Form CRS Relationship Summary; Amendments to Form ADV

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Conformed to Federal Register version 
SECURITIES AND EXCHANGE COMMISSION 
17 CFR Parts 200, 240, 249, 275, and 279 
[Release Nos. 34-86032; IA-5247; File No. S7-08-18] 
RIN 3235-AL27 
Form CRS Relationship Summary; Amendments to Form ADV 
AGENCY:  Securities and Exchange Commission. 
ACTION:  Final rule. 
SUMMARY:  The Securities and Exchange Commission (the “Commission” or the “SEC”) is 
adopting new rules and forms as well as amendments to its rules and forms, under both the 
Investment Advisers Act of 1940 (“Advisers Act”) and the Securities Exchange Act of 1934 
(“Exchange Act”) to require registered investment advisers and registered broker-dealers 
(together, “firms”) to provide a brief relationship summary to retail investors.  The relationship 
summary is intended to inform retail investors about: the types of client and customer 
relationships and services the firm offers; the fees, costs, conflicts of interest, and required 
standard of conduct associated with those relationships and services; whether the firm and its 
financial professionals currently have reportable legal or disciplinary history; and how to obtain 
additional information about the firm.  The relationship summary will also reference 
Investor.gov/CRS, a page on the Commission’s investor education website, Investor.gov, which 
offers educational information to investors about investment advisers, broker-dealers, and 
individual financial professionals and other materials.  Retail investors will receive a relationship 
summary at the beginning of a relationship with a firm, communications of updated information 
following a material change to the relationship summary, and an updated relationship summary 

 
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upon certain events.  The relationship summary is subject to Commission filing and 
recordkeeping requirements. 
DATES: Effective dates:  The rules and form are effective September 10, 2019. 
Compliance dates: The applicable compliance dates are discussed in section II.D.   
FOR FURTHER INFORMATION CONTACT:  Gena Lai, James McGinnis, Elizabeth 
Miller, Sirimal R. Mukerjee, Olawalé Oriola, Alexis Palascak, Benjamin Tecmire, Roberta 
Ufford, Jennifer Porter (Branch Chief),  Investment Adviser Regulation Office at (202) 551-6787 
or [email protected]; Benjamin Kalish and Parisa Haghshenas (Branch Chief), Chief Counsel’s 
Office at (202) 551-6825 or [email protected], Division of Investment Management; Alicia 
Goldin, Emily Westerberg Russell, Lourdes Gonzalez (Assistant Chief Counsel), Office of Chief 
Counsel, Division of Trading and Markets, at (202)-551-5550 or [email protected], 
Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. 
SUPPLEMENTARY INFORMATION:  The Commission is adopting new rule 17 CFR 
275.204-5 [rule 204-5] under the Investment Advisers Act of 1940 [15 U.S.C. 80b]
1
 and is 
adopting amendments to Form ADV to add a new Part 3: Form CRS [17 CFR 279.1] under the 
Advisers Act.  The Commission is also adopting amendments to rules 17 CFR 275.203-1 [rule 
203-1]  , 17 CFR 275.204-1 [rule 204-1], and 17 CFR 275.204-2 [rule 204-2] under the Advisers 
Act.  The Commission is adopting new rule 17 CFR 240.17a-14 [rule 17a-14]
2
 under the 
                                                                                                                                                             
1
  15 U.S.C. 80b. Unless otherwise noted, when we refer to the Advisers Act, or any paragraph of the 
Advisers Act, we are referring to 15 U.S.C. 80b, at which the Advisers Act is codified, and when we refer 
to rules under the Advisers Act, or any paragraph of these rules, we are referring to Title 17, Part 275 of the 
Code of Federal Regulations [17 CFR 275], in which these rules are published. 
2
  15 U.S.C. 78a. Unless otherwise noted, when we refer to the Exchange Act, or any paragraph of the 
 

 
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Securities Exchange Act of 1934 and new Form CRS [17 CFR 249.641] under the Exchange 
Act.  The Commission is also adopting amendments to rules 17 CFR 240.17a-3 [rule 17a-3] and 
17 CFR 240.17a-4 [rule 17a-4] under the Exchange Act.  The Commission is also adopting 
amendments to rule 17 CFR 200.800 [rule 800].  
Table of Contents 
I. INTRODUCTION 
II. Form CRS Relationship Summary 
A. Presentation and Format 
1. Limited Prescribed Wording 
2. Standard Question-and-Answer Format and Other Presentation Instructions 
3. Electronic and Graphical Formats, and Layered Disclosure 
4. Conversation Starters 
5. Presentation of Relationship Summaries by Dual Registrants and Affiliated 
Firms
 
B. Items 
1. Introduction 
2. Relationships and Services 
3. Summary of Fees, Costs, Conflicts, and Standard of Conduct 
4. Disciplinary History 
5. Additional Information 
6. Proposed Items Omitted in Final Instructions 
C. Filing, Delivery, and Updating Requirements 
1. Definition of Retail Investor 
2. Filing Requirements 
3. Delivery Requirements 
4. Updating Requirements 
D. Transition Provisions 
E. Recordkeeping Amendments 
                                                                                                                                                             
Exchange Act, we are referring to 15 U.S.C. 78a, at which the Exchange Act is codified, and when we refer 
to rules under the Exchange Act, or any paragraph of these rules, we are referring to Title 17, Part 240 of 
the Code of Federal Regulations [17 CFR 240], in which these rules are published. 

 
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III. Disclosures about a Firm’s Regulatory Status and a Financial 
Professional’s Association 
IV. Economic Analysis 
A. Introduction 
B. Baseline 
1. Providers of Financial Services 
2. Investor Perceptions about the Marketplace for Financial Services and 
Disclosures
 
3. Investor Responses to Disclosures about Financial Professionals and Firms 
C. Broad Economic Considerations 
D. Economic Effects of the Relationship Summary 
1. Retail Investors 
2. Broker-Dealers and Investment Advisers (Registrants) 
3. Impact on Efficiency, Competition, and Capital Formation 
4. Alternatives to the Relationship Summary 
V. Paperwork Reduction Act Analysis 
A. Form ADV 
1. Respondents:  Investment Advisers and Exempt Reporting Advisers 
2. Changes in Average Burden Estimates and New Burden Estimates 
3. Total Revised Burden Estimates for Form ADV 
B. Rule 204-2 under the Advisers Act 
1. Changes in Burden Estimates and New Burden Estimates 
2. Revised Annual Burden Estimates 
C. Rule 204-5 under the Advisers Act 
1. Respondents:  Investment Advisers 
2. Initial and Annual Burdens 
D. Form CRS and Rule 17a-14 under the Exchange Act 
1. Respondents:  Broker-Dealers 
2. Initial and Annual Burdens 
E. Recordkeeping Obligations under Exchange Act Rule 17a-3 
F. Record Retention Obligations under Exchange Act Rule 17a-4 
1. Changes in Burden Estimates and New Burden Estimates 
2. Revised Annual Burden Estimates 
VI. Final Regulatory Flexibility Analysis 
A. Need for and Objectives of the Amendments 
B. Significant Issues Raised by Public Comments 
C. Small Entities Subject to the Rule and Rule Amendments 
1. Investment Advisers 
2. Broker-Dealers 
D. Projected Reporting, Recordkeeping, and Other Compliance Requirements 

 
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1. Initial Preparation and Filing of the Relationship Summary 
2. Delivery and Updating Requirements Related to the Relationship Summary 
3. Recordkeeping Requirements Related to the Relationship Summary 
E. Agency Action to Minimize Effect on Small Entities 
VII. Statutory Authority 
Text of the Rule and Form 
  
I. INTRODUCTION 
Individual investors rely on the services of broker-dealers and investment advisers when 
making and implementing investment decisions.  Research continues to show that retail investors 
are confused about the services, fees, conflicts of interest, and the required standard of conduct 
for particular firms, and the differences between broker-dealers and investment advisers.
3
  We 
are adopting a new set of disclosure requirements designed to reduce retail investor confusion in 
the marketplace for brokerage and investment advisory services and to assist retail investors with 
the process of deciding whether to engage, or to continue to engage, a particular firm
4
 or 
financial professional and whether to establish, or to continue to maintain, an investment 
advisory or brokerage relationship.
5
  Firms will deliver to retail investors a customer or client 
                                                                                                                                                             
3
  Brian Scholl, et al., SEC Office of the Investor Advocate and RAND Corporation, The Retail Market for 
Investment Advice (2018), available at https://www.sec.gov/comments/s7-07-18/s70718-4513005-
176009.pdf (“OIAD/RAND”) (finding that participant understanding of types of financial services and 
financial professionals continues to be low).  The SEC’s Office of Investor Advocate and the RAND 
Corporation prepared this research report regarding the retail market of investment advice prior to, and 
separate from, our rulemaking proposal.  This report was included in the comment file at 
https://www.sec.gov/comments/s7-07-18/s70718-4513005-176009.pdf. 
4
  For purposes of this release, the term “firm” includes sole proprietorships and other business organizations 
that are registered as (i) an investment adviser under section 203 of the Advisers Act; (ii) a broker-dealer 
under section 15 of the Exchange Act; or (iii) a broker-dealer under section 15 of the Exchange Act and as 
an investment adviser under section 203 of the Advisers Act. 
5
  The requirements adopted here, with modifications as discussed in this release, were proposed in Form 
CRS Relationship Summary; Amendments to Form ADV; Required Disclosures in Retail Communications 
 

 
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relationship summary (“relationship summary” or “Form CRS”) that provides succinct 
information about the relationships and services the firm offers to retail investors, fees and costs 
that retail investors will pay, specified conflicts of interest and standards of conduct, and 
disciplinary history, among other things.
6
  The relationship summary will also link to 
Investor.gov/CRS on the Commission’s investor education website, Investor.gov, which offers 
educational information to investors about investment advisers, broker-dealers, and individual 
financial professionals and other materials.  
We proposed a version of a relationship summary on April 18, 2018.
7
  The proposed 
relationship summary would have required information separated into the following sections: (i) 
introduction; (ii) the relationships and services the firm offers to retail investors; (iii) the standard 
of conduct applicable to those services; (iv) the fees and costs that retail investors will pay; (v) 
comparisons of brokerage and investment advisory services (for standalone broker-dealers and 
investment advisers);
8
 (vi) conflicts of interest; (vii) where to find additional information, 
                                                                                                                                                             
and Restrictions on the use of Certain Names or Titles, Investment Advisers Act Release No. 4888, 
Exchange Act Release No. 83063 (Apr. 18, 2018) [83 FR 23848 (May 23, 2018)] (“Proposing Release”). 
6
  For investment advisers registered with the Commission, a new Form ADV Part 3 will describe the 
requirements for the relationship summary and it will be required by amended rule 203-1. For broker-
dealers, Form CRS will be required by new rule 17a-14 under the Exchange Act. When we refer to Form 
CRS in this release, we are referring to Form CRS for both broker-dealers and investment advisers 
registered with the Commission. We are also adopting conforming technical and clarifying amendments to 
the General Instructions of Form ADV.  
7
 See Proposing Release, supra footnote 5. 
8
  We proposed definitions for “standalone investment adviser” and “standalone broker-dealer”.  See 
Proposed General Instruction 9.(f) to Form CRS.  Given the streamlining and other revisions to the Form 
CRS instructions relative to the proposal, we believe that these proposed definitions are no longer needed 
and therefore are not adopting them.  We use the terms throughout this release, however, for the avoidance 
of doubt, to indicate broker-dealers and investment advisers that are not dual registrants.  We are adopting 
the proposed definition for “dual registrant” substantially as proposed.  We are adding language in the 
 

 
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including whether the firm and its financial professionals currently have reportable legal or 
disciplinary history and who to contact about complaints; and (viii) key questions for retail 
investors to ask the firm’s financial professional.   The proposed instructions required firms to use 
standardized headings in a prescribed order throughout the disclosure and respond to the required 
items by using a mix of language prescribed in the instructions as well as their own wording in 
describing their services and offerings.  The proposal limited the relationship summary to four 
pages or an equivalent length if in electronic format and also included three examples of how the 
relationship summary might look for a standalone broker-dealer, a standalone investment 
adviser, and a dual registrant. 
To better understand retail investors’ views about the disclosures designed for them, the 
Commission engaged in broad outreach to investors and other market participants.  As described 
further throughout the release, the Commission received substantial feedback on the proposed 
relationship summary in several forms.  We received comment letters in connection with the 
Proposing Release from a variety of commenters including individual investors, consumer 
advocacy groups, financial services firms, investment professionals, industry and trade 
associations, state securities regulators, bar associations, and others.
9
  Several of those 
commenters provided alternative mock-ups to illustrate their suggestions.  Additionally, some 
                                                                                                                                                             
definition of dual registrant in the final instructions to clarify that a dually registered firm is not considered 
a dual registrant for purposes of Form CRS and the final instructions if the dually registered firm does not 
provide both investment advisory and brokerage services to retail investors.  See General Instruction 11.C 
to Form CRS; see infra footnotes 201- 202 and accompanying text. 
9
  The comment letters are available in the comment file at https://www.sec.gov/comments/s7-08-
18/s70818.htm.   

