An update on Reg BI by Knut A. Rostad
Does it matter that the “F” word is banned on Form CRS? The SEC’s broker standard, Reg BI, argues against “mandated . . . one size fits all” compliance mitigation measures.
Instead, it champions ‘choice.’ That is, to allow BDs “flexibility” to write their own policies and procedures “based on each firm’s circumstances.”
But when it comes to letting investment advisers call themselves fiduciaries on Form CRS, choice is gone and ‘one size does fit all’. Here’s how:
On the mandated Reg BI Form CRS, in the section where prescribed language is required, the SEC prohibits investment advisers from disclosing to investors they adhere to a fiduciary standard. The “F” word is essentially banned here. Instead, exactly like brokers and dual registrants, advisers are required to disclose — no ifs, ands or buts — what brokers believe they already do under FINRA: “We have to act in your best interest and not put our interest ahead of yours.”
The explanation: According to Reg BI, retail investors do not understand “fiduciary.” The lesson: Get comfortable in ‘One size fits all.’