Originally published August 5, 2018:
Regulators are talking about you, and they want you to talk with them before Tuesday, Aug. 7. That’s the deadline for submitting comments to regulators who want your point of view before they finalize new regulations that will impact how the financial industry communicates with you. You can provide comments quickly and easily online, as I’ll explain shortly.
But first, let me emphasize that it’s going to be worth your while to read the proposed “Relationship Summary” documents that financial firms will be required to provide to you.
There are three versions. One is for people who are interested in working with “brokers,” another for “advisers” and a third for “dually registered firms,” which are firms such as Merrill Lynch and UBS that are regulated both as brokers and advisers. Financial professionals who work for dually registered firms are called “dually hatted financial professionals.”
If those terms (brokers, advisers and dually registered) are not clear to you, it will be important to see if the relationship summaries help you understand the differences — enough so that you can choose who you want to be your financial professional. That’s the Securities and Exchange Commission’s goal.
As you read each document (they are short), keep in mind that you are looking for clarity. Do the documents help you understand who’s who, and, more importantly, who you would want to work with? (I’m holding back from defining terms for you for that reason.):
- “Is a Brokerage Account Right For You?” This disclosure applies to “stand-alone brokers.” Go to: https://tinyurl.com/y7b3kmh3.
- “Is An Investment Advisory Account Right For You?” This disclosure applies to “stand-alone advisers.” Go to: https://tinyurl.com/ya2f3ft9.
- “Which Type of Account is Right for You — Brokerage, Investment Advisory or Both?” This form applies to dually registered firms. Go to: https://tinyurl.com/y8nhp9yw.
After you read each document, the SEC would like you to fill out a form called “Your Relationship with Your Financial Professional: Feedback on the Relationship Summary.” Go to: https://tinyurl.com/y968zzox.
Why is it important for you to read and comment on these documents? These summaries are intended to clarify the confusion that the SEC believes you are laboring under when transacting with the financial services industry.
The SEC also believes that these disclosures will lead you to discuss the differences among financial providers with friends and family.
Quoting from the release: “[R]ecipients of the Relationship Summary, to the extent they discuss investing in general, may discuss the topics covered in the summary with family and friends and in the process increase the degree of public awareness about the issues discussed in the disclosure.”
How can you submit comments to the SEC? That’s easy. Go to: https://tinyurl.com/yc7xctsr. And you can read comments made so far by other members of the public here: https://tinyurl.com/yd7k5bxr.
To read the entire 471-page proposal, which is called “Form CRS Relationship Summary; Amendments to Form ADV; Required Disclosures in Retail Communications and Restrictions on the use of Certain Names or Titles,” go to: https://tinyurl.com/ybgaaqph. By the way, in the proposal, the SEC is requesting answers to 743 questions.
A related proposal called “Regulation Best Interest” is 408 pages long and requests answers to an additional 384 questions. Go to: https://tinyurl.com/yajkldyv.
If you consider yourself a confident and informed investor, you will want to check your knowledge by reading these two proposals. They are gold mines for setting out the standards and problems that relate to the regulatory structure defining financial services providers. They are essential reading for the serious investor.
To read Julie Jason's books, go to: https://juliejason.com/books/julies-books