 
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commenters submitted reports of surveys or studies that they had conducted or engaged third 
parties to conduct in connection with the proposal. The Commission also received input and 
recommendations from its Investor Advisory Committee (“IAC”) on the proposed relationship 
summary to improve its effectiveness.
10
   
The Commission also solicited comments from individual investors through a number of 
forums in addition to the traditional requests for comment in the Proposing Release.  The 
Commission used a “feedback form” designed specifically to solicit input from retail investors 
with a set of questions requesting both structured and narrative responses, and received more 
than 90 responses from individuals who reviewed and commented on the sample proposed 
relationship summaries published in the proposal.
11
  Seven investor roundtables were held in 
                                                                                                                                                             
10
  See Investor Advisory Committee, Recommendation of the Investor as Purchaser Subcommittee Regarding 
Proposed Regulation Best Interest, Form CRS, and Investment Advisers Act Fiduciary Guidance (Nov. 7, 
2018), available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac110718-investor-
as-purchaser-subcommittee-recommendation.pdf. (“IAC Form CRS Recommendation”).  The majority of 
the IAC recommended that the Commission conduct usability testing of the proposed Form CRS 
disclosures and, if necessary, revise them to ensure that they enable investors to make an informed choice 
among different types of providers and accounts.  In addition, when considering potential Commission 
rulemaking under section 913 of the Dodd-Frank Act, the IAC also recommended that the Commission 
adopt a uniform, plain English disclosure document to be provided to customers and potential customers of 
broker-dealers and investment advisers at the start of the engagement, and periodically thereafter, that 
covers basic information about the nature of services offered, fees and compensation, conflicts of interest, 
and disciplinary record.  See Investor Advisory Committee, Recommendation of the Investor Advisory 
Committee: Broker-Dealer Fiduciary Duty (Nov. 22, 2013), available at 
https://www.sec.gov/spotlight/investor-advisory-committee-2012/fiduciary-duty-recommendation-
2013.pdf, as amended in https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac112213-
minutes.htm (“IAC Broker-Dealer Fiduciary Duty Recommendations”).  We discuss these IAC findings 
and recommendations in several sections below. Under section 39 of the Exchange Act, the Commission is 
required to review, assess, and disclose the action, if any, the Commission intends to take with respect to 
the findings and recommendations of the IAC; however, the Commission is not required to agree or to act 
upon any such findings or recommendations.  See 15 U.S.C. 78pp. 
11
  The feedback forms are available in the comment file at https://www.sec.gov/comments/s7-08-
18/s70818.htm (“Feedback Forms”).  When we refer to Feedback Form commenters, we include those who 
completed and submitted a Feedback Form with a relevant response or comment answering at least one of 
the questions on the form.  To simplify discussion of comments received on the Feedback Forms, staff 
 

 
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different locations across the country to solicit further comment from individual investors on the 
proposed relationship summary,  and we received in-person feedback from almost 200 attendees 
in total.
12
   
Fur  ther, t  he Commission’s Office of the Investor Advocate engaged the RAND 
Corporation (“RAND”) to conduct investor testing of the proposed relationship summary.
13
  
RAND conducted a survey of over 1,400 individuals through a nationally representative panel to 
collect information on the opinions, preferences, attitudes, and level of self-assessed 
comprehension regarding the sample dual-registrant relationship summary in the proposal.  
RAND also conducted qualitative interviews of a smaller sample of individuals to ascertain 
comprehension of the relationship summary and gain feedback from interview participants, 
which allowed RAND to obtain insights to complement its survey.
14
  On November 7, 2018, the 
Office of the Investor Advocate made the report on that testing available in the comment file to 
                                                                                                                                                             
aggregated and summarized these comments in an appendix to this release (see Appendix C, the “Feedback 
Forms Comment Summary”), and references to individual Feedback Forms in this release use short-form 
names defined in the Feedback Forms Comment Summary.   
12
  The transcripts from the seven investor roundtables, which took place in Atlanta (“Atlanta Roundtable”), 
Baltimore (“Baltimore Roundtable”), Denver (“Denver Roundtable”), Houston (“Houston Roundtable”), 
Miami (“Miami Roundtable”), Philadelphia (“Philadelphia Roundtable”), and Washington, D.C. 
(“Washington, D.C. Roundtable”), are available in the comment file at https://www.sec.gov/comments/s7-
08-18/s70818.htm#transcripts.   
13
  Angela A. Hung, et al., RAND Corporation, Investor Testing of Form CRS Relationship Summary (2018), 
available at https://www.sec.gov/about/offices/investorad/investor-testing-form-crs-relationship-
summary.pdf (“RAND 2018”).   
14
  RAND conducted a total of 31 in-person interviews with investors recruited using guidelines designed to 
achieve a sample that had a broad range of educational background, racial and ethnic characteristics, 
gender, age and experience working with financial professionals. In describing the design of qualitative 
interviews, RAND explains that interviews included some general questions about comprehension and 
helpfulness of the form, which provided a window into participants’ understanding of concepts introduced 
in the relationship summary, but were not designed to serve as a full assessment of participants’ objective 
understanding of the relationship summary.  See RAND 2018, supra footnote 13. 

 
10 
 
allow the public to consider and comment on the supplemental information.
15
  The Commission 
received several letters in response to the inclusion of the RAND 2018 report in the comment 
file.
16
 
As noted, some commenters submitted reports of surveys and studies to the comment file, 
and the design and scope of these varied considerably. Two reports described online surveys of 
larger sample sizes – one based on the sample proposed dual-registrant relationship summary
17
 
and another based on the proposed sample standalone investment adviser relationship 
summary.
18
 A group of commenters submitted two reports of usability testing of the sample 
proposed dual-registrant relationship summary based on a small number of long-form 
                                                                                                                                                             
15
  See Investor Testing of the Proposed Relationship Summary for Investment Advisers and Broker-Dealers, 
Securities and Exchange Commission Press Release 2018-257 (Nov. 7, 2018), available at 
https://www.sec.gov/news/press-release/2018-257. 
16
  See, e.g., Comment Letter of Investment Adviser Association (Dec. 4, 2018); Comment Letter of Ron A. 
Rhodes (Dec. 6, 2018); Comment Letter of AFL-CIO, et al. (Dec. 7, 2018) (“AFL-CIO Letter”); Comment 
Letter of Betterment (Dec. 7, 2018) (“Betterment Letter II”); Comment Letter of Consumer Federation of 
America (Dec. 7, 2018) (“CFA Letter II”); Comment Letter of Financial Services Institute (Dec. 7, 2018) 
(“FSI Letter II”); Comment Letter of Public Investors Arbitration Bar Association (Dec. 7, 2018); 
Comment Letter of Consumer Reports (Feb. 15, 2019) (“Consumer Reports Letter”).   
17
  Comment Letter of Cetera Financial Group (Nov. 19, 2018) (“Cetera Letter II”) (attaching report of 
Woelfel Research Inc. (“Woelfel”)). Woelfel, an independent research firm, conducted internet interviews 
in June 2018 with a sample of 800 adults aged 25 and over, including individuals that had a current 
relationship with a financial professional and individuals who did not have a current financial professional 
relationship. Respondents were asked to read the sample dual-registrant relationship summary included in 
the proposal and answer a series of questions about the document overall and for specific sections.  Id.  
18
     Comment Letter of Betterment (Aug. 7, 2018) (“Betterment Letter I”) (attaching report of Hotspex, Inc. 
(“Hotspex”)).  Hotspex, an independent research firm, conducted online surveys with 304 current or 
potential U.S. investors ages 18 and over in June 2018.  The survey tested the standalone investment 
adviser relationship summary prepared following the instructions and sample design of the proposal (the 
“SEC Form”) and a redesigned version developed by Betterment.  Id.  Respondents reviewed and answered 
questions about only one version; 154 responded to questions on the SEC Form.  Id. 

 
11 
 
interviews.
19
  One of the two surveys, and the two interview-based studies, included questions 
designed to ascertain comprehension and tested alternate relationship summary designs with 
changes to some of the proposed prescribed wording and presentation from the proposal.
20
  
Finally, two different commenters submitted surveys of retail investors’ views about disclosure 
communications provided by firms and their relationships with financial professionals, which did 
not test any version of the proposed relationship summary.
21
   
The Commission appreciates the time and effort of these commenters who submitted 
surveys and studies.  The Commission has carefully considered this input.  The varying designs 
and scope of these surveys and studies limits us from drawing definitive conclusions, and we do 
                                                                                                                                                             
19
  Kleimann Communication Group, Inc., Final Report on Testing of Proposed Customer Relationship 
Summary Disclosures, Submitted to AARP, Consumer Federation of America, and Financial Planning 
Coalition (Sept. 10, 2018), available at https://www.sec.gov/comments/s7-08-18/s70818-4341455-
173259.pdf (“Kleimann I”) (results of 15 90-minute qualitative interviews focusing on how consumers 
interacted with the sample dual-registrant relationship summary as proposed); Kleimann Communication 
Group, Inc., Report on Development and Testing of Model Client Relationship Summary, Presented to 
AARP and Certified Financial Planner Board of Standards, Inc. (Dec. 5, 2018), available at 
https://www.sec.gov/comments/s7-07-18/s70718-4729850-176771.pdf  (“Kleimann II”) (results of testing 
alternate designs of the proposed dual-registrant relationship summary in 18 one-on-one qualitative 
interviews). 
20
  See Betterment Letter I (Hotspex), supra footnote 18 (online survey included ten true-false questions 
designed to test investor comprehension of the standalone investment adviser relationship summary as 
proposed relative to a version redesigned by Betterment); Kleimann I, supra footnote 19 (interview 
questions designed to elicit responses that could demonstrate two levels of cognitive skills); Kleimann II, 
supra footnote 19.   
21
  Comment Letter of Charles Schwab & Co., Inc. (Aug. 6, 2018) (“Schwab Letter I”) (attaching report of 
Koski Research (“Koski”)).  Koski, an independent research firm, conducted an online survey of a national 
sample of 1000 investors in June 2018 to measure investor understanding of fiduciary duty and best interest 
standards for investment advice and obtain input from retail investors on method, frequency and content of 
disclosure communications.  Id.; Comment Letter of the Center for Capital Markets Competitiveness of the 
U.S. Chamber of Commerce (Sept. 5, 2018) (“CCMC Letter”) (attaching report of investor polling 
(“investor polling”)).  CCMC commissioned online polling of 801 investors in May 2018 to examine 
investors’ perspectives on working with financial professionals and gauge priorities regarding new 
regulatory requirements. Id. 
 

 
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not view any one of the surveys and studies submitted by commenters, or the RAND 2018 report, 
as dispositive.  However, these surveys and studies submitted by commenters, together with the 
results of the RAND 2018 report, input from individual investors at our roundtables and on 
Feedback Forms, and other information offered by other commenters, have informed our policy 
choices. Throughout this release we discuss observations reported in the RAND 2018 report and 
in surveys and studies submitted by commenters, and how these observations informed our 
policy choices as well as the costs and benefits of such choices. 
Overall, we believe that feedback we have received from or on behalf of retail investors 
through the RAND 2018 report, surveys and studies submitted by commenters, and input 
received at roundtables and on Feedback Forms, demonstrate that the proposed relationship 
summary would be useful for retail investors and provide information, e.g., about services, fees 
and costs, and standard of care, that would help investors to make more informed choices when 
deciding among firms and account options.  For example, among the RAND 2018 survey 
respondents, nearly 90% said that the relationship summary would help them make more 
informed decisions about types of accounts and services and more than 80% said it would help 
them compare accounts offered by different firms.
22
  RAND 2018 survey participants rated 
information about the firm’s relationship and services and fees and costs to be among the most 
informative.
23
  In other surveys, large majorities of respondents also reacted positively to the 
                                                                                                                                                             
22
  RAND 2018, supra footnote 13. 
23
  RAND 2018, supra footnote 13 (a majority of respondents rated both of the relationships and services 
section and fees and costs sections of the relationship summary as one of two sections that are “most 
informative”).   

 
13 
 
relationship summary and the types of information that would be provided.
24
  In the RAND 2018 
qualitative interviews, it was observed that participants could learn new information from the 
proposed relationship summary.
25
  Similarly, other surveys and studies that assessed investor 
comprehension observed that investors learned important information by reviewing the 
relationship summary.
26
  Over 70% of individuals submitting Feedback Forms commented that 
they found the relationship summary to be “useful,” with more than 80% rating the relationship 
summary sections describing relationships and services, obligations, and fees and costs as “very 
useful” or “useful.”
27
  Investor roundtable participants also reacted positively and indicated that 
                                                                                                                                                             
24
  Cetera Letter II (Woelfel), supra footnote 17 (more than 80% of respondents rated all of the nine topics 
covered by the relationship summary as “very” or “somewhat” important; 88% rated fees and costs and the 
firm’s obligations as “very” or “somewhat” important; 61% said the relationship summary had provided the 
necessary information to help decide whether a brokerage relationship or an advisory relationship is best); 
Betterment Letter I (Hotspex), supra footnote 18 (finding that around 90% of survey respondents found the 
proposed relationship summary “very useful” or “somewhat useful”); see also CCMC Letter (investor 
polling), supra footnote 21 (when the concept of the proposed relationship summary was described, 62% of 
participants said they would be interested in reading the document and 72% agreed that the new document 
will “boost transparency and help build stronger relationships between me and my financial professional”). 
25
  RAND 2018, supra footnote 13 (concluding from qualitative interviews that “[p]articipants demonstrated 
evidence of learning new information from the relationship summary” even though interview discussions 
revealed areas of confusion). 
26
 See Kleimann I, supra footnote19 (although the authors concluded that, overall, participants had difficulty 
with “sorting out similarities and differences,” the study reports that “nearly all participants easily 
identified a key difference between Brokerage Accounts and Advisory accounts as the fee structure” and 
that “most participants understood that both Brokerage Accounts and Advisory Accounts could have 
financial relationships with other companies that could be potential conflicts with clients’ best interests.”); 
see also Betterment Letter I (Hotspex), supra footnote 18 (83% of respondents correctly identified as “true” 
a statement that “some investment firms have a conflict of interest because they benefit financially from 
recommending certain investments” when viewing a version of the standalone adviser relationship 
summary constructed based on the instructions set forth in the proposal”).  
27
 See Feedback Forms Comment Summary, supra footnote 11 (summary of answers to Questions 1 and 2).  
In addition, more than 70% of commenters on Feedback Forms rated all of the other sections of the 
proposed relationship summary as “very useful” or “useful.” Id. 

