By June 30, 2020, brokers and firms will be required to issue a Form CRS Relationship Summary to customers. The Form CRS by the Financial Industry Regulatory Authority will require brokers and firms to tell clients how they’re monitoring investments, what services are offered, fees, costs, potential conflicts and other vital information needed to make informed decisions about investments.
FINRA members may be confused and even panic over these new reports they will have to deliver to clients. Luckily, FINRA has released a checklist that includes the U.S. Securities and Exchange’s Regulation Best Interest (Reg BI). Here are some of the biggest things to check for from the list.
–Consider care, skill and costs when making recommendations to clients. A client should always know what he or she is going to pay for a specific security. Beyond the purchase price, clients should also be informed of costs related to sales or exchanges of the security, such as a deferred sales charge or liquidation cost.
–What does your firm do against conflicts of interest? FINRA requires firms to have written policies that identify and disclose or eliminate all conflicts of interest. A conflict of interest is defined as an interest that may cause a broker to make a recommendation for, especially if that security is not in the best interest of the client.
–Does your firm have policies that prevent sales contests and bonuses for specific securities? This rule is in place to help prevent conflicts of interest. FINRA does point out bonuses for total products sold or customer satisfaction is not prohibited.
-Your relationship history in the Form CRS should include detailed information about your firm. Customers should know if the firm is registered with the SEC. Clients should also know what fees are associated with each firm and be informed of free search tools available at investor.gov. CRS require quite a bit of information about firms and brokers, including relevant disciplinary history, fees and costs that help the firm make money, and a description of all the services and advices that can be offered. FINRA reminds brokers to not use the terms “adviser” or “advisor” unless you are a registered municipal advisor, an advisor to a special entity or a registered commodity trading advisor.
You can read the full checklist on FINRA’s website here.
The Spencer Law Firm’s attorneys litigate securities related proceedings such as FINRA arbitration and enforcement actions. If you have any questions regarding FINRA or if you have a FINRA arbitration or enforcement action and need assistance, please feel free to call Bonnie Spencer at the Spencer Law Firm at (888)237-459 to see what we can do for you. You can also visit us at Spencer-Law.com or at our office at 4635 Southwest Freeway, Suite 900, Houston, Texas, 77027.