A prominent investment advisors trade group sent new Securities and Exchange Commission Chairman Gary Gensler a letter this week asking him to test form CRS, create meaningful ESG disclosures for advisors and their clients and encourage e-delivery of investor materials.
The Investment Adviser Association sent what it termed its “critical adviser issues” agenda to Gensler as he formulates his regulatory agenda for the agency and for the approximately 13,000 federally registered investment advisers it oversees.
“Fiduciary advice has never been more important to consumers’ ability to save and invest for the future,” IAA President and CEO Karen Barr wrote to Gensler. “As fiduciaries, investment advisers have a special relationship of trust and confidence with their clients, acting in their clients’ best interest throughout and with respect to all aspects of their advisory relationship.”
While IAA supports Regulation Best Interest advice rules, it called on Gensler to test the efficacy of Form CRS (or Customer Relationship Summary)—the critical consumer disclosure piece that is supposed to highlight a professional’s level of service, compensation and conflicts of interest.
Barr said the IAA believes the rulemaking has “the tools to achieve its investor protection goals through the SEC’s meaningful interpretation, implementation, and enforcement of its provisions. But he aadded that the group “also supports the need for investor testing as to the effectiveness of form CRS, and stands ready to work with the commission to ensure the package as implemented is effective in educating and protecting investors.”
Testing done by trade and industry organizations such as AARP and the Consumer Federation of America have said that the disclosure form confuses investors regarding the level of care they’d receive from their investment professional, what they’d pay for the services and what underlying conflicts of interest might cost them.
IAA also asked the agency to make e-delivery of client communications a default option and create a principles-based custody rule that reduces confusion and provides clear rules advisors can use to safekeep client assets, including digital assets. In addition, the trade group asked the agency to streamline and update “the unnecessarily complex pay-to-play rule” governing advisor political donations.
The IAA wants the agency to consider the economic impact of regulations on smaller advisory firms “more carefully and conduct a more realistic assessment of the cumulative impact of policy and regulatory decisions on these firms’ businesses and their ability to serve the investing public,” Barr said.
Barr also called on Gensler to facilitate advisors’ ability to engage in sustainable investing, "including development of a framework for issuer disclosure to inform such investing."
In a fireside chat at Finra’s annual conference yesterday, Gensler said he wanted to create a system that encouraged companies to disclose their important environmental, societal and governance activities in a meaningful way.
FOX Business broke the story earlier this week that the agency was sending its regulated enities inquiries asking detailed questions about their ESG disclosures, including identifying their investments in entities that import raw materials from countries that finance war or have forced labor anywhere in their global supply chains.
The agency will also be monitoring the racial diversity of corporate boards, Barr said.