Reminder: Form CRS Acknowledgement Requirements

October 5, 2021    Compliance & Licensing, Operations

Regulation Best Interest (“Reg BI”) introduced a new disclosure document, Form CRS (Client Relationship Summary), which has specific delivery and record retention requirements.  This Notice is to serve as a reminder as to the requirements for the Form CRS acknowledgement form.

When Form CRS is Required

For new customers:

  1. For new brokerage and direct business customers, Form CRS must be delivered prior to or at the time of:
    1. Opening an account or changing the broker/dealer on a direct business account;
    2. Recommending an account type, securities transaction, or investment strategy that involves securities (e.g. recommending a customer open a brokerage account, or purchase a specific security or variable product), or
    3. Placing an order for the retail investor. 
  2. For new advisory clients, the Form CRS must be delivered prior to or at the time of entering into an advisory contract with the investor.
    1. Required for co-advised (Illuminations, Directions, Morningstar, and SEI, Schwab Retirement Advisor Services, and American Funds Retirement Plan Solutions),
    2. Only required for solicitor accounts when there is a recommended rollover.

For Existing Customers:

Reg BI specifies certain other instances which trigger subsequent delivery requirements.  Form CRS must be delivered to existing customers when you:

  1. Open a new account that is different from their existing account(s);
  1. Recommend a rollover from a qualified plan into a new or existing account;
  1. Recommend or provide a new brokerage or advisory service or investment that doesn’t necessarily involve the opening of a new account and would not be held in an existing account (e.g. ownership changes).

These subsequent delivery requirements apply to both broker-dealer and advisory customers.

Acknowledgement of Form CRS Delivery Form

Generally, recommendations, account establishment, and trading orders occur in conjunction with completing some form of account paperwork.  Therefore, Form CRS is included in the new account kit available through Docupace Starting Point.  If you do not use Starting Point, you must ensure the Form CRS is the first document provided to the customer when completing new account paperwork. 

Prospective Customers Who Do Not Open an Account

If, prior to actually providing account paperwork, you make a recommendation that triggers the Form CRS delivery requirement to a prospective customer (i.e. an investor who doesn’t already have a business relationship with ESI), you must provide them with the Form CRS, and then you must document delivery by completing the Acknowledgement of Form CRS Delivery (“Acknowledgement”), which is bundled with our Form CRS (please refer to ESI Form ES0717).  The Acknowledgement form is a record of delivery and must be retained for six years from the date of delivery, in accordance with the instructions provided below (see “Form CRS prospective client file”). 

Form CRS Prospective Client File

Prospective customers will not yet have an established Docupace client file. Therefore, the acknowledgement for prospective clients will be maintained in print form in a Form CRS Prospective Client File. The Form CRS Prospective Client File is a required book and record to be maintained in all branch offices and FOSJs (similar to the Complaint File or the Seminar File).

  • If you complete an Acknowledgement for a prospective customer, ensure the Acknowledgement is added to the Form CRS Prospective Client File in your branch or FOSJ (which ever you are located in).
    • There is no requirement to submit the acknowledgements to your FOSJ if you are in a detached branch office, or for your supervisor to approve them.
    • Acknowledgements are to be maintained in the branch file as a record of delivery. The file will be subject to review during office examinations.
  • The Acknowledgement must be kept for 6 years from the date of delivery, regardless of whether or not the individual ever opens an account through ESI.
  • If the prospect becomes a client, add the Acknowledgment to their Docupace client file. It would be acceptable to submit the acknowledgement along with the new account paperwork when they become a client.
  • The Field Office Books & Records Table reflects that the Form CRS Prospective Client File requirement.

QUESTIONS

If you have any questions, please feel free to contact Compliance at 800-344-7437.

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