On July 26, 2021,1 for the first time since Form CRS became effective in June of 2020,2 the Securities and Exchange Commission (the “SEC”) found that twenty-one registered investment advisers and six registered broker-dealers (collectively, “Registrants”) failed to timely file and deliver Form CRS to their retail investors.3
Registrants who have retail investors were required to file Forms CRS4 with the SEC (and the Financial Industry Regulatory Authority (FINRA) for broker-dealers) and begin delivering them to prospective and new retail investors by June 30, 2020. Registrants were also required to deliver Form CRS to existing retail investor clients or customers by July 30, 2020 and prominently post their current Form CRS on their website, if they had one.
According to the SEC’s orders, the Registrants missed their Form CRS related regulatory deadlines. The orders found that none of the Registrants filed or delivered its Form CRS, or posted it to its website, until being reminded, in some cases twice, of the missed deadlines by the SEC’s Division of Examinations or FINRA. Without admitting or denying the findings, the Registrants agreed to pay civil penalties ranging from $10,000 to $97,523.
S&K Observations
These enforcement actions emphasize the importance for Registrants that have retail investors to satisfy their Form CRS filing and delivery obligations in a timely manner. It is also a reminder of the need to have proactive and effective compliance programs. All investment advisers and broker-dealers should pay close attention when notified by regulators and take action when necessary. We recommend that Registrants take this opportunity to review the applicability of Form CRS and their compliance with the regulatory requirements of the form.
Seward & Kissel LLP, and our compliance consulting service SKRC (Seward & Kissel Regulatory Compliance), are available to assist Registrants with compliance with the requirements of Form CRS.
