It remains to be seen if the new disclosure requirements the SEC is proposing with Form CRS, which requires an eight-point disclosure—including disclosure of fees, commissions and any conflicts of interest—can be accomplished in a meaningful way in just four pages, Thompson said.
The stated mission of the new disclosure is to help investors clearly differentiate whether or not they are working with a broker with a best interest standard, an advisor with a fiduciary standard or a dually registered advisor who can take his or her advisor’s fiduciary hat on and off depending on the task at hand. Dually registered advisors create a substantial grey area when it comes to clearly explaining to consumers that sometimes they are fiduciaries and sometimes they aren’t, Thompson said.
On the advisor side, the SEC issued a separate, 38-page proposal for federally regulated RIAs. “The first half of the guidance doesn’t really have surprises, but reaffirms and clarifies the key fiduciary duties investment advisors have,” Thompson said. The second part of the proposal seeks feedback on mandating continuing education, account statements, minimum capital and fidelity bond requirements for advisors.
“The fact that [the SEC] did not put out specific rules shows that this is a sounding board,” Thompson said. “Sometimes they will do that. They send out concept releases and don’t act on those. But certainly, if this is of interest to you, I would consider getting involved and directly or indirectly commenting to the SEC.”
None of the SEC’s three proposals will apply to insurance agents who sell fixed annuities, index annuities or life insurance products because neither agents nor these products are subject to oversight from the SEC, Thompson noted. Insurance agents selling these products are also not held to a fiduciary duty now that the DOL fiduciary rule has been vacated by a court decision.