In the SEC’s recently approved Reg BI, the SEC requires a client relationship summary, the Form CRS. This document must be presented to clients and is meant to explain the differences between broker-dealers, investment advisers and dual registrants.
In the 524-page Reg BI, it states; “For example, we are substantially revising our approach to disclosing standard of conduct and conflicts of interest to make this information clearer to retail investors, including (among other changes) eliminating the word ‘fiduciary’ and requiring firms — whether broker-dealers, investment advisers, or dual registrants — to use the term ‘best interest’ to describe their applicable standard of conduct.” This confused many advisers who were concerned that they could no longer refer to themselves as fiduciaries. However, today the SEC clarified their position by stating: “Investment advisers are fiduciaries, recognized and regulated as such by the commission. Recent commission action does not prohibit investment advisers from calling themselves fiduciaries.” The SEC prohibition on the word “fiduciary” only applies to the standard-of-conduct description in the Form CRS. Investment advisers can continue to describe themselves as fiduciaries and to market that standard of care to clients in every other way.
About Red Oak Compliance Solutions
Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry. It is a comprehensive suite of SEC 17A-4 compliant features that are 100% books and records compliant and provides clients with 35% faster approvals and 70% fewer touches or better. We also offer Smart Review(SM), which solves for the storage and maintenance of disclosures, helping firms reduce risk, decrease review times, and increase the speed of distribution of marketing materials. Smart Registration(SM) automates the licensing and registration management process to help reduce regulatory risk and time spent on manual processes. Overall, Red Oak allows firms to minimize risk, reduce costs, and increase compliance review process effectiveness and efficiencies.