Form CRS doesn’t work — but there’s hope under the new SEC.
That was the consensus of fiduciary experts and ex-regulators at an online press conference hosted by the Institute for the Fiduciary Standard yesterday.
Despite last year’s activation of the
“Since the SEC has built its entire regulatory structure around disclosure, the least it could do is to make these mandated disclosures simple and understandable,” said former Assistant Secretary for the Department of Labor Phyllis Borzi. “And in that respect it's failed.”
But the panel, hosted by Knut Rostad, the institute’s co-founder and president, was also united in hopes for an improved Form CRS, one that draws sharper contrasts between RIAs and brokers — achieved through SEC guidance and without triggering rulemaking tripwires.
Panelists included Deborah Bosley, founder of the Plain Language Group; Michelle Richter, principal of Fiduciary Insurance Services; and former SEC Commissioner Luis Aguilar. Morningstar’s head of policy research, Aron Szapiro, also provided a statement.
The reason for their optimism is new SEC chairman Gary Gensler and his slate of SEC commissioners. “I think you've got to go back 25 years, frankly, before you find a commission that, we have reason to believe, is as attuned to investor protection and investor interests as we see now,” said Borzi.
Rostad said he is currently seeking a meeting with Gensler to discuss such SEC guidance.
“The current disclosures obscure and mislead retail investors, experts and investment professionals as to how broker-dealers and investment advisers differ.It is shameful,” Rostad said in a statement. “Fixing this disclosure does not require a congressional commission or a new study. It requires courage to tell investors the truth.”
He added, and the panel agreed, “We could start with a way to define best interest so that we knew what the heck it meant.”
In tandem with the press conference, the institute issued a white paper, a sample disclosure letter for securities firms and a model Form CRS.
Some clients are apparently not getting to see Form CRS at all. As of March, hundreds of firms had failed to file the documents with the SEC, prompting Enforcement Division Director Peter Driscoll to warn that firms not replying to the commission’s queries
Borzi noted that when she was at the Labor Department, the agency first tried to contrast the duties of brokers and investment advisors, an approach that failed “because the [semantic] landscape has been so muddied over the years.” Then, she said, “We moved to ‘let's have everybody have a baseline standard’ and I think we were more successful.”
Nevertheless, Borzi says she commends the SEC’s “deliniation” approach. “Fiduciary conduct and non-fiduciary conduct — there’s a place in the marketplace for both,” she said.
