Series 6 Exam AD Banker (Chapter 9.1 - Regulation Best Interest (BI) and Customer Relationship Summary (Form CRS)

Customer Relationship Summary Form (Form CRS)

- a form that briefly describes the firm's relationship with their clients - must be delivered to each retail customer and filed with the SEC - firms must provide the information in a specific order using specific headings for each category, which are in question and answer format (the categories include conversation starters for investors) - these give customers the precise questions to ask to obtain the desired information - IAs firms must deliver document to retail customers before or at the time the advisory contract relationship is established (this has become form ADV part 3 for IA) - BDs must deliver document to retail customers at the time of making a recommendation (must be delivered before placing an order or opening an account for retail customers) - existing customers must receive before new account opening - firms must update form CRS with the SEC within 30 days of the event causing material change - customer must receive updated form CRS within 60 days - firms must deliver form CRS to retail customer within 30 days of request - record keeping requirement is 6 years from date of last use for BDs and 5 years for IAs - the following lists the categories required and the specific headings that are to be used in each category: - introduction - relationship and services - fees, costs, conflicts, and standard of conduct - disciplinary history - additional information

Disclosure Obligation (RBI)

- all required disclosures must be made, before or at the time of the recommendation, about the recommendation and the relationship with the retail customer - this obligation also includes material facts relating to any conflicts of interest involved with the recommendation

Care Obligation (RBI)

- all those making recommendation must use reasonable diligence, care, and skill - firms must understand the potential risks, rewards, and costs involved with the recommendation - any recommendations must take into consideration the customer's investment profile and be in the customer's best interest

Regulation Best Interest (BI)

- established new standards for broker-dealers when dealing with retail customers - the goal was to increase transparency when recommending an investment or investment strategy and insure that firms are acting in the best interest of all customers - 4 components needed to meet the general obligations of Regulation BI: - disclosure obligation - care obligation - conflict of interest obligation - compliance obligation

Conflict of Interest Obligation (RBI)

- firms must establish, maintain, and enforce written policies designed to address conflicts of interest associated with any recommendations

Compliance Obligation (RBI)

- firms must establish, maintain, and enforce written policies to achieve compliance with Regulation BI

Additional Information (CRS)

- must include information about where an investor can find additional information about the firm including how to obtain a copy of the relationship summary - must include a telephone number - conversation starter included

Disciplinary History (CRS)

- specific heading for all firms: "do you or your financial professionals have legal or disciplinary history?" - conversation starters included - this section must include a link to Investor.gov/CRS for a free and simple search tool to research financial professionals and firms

Fees, Costs, Conflicts, and Standard of Conduct (CRS)

- specific heading for all firms: "what fees will I pay?" - conversation starters included - specific heading for broker-dealers: "what are your legal obligations to me when providing recommendations? how else does your firm make money and what conflicts of interest do you have?" - specific heading for investment advisers: "what are your legal obligations when acting as my investment adviser? how does your firm make money and what conflicts of interest do you have?" - specific heading for dually registered firms: "what are your legal obligations to me when providing recommendations as my broker-dealer or when acting as my investment adviser? how else does your firm make money and what conflicts of interest do you have?" - conversation starters included - specific heading for all firms: "how do your financial professionals make money?"

Relationship and Services (CRS)

- specific heading for all firms: "what investment services and advice can you provide me?" - conversation starters included