 
14 
 
they found the relationship summary to be useful.
28
  A significant percentage of RAND 2018 
survey participants agreed that the relationship summary would facilitate conversations between 
retail investors and their financial professionals, and other surveys and studies reported similar 
observations.
29
   Investor roundtable participants and comments on Feedback Forms also 
indicated that the relationship summary could facilitate conversations between retail investors 
and their financial professionals in a beneficial way.
30
   
Many other commenters supported the concept of a short disclosure document for retail 
investors that would serve as part of a layered disclosure regime,
31
 and agreed that that the 
                                                                                                                                                             
28
 See e.g., Houston Roundtable, at 19 (“I think your idea of having . . . a short four page . . . is really 
helpful”), at 27 (reacting positively to the idea of the relationship summary but asking that updated versions 
indicate the changed content), and at 35 (agreeing that a disclosure such as the relationship summary is 
needed); Atlanta Roundtable, at 28 (stating that the proposed sample relationship summary is “a very good 
form” and “concise” and “easy to read and clear” but needs to be in a form that can be compared with other 
relationship summaries). 
29
  RAND 2018, supra footnote 13 (approximately 76% of participants agreed that they would use the 
relationship summary as the basis for a conversation with an investment professional; in qualitative 
interviews, participants said they liked all of the questions and they would ask questions in meeting with a 
financial service provider); see also Kleimann I, supra footnote 19 (many investors responded that they 
would use key questions when speaking with their brokers); Betterment Letter I (Hotspex), supra footnote 
18 (93% of respondents viewing a version of the proposed standalone relationship summary indicated that 
they were very or somewhat likely to ask the suggested questions.).  
30
  Houston Roundtable (several investors responding that key questions would be helpful conversation 
starters, one commenter remarking that the Key Questions were “very, very good”); Feedback Forms 
Comment Summary, supra footnote 11 (summary of responses to Question 7) (over 75% of commenters 
indicated that the Key Questions are useful).  Eleven Feedback Forms included specific comments agreeing 
that the Key Questions would encourage discussions with financial professionals.  See, e.g., Hawkins 
Feedback Form (“Useful information for the investor to have before engaging in a conversation with an 
investment firm. Giving some examples of types of questions to ask would be beneficial.”); Asen Feedback 
Form (“The Relationship Summary (and not the individual BD or RIA account opening forms) is the 
opportunity to have that important conversation and “educate” the customer.”); Baker Feedback Form 
(“key questions are very useful as they give words to an unsophisticated client”). 
31
  See, e.g., Comment Letter of AARP (Aug. 7, 2018) (“AARP Letter”); Comment Letter of Consumers 
Union (Oct. 19, 2018) (“Consumers Union Letter”); Comment Letter Type B; Comment Letter of the North 
American Securities Administrators Association, Inc. (Aug. 23, 2018) (“NASAA Letter”); Comment Letter 
of the Securities Industry and Financial Markets Association (Aug. 7, 2018) (“SIFMA Letter”); Comment 
 

 
15 
 
relationship summary would facilitate conversations between retail investors and their financial 
professionals in a beneficial way.
32
  However, some commenters argued that the relationship 
summary is duplicative of other disclosures and is unnecessary.
33
  Others cautioned against over-
reliance on disclosure efforts to address all issues related to the different business models and the 
applicable standard of conduct for broker-dealers and investment advisers.
34
   
                                                                                                                                                             
Letter of Triad Advisors, LLC (Jul. 26, 2018) (“Triad Letter”); Comment Letter of Investacorp, Inc. (Jul. 
26, 2018) (“Investacorp Letter”); Comment Letter of Ladenburg Thalmann Financial Services Inc. (Jul. 26, 
2018) (“Ladenburg Letter”); Comment Letter of KMS Financial Services, Inc. (Jul. 27, 2018) (“KMS 
Financial Letter”); Comment Letter of Securities America, Inc. (Jul. 27, 2018) (“Securities America 
Letter”). 
32
  See, e.g., Comment Letter of Commonwealth Financial Network (Aug 7, 2018) (“CFN Letter”) (“Form 
CRS may also drive conversations that help potential clients and advisors determine which type of 
relationship (brokerage or advisory) is most appropriate.”); CCMC Letter (concluding from investor polling 
that “[t]he SEC’s proposed Form CRS could be a good way to start a conversation with investors.”); 
Comment Letter of the Financial Services Institute (Aug. 7, 2018) (“FSI Letter I”) (“The greatest benefit of 
these disclosures will come in the conversations they facilitate between the client and their financial 
professionals”); Comment Letter Wells Fargo & Company (Aug. 7, 2018) (“Wells Fargo Letter”) (“the 
basic premise that a brief overview document designed to provide a high-level understanding of important 
information to clients (with directions to more detailed information) that can be used to prompt more 
detailed conversations with financial professionals is a good one”).  Triad Letter (“The greatest benefit of 
the CRS will come in the conversations it facilitates between the client and their Financial 
Professional....”); Ladenburg Letter (same); KMS Financial Letter (same). 
33
  Some commenters stated that Form CRS would be duplicative of the Disclosure Obligation required by 
Regulation Best Interest.  See, e.g., Triad Letter; Investacorp Letter; Ladenburg Letter; KMS Financial 
Letter; Securities America Letter; FSI Letter I; Comment Letter of Securities Service Network, LLC (Aug. 
6, 2018); Comment Letter of Cambridge Investment Research, Inc. (Aug. 7, 2018) (“Cambridge Letter”).  
Others argued that Form CRS is duplicative of other Form ADV disclosures.  See, e.g., Comment Letter of 
MarketCounsel (Aug. 7, 2018) (“MarketCounsel Letter”); Comment Letter of the Investment Adviser 
Association (Aug. 6, 2018) (“IAA Letter I”); Comment Letter of Gerald Lopatin (Jul. 30, 2018).  One 
commenter expressed concern that because the relationship summary would be duplicative of Form ADV 
and Form BD, retail customers would be less likely to read the more comprehensive disclosures.  See 
Comment Letter of Financial Engines (Aug. 6, 2018) (“Financial Engines Letter”). 
34
  See Comment Letter of Integrated Financial Planning Solutions (Jul. 20, 2018) (“IFPS Letter”) (“Clients do 
not have the ability to understand the disclosure material that is still written only by and for lawyers.”); 
Comment Letter of Sen. Elizabeth Warren (Aug. 7, 2018) (“Warren Letter”) (arguing that “the 
[Commission] shouldn’t rely on disclosure alone to protect consumers”); Consumers Union Letter 
(“[W]hile we support simple, understandable disclosures, we caution against placing too much reliance on 
disclosure to protect investors.”); Consumer Reports Letter. 

 
16 
 
Nearly all commenters (including commenters on Feedback Forms) and investors 
participating in roundtables, suggested modifications to the proposed relationship summary, as 
did observations reported in the RAND 2018 report and surveys and studies submitted to the 
comment file.  Suggested changes generally pertained to:  appropriate placement of educational 
material; length and format; use of prescribed wording; comprehensibility; additional flexibility 
for firms; and delivery requirements (including electronic delivery).  For example, some 
commenters and observations from the RAND 2018 survey and other surveys and studies 
indicated that the proposed relationship summary could be difficult to understand, particularly 
the proposed disclosures on fees, conflicts of interest, and standards of conduct.
35
  Many 
commenters preferred a shorter, one-to-two page document relying more heavily on layered 
disclosure, such as by using more hyperlinks and other cross-references to more detailed 
disclosure.
36
  Many commenters from both industry and investor groups argued that some of the 
                                                                                                                                                             
35
  See RAND 2018, supra footnote 13 (among other findings, the percentages of respondents indicating that 
the fees and costs, conflicts of interest, and standards of conduct sections were either “difficult” or “very 
difficult” to understand were 35.5%, 33.5%, and 22.9%, respectively); Kleimann I, supra footnote 19 
(noting that participants had difficulty “sorting out similarities and differences between Broker-Dealer 
Services and Investment Adviser Services. Both the formatting and language contributed to the 
confusion.”); Betterment Letter I (Hotspex), supra footnote 18 (showing that survey participants had 
difficulty understanding differences in standard of care and did not find the section on conflicts in the 
standalone adviser relationship summary to be useful); see also Comment Letter of John Wahh (Apr. 23, 
2018) (“Wahh Letter”) (relationship summary is “impenetrable”); Comment Letter of David John Marotta 
(Apr. 26, 2018) (“Marotta Letter”) (disclosures would be too confusing to clients); Comment Letter of John 
H. Robinson (Aug. 6, 2018) (“Robinson Letter”) (expressing concern that relationship summary is too text-
heavy for consumers to read and will be ineffective in resolving investor confusion); Comment Letter of 
CFA Institute (Aug. 7, 2018) (“CFA Institute Letter I”) (“[A]s proposed, CRS is too wordy and technically 
written for the average investor to understand.”).   
36
  See, e.g., AARP Letter; Comment Letter of Better Markets (Aug. 7, 2018) (“Better Markets Letter”); 
Comment Letter of the Bank of America (Aug. 7, 2018) (“Bank of America Letter”); Comment Letter of 
the Committee on Capital Markets Regulation (Jul. 16, 2018) (“CCMR Letter”); Comment Letter of LPL 
Financial LLC (Aug. 7, 2018) (“LPL Financial Letter”); Schwab Letter I.  Cf. RAND 2018, supra footnote 
13 (finding at least a plurality of respondents would keep the length of each section “as is”; however, when 
 

 
17 
 
prescribed wording would not be accurate or applicable in relation to the different services and 
business models of all firms or could lead to confusing or misleading disclosures.
37
  Various 
commenters advocated for more flexibility for firms to use their own wording to describe their 
services more accurately.
38
  Many commenters favored the use of a question-and-answer format, 
                                                                                                                                                             
asked “Is the Relationship Summary too long, too short, or about right?”, 56.9% of respondents answered 
“too long” and only 41.2% responded “about right”).  
37
  See,  e.g.,  Comment  Letter  of  the  Vanguard  Group,  Inc.  (Aug.  7,  2018)  (“Vanguard  Letter”)  (explaining  
instances in which the prescribed wording would be inaccurate or not sufficiently nuanced for some of its 
services);  Comment  Letter  of  the  American  Council  of  Life  Insurers  (Aug.  3,  2018)  (“ACLI  Letter”)  
(“[M]any  of  the  statements  mandated  in  the  Proposed  Rule  are  inaccurate  from  the  perspective  of  a  life  
insurer-affiliated  broker-dealer);  IAA  Letter  I  (expressing  concern  that  the  proposed  prescribed  language  
describing legal standards of conduct would result in less accurate understanding and greater confusion for 
investors);  FSI  Letter  I  (“[S]ome  of  the  prescribed  disclosure  language  is  highly  problematic,  will  add  to  
investor confusion, and would negatively impact [firms’]  client  relationships.”);  AARP  Letter  (expressing  
concern  that  some  of  the  prescribed  language  is  too  technical  and  likely  to  confuse  retail  investors);  
Comment Letter of the Insured Retirement Institute (Aug. 7, 2018) (“IRI Letter”) (expressing concern that 
the  prescribed  language  would  not  permit  descriptions  of  services  offered  outside  of  brokerage  accounts,  
such  as  recommendations  of  variable  annuities).    One  commenter  asserted  that  prescribed  wording  
requiring  firms  to  compare  themselves  adversely  with  their  competitors  could  raise  First  Amendment  
concerns.    See Comment  Letter  of  the  Consumer  Federation  of  America  (Aug.  7,  2018)  (“CFA  Letter  I”)  
(arguing  that  certain  language  requiring  firms  to  compare  their  own  services  unfavorably  to  those  of  their  
competitors may raise First Amendment concerns, and that Proposed Item 5, Comparisons to be provided 
by  standalone  investment  advisers  and  standalone  broker-dealers,  should  be  eliminated  entirely); see  also  
infra footnotes 77–80 and accompanying text.  Although not explicitly raising First Amendment concerns, 
another   commenter   also   opposed   requiring   firms   to   describe   services   of   other   types   of   financial   
professionals.  See IAA  Letter  I  (“In  our  view,  it  is  not  appropriate  to  require  firms  to  include  statements  
about business models other than their own.”). But see Comment Letter of AFL-CIO, Consumer Federation 
of America, et. al.  (Apr. 26, 2019) (“AFL-CIO, CFA Letter”) (arguing that allowing firms more flexibility 
in  their  disclosure  will  result  in  a  failure  to  clearly  convey  important  information,  and  such  information  
would not be comparable from firm to firm). 
38
  See, e.g., ACLI Letter (“Firms should have the flexibility in the Form CRS to accurately describe their 
business model and what their clients can expect from the relationship”); NASAA Letter (“[F]irms should 
have some level of flexibility in crafting their own Form CRS so that it is tailored for the different types of 
customers they service.”); Letter from Members of Congress (Aug. 8, 2019) (“The SEC should develop a 
disclosure form that ensures firms have the flexibility to provide information that the average investor will 
understand.”); IAA Letter I (advocating that firms be given flexibility to draft their own descriptions of 
their principal services and conflicts of interest); FSI Letter I (suggesting that the prescribed wording 
regarding the extent and frequency of monitoring be removed or customized using the firm’s own 
wording); IRI Letter (firms need more latitude to describe their relationships and services and fees and 
costs, given their variability; one-size-fits-all disclosures are insufficient); Comment Letter of T. Rowe 
Price (Aug. 10, 2018) (“T. Rowe Letter”) (firms should have the flexibility to tailor their disclosures to 
make it clearer and more readable without potentially confusing investors); Vanguard Letter (suggesting 
 

 
18 
 
suggesting, for example, that focusing a document on investors’ questions helps them to feel that 
the document is relevant to them and encourages them to read it.
39
  Some commenters viewed 
parts of the relationship summary as educational, such as the sections comparing broker-dealers 
and investment advisers, describing the applicable standard of conduct, and containing key 
questions investors should ask, and advocated that the Commission should develop and provide 
educational material separately from firm-specific disclosures, such as in an additional disclosure 
layer or on the Commission’s website.
40
  Several individuals submitting Feedback Forms also 
were supportive of links to additional educational information.
41
 
                                                                                                                                                             
that the Commission clarify that all of the prescribed disclosures may be modified to accurately describe 
the nature of firms’ services and conflicts of interest given their business models); Comment Letter of 
CUNA Mutual Group (Aug. 7, 2018).   
39
  See, e.g., CFA Letter I.  Many of the mock-ups submitted by commenters used a question-and-answer 
format.  See Comment Letter of Fidelity Brokerage Services LLC (Aug. 7, 2018) (“Fidelity Letter”); IAA 
Letter I; LPL Financial Letter; Comment Letter of Primerica (Aug. 7, 2018) (“Primerica Letter”); Schwab 
Letter I; SIFMA Letter; Wells Fargo Letter.  For the purposes of this release, we view the substance and 
design of all mock-ups that commenters provided within their comment letters as comments on our 
proposed form, and the mock-ups have informed our approach to the relationship summary, as discussed 
below throughout. 
40
  See, e.g., Comment Letter of the American Securities Association (Aug. 7, 2018) (“ASA Letter”); 
Primerica Letter; ACLI Letter; IAA Letter I; Comment Letter of Pickard Djinis and Pisarri LLP (Aug. 14, 
2018) (“Pickard Djinis and Pisarri Letter”); Comment Letter of L.A. Schnase (Jul. 30, 2018) (“Schnase 
Letter”); CFA Letter I; LPL Financial Letter. 
41
  See, e.g., Daunheimer Feedback Form (“I would like to see a list of applicable websites for discerning 
disciplinary websites or anything else that would additionally educate a consumer.”); Asen Feedback Form 
(“Might want to consider hyperlinking key words for ease of definition lookup.”); Baker Feedback Form 
(responding to a question on the Additional Information section, commented “Helpful also were the 
website links, i.e., sec.gov, investor.gov, BrokerCheck.Finra.org.”); Smith2 Feedback Form (“would like to 
see a link included a site or sites that contain general investment information.  Types of investments, risks, 
time horizons ...”). 

