The rulemaking package of June 5, 2019 has two “overarching objectives” according to then SEC Chair Jay Clayton. First, to bring the conduct standards and the “related mandated disclosures in line with reasonable investor expectations”. Second, to “preserve retail investor access” – regarding choice and cost – to investment services and products.
Behind these objectives is the often-stated urgency that drives much thinking on retail investors. The urgency is investor “confusion”. It is an influencer in the rulemaking that is hard to overstate. Chair Clayton cited investor confusion in two of three reasons for the “Need for action” for rulemaking. The Form CRS Release states CRS exists “to reduce retail investor confusion in the market-place for brokerage and investment advisory services” and research continues to show that investors are confused by “the differences” between broker-dealers and investment advisers. Clayton said CRS provides “succinct information about the relationships and services”. “Material information” must be disclosed.
This backdrop sets out what the rulemaking and Form CRS seek to do. Form CRS seeks to bridge the gap between professional reps and ordinary investors — through plain language words that inform and matter. The Institute reviewed 29 BD / IA and 12 RIA CRS forms. This paper reports our findings. The Plain Language Group report reviewing six CRS forms for readability and best practices is attached.
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Download the full paper here or below.