Alerts offer guidance
The SEC’s Office of Compliance Inspections and Examinations (OCIE) has just published two Risk Alerts, one for Form CRS and the other for Reg BI. Designed to “empower firms to assess their preparedness,” these alerts offer insight into potential focal points for OCIE’s initial examinations. They detail specific items the OCIE may cover, including Form CRS implementation and across the four obligations of the Reg BI standard of care. The overarching messages make clear that there is much to be done:
Form CRS initial examinations will assess whether firms have “made a good faith effort to implement Form CRS.”
Reg BI initial examinations will focus principally on assessing a) whether appropriate policies and procedures have been established and b) whether firms have made “reasonable progress in implementing those policies and procedures.”
FINRA also just published findings from their Regulation Best Interest Preparedness Review, conducted late 2019 to early 2020. They have shared the report “to provide firms with information on how some firms are preparing for Reg BI and Form CRS.” Highlights of key findings include:
- Governance and Implementation Management – “Firms developed governance structures to lead and manage Reg BI and Form CRS compliance requirements,” such as project teams and working groups, timelines and training.
- Written Supervisory Procedures (WSPs) and Supervisory Systems – “Firms were developing written policies and procedures and implementing technological tools to meet their obligations under Reg BI and Form CRS.” These include inventory of changes, updates to WSPs and identification of technology tools (including discussions with clearing firms and vendors about their systems’ capabilities) to monitor compliance.
- Conflicts of Interest – “Firms were addressing conflicts of interest requirements,” for example, creating conflict logs or inventories, conflicts committees, limitations on products, updated compensation practices and surveillance; reviewing and updating disclosures; restricting use of the terms “Adviser” or “Advisor” and eliminating sales contests.
- Form CRS – “Firms have started developing their Form CRS and related delivery timelines.” For example, they are drafting the form and working with internal technology departments, vendors, clearing firms and consultants to prepare for timely delivery via hard copy, electronic delivery methods and/or web portals; as well as developing processes to capture, supervise and audit the delivery of Form CRS.
What firms need to do now
With no extension from the SEC, firms are pushing ahead fast. Most are well along their Reg BI compliance journey and have scheduled their Form CRS delivery dates. For those that have not done so, time is of the essence.
All firms must also address “Day Two” in their Reg BI processes. This requires a plan for delivering Form CRS to prospects, new clients and more after the initial bulk mailing. It must include a plan for Reg BI training as well.
Firms will benefit from the new guidance from the SEC and a renewed review of their approach to Reg BI and Form CRS compliance. Additional useful resources include:
- Regulation Best Interest: The Broker-Dealer Standard of Conduct is the full final ruling.
- Form CRS Relationship Summary provides Form CRS detail.
- The FINRA Reg BI checklist provides a more comprehensive view of compliance requirements.
- SEC FAQs on Reg BI addresses some of the most asked questions.
- SEC FAQs on Form CRS addresses questions about Form CRS.
- The SEC Small Entity Compliance Guide homes in how smaller firms must comply.
Broadridge can help
Broadridge is open for business. We bring a powerful, unique vantage point to Reg BI and Form CRS compliance, as well as a “Day Two” solution. We’ve kept abreast of ongoing developments through conversations with scores of clients, industry participants and continuous review of ongoing Reg BI developments. From consultative engagements to full-blown education and implementation, we are helping numerous broker-dealers (and dually registered firms) and their registered representatives efficiently prepare for June 30th and beyond. The clock is ticking. Let us know how we can help your firm step up to Reg BI.
Contact Broadridge today: timothy.slavin@broadridge.com
For industry updates, visit www.broadridge.com/regbicomply