 
19 
 
Although some commenters argued that the relationship summary is duplicative of other 
disclosures and is unnecessary,
42
 we believe that the relationship summary has a distinct purpose 
and will provide a separate and important benefit relative to other disclosures.  The relationship 
summary is designed to help retail investors select or determine whether to remain with a firm or 
financial professional by providing better transparency and summarizing in one place selected 
information about a particular broker-dealer or investment adviser.  The format of the 
relationship summary also allows for comparability among the two different types of firms in a 
way that is distinct from other required disclosures.  Both broker-dealers and investment advisers 
must provide disclosures on the same topics under standardized headings in a prescribed order to 
retail investors, which should benefit retail investors by allowing them to more easily compare 
services by comparing different firms’ relationship summaries.
43
  We do not believe that existing 
disclosures provide this level of transparency and comparability across investment advisers, 
broker-dealers, and dual registrants.  The relationship summary also e ncourages retail investors 
to ask questions and highlights additional sources of information.  All of these features should 
make it easier for investors to get the facts they need when deciding among investment firms or 
financial professionals and the accounts and services available to them.  As noted above, the 
relationship summary will complement additional rules and guidance that the Commission is 
                                                                                                                                                             
42
  See supra footnote 33. 
43
  Several individuals submitting Feedback Forms said that more firm-specific information that could be 
easily compared would be helpful.  See, e.g., Lee1 Feedback Form (“The information should let me 
compare firms. . . . Make it short, more useful (so I can compare services and firms).”); Anonymous13 
Feedback Form (“Firm specific info would be nice on this document.”);  Bhupalam Feedback Form (“I 
would like to see additional information regarding specific firm rather than a general description.”). 

 
20 
 
adopting concurrently to enhance protections for retail investors and is not designed to address 
all investor protection issues related to different business models and legal obligations of broker-
dealers and investment advisers.
44
 
Further to this purpose, in response to the comment letters and other feedback, we 
modified the instructions to reorganize and streamline the relationship summary, to enable more 
accurate descriptions tailored to what firms offer, and to help improve investor understanding of 
the disclosures provided.  The instructions we are adopting are consistent with and designed to 
fulfill the original goals of the proposal, including the creation of relationship summaries that 
will highlight certain information in one place for retail investors in order to help them select or 
decide whether to remain with a firm or financial professional, encourage retail investors to 
engage in meaningful and individualized conversations with their financial professionals, and 
empower them to easily find additional information.  Although certain prescribed generalized 
comparisons between brokerage and investment advisory services have been removed from the 
final instructions, we believe the revised instructions will result in more meaningful comparisons 
among firms. 
The key changes of the relationship summary and i nstructions we are adopting include 
the following:
45
  
                                                                                                                                                             
44
  See supra footnote 34. 
45
  If any of the provisions of these rules, or the application thereof to any person or circumstance, is held to be 
invalid, such invalidity shall not affect other provisions or application of such provisions to other persons or 
circumstances that can be given effect without the invalid provision or application. 
 

 
21 
 
• Standardized Question-and-Answer Format and Less Prescribed Wording.  
Instead of declarative headings as proposed, the final instructions for the 
relationship summary will require a question-and-answer format, with 
standardized questions serving as the headings in a prescribed order to promote 
consistency and comparability among different relationship summaries.  The 
headings will be structured and machine-readable, to facilitate data aggregation 
and comparison.  Under the standardized headings, firms will generally use their 
own wording to address the required topics.  Thus, the final instructions contain 
less prescribed language, which creates more flexibility in providing accurate 
information to investors.  Investment advisers and broker-dealers will be limited 
to two pages and dual registrants will be limited to four pages (or an equivalent 
length if in electronic format).
46
   
• Use of Graphics, Hyperlinks, and Electronic Formats.  To help retail investors 
easily digest the information, the instructions will specifically encourage the use 
of charts, graphs, tables, and other graphics or text features in order to explain or 
compare different aspects of the firm’s offerings.  If the chart, graph, table, or 
other graphical feature is self-explanatory and responsive to the disclosure item, 
additional narrative language that may be duplicative is not required.  For 
electronic relationship summaries, the instructions encourage online tools that 
populate information in comparison boxes based on investor selections.  The 
                                                                                                                                                             
46
  For clarification purposes, one page is equivalent to a single-side of text on a sheet of paper, rather than two 
sides of the same paper. 

 
22 
 
instructions permit, and in some instances require, a firm to cross-reference 
additional information (e.g., concerning services, fees, and conflicts), and will 
require embedded hyperlinks in electronic versions to further facilitate layered 
disclosures.  Firms must use text features to make the required cross-references 
more noticeable and prominent in relation to other discussion text.   
• Introduction with Link to Commission Information.  The relationship summary 
will include a more streamlined introductory paragraph that will provide a link to 
Investor.gov/CRS, a page on the Commission’s investor education website, 
Investor.gov, which offers educational information about investment advisers, 
broker-dealers, and individual financial professionals and other materials.   In 
order to highlight the importance of these materials, the introduction also will 
note that brokerage and advisory services and fees differ and that it is important 
for the retail investor to understand the differences. 
• Combined Fees, Costs, Conflicts of Interest, and Standard of Conduct Section.  
We are integrating the proposed fees and costs section with the sections 
discussing the conflicts of interest and standards of conduct.  We are also 
expanding the discussion of fees and making several other changes to help make 
the disclosures clearer for retail investors.  The relationship summary will cover 
the same broad topics as proposed, including a summary of fees and costs,  a 
description of ways the firm makes money, certain conflicts of interest, and 
standards of conduct.  In addition, firms will include disclosure about financial 
professionals’ compensation.   

 
23 
 
• Separate Disciplinary History Section.  Firms will be required to indicate under a 
separate heading whether or not they or any of their financial professionals have 
reportable disciplinary history and where investors can conduct further research 
on these events, instead of including this information under the Additional 
Information section as proposed. 
• Conversation Starters.  The proposed Key Questions to Ask have generally been 
integrated into the relationship summary sections either as question-and-answer 
headings or as additional “conversation starters” to provide clearer context for the 
questions.  Retail investors can use these questions to engage in dialogue with 
their financial professionals about their individual circumstances.  The discussion 
topics raised by certain other proposed key questions have been incorporated into 
the relationship summary through otherwise-required disclosure. 
• Elimination of Proposed Comparisons Section.  We are eliminating the proposed 
requirement that broker-dealers and investment advisers include a separate section 
using prescribed wording that in a generalized way described how the services of 
investment advisers and broker-dealers, respectively, differ from the firm’s 
services.  We encourage, but do not require, dual registrants to prepare a single 
relationship summary that discusses both brokerage and investment advisory 
services.  Whether dual registrants prepare a single or two separate relationship 
summaries to describe their brokerage and investment advisory services, they 
must present information on both services with equal prominence and in a manner 
that clearly distinguishes and facilitates comparison between the two.  The 
material provided on Investor.gov offers educational information about 

 
24 
 
investment advisers, broker-dealers, and individual financial professionals and 
other materials. 
• Delivery.  As proposed, investment advisers must deliver a relationship summary 
to each new or prospective client who is a retail investor before or at the time of 
entering into an investment advisory contract with the retail investor.  In a change 
from the proposal, broker-dealers must deliver the relationship summary to each 
new or prospective customer who is a retail investor before or at the earliest of: (i) 
a recommendation of an account type,  a securities transaction, or an investment 
strategy involving securities; (ii) placing an order for the retail investor; or (iii) 
the opening of a brokerage account for the retail investor.  We also are revising 
the instructions to provide greater clarity on the use of electronic delivery, while 
generally maintaining the guidelines that were proposed. 
We designed the final disclosure requirements in light of comments, input from 
individual investors through roundtables and on Feedback Forms, and observations reported in 
the RAND 2018 report and other surveys and studies, that suggest retail investors benefit from 
receiving certain information about a firm before the beginning of a relationship with that firm, 
but they prefer condensed disclosure so that they may focus on information that they perceive as 
salient to their needs and circumstances, and prefer having access to other “layers” of additional 
information rather than receiving a significant amount of information at once.  Together, all of 
the required disclosures will assist a retail investor to make an informed choice regarding 
whether a brokerage or investment advisory relationship, as well as whether a particular broker-
dealer or investment adviser, best suits his or her particular needs and circumstances.  The 

 
25 
 
relationship summary will complement additional rules and guidance that the Commission is 
adopting concurrently to enhance protections for retail investors.
47
   
Some commenters responding to the RAND 2018 report noted that the RAND 2018 
survey and qualitative interviews did not objectively test investor comprehension, and they 
pointed to observations from RAND 2018 interviews that suggested that some interview 
participants failed to understand differences in the legal standards that apply to brokerage and 
advisory accounts and did not understand the meaning of the word “fiduciary” for example.
48
  
They argued that we should conduct more usability testing before adopting Form CRS and 
Regulation Best Interest.
49
  
                                                                                                                                                             
47
  See Regulation Best Interest, Exchange Act Release No. 86031 (June 5, 2019) (adopting rule 15l-1 under 
the Exchange Act (“Regulation Best Interest”)) (“Regulation Best Interest Release”).  Along with adopting 
Regulation Best Interest, the Commission is clarifying standards of conduct for investment advisers.  See 
Commission Interpretation Regarding Standard of Conduct for Investment Advisers, Advisers Act Release 
No. 5248 (June 5, 2019) (“Fiduciary Release”).  The Commission is also providing guidance about when a 
broker-dealer’s advisory services are solely incidental to the conduct of the business of a broker or dealer.  
See Commission Interpretation Regarding the Solely Incidental Prong of the Broker-Dealer Exclusion to 
the Definition of Investment Adviser, Advisers Act Release No. 5249 (June 5, 2019) (“Solely Incidental 
Release”).   
48
  See CFA Letter II (noting that the testing conducted for the RAND 2018 Report is limited and does not 
provide more detailed information, such as transcripts of the in-depth interviews, to present fully the level 
of investor understanding); Comment Letter of CFA Institute (May 16, 2019) (“CFA Institute Letter II”) 
(“The RAND Report is clear that its survey was not designed to measure objective comprehension ... Nor 
did it provide respondents with alternatives that could have allowed them to express preferences for certain 
formats or language.”).  See also AFL-CIO Letter; Consumer Reports Letter; Comment Letter of PIABA 
(Dec. 7, 2018).   
49
  See, e.g., AFL-CIO Letter (“If the Commission chooses to maintain different standards for brokers and 
advisers, it must clearly delineate what the differences are ... This would require rethinking the Form CRS 
and re-testing to ensure that it achieves these goals ...”); CFA Letter II (“make the [RAND 2018] report the 
start, not the end, of an iterative process of testing and revision needed to develop disclosure that works  
...”); AFL-CIO, CFA Letter (stating “. . . unless the Commission retests the revised disclosure, it won’t 
have any way to know whether the revised version solves the problems that earlier testing has identified.”); 
Consumer Reports Letter (“SEC must test and retest Form CRS disclosures ... and continue to publish the 
results of its testing before the form is made final”); CFA Institute Letter II.  Others commented on the 
results of the RAND 2018 report but did not suggest delaying adoption of Form CRS.  See, e.g., Comment 
Letter of Charles Schwab & Co. Inc. (Dec. 7, 2018) (“Schwab Letter II”) (“The Commission should 
 

 
26 
 
We disagree.  The amount of information available from the various investor surveys and 
investor testing described in this release, including those submitted by commenters, as well as 
the comment letters and other input submitted to the Commission for this rulemaking, is 
extensive.  We considered all of this information thoroughly, leveraging our decades of 
experience with investor disclosures, when evaluating changes to the relationship summary from 
the proposal.  The perceived usefulness of the relationship summary, as shown by observations 
in the RAND 2018 report, surveys and studies submitted by commenters, and input from 
individual investors at our roundtables and in Feedback Forms, demonstrates that, even as 
proposed, the relationship summary would benefit investors by providing information that would 
help investors make more informed choices when deciding among firms and account options.
50
  
Large majorities of participants in the RAND 2018 survey and in other surveys supported the 
specific topics, such as services, fees, conflicts and standards of conduct, that we require firms to 
address in the relationship summary.
51
  Even though the RAND 2018 qualitative interviews and 
                                                                                                                                                             
acknowledge and act on consensus findings to improve the Form CRS”); Betterment Letter II (noting that 
the RAND 2018 report “demonstrates that Form CRS serves a valuable function”).  See also FSI Letter II 
(encouraging the Commission to “continue investor testing of Form CRS after the final rule is in place”). 
50
  See supra footnotes 22 to 30 and accompanying text.  We note that the Department of Labor did not 
describe or reference usability testing in adopting its now vacated rule broadening the definition of 
fiduciary investment advice under the Employee Retirement Income Security Act of 1974 as amended 
(“ERISA”) and the related Best Interest Contract Exemption (“BIC Exemption”).  The BIC Exemption 
required certain disclosures to be provided to a retirement investor and included on a financial institution’s 
public website.  See DOL, Best Interest Contract Exemption, 81 FR 21002, 21045-52 (Apr. 8, 2016). 
51
  See supra footnotes 23 to 24 and accompanying text; see also Schwab Letter (Koski), supra footnote 
21(reporting that retail investors say it is most important for firms to communicate about “costs I will pay 
for investment advice,” a “description of advice services,” the “obligations the firm and its representatives 
owe me” and any “conflicts of interest related to the advice I receive”); CCMC Letter (investor polling), 
supra footnote 21 (reporting as issues that “matter most” to investors, “explaining fees and costs,” 
explaining conflicts of interest” and “explaining own compensation”). 

 
27 
 
another interview-based study observed that interview participants could have some gaps in 
understanding, these studies still observed that interview participants could learn new important 
information from the relationship summary as proposed.
52
   
In addition, as noted above and discussed in further detail below, we are making a 
number of modifications designed to improve the relationship summary relative to the proposal, 
which are informed by these and other observations reported by RAND 2018 and other surveys 
and studies, as well as by investor feedback at roundtables and in Feedback Forms and the other 
comment letters we have received.  For example, we are substantially revising our approach to 
disclosing standard of conduct and conflicts of interest to make this information clearer to retail 
investors, including (among other changes) eliminating the word “fiduciary” and requiring 
firms—whether broker-dealers, investment advisers, or dual registrants—to use the term “best 
interest” to describe their applicable standard of conduct.
53
  Further, as compared to the proposal, 
modifications adopted in the final relationship summary instructions require less prescribed 
                                                                                                                                                             
52
  See RAND 2018, supra footnote 13 (describing that participants in qualitative interviews had difficulty 
reconciling the information provided in the obligations section and conflicts of interest section and other 
areas of confusion, but concluding that “[p]articipants demonstrated evidence of learning new information 
from the relationship summary”); Kleimann I, supra footnote 19 (although study author concluded that, 
overall, participants had difficulty with “sorting out similarities and differences,” the study reports that 
“nearly all participants easily identified a key difference between Brokerage Accounts and Advisory 
accounts as the fee structure;” “[p]articipants expected to pay for transactions in a Brokerage Account or 
the quarterly fee for an Advisory Account;” “most participants understood that both Brokerage Accounts 
and Advisory Accounts could have financial relationships with other companies that could be potential 
conflicts with clients’ best interests” and “[nearly all participants saw the Key Questions as essential ... 
straightforward and raised important questions that they themselves might not have thought to ask.”); see 
also Betterment Letter I (Hotspex) supra footnote 18 (83% of respondents correctly identified as “true” a 
statement that “some investment firms have a conflict of interest because they benefit financially from 
recommending certain investments” when viewing a version of the standalone adviser relationship 
summary constructed based on the instructions set forth in the proposal). 
53
  See infra, Section II.B.3. 

