Director, Bates Compliance – or 860-671-7270

Hank Sanchez, Managing Director, Bates Compliance – or 504-450-9632