Form CRS

Redmayne Wealth, an SEC-registered adviser serving retail clients, is preparing its Form CRS relationship summary. Which statement about that document is correct?

1. A.It is prepared once and never updated, because it describes the relationship as it stood at inception.Incorrect. Form CRS must be amended when its information becomes materially inaccurate.
2. B.It is delivered only on request, and only to clients with more than $1 million of assets.Incorrect. It goes to every retail investor at or before the agreement, with no asset threshold.
3. C.It is a short, length-limited plain-English summary delivered before or at the time of entering the advisory agreement, includes prescribed conversation starter questions, and supplements rather than replaces the Part 2A brochure.Correct. Form CRS is brief, delivered at or before contract, contains conversation starters, and does not displace the brochure.
4. D.It replaces the Form ADV Part 2A brochure for retail clients, who receive only the relationship summary.Incorrect. Both documents must be delivered; Form CRS was never intended to carry the brochure detail.

Why: Form CRS, filed as Part 3 of Form ADV, is a short plain-English summary subject to a strict length limit. It must be delivered to a retail investor before or at the time the firm enters into an advisory agreement, and it must include the prescribed conversation starter questions the investor is encouraged to ask. It is deliberately a supplement, not a substitute: the Part 2A brochure still has to be delivered, because Form CRS is far too short to carry the detail the brochure rule requires. It must also be amended when the information in it becomes materially inaccurate.

Ottershaw Securities has finished drafting its relationship summary, Form CRS. Beyond delivering it to retail investors at the required times, the firm must:

1. A.Provide it only to those retail investors who request a copyDelivery is required at set trigger points, and the document must also be posted publicly.
2. B.Do nothing further, since delivery to retail investors satisfies the requirementDelivery is one of three obligations; filing and public posting are the others.
3. C.File it with FINRA advertising regulation and retain a copy for three yearsForm CRS is filed with the SEC. It is not an advertising filing.
4. D.File it electronically with the SEC and post the current version prominently on its public website, updating both when it is amendedCorrect. Form CRS is filed and publicly posted, and amendments must be filed and communicated to existing retail customers.

Why: Form CRS is a filed, public document. The firm must file it electronically with the SEC and post the current version prominently on its public website so that anyone can find it without asking. When the summary is amended, the amendment is filed and the updated version must be communicated to existing retail customers within the prescribed period.

Silverbrook Securities changes its retail fee schedule, and the description of fees in the firm's Form CRS relationship summary is now materially inaccurate. What must Silverbrook do about the relationship summary?

1. A.Give the amended summary only to investors who open accounts after the change; existing customers receive it at their next scheduled account reviewExisting retail investors must be told about the changes within 60 days; the firm cannot wait for an account review.
2. B.File an amended relationship summary within 30 days of the information becoming materially inaccurate, and communicate the changes to existing retail investors within 60 days after the amendment is required, at no chargeCorrect. Material inaccuracies trigger a 30-day amendment-and-filing obligation and a 60-day communication obligation to existing retail investors, delivered free of charge.
3. C.File the amendment with FINRA's Advertising Regulation Department within 10 business days of first useThat is the retail communication filing deadline under FINRA Rule 2210. Form CRS is filed with the SEC.
4. D.Wait until the next annual update, because the relationship summary is refreshed only once each calendar yearForm CRS is not an annual-only document. A material inaccuracy must be corrected promptly under the 30-day rule.

Why: A relationship summary must stay accurate. When information in Form CRS becomes materially inaccurate, the firm must file an amended summary within 30 days and then communicate the changes to existing retail investors within 60 days after the amendment is required to be made, free of charge. The relationship summary is not an annual-only document, and it is filed with the SEC through the electronic filing system, not with FINRA's Advertising Regulation Department.

A representative at Kestrel Wealth meets a new retail customer, and at the close of the meeting recommends a specific mutual fund. The firm delivered its relationship summary when the relationship began. Under Regulation Best Interest's DISCLOSURE Obligation, what does the firm owe this customer with respect to the recommendation?

1. A.Nothing further, because the relationship summary already delivered satisfies the Disclosure Obligation.Wrong. The relationship summary is a separate requirement and does not substitute for Reg BI's recommendation-level disclosure.
2. B.Before or at the time of the recommendation, full and fair written disclosure of the material facts about the scope and terms of the relationship, including capacity, fees and costs, services, material limitations, and the material facts about conflicts of interest.Correct. That content and that timing are exactly what the Disclosure Obligation requires.
3. C.A written summary of its conflicts of interest delivered within 30 days after the recommendation.Wrong on timing. Disclosure must precede or accompany the recommendation, not follow it.
4. D.Oral disclosure of its compensation, and only if the customer asks.Wrong. The obligation is affirmative and written; it does not wait for a customer question.

Why: The Disclosure Obligation requires a broker-dealer to provide full and fair written disclosure of all material facts about the scope and terms of the relationship, before or at the time of the recommendation. That includes the capacity in which the firm and the representative are acting, the fees and costs the customer will pay, the type and scope of services provided, and any material limitations on the securities or strategies that may be recommended, along with the material facts about conflicts of interest tied to the recommendation. Delivering the relationship summary is a separate SEC requirement and does not discharge the Disclosure Obligation.