 
28 
 
wording,  and instead, firms will generally use their own wording to address required topics, 
which creates flexibility in providing accurate information to investors.  We believe that this 
modification substantially limits the practicability and benefit of additional usability testing 
because there is no single version of the relationship summary (or a limited set of form versions) 
that may be used to gauge investor comprehension given firms’ flexibility to tailor their 
relationship summary.
54
  Therefore, we believe that any anticipated benefit from continued 
rounds of investor usability testing does not justify the cost to investors of delaying a rulemaking 
designed to increase investor protection. 
Accordingly, we believe that the totality of input received through comments (including 
Feedback Forms), outreach at roundtables and through the OIAD/RAND and RAND 2018 
reports, as well as surveys and studies submitted by commenters, fully supports our 
consideration and adoption of the relationship summary, with modifications informed by this 
input as discussed more fully below.  However, to help ensure that the relationship summary 
fulfills its intended purpose, we have directed our staff to review a sample of relationship 
summaries that are filed with the Commission beginning after June 30, 2020, when firms first 
                                                                                                                                                             
54
  In this regard, the RAND 2018 report and surveys and studies submitted by commenters generally were 
based on sample versions of the relationship summary that we included in the proposal.  Alternate designs 
tested by commenters generally used the all of the same topics (e.g., a description of service and the 
relationship, fees and costs, standard of care, conflicts, additional information and key questions) as the 
proposed sample versions, with changes using different versions of prescribed wording and formatting 
designed to be more appealing to readers.  See Kleimann II, supra footnote 19 (describing alternative Form 
CRS design assumptions) and Betterment Letter I (Hotspex) supra footnote 18 (describing approach to 
optimizing the Form CRS).  Given modifications that we are adopting to the Form CRS instructions that 
provide firms more flexibility to use their own wording to describe service offerings, fees and costs and 
their conflicts of interest and more flexibility in formatting as compared to the proposal, we are not 
preparing sample or illustrative versions of the relationship summary that could be used to repeat such 
surveys and testing, and we do not believe that we would be able to develop sample versions that would be 
representative given the diversity among firms in their service and product offerings.   

 
29 
 
file their relationship summaries, and to provide the Commission with the results of this review.  
The Commission and its staff are also reviewing educational materials provided on Investor.gov 
and intend to develop additional content in order to continue to improve the information 
available to investors about working with investment advisers, broker-dealers, individual 
financial professionals, and investing. 
 In the Proposing Release, we proposed certain disclosures to be included in all print or 
electronic retail investor communications by broker-dealers, investment advisers, and their 
financial professionals (the “Affirmative Disclosures”).  We have determined not to adopt the 
Affirmative Disclosures, as we discuss further below.  In our view, the combination of the 
disclosure requirements in Form CRS and Regulation Best Interest should adequately address the 
objectives of the proposed Affirmative Disclosures. 
II. FORM CRS RELATIONSHIP SUMMARY 
A. Presentation and Format  
The relationship summary is designed to be a short and accessible disclosure for retail 
investors that helps them to compare information about firms’ brokerage and/or investment 
advisory offerings and promotes effective communication between firms and their retail 
investors.
55
  The proposed instructions included requirements on length, formatting, and content.  
The proposal also provided three examples of what a relationship summary might look like for a 
                                                                                                                                                             
55
  Form CRS defines “relationship summary” as “[a] disclosure  prepared in accordance with these 
Instructions that you must provide to retail investors” and also references Advisers Act rule 204-5 and 
Exchange Act rule 17a-14.  Firms that do not have any retail investors to whom they must deliver a 
relationship summary are not required to prepare or file one.  See General Instructions to Form CRS, 
Advisers Act rule 204-5, Exchange Act rule 17a-14(a).   

 
30 
 
standalone broker-dealer, standalone investment adviser, and dual registrant.  In providing 
feedback on the proposed sample relationship summaries, c  ommenters on Feedback Forms and 
participants in the RAND 2018 survey and other surveys and studies provided by commenters 
indicated that the proposed relationship summary could be too dense and difficult to read.
56
  
They suggested using simpler terms and more white space, among other changes.
57
  Commenters 
also encouraged the use of design principles that would result in a more visually appealing and 
                                                                                                                                                             
56
  See Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Questions 1 and 4) 
(33 commenters (35%) answered “Somewhat” or “No” in either of Question 3(a) (Do you find the format of 
the Relationship Summary easy to follow?) or Question 3(c) (Is the Relationship Summary easy to read?); 
comments responding to Question 4 (“Are there topics in the relationship summary that are too technical 
or that could be improved?”); 41 Feedback Forms (44%) indicated in response to Question 4 or another 
question that the relationship summary was too technical or suggested one or more  topics that could be 
improved); see also RAND 2018, supra footnote 13 (on average, 24% of respondents described any given 
section as difficult or very difficult, more than 30% described the fees and costs section as difficult or very 
difficult; but qualitative interview discussions revealed that there were areas of confusion for  participants, 
including differences between account types or financial professionals); Betterment Letter I (Hotspex) 
supra footnote 18 (only 22% of respondents reviewing a version of the standalone adviser relationship 
summary said information was easy to understand; only 18% said the format was appealing); Kleimann I, 
supra footnote 19 (finding that participants were confused).  Cf. Cetera Letter II (Woelfel), supra footnote 
17 (more than 75% of respondents strongly or somewhat agreed that individual topics covered by the 
relationship summary were described clearly).  See also comments discussed supra footnote 35. 
57
  Comment Letter of Front Street Consulting (Jun. 8, 2018) (stating that disclosure must be readable and 
understandable using plain language); Kleimann II, supra footnote 19 (describing design and content 
principles for a redesigned relationship summary, noting that “[h]eading and white space allow readers to 
have an overview of the content, see the overall structure of the content, and choose which parts most 
interest them...”); IAA Letter I (recommending flexibility for innovative use of design techniques 
including “using more white space, and using visuals like icons and images”); Fidelity Letter (discussing 
designed relationship summary using “key design elements that are informed by our experienced 
employees whose focus is on graphic design and applying design thinking techniques to customer facing 
products”). Schwab Letter I (Koski), supra footnote 21 (reporting that the “majority of retail investors 
surveyed want communications that are relevant to them (91%), short and to the point (85%), and visually 
appealing (79%)”); Schwab Letter II (stating that combined results of RAND 2018 and its own survey 
indicate that the Form CRS should be shorter, organized around questions, focus on “fees/costs” and 
“services/relationships” and contain “hyperlinks”); Betterment Letter I (Hotspex), supra footnote 18   
(providing suggestions for streamlining and focusing the content requirements and improving the visual 
layout and format of the relationship summary to improve its effectiveness). 

 
31 
 
accessible disclosure.
58
  In addition, the IAC recommended, through a majority vote, uniform, 
simple, and clear summary disclosures to retail investors.
59
  We have incorporated many of these 
suggestions into the instructions.  
We are changing the instructions to require a question-and-answer format, give additional 
support for electronic formats, provide guidance that firms should include white space, and 
implement other design features to make the relationship summary easier to read.
60
  We are 
requiring firms to use standardized headings in a prescribed order to preserve comparability, 
while permitting greater flexibility in other aspects of the relationship summary’s wording and 
design to enhance the relationship summary’s accuracy, usability, and effectiveness.
61
  The final 
instructions will require limited prescribed wording compared to the proposal and will permit 
firms to use their own wording to describe most topics.  We also are not requiring firms to 
discuss the sub-topics required within each section in a prescribed order, as proposed.
62
  Dual 
                                                                                                                                                             
58
  See, e.g., Betterment Letter II (“The form should better implement design principles that have been shown 
to facilitate visual appeal and comprehension.”); Schwab Letter I (citing to a presentation given by 
Kleimann Communication Group, Inc., at an IAC meeting on June 14, 2018); IAA Letter I (arguing that 
more visually dynamic and engaging design would make the relationship summary more effective and 
likely to be read). 
59
  See IAC Form CRS Recommendation, supra footnote 10 (reiterating a recommendation from the IAC 
Broker-Dealer Fiduciary Duty Recommendations in 2013 to “adopt a uniform, plain English disclosure 
document to be provided to customers and potential customers of broker-dealers and investment advisers 
that covers basic information about the nature of services offered, fees and compensation, conflicts of 
interest, and disciplinary record” and recommending that the Commission work with a design expert and 
test the relationship summary for effectiveness). 
60
  General Instruction 2.A. to Form CRS.  (“You should include white space and implement other design 
features to make the relationship summary easy to read.”). 
61
  See, e.g., Items 2.B. and 3.C.(ii) of Form CRS.   
62
  See Proposed General Instruction 1.(b) to Form CRS (“Unless otherwise noted, you must also present the 
required information within each item in the order listed.”). 

 
32 
 
registrants
63
 and affiliated brokerage and investment advisory firms also will have flexibility to 
decide whether to prepare separate or combined relationship summaries.  These changes are 
intended to enhance the relationship summary’s clarity, usability, and design, and to promote 
effective communication and understanding between retail investors and their firms and financial 
professionals.  We describe these changes in more detail below.  
We are also adopting some parts of the instructions that address presentation and 
formatting as proposed.  The instructions state that the relationship summary should be concise 
and direct, and firms must use plain English and take into consideration retail investors’ level of 
financial experience, as proposed.
64
  Firms also are not permitted to use multiple negatives, or 
legal jargon or highly technical business terms unless firms clearly explain them, as proposed.  In 
a change from the proposal, the instructions will not permit use of legal jargon or technical terms 
without explaining them in plain English, even if the firm believes that reasonable retail 
investors will understand those terms.
65
  Several commenters suggested that the relationship 
                                                                                                                                                             
63
  Form CRS defines “dual registrant” as “A firm that is dually registered as a broker or dealer registered 
under section 15 of the Exchange Act and an investment adviser registered under section 203 of the 
Advisers Act and offers services to retail investors as both a broker-dealer and an investment adviser.”  
General Instruction 11.C. to Form CRS.  This definition varies from the one proposed in that it includes 
only those investment advisers registered with the SEC, rather than with the States.  For the avoidance of 
doubt, it also includes the statutory registration provisions for broker-dealers and investment advisers.  
64
  See General Instruction 2.A. to Form CRS (providing that firms should (i) use short sentences and 
paragraphs; (ii) use definite, concrete, everyday words; (iii) use active voice; (iv) avoid legal jargon or 
highly technical business terms unless firms clearly explain them; and (v) avoid multiple negatives.  Firms 
must write their responses to each item as if speaking to the retail investor, using “you,” “us,” “our firm,” 
etc.).  Delivery of the relationship summary will not necessarily satisfy the additional requirements that 
broker-dealers and investment advisers have under the federal securities laws and regulations or other laws 
or regulations.  See General Instruction 2.D. to Form CRS; Proposed General Instruction 3 to Form CRS. 
65
  General Instruction 2.A. to Form CRS.  Compare to Proposed General Instruction 2 to Form CRS 
(“...avoid legal jargon or highly technical terms unless you clearly explain them or you believe that 
reasonable retail investors will understand them...”). 

 
33 
 
summary avoid the use of jargon (e.g., terms like “asset-based fee” and “load” in the fees 
section),
66
 and several roundtable participants and participants in the RAND 2018 interviews and 
another study said that they did not understand certain technical terms.
67
  Roundtable participants 
and commenters on Feedback Forms asked that the relationship summary include definitions or a 
glossary.
68
  In addition, the IAC recommended that a document such as the relationship summary 
use plain English and a concise format.
69
  As a result, we are instructing firms to avoid using 
legal jargon and highly technical terms in the relationship summary unless they are able to 
explain the terms in the space of the relationship summary.  We believe this simpler approach 
obviates the need for firms to justify what they believe a reasonable retail investor would or 
would not understand.  Firms would have the flexibility to use their own wording, including 
legal or highly technical terms as long as they explain them, or may prefer to use simpler terms, 
given the space limitations of the relationship summary.  Additionally, we have added a cover 
page for Form CRS under the Exchange Act (17 CFR 249.640) only, displaying a currently valid 
                                                                                                                                                             
66
  CFA Letter I; AARP Letter; IAA Letter I. 
67
  See, e.g., Miami Roundtable; Houston Roundtable; Philadelphia Roundtable; RAND 2018, supra 
footnote13 (in qualitative interviews participants asked for definitions of “transaction-based fee,” asset-
based fee,” and struggled with terms such as “mark-up,” “mark-down,” “load,” surrender “charges” and 
“wrap fee”); see also Kleimann I, supra footnote 19. 
68
  See, e.g., Philadelphia Roundtable, at 64 (participant recommending a glossary at the end of the 
relationship summary); Washington, D.C. Roundtable, at 31 (“You might want to consider a glossary of 
terms.”); Feedback Forms Comment Summary, supra footnote 11 (summary of comments to Question 4) 
(10 comments asked for a definition or a better explanation of the term “fiduciary,” seven asked for 
definitions of terms such as transaction-based fee, asset-based fee or wrap fee); see also Anonymous18 
Feedback Form (“A glossary would be nice – not in “legalize” [sic] language”).  
69
  See IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10; and IAC Form CRS 
Recommendation, supra footnote 10. 

 
34 
 
OMB control number and including certain statements relating to federal information law and 
requirements, and the SEC’s collection of information.
70
   
1. Limited Prescribed Wording  
The proposed instructions would have required firms to include prescribed wording 
throughout many sections of the relationship summary.  In particular, the fees and costs, standard 
of conduct, and the comparison section for standalone broker-dealers and investment advisers 
included a number of required statements, many that differed for broker-dealers, investment 
advisers, and dual registrants.
71
  The introduction, conflicts of interest, and key questions 
sections also included some required statements.
72
  I  n response to comments (as described more 
fully below) we are largely eliminating the prescribed wording and replacing those statements 
with instructions that generally allow firms to describe their own offerings with their own 
wording.  
For example, the proposed instructions would have required broker-dealers to state, “If 
you open a brokerage account, you will pay us a transaction-based fee, generally referred to as a 
commission, every time you buy or sell an investment” and “The fee you pay is based on the 
specific transaction and not the value of your account.”
73
  Broker-dealers also would have stated 
“The more transactions in your account, the more fees we charge you.  We therefore have an 
                                                                                                                                                             
70
  Under the Advisers Act, Form CRS is Part 3 of Form ADV, which already contains a cover page. 
71
  See infra discussion at Sections II.B.3 (fees and costs and standard of conduct) and II.B.6 (proposed items 
omitted in final instructions). 
72
  See infra discussion at Sections II.B.1 (introduction) and II.B.3 (conflicts of interests) and supra Section 
II.A.4 (conversation starters).   
73
  Proposed Items 2.B.1. and 4.B.1. of Form CRS.   

