Investment advisers registered with the U.S. Securities and Exchange Commission will begin filing their initial Form CRS on May 1, 2020 through the IARD system. They will need to file their initial Form CRS no later than June 30, 2020. Pursuant to the instructions to Form CRS, existing clients must be delivered an initial Form CRS within 30 days after the date that the investment adviser is first required to file the Form CRS (i.e., by July 30, 2020).
For investment advisers with fiscal year ends that end in the calendar year, they must file an annual updating amendment to Form ADV within 90 days of the calendar year end (i.e., March 30). Each year, these investment advisers must also deliver within 120 days of the end of your fiscal year (i.e., April 30), to each client:
- a free updated brochure that either includes a summary of material changes or is accompanied by a summary of material changes (“Brochure Delivery”), or
- deliver to each client a summary of material changes that includes an offer to provide a copy of the updated brochure and information on how a client may obtain the brochure (“Offer Delivery”).
Given that the Brochure Delivery or the Offer Delivery is generally required to be made by April 30, it places a great burden on adviser to make an additional delivery of their initial Form CRS by July 30. This is especially true for advisers who do not have mechanisms to deliver regulatory disclosures through electronic means and have a large number of retail investors who will need to receive an initial Form CRS. This leaves advisers with only a couple of options. Each of these options is outlined below in a diagram discussing their pros and cons.
The adviser could deliver its initial Form CRS at the the same time they make a Brochure Delivery or Offer Delivery. (i.e., by April 30)
The adviser could deliver its Form CRS between May 30, 2020 and July 30, 2020
Reduces number of communications to clients; reduces mailing costs; reduces operational time and costs
Delivery would be made in strict conformity with the instructions to Form CRS
Would be delivered before the legal requirement to prepare or deliver Form CRS becomes effective; additional guidance could be released on the form or delivery obligations; the form could be repealed
Increases the number of communications to clients; increases mailing costs; increases operational time and costs