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SEC Committee Recommends Firms Improve Form CRS Disclosures
Wednesday, December 22, 2021

The SEC Standards of Conduct Implementation Committee (the "Committee") called on firms to improve their Form CRS relationship summary disclosures. The Committee previously reviewed firms' compliance with Form CRS and released preliminary findings in October 2020, focusing on a number of areas where firms could make improvements to Form CRS disclosures.

In the statement, the Committee highlighted a number of areas where Form CRS disclosures should be improved, including by:

  • removing technical language, legal terminology and disclaimers lacking clear explanation;

  • correcting omissions or improper modifications of required disclosures in the form, including those "related to conflicts of interest, investment authority, monitoring services, and disciplinary history";

  • updating disclosures to reflect the final, rather than proposed, instructions to Form CRS;

  • including detailed cross-references to required information in other forms, such as services, fees and costs, and conflicts of interest;

  • disclosing in more detail key information such as monitoring procedures, investment authority, limited investment offerings, standards of conduct and compensation arrangements;

  • adhering strictly to reporting requirements when answering questions about disciplinary history;

  • posting a current and prominently visible relationship summary on the firm's websites;

  • clearly describing relationships between affiliated firms;

  • removing superlative and boilerplate language; and

  • improving designs that detract from the form's legibility.

Commentary

This is an important guidance for firms to review to improve CRS disclosures regarding relationship summaries - which has heightened focus from the regulators as well as clients and investors.  As such, firms should consider using this guidance to enhance disclosures regarding affiliate relationships not only in Form CRS but also in other communications and documentation provided to clients and investors.

Primary Sources

  1. Staff Statement Regarding Form CRS Disclosures

  2. Form CRS Final Instructions

  3. Form CRS Proposed Instructions

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