 
35 
 
incentive to encourage you to engage in transactions.”
74
  Instead the final instructions will 
require broker-dealers to describe the principal fees and costs that retail investors will incur, 
including their transaction-based fees, and summarize how frequently the fees are assessed and 
the conflicts of interest they create.
75
     
Many commenters requested more flexibility for firms to provide accurate descriptions of 
their services.
76
  Some argued that the mix of prescribed and firm-authored wording required by 
the proposed instructions would be inaccurate, contribute to investor confusion, or be ineffective 
for investors, particularly language that some commenters considered “boilerplate.”
77
  
Observations reported in the RAND 2018 qualitative interviews and other surveys and studies 
                                                                                                                                                             
74
  Proposed Item 4.B.5. of Form CRS. 
75
  See Items 3.A. through 3.C. of Form CRS.   
76
  See, e.g., IAA Letter I; Comment Letter of Massachusetts Mutual Life Insurance Company (Aug. 7, 2018) 
(“MassMutual Letter”); Comment Letter of the Association for Advanced Life Underwriting (Aug. 7, 
2018) (“AALU Letter”); Comment Letter of Prudential Financial, Inc. (Aug. 7, 2018) (“Prudential Letter”); 
Comment Letter of Mutual of America Life Insurance Company (Aug. 3, 2018) (“Mutual of America 
Letter”); Comment Letter of John Hancock Life Insurance Company (U.S.A) (Aug. 3, 2018) (“John 
Hancock Letter”); ACLI Letter; Comment Letter of New York Life Insurance Company (Aug. 7, 2018) 
(“New York Life Letter”); Comment Letter of Transamerica (Aug. 7, 2018) (“Transamerica Letter”); 
Vanguard Letter.  See also Betterment Letter I, supra footnote 18 (arguing that investor survey conducted 
by Hotspex showed that its more customized version of the relationship summary facilitated investor 
understanding).  Some individuals submitting Feedback Forms also preferred more firm-specific 
information.  See, e.g., Anonymous13 Feedback Form (“Firm-specific info would be nice on this 
document.”); Bhupalam Feedback Form (“I would like to see additional information regarding specific firm 
rather than a general description.”); Christine Feedback Form (“I’m interested in my individual advisor’s 
orientation – small cap, mid cap, large cap or mix growth vs. value foreign, domestic or mix fundamental 
or quantitative long term or short term”). 
77
  ASA Letter (“[T]he mix of prescribed and customized language will only create more confusion and 
complexity, as well as legal risk for financial institutions.”); Primerica Letter (“This mix of prescribed and 
flexible disclosure would ultimately result in a patchwork of new disclosures that fail to comprehensively 
describe a particular firm’s business model in a way that is accessible and digestible by retail investors.”); 
IAA Letter I (“Many firms would . . . be compelled to explain to prospective clients how and why their 
business is different from the boilerplate descriptions and why the comparisons are not applicable. The 
boilerplate language may thus detract from a firm’s ability to explain its own services and make it harder 
for investors to understand those services.”). 

 
36 
 
also showed that investors had difficulty understanding, were confused by, or misinterpreted 
some of the prescribed wording.
78
  A range of commenters asserted that the proposed prescribed 
wording could be inaccurate or inapplicable.
79
  For example, various providers of insurance 
products explained that references to brokerage or investment advisory accounts were not 
consistent with their business models and could confuse retail investors because customers 
generally purchase insurance products directly from the issuer, without needing to open a 
brokerage account.
80
  One commenter expressed concern that some of the prescribed wording 
could constitute impermissible compelled speech that could raise First Amendment concerns.
81
  
That same commenter, with others, also opposed providing firms with more flexibility than 
                                                                                                                                                             
78
  E.g., RAND 2018, supra footnote 13 (describing that, in qualitative interviews, participants noted some 
words or phrases that needed further definition and some misunderstood differences between account types 
and professionals); Kleimann I, supra footnote 19; Betterment Letter I (Hotspex) supra footnote 18 
(finding that investors had difficulty understanding certain key information on the SEC sample version of 
standalone investment adviser relationship summary); see also Kleimann II,  supra footnote 19 (investors 
misconstrued the legal standard in alternative versions of prescribed wording used in a redesigned version 
of the relationship summary); Feedback Forms Comment Summary, supra footnote 11 (summary of 
responses to Question 4) (41 Feedback Forms included narrative responses that indicated that one or more 
topics were too technical or could be improved; of these, 20 indicated that the relationship summary 
language was too technical, wordy, confusing or should be simplified; 23 indicated that information on fees 
and costs was too technical or needed to be more clear; 23 suggested that information in sections on 
relationships and services and obligations needed clarification, and 14 suggested clarification or more 
information about conflicts of interest).    
79
  See, e.g., IAA Letter I; ACLI Letter; AARP Letter; SIFMA Letter; FSI Letter I; Triad Letter; Vanguard 
Letter. 
80
  See, e.g., Comment Letter of the Committee of Annuity Insurers (Aug. 7, 2018) (“Committee of Annuity 
Insurers Letter”) (“The use of the term ‘brokerage account may be confusing to retail investors purchasing 
and owning annuities, as annuities are typically ‘held’ directly by an insurance company.”); ACLI Letter; 
IAA Letter I; FSI Letter I; Comment Letter of Lincoln Financial Group (Nov. 13, 2018) (“Lincoln 
Financial Group Letter”) (“Sales of variable annuities, and variable life insurance products, typically do not 
involve the opening of a brokerage account and are not conducted in a brokerage account.”). 
81
  See CFA Letter I, supra footnote 37.   

 
37 
 
proposed to implement the relationship summary, arguing that more flexibility could impair 
comparability.
82
 
We recognize that extensive use of prescribed wording in certain contexts could add to 
investor confusion and may not accurately or appropriately capture information about particular 
firms.  Accordingly, the final instructions permit firms, within the parameters of the instructions, 
to describe their services, investment offerings, fees, and conflicts of interest using their own 
wording.  This approach should enable firms to reflect accurately what they offer to retail 
investors, should result in disclosures that are more useful to retail investors, and should mitigate 
concerns relating to the mix of prescribed and firm-authored wording, and the extensive use of 
prescribed wording, that the proposed instructions required.   
Although we are allowing more flexibility so that firms can describe their offerings more 
accurately, firms still will be required to discuss required topics within a prescribed order, as 
discussed below.
83
  This approach will facilitate transparency, consistency, and comparability of 
information across the relationship summaries of different firms, helping retail investors to focus 
on information that we believe would be particularly helpful in deciding among firms, financial 
professionals, services, and accounts — namely:  relationships and services; fees, costs, conflicts, 
and required standard of conduct; disciplinary history; and how to get additional information.  
We believe that more tailored, specific, and distinct information in the required topic areas also 
                                                                                                                                                             
82
  See AFL-CIO, CFA Letter. 
83
  See, e.g., General Instructions 1.A and 1.B., and 2.B. to Form CRS.   

 
38 
 
will better serve the educational purpose by facilitating more robust substantive comparisons 
across firms.    
This approach addresses — and mitigates —First Amendment concerns.  Generally, the 
instructions no longer require any specific speech.
84
  Rather, they permit firms to use their own 
words to impart accurate information to investors.  In certain circumstances, however, we are 
continuing to require firms to use prescribed wording.  For example, the final instructions require 
firms to use standardized headings and conversation starters, which are in the form of questions 
that investors are encouraged to ask.
85
  These elements are organizational (the headings) or 
intended to prompt a discussion by the investor (the conversation starters).
86
  The final 
instructions also require firms to include prescribed statements describing their required standard 
of conduct when providing recommendations or advice.
87
  Requiring firms to provide a 
consistent articulation of their required legal obligations in this regard will reduce and minimize 
investor confusion, as compared with allowing firms to state their required standard of conduct 
using their own wording.
88
  These statements are designed to require the disclosure of purely 
factual information about the standard of conduct that applies to the provision of 
recommendations by broker-dealers and the provision of advice by investment advisers under 
                                                                                                                                                             
84
  For example, the final instructions no longer require the proposed Comparisons section or other prescribed 
wording that could be perceived as requiring firms to compare their owns services unfavorably to those of 
their competitors.  See infra Section II.B.6.   
85
  See infra Sections II.A.2 and II.A.4. 
86
 See infra Sections II.A.2. and II.A.4. 
87
  Item 3.B.(i) of Form CRS.  See infra Section II.B.3.b. 
88
  See infra Sections II.A.2 and II.B.3.b. 

 
39 
 
their respective legal regimes.
89
  Finally, the instructions require firms to include a prescribed, 
factual statement regarding the impact of fees and costs on investments, and a prescribed 
statement encouraging retail investors to understand what fees and costs they are paying.
90
  As 
explained further below, the final instructions provide that if a required disclosure or 
conversation starter is inapplicable to a firm’s business or specific wording required by the 
instructions is inaccurate, firms may omit or modify it.
91
 
As in the proposal, the final instructions include parameters for the scope of information 
expected within the relationship summary, though we are modifying the requirements to clarify 
the scope further in light of commenter concerns.   First, all information in the relationship 
summary must be true and may not omit any material facts necessary in order to make the 
disclosures, in light of the circumstances under which they were made, not misleading.
92
  The 
                                                                                                                                                             
89
  See Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229, 249-50 (2010) (upholding against 
First Amendment challenge a requirement that lawyers disclose their “legal status” and “the character of 
the assistance provided”);  Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985) 
(upholding required disclosure of factual information about terms of service); Pharm. Care Mgmt. Ass’n v. 
Rowe, 429 F.3d 294, 310 (1
st
 Cir. 2005) (upholding requirement that pharmacy benefit managers disclose 
conflicts of interest and financial arrangements). 
90
  See Item 3.A.(iii) of Form CRS (requiring firms to state, “You will pay fees and costs whether you make or 
lose money on your investments.  Fees and costs will reduce any amount of money you make on your 
investments over time.  Please make sure you understand what fees and costs you are paying.”).  See also 
infra footnotes 424–425 and accompanying text.   
91
  See General Instruction 2.B to Form CRS.  We are adopting this provision to ensure that firms are not 
compelled to include wording in their relationship summaries that is misleading or inaccurate in the context 
of their business models.  This provision may apply in limited circumstances.  For example, the headings 
and conversation starters prescribed by the final instructions are worded at a highly generalized level and 
cover selected key topics that are broadly applicable to broker-dealers and investment advisers and their 
relationships with retail investors, irrespective of business model (i.e., relationships and services the firm 
offers to retail investors, fees and costs that retail investors will pay, specified conflicts of interest and 
standards of conduct, and disciplinary history).     
92
  General Instruction 2.B. to Form CRS (“All information in your relationship summary must be true and 
may not omit any material facts necessary in order to make the disclosures required by these Instructions 
 

 
40 
 
proposed instructions required all information in the relationship summary to be true and 
prohibited firms from omitting any material facts necessary to make the disclosures required by 
the instructions and the applicable item not misleading, but did not include the clause “in light of 
the circumstances under which they were made.”
93
  Commenters raised concerns with respect to 
the applicability of this standard to a short document with strict page limits that is meant to 
provide only a brief summary of information.
94
   
We continue to believe that firms should include only as much information as is 
necessary to enable a reasonable investor
95
 to understand the information required by each 
                                                                                                                                                             
and the applicable Item, in light of the circumstances under which they were made, not misleading.”).  Cf. 
Proposed Instruction 3 to Form CRS (“All information in your relationship summary must be true and may 
not omit any material facts necessary to make the disclosures required by these Instructions and the 
applicable item not misleading.”). 
93
  Proposed General Instruction 3 to Form CRS. 
94
  See, e.g., LPL Financial Letter (raising concerns that the relationship summary raises the risk of liability for 
material omissions given its page limits and required level of detail); CCMC Letter (“The page and length 
limitations imposed by the proposed regulation, coupled with the required disclosure that is mandated by 
the proposed rules, present a substantial risk of liability for omissions that may be necessary only to ensure 
the disclosure meets the Commission’s strict formatting requirements.”); Fidelity Letter (stating that firms 
“would find it very challenging to summarize their offerings within the four-page limit and other content 
and formatting constraints of the form as proposed, let alone to do so in a manner that provides sufficient 
detail to convey meaningful information to investors, and is sufficiently accurate to avoid creating liability 
for a misstatement”). 
95
  The proposed instructions referred to a “reasonable retail investor.”  For example, under the proposed 
instructions, firms would have been able to omit or modify prescribed wording or other statements required 
to be part of the relationship summary if such statements were inapplicable to a firm’s business or would 
have been misleading to a “reasonable retail investor.”  See Proposed General Instruction 3 to Form CRS.  
The final instructions no longer make reference to a “reasonable retail investor.”  By eliminating the 
reference to a “reasonable retail investor,” we are clarifying that we did not intend at the proposal, and do 
not intend now, to introduce a new standard under the federal securities laws, which generally refer to what 
a “reasonable investor” would consider important in making a decision.  See infra footnotes 95–105 and 
accompanying text.  References to a “reasonable retail investor” in the proposed instructions were meant to 
clarify how the operative Instruction or Item would apply in the context of a retail investor.  Because new 
rule 17a-14 under the Exchange Act and new rule 204-5 under the Advisers Act require firms to deliver 
relationship summaries to retail investors in accordance with such rules, we do not believe such 
clarifications are necessary.        

