Firms Should Move Full Steam Ahead on Regulation Best Interest and Form CRS

In an April 2, 2020 statement regarding the SEC’s approach to the allocation of resources, oversight and rulemaking in light of the COVID-19 coronavirus, SEC Chairman Jay Clayton discussed Regulation Best Interest (Reg BI) and Form CRS. In particular, Chairman Clayton stated that the SEC currently has no plans to extend the June 30, 2020 compliance date for Reg BI and Form CRS, or the filing dates for Form CRS.

Chairman Clayton encouraged firms that are unable to meet the requirements of Reg BI or Form CRS as a result of the COVID-19 coronavirus (e.g., due to national, state or local health and safety directives and guidance) to discuss their particular challenges, including any operational or resource issues, with the SEC staff. However, Chairman Clayton offered no possibility of extensions, whether on an industry-wide or case-by-case basis. Rather, he said that the impact of unforeseen circumstances on firms likely will be considered in the SEC’s examination and enforcement efforts.

Chairman Clayton noted that that in the initial period following June 30, the SEC’s examination program will focus on whether broker-dealers “have made a good faith effort to implement policies and procedures necessary to comply with Reg BI.” In anticipation of these examinations, Chairman Clayton stated that the Office of Compliance Inspections and Examinations will shortly issue two Risk Alerts that, respectively, will provide guidance to (1) broker-dealers regarding the scope and content of initial examinations for Reg BI, and (2) broker-dealers and investment advisers with similar information regarding examinations for Form CRS.