313-334-7767

This past summer, many investors received what looks like a form letter in the mail from their investment firms. At first glance, many investors may have been tempted to pitch that form letter in the recycling bin without thoroughly reading the contents.

If the letter is a U.S. Securities and Exchange Commission (SEC) Form CRS, it is in an investor’s best interest to take the time to read the contents.

In June 2019 the SEC adopted a package of rules and interpretations “designed to enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers.”1 This package included a new Regulation Best Interest and two separate interpretations under the Investment Advisers Act of 1940.

The Regulation Best Interest requires that broker-dealers “act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer … making it clear that a broker-dealer may not put its financial interests ahead of the interests of a retail customer when making recommendations.”2

Also as part of this package, the SEC requires that all investment advisers and broker-dealers provide existing and new clients with a new form called a Customer Relationship Summary (CRS). Investors may also request this form at any time going forward. The SEC required that compliance begin by June 30, 2020.

The CRS form is important as it will provide investors with summary information on the following:

  • 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.3

Other information may be included based on the services provided by the firm.

To make it easier for investors to compare investment advisers and broker-dealers and make informed decisions on their investments the summary will have a standardized question and answer format. “The rules and interpretations we are adopting today address issues that the Commission has been actively considering for nearly two decades,” said SEC Chairman Jay Clayton when the rules and interpretations were adopted. “This rulemaking package will bring the legal requirements and mandated disclosures for broker-dealers and investment advisers in line with reasonable investor expectations, while simultaneously preserving retail investors’ access to a range of products and services at a reasonable cost.”4

It is crucial for investors to research the companies in which and through which they are investing. Seeking advice from an experienced Securities Attorney can help protect your rights as an investor. The Law Offices of Peter C Rageas, P.C. has over 20 years’ experience in all types of securities litigation, investment fraud, stock broker negligence and more!

If you have questions about your investments, broker misconduct, or about your broker’s management of your account, please contact our Securities Law Firm at: 313-334-7767 for a consultation.