 
41 
 
item.
96
  As discussed below, we believe that investors will benefit from receiving a relationship 
summary containing high-level information that they will be more likely to read and understand, 
with the ability to access more detailed information.
97
  As a result, we recognize a firm’s 
relationship summary by itself is a summary of the information required to inform retail 
investors about the services a firm provides along with its fees, costs, conflicts of interest, and 
standard of conduct.  We also believe that the disclosure provided in the relationship summary 
should be responsive and relevant to the topics covered by the final instructions,
98
 and not omit 
information that is required to be disclosed or necessary to make the required disclosure not 
misleading.
99
  We are sensitive to commenters’ concerns, however, regarding expectations for 
                                                                                                                                                             
96
  General Instruction 2.A. to Form CRS.  The instructions remind firms to use not only short sentences as 
proposed, but also short paragraphs.  General Instruction 2.A.(i) to Form CRS. 
97
  See infra Section II.A.3. 
98
  Firms should keep in mind the applicability of the antifraud provisions of the federal securities laws, 
including section 206 of the Advisers Act, section 17(a) of the Securities Act, and section 10(b) of the 
Exchange Act and rule 10b-5 thereunder, in preparing the relationship summary, including statements made 
in response to the relationship summary’s “conversation starters.”  See infra Section II.B.2.c. 
99
  This approach is consistent with the approach the Commission has taken with respect to disclosure more 
broadly.  See, e.g., rule 408(a) under Regulation C [17 CFR 230.408(a)] (“In addition to the information 
expressly required to be included in a registration statement, there shall be added such further material 
information, if any, as may be necessary to make the required statements, in the light of the circumstances 
under which they are made, not misleading”); Exchange Act rule 12b-20 [17 CFR 240.12b-20] (“In 
addition to the information expressly required to be included in a statement or report, there shall be added 
such further material information, if any, as may be necessary to make the required statements, in the light 
of the circumstances under which they are made not misleading”); see also Commission Statement and 
Guidance on Public Company Cybersecurity Disclosures, Securities Act Release No. 82746 (Feb. 21, 2018)  
[83 FR 8166 (Feb. 26, 2018)] (stating that the “Commission considers omitted information to be material if 
there is a substantial likelihood that a reasonable investor would consider the information important in 
making an investment decision or that disclosure of the omitted information would have been viewed by 
the reasonable investor as having significantly altered the total mix of information available”); TSC 
Industries v. Northway, 426 U.S. 438, 449 (1976) (stating a fact is material “if there is a substantial 
likelihood that a reasonable shareholder would consider it important” in making an investment decision or 
if it “would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of 
information made available” to the shareholder); Basic, Inc. v. Levinson, 485 U.S. 224, 240 (1988) (stating 
that “materiality depends on the significance the reasonable investor would place on the withheld or 
 

 
42 
 
the scope of required information within page limits.  In this regard, the instructions continue to 
provide, as proposed, that firms may not include a disclosure in the relationship summary other 
than a disclosure that is required or permitted by the instructions and the applicable item,
100
 and 
that all the information contained in the relationship summary must be true.
101
   
In a change from the proposal, and to address commenters’ concerns, the final 
instructions provide that the information contained in the relationship summary may not omit 
any material facts necessary in order to make the disclosures, in light of the circumstances under 
which they were made, not misleading.
102
  We have added the phrase “in light of the 
circumstances under which they were made” to clarify that the content included or not included 
in the relationship summary should be viewed, for example, in light of the fact that the disclosure 
is intended to be a summary, that firms must adhere to the page limit, and that there will be links 
to additional information.  Any information contained in the relationship summary or omitted 
facts will not be viewed in isolation in respect of determining whether such information would 
have been viewed by a reasonable investor as having significantly altered the total mix of 
                                                                                                                                                             
misrepresented information”); Securities and Exchange Com’n v. Texas Gulf Sulphur, 258 F. Supp. 262, 
279 (S.D.N.Y. 1966) (stating that “[a]n insider’s liability for failure to disclose material information which 
he uses to his own advantage in the purchase of securities extends to purchases made on national securities 
exchanges as well as to purchases in ‘face-to-face’ transactions”); Cochran v. Channing Corporation, 211 
F. Supp. 239, 242 (S.D.N.Y. 1962) (stating that the “Securities Exchange Act was enacted in part to afford 
protection to the ordinary purchaser or seller of securities. Fraud may be accomplished by false statements, 
a failure to correct a misleading impression left by statements already made or, as in the instant case, by not 
stating anything at all when there is a duty to come forward and speak”). 
100
  General Instruction 1.B. to Form CRS; see also Proposed General Instruction 1.(d) to Form CRS. 
101
  General Instruction 2.B. and 2.C. to Form CRS; see also Proposed General Instruction 3 to Form CRS.  
102
  Id. 

 
43 
 
information available.
103
  As discussed below, firms will provide additional detail and context 
through layered disclosure.  For example, the instructions require firms to include specific 
references or a link to additional information as part of the relationships and services and fees 
and conflicts sections.
104
  In other instances, the instructions encourage firms to reference or link 
to additional information to supplement their required disclosures.
105
 While this change from the 
proposal is drawn from other areas of the federal securities laws,
106
 Form CRS is not intended to 
create a private right of action.
 
 
Second, firms may omit or modify required disclosures or conversation starters that are 
inapplicable to their business, or specific wording required by the final instructions that is 
inaccurate.
107
  The proposed instructions permitted firms to omit or modify required disclosures 
that were inapplicable to their business or would be misleading to a reasonable retail investor.
108
  
We modified the proposed instruction to provide a more concrete requirement allowing firms to 
omit or modify prescribed wording, rather than using a broader standard referencing a reasonable 
                                                                                                                                                             
103
  See rule 10b-5 under the Exchange Act [17 CFR 240.10b-5]; supra footnote 99 and accompanying text;see 
also footnote 469 and accompanying text. 
104
 See infra Section II.A.3.  
105
  See, e.g., General Instruction 3.A. to Form CRS (“You are encouraged to use charts, graphs, tables, and 
other graphics or text features in order to respond to the required disclosures. . . .  You also may include: (i) 
a means of facilitating access to video or audio messages, or other forms of information (whether by 
hyperlink, website address, Quick Response Code (“QR code”), or other equivalent methods or 
technologies); (ii) mouse-over windows; (iii) pop-up boxes; (iv) chat functionality; (v) fee calculators; or 
(vi) other forms of electronic media, communications, or tools that designed to enhance a retail investor’s 
understanding of the material in the relationship summary.”).   
106
  See supra footnotes 99 and 103 and accompanying text. 
107
  General Instruction 2.B. to Form CRS. 
108
  See Proposed General Instruction 3 to Form CRS (“If a statement is inapplicable to your business or would 
be misleading to a reasonable retail investor, you may omit or modify that statement.”). 

 
44 
 
retail investor.  This instruction is intended to ensure that no statements are misleading or 
inaccurate in the context of a firm’s particular services or business.  Rather, the objective of the 
Commission is to ensure that required disclosures are purely factual and provide investors with 
an accurate portrayal of the firm’s services and operations. 
Finally, given that firms will use mostly their own wording, we are adding instructions 
that remind firms that their responses must be factual and provide balanced descriptions to help 
retail investors evaluate the firm’s services.
109
  For example, firms may not include exaggerated 
or unsubstantiated claims, vague and imprecise “boilerplate” explanations, or disproportionate 
emphasis on possible investments or activities that are not made available to retail investors.
110
  
The relationship summary is designed to serve as disclosure, rather than marketing material, and 
should not unduly emphasize aspects of firms’ offerings that may be favorable to investors over 
those that may be unfavorable. 
2. Standard Question-and-Answer Format and Other Presentation 
Instructions  
As with the proposed instructions, the final instructions require firms to present 
information under standardized headings and to respond to all the items in the final instructions 
in a prescribed order.
111
   Instead of using declarative headings as proposed, however, the 
headings will be in the form of questions.
112
  This change responds to feedback from surveys and 
                                                                                                                                                             
109
  General Instruction 2.C. to Form CRS. 
110
  General Instruction 2.C. to Form CRS. 
111
  General Instruction 1.B. to Form CRS. 
112
  See generally Items 2.A., 3.A., 3.B., 3.C, and 4.A to Form CRS.   

 
45 
 
studies
113
 and commenters,
114
 including many submitting their own mock-ups of the relationship 
summary that suggested or used a question-and-answer format in their own documents.  Several 
commenters noted that the question-and-answer format is a more effective design for consumer 
disclosures because it focuses on questions to which a consumer wants answers and allows a 
consumer to skim quickly and understand where to get more information.
115
  Based on 
consideration of these comments, we are both incorporating the format generally and are 
utilizing several of the question headings suggested by commenters in mock-  ups, as discussed in 
each item below. 
In addition to the standardized headings, we continue to believe that a prescribed order of 
topics facilitates comparability of different firms’ relationship summaries.  Commenters 
generally supported or did not oppose the premise of a prescribed order of topics.
116
  Some 
                                                                                                                                                             
113
  See e.g.; RAND 2018, supra footnote 13 (reporting that about 60% of survey respondents preferred a 
question-and-answer format over the sample relationship summary format presented in the survey). 
Kleimann I, supra footnote 19 (“Participants liked the Key Questions section, but wanted the questions to 
be answered within the document.”). 
114
  IAA Letter I (“A [question-and-answer] format will help keep the relationship summary short and should 
also remove the onus of the retail investor having to ask questions.  This format would encourage further 
conversation, particularly if the Commission requires firms to point investors to additional information—
including comparison information and other key questions—on the SEC’s website.”); Schwab Letter I 
(citing Kleimann Communication Group, Inc., Making Disclosures Work for Consumers (Jun. 14, 2018), 
available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac061418-slides-by-susan-
kleimann.pdf, and contemporaneous discussions); Schwab Letter II (“Form CRS should be organized 
around questions”); Fidelity Letter (redesigned relationship summary with a question-and-answer format).   
115
  See Kleimann II, supra footnote 19 (“Readers ask questions when they read, especially of functional 
documents . . . .  For good design, we want to build upon this tendency by identifying the key questions 
investors should or are likely to ask and featuring them prominently in the text, thus easing the cognitive 
task for readers.); Schwab Letter I (“[Q]uestions that a consumer has . . . should be the organizing 
principle.”); see also CFA Letter I.  
116
  See, e.g., Trailhead Consulting Letter (supporting a standardized order of topics to facilitate comparability); 
Fidelity Letter (“[W]e urge the SEC to consider prescribing content and topics, but not specific 
language...”).   

 
46 
 
commenters did, however, suggest changes to the organization or inclusion of topics, either 
explicitly in their comment letters, implicitly by the design of their own mock-ups, or both.
117
  
Results of surveys and studies that assessed comprehension of the sample proposed relationship 
summaries demonstrated the importance of context and revealed confusion caused by the 
placement of some information.  For example, the RAND 2018 qualitative interviews suggested 
that investors were confused by and had difficulty reconciling the conflicts and standard of 
conduct sections, which were separated by the fees and comparisons sections.
118
  Another study 
suggested that the appearance of fee information in three separate sections and separation of the 
fees and conflicts sections by the comparisons section inhibited understanding of the connection 
between fees and conflicts.
119
  As discussed further below, we are combining the proposed Fees 
and Costs, Conflicts of Interest, and Standard of Conduct sections into one, to address these 
comments.
120
  In addition, in response to suggestions that we provide more flexibility for how 
                                                                                                                                                             
117
  See, e.g., CFA Letter I (suggesting changes to the order of the disclosures and the design of the relationship 
summary); IAA Letter I (suggesting a different order of topics and elimination of the Comparisons section, 
including by submitting its own mock-up); Comment Letter of Charles Schwab & Co., Inc. (Feb. 26, 2019) 
(“Schwab Letter III”) (providing sample Form CRS instructions that permit flexibility as to the order of 
sub-topics under each topic).  On Feedback Forms, 57 (about 60%) commenters responded “yes” when 
asked whether information was in the appropriate order; 8 commenters suggested moving the Key 
Questions to be first or closer to the front of the document.  See Feedback Forms Comment Summary, 
supra footnote 11 (summary of responses to Questions 3(b) and 7).  A few commenters on Feedback Forms 
suggested moving the Additional Information section forward.  See Durgin Feedback Form, Salkowitz 
Feedback Form, Starmer2 Feedback Form, Anonymous14 Feedback Form, and a few suggested changes to 
the order of discussion of obligations and conflicts.  See Anonymous28 Feedback Form, Asen Feedback 
Form, Lee2 Feedback Form.   
118
  See RAND 2018, supra footnote 13.  
119
  See Kleimann I, supra footnote 19, at 30 (participants “had difficulty building knowledge and relating one 
piece to another when it was separated by physical space.”).  
120
  See Item 3 of Form CRS. 

 
47 
 
firms describe their services so that they can more accurately convey the information, the final 
instructions do not require firms to present the information within each section in the order 
listed.
121
  Therefore, firms are free to discuss the required sub-topics within each item in an order 
that they believe best promotes accurate and readable descriptions of their business. 
The final instructions provide for page limits to promote brevity, as proposed.  The 
proposed instructions limited the length of the relationship summary to four pages for both 
standalone firms and dual registrants.
122
  The final instructions provide that for dual registrants 
that include their brokerage services and advisory services in a single relationship summary, the 
relationship summary must not exceed four pages in paper format, or the equivalent if delivered 
electronically.
123
  For broker-dealers
124
 and investment advisers
125
 a relationship summary in 
                                                                                                                                                             
121
  See Proposed General Instruction 1.(b) to Form CRS (“Unless otherwise noted, you must also present the 
required information within each item in the order listed.”). 
122
  Proposed General Instruction 1.(c) to Form CRS. 
123
  General Instruction 1.C. to Form CRS. 
124
  Proposed Form CRS defined “standalone broker-dealer” as “a broker or dealer registered under section 15 
of the Exchange Act that offers services to retail investors and (i) is not dually registered as an investment 
adviser under section 203 of the Advisers Act or (ii) is dually registered as an investment adviser under 
section 203 of the Advisers Act but does not offer services to retail investors as an investment adviser.”  
We are not adopting this definition because we believe using the term “broker-dealer” is sufficient for the 
final instructions.  The final instructions provide that Form CRS applies to broker-dealers registered under 
section 15 if the Exchange Act.  See supra footnote 8. 
125
  Proposed Form CRS defined “standalone investment adviser” as “an investment adviser registered under 
section 203 of the Advisers Act that offers services to retail investors and (i) is not dually registered as a 
broker or dealer under Section 15 of the Exchange Act or (ii) is dually registered as a broker or dealer 
under Section 15 of the Exchange Act but does not offer services to retail investors as a broker-dealer.”  
We are not adopting this definition because we believe using the term “investment adviser” is sufficient for 
the final instructions.  See supra footnote 8.  Furthermore, the final instructions specify that Form CRS 
applies to investment advisers registered under section 203 of the Advisers Act.   

