Tips for Updating Your Compliance Program: Form CRS
Compliance officers face the thankless task each year of reviewing their policies and procedures to determine their adequacy and effectiveness, as required by Advisers Act Rule 206(4)-7. This review entails updating the firm's compliance program to reflect changes to relevant regulations and new regulatory guidance, and confirming the program is appropriately followed by the firm.
We’ve compiled a series of tips to help you focus on the U.S. Securities and Exchange Commission (SEC) focus areas for 2023. You can read our previous tips here:
- Tip 1: Get ready for SEC focus on hedge clauses in advisory agreements
- Tip 2: Keep tabs on Continuing Education requirements
- Tip 3: Update your compliance program to address the SEC Risk Alert about MNPI compliance issues
- Tip 4: Prepare for an SEC examination focused on Marketing Rule compliance
- Tip 5: Update Your Compliance Program to Prevent Identity Theft Under Regulation S-ID
- Tip 6: Environmental, Social, and Governance (ESG)
- Tip 7: Electronic Communications
- Tip 8: Prohibited Transaction Exemption
- Tip 9: Conflicts of Interest
- Tip 10: Fiduciary Standard
Tip #11 – Review and Update Your Form CRS
On February 15, 2022, the SEC charged twelve firms for failure to meet Form CRS obligations. Each missed regulatory deadlines, which included the Form CRS delivery to clients and posting Form CRS on the firm's website. In addition, the SEC found that certain firms omitted specific information and required language from their Form CRS. Counting the 21 cases brought in 2021, the SEC has now charged forty-two financial firms for failing to meet their Form CRS obligations.
- Confirm that Form CRS has been filed with the SEC.
- Perform testing to ensure that Form CRS is delivered to clients and prospects. Firms are required to deliver the Form CRS to clients upon the occurrence of any of the following:
- any time the firm opens a new account that is different from the client’s existing account(s)
- when the firm recommends that the client roll over assets from a retirement account into a new or existing account or investment
- when the firm recommends or provides a new investment advisory service or investment that does not necessarily involve the opening of a new account and would not be held in an existing account
- Confirm the firm has prominently posted Form CRS on its website, the link works, and the version posted is current.
- Review Form CRS periodically to ensure it is consistent with the firm’s business practices, Form ADV disclosures, policies and procedures, agreements, websites, social media sites, marketing materials, and discipline history, if any.
- Review the SEC’s Standards of Conduct Implementation Committee’s Statement for more guidance.
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Designed by former regulators and compliance experts, ACA Signature provides services and solutions tailored to fulfill your firm’s ongoing compliance obligations. Our team includes former SEC, FINRA, FCA, NFA, CFTC, and state regulators along with former Chief Compliance Officers and senior compliance managers from prominent financial institutions in the industry. With over 20 years’ experience in the compliance industry, ACA is synonymous with quality compliance support.
Reach out to your ACA consultant, or contact us to find out how ACA Signature can help transform your firm’s compliance program.
Listen to our 2023 Regulatory Outlook webcast on demand
We recently hosted a webcast to review the regulatory changes that will likely have implications on compliance programs in 2023, and provide recommendations to prepare for these changes. Our experts discussed rule proposals and adoption, examination and enforcement trends, and regulatory guidance. Watch our webcast for more insights to help you prepare your compliance program for this year’s focus areas.