 
48 
 
paper format must not exceed two pages, or the equivalent if delivered electronically.
126
  Dual 
registrants that prepare separate relationship summaries for their brokerage and advisory services 
are limited to two pages each, or the equivalent if delivered electronically.
127
  Unlike the 
proposed instructions, the final instructions do not prescribe paper size, font size, and margin 
width, providing instead that they should be reasonable.
128
  For example, we believe that 8½” x 
11” paper size, at least an 11 point font size, and a minimum of 0.75” margins on all sides, as 
proposed, could be considered reasonable, but other parameters could also be reasonable.    The 
objective of the proposed paper, font, and margin size limitations was to make the relationship 
summary easy to read.  We expect that a visually engaging and effective design, including in 
electronic format, c  ould achieve the same objective without the prescriptive limitations.   
Many commenters preferred a shorter, one-to-two page document more heavily relying 
on layered disclosure with increased use of hyperlinks and other cross-references to more 
detailed disclosure.
129
  Commenters also said that investors are more likely to read a shorter 
                                                                                                                                                             
126
  General Instruction 1.C. to Form CRS. 
127
  General Instruction 1.C. to Form CRS.  We discuss additional considerations and requirements for dual 
registrants and affiliates in Section II.A.5 below. 
128
  General Instruction 1.C. to Form CRS. 
129
  See, e.g., Schwab Letter I (“Form CRS should simply be a short navigation aid to the existing Form ADV 
Part 2 disclosure” for investment advisers or “to additional information readily available on the firm’s 
website or enclosed with the account documentation” for broker-dealers.); FSI Letter I (“While we support 
the Commission’s efforts to ensure concise disclosure by limiting the required Form CRS to four pages (or 
its electronic equivalent), we suggest an even shorter document (perhaps as short as one page) with 
hyperlinks to more detailed disclosures.”); see also AARP Letter; Better Markets Letter; Comment Letter 
of the Teachers Insurance and Annuity Association of America (Aug. 7, 2018) (“TIAA Letter”); Bank of 
America Letter; CCMR Letter; LPL Financial Letter; Kleimann II, supra footnote 19 (“Form CRS should 
be as short as possible.”). 

 
49 
 
document.
130
  Several commenters submitted mock-ups that were shorter than four pages.
131
  
Others indicated that the length of Form CRS was acceptable but should not exceed four 
pages.
132
  On the other hand, certain commenters suggested that the length of the relationship 
summary may be too short to appropriately describe firms’ insurance services or products.
133
  
One commenter said that it would be challenging for dual registrants to summarize all of their 
offerings within the four-page limit.
134
  Investor feedback from surveys, studies, roundtables, and 
Feedback Forms also did not show consistent results.  For example, 57% of the RAND 2018 
survey respondents indicated that the proposed relationship summary was too long, 41% said it 
was about right, and roughly 2% said it was too short.
135
  In section-by-section questioning, 
however, the most common response from RAND 2018 survey respondents was to keep the 
section length as is.
136
  Similarly, some roundtable participants provided feedback that the 
                                                                                                                                                             
130
  See Fidelity Letter; see also Schwab Letter I (Koski), supra footnote 21 (85% of survey participants 
answered that they would be more likely to read disclosure that is short and to the point with links to more 
information; 61% answered that they would be less likely to read a document that is longer and more 
comprehensive, but 31% answered that they would be more likely to read a longer and more 
comprehensive disclosure); Comment Letter of Glen Strong (Jul. 27, 2018). 
131
  See, e.g., Schwab Letter I; Fidelity Letter; IAA Letter I. 
132
  See Cambridge Letter; Comment Letter of Morningstar, Inc. (Aug. 7, 2018) (“Morningstar Letter”); 
Trailhead Consulting Letter. 
133
  See, e.g., ACLI Letter; MassMutual Letter. 
134
  See Fidelity Letter. 
135
  RAND 2018, supra footnote 13. 
136
  RAND 2018, supra footnote 13; see also Cetera Letter II (Woelfel), supra footnote 17 (when asked 
generally how the relationship summary could be improved, 10% of survey respondents said relationship 
summary could be shorter). 

 
50 
 
proposed length was right at the maximum, “about right,”  or “good,”
137
 whereas others would 
have preferred a shorter document.
138
  About 40% of commenters on Feedback Forms said that 
relationship summary was an appropriate length, while about 30% indicated a preference for a 
shorter document.
139
   
In light of commenter and investor feedback, we have determined that the relationship 
summary should be no more than four pages, and that in many cases a document shorter than 
four pages is appropriate.  As proposed, both standalone firms and dual registrants were subject 
to a four-page limit, even though a dual registrant may have to include more disclosures 
discussing its advisory business and brokerage business as compared with standalone firms.  
Upon further consideration of the comments advocating for a more streamlined disclosure that 
includes more white space, we are adopting a four-page limit for dual registrants that prepare one 
combined relationship summary, to permit them to capture all of the required information within 
twice as much space as for standalone firms.  If dual registrants and affiliated
140
 standalone firms 
choose to prepare separate relationship summaries for their brokerage and investment advisory 
services, each relationship summary should not exceed two pages.
141
  The two-page limit will 
                                                                                                                                                             
137
  Washington, D.C. Roundtable, at 18, 26.  
138
  See Philadelphia Roundtable, at 5, 19 (noting that lengthy disclosure “actually prevents investor interest 
and really understanding more.  If something like [the relationship summary] can replace the 200 pages and 
then you have access to the 200 pages if you want them, that’s a better system”). 
139
  See Feedback Forms Comment Summary (summary of responses to Question 6), supra footnote 11. 
140
  Form CRS defines an “affiliate” as “Any persons directly or indirectly controlling or controlled by you or 
under common control with you.”  General Instruction 11.A. to Form CRS. 
141
  General Instruction 1.C. to Form CRS (“Dual registrants and affiliates that prepare separate relationship 
summaries are limited to two pages for each relationship summary. . . . If delivered electronically, the 
 

 
51 
 
help to facilitate comparison of the dual registrant’s services, as investors can easily review the 
separate relationship summaries side-by-side, and will encourage firms to focus on succinctly 
and clearly explaining the required information.  Some commenters, including providers of 
insurance products, supported a longer relationship summary or expressed concern that four 
pages would not be enough to allow for a summary of all of their offerings.
142
  We believe that 
the elimination of certain sections (such as the comparison section)
143
 and most of the prescribed 
wording from the relationship summary, along with the flexibility firms will have under the final 
instructions to describe services with their own wording, and to omit or modify required 
disclosures or conversation starters that are inapplicable to their business or specific wording that 
is inaccurate, should help to alleviate the concerns of those who advocated for the relationship 
summary to be longer. 
3. Electronic and Graphical Formats, and Layered Disclosure  
We are adding instructions that clarify our support for firms wishing to use electronic 
media in preparing the relationship summary for retail investors.
144
  The proposed instructions 
would have permitted firms to add embedded hyperlinks within the relationship summary in 
                                                                                                                                                             
relationship summary must not exceed the equivalent of two pages or four pages in paper format, as 
applicable.”). 
142
  See supra footnotes 133–134 and accompanying text.  
143
  See infra Section II.B.6 (Proposed Items Omitted in Final Instructions). 
144
   Delivery is discussed in Section II.C.  Firms may deliver electronic versions of the relationship summary in 
accordance with the final instructions and the Commission’s guidance regarding electronic delivery.  See 
General Instructions 10.B. through 10.D. to Form CRS. 

 
52 
 
order to supplement required disclosures
145
 and would have required firms to use hyperlinks for 
any document that is cross-referenced in any electronic relationship summary.
146
  The proposed 
instructions also permitted firms to use various graphics or text features to explain the required 
information but did not reference whether they should be electronic- or paper-based.
147
 
Many commenters supported electronic formats, including in connection with layered 
disclosure.
148
  One commenter endorsed electronic, including mobile, formats as inherently 
easier to navigate and use in a layered approach and asserted that the relationship summary 
would be more engaging to investors, and thus more effective as a disclosure, if the Commission 
encouraged more creative use of electronic formats.
149
  Research submitted by commenters and 
feedback from our investor roundtables indicated that investors preferred a more visually 
                                                                                                                                                             
145
  Proposed General Instruction 1.(g) to Form CRS (“You may add embedded hyperlinks within the 
relationship summary in order to supplement required disclosures, for example, links to fee schedules, 
conflicts disclosures, the firm’s narrative brochure required by Part 2A of Form ADV, or other regulatory 
disclosures.”). 
146
  Proposed General Instruction 1.(g) to Form CRS (“In a relationship summary that is posted on your website 
or otherwise provided electronically, you must use hyperlinks for any document that is cross-referenced in 
the relationship summary if the document is available online.”). 
147
  Proposed General Instruction 1.(f) to Form CRS (“You may use charts, graphs, tables, and other graphics 
or text features to respond to explain the required information, so long as the information: (i) is responsive 
to and meets the requirements in these instructions (including space limitations); (ii) is not inaccurate or 
misleading; and (iii) does not, because of the nature, quantity, or manner of presentation, obscure or impede 
understanding of the information that must be included. When using interactive graphics or tools, you may 
include instructions on their use and interpretation.”). 
148
  See, e.g., IAA Letter I (“Each key point should be made as simply and succinctly as possible, and the 
investor should then be pointed clearly and directly to specific additional plain English disclosure 
explaining the point . . . . This approach would also provide firms with the flexibility they need to use 
innovative design and delivery techniques.”).   
149
  See IAA Letter I.   

 
53 
 
appealing disclosure.
150
  Commenters recommended a more visually-focused and designed 
experience, and many mock-ups that commenters submitted used graphics and other design 
features extensively.
151
  In addition, the IAC has recommended exploring the use of layered 
disclosure in certain contexts.
152
  The IAC has also recommended that the Commission “continue 
to explore methods to encourage a transition to electronic delivery that respect investor 
preferences and that increase, rather than reduce, the likelihood that investors will see and read 
important disclosure documents.”
153
  Some commenters also expressed support for the IAC’s 
recommendation relating to electronic delivery.
154
   
                                                                                                                                                             
150
  See Betterment Letter I (Hotspex), supra footnote 18 (reporting study authors’ conclusions that survey 
respondents found a version of the standalone adviser relationship summary “more appealing and 
understandable,” where Betterment revised the form to “[i]mprove visual hierarchy (e.g., layout, shading, 
shorten and standardize paragraph lengths to improve legibility, appeal and retention of information”); 
Schwab Letter I (Koski), supra footnote 21(79% of survey respondents said they are more likely to read 
disclosure that is “visually appealing and did not seem like a legal document”); Washington, D.C. 
Roundtable, at 20; Atlanta Roundtable, at 35. 
151
  See, e.g., CFA Letter I; Fidelity Letter (citing to Stanford Law School Design Principles, Use visual design 
and interactive experiences, to transform how you present legal info to lay people, available at 
http://www.legaltechdesign.com/communication-design); Betterment Letter I (mock-up); SIFMA Letter; 
IAA Letter I; Schwab Letter I; see also Kleimann II, supra footnote 19 (describing design assumptions for 
a redesigned version of the relationship summary). 
152
  See IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10 (in connection with the 
disclosure of disciplinary history, the Commission “should look at whether it might be beneficial to adopt a 
layered approach to such disclosures, with the goal of developing a more abbreviated, user-friendly 
document for distribution to investors”). 
153
  Investor Advisory Committee, Recommendation of the Investor as Purchaser Subcommittee:  Promotion of 
Electronic Delivery and Development of a Summary Disclosure Document for Delivery of Investment 
Company Shareholder Reports (Dec. 7, 2017), available at https://www.sec.gov/spotlight/investor-
advisory-committee-2012/recommendation-promotion-of-electronic-delivery-and-development.pdf (“IAC 
Electronic Delivery Recommendation”). 
154
  See, e.g., FSI Letter I; Cambridge Letter; Comment Letter of the Institute for Portfolio Alternatives (Aug. 
7, 2018) (“Institute for Portfolio Alternatives Letter”). 

 
54 
 
Accordingly, we are adopting and adding provisions to the proposed instructions to 
encourage the use of electronic formatting and graphical, text, online features and layered 
disclosures in preparing their relationship summaries.
155
  Key elements of the final instructions 
include the following:  
• The instructions encourage (rather than just permit, as proposed) firms to use 
graphics or text features to respond to the required disclosures, or to make 
comparisons among their offerings, including by using charts, graphs, tables, text 
colors, and graphical cues, such as dual-column charts.
156
  If the chart, graph, 
table, or other graphical feature is self-explanatory and responsive to the 
disclosure item, additional narrative language that may be duplicative is not 
required.  For a relationship summary provided electronically, the instructions 
further encourage online tools that populate information in comparison boxes 
based on investor selections.
157
  
                                                                                                                                                             
155
  We created a separate section in the instructions focused on electronic and graphical formats that includes 
these instructions.  Proposed General Instruction 1.(f) to Form CRS (“You may use charts, graphs, tables, 
and other graphics or text features to explain the required information, so long as the information: (i) is 
responsive to and meets the requirements in these instructions (including space limitations); (ii) is not 
inaccurate or misleading; and (iii) does not, because of the nature, quantity, or manner of presentation, 
obscure or impede understanding of the information that must be included.  When using interactive 
graphics or tools, you may include instructions on their use and interpretation.”). 
156
  See General Instruction 3.A. to Form CRS (“You are encouraged to use charts, graphs, tables, and other 
graphics or text features to respond to the required disclosures.  You are also encouraged to use text 
features, text colors, and graphical cues, such as dual-column charts, to compare services, account 
characteristics, investments, fees, and conflicts of interest.”). 
157
  See General Instruction 3.A. to Form CRS (“For a relationship summary that is posted on your website or 
otherwise provided electronically, we encourage online tools that populate information in comparison 
boxes based on investor selections.”). 

 
55 
 
• The instructions reference a non-exhaustive list of electronic media, 
communications, or tools that firms may use in their relationship summary.
158
  
We are including an instruction that, in a relationship summary that is posted on a 
firm’s website or otherwise provided electronically, firms must provide a means 
of facilitating access (e.g., hyperlinking) to any information that is referenced in 
the relationship summary if the information is available online.
159
  For 
relationship summaries delivered in paper format, firms may include URL 
addresses, QR codes, or other means of facilitating access to such information.
160
  
This instruction permits layered disclosure through paper disclosures and hybrid 
paper and electronic deliveries, while supporting some investors’ preference for 
paper.   
                                                                                                                                                             
158
  General Instruction 3.A. to Form CRS (“You also may include: (i) a means of facilitating access to video or 
audio messages, or other forms of information (whether by hyperlink, website address, Quick Response 
Code (“QR code”), or other equivalent methods or technologies); (ii) mouse-over windows; (iii) pop-up 
boxes; (iv) chat functionality; (v) fee calculators; or (vi) other forms of electronic media, communications, 
or tools designed to enhance a retail investor’s understanding of the material in the relationship 
summary.”). 
159
  General Instruction 3.B. to Form CRS. (“In a relationship summary that is posted on your website or 
otherwise provided electronically, you must provide a means of facilitating access to any information that 
is referenced in the relationship summary if the information is available online, including, for example, 
hyperlinks to fee schedules, conflicts disclosures, the firm’s narrative brochure required by Part 2A of Form 
ADV, or other regulatory disclosures.”).   
160
  General Instruction 3.B. to Form CRS.  (“In a relationship summary that is delivered in paper format, you 
may include URL addresses, QR codes, or other means of facilitating access to such information.”). 

 
56 
 
• The instructions provide guidance that firms may include instructions on the use 
and interpretation of interactive graphics or tools, as proposed.
161
  We believe that 
these features can make the relationship summary more engaging, accessible, and 
effective in communicating to retail investors.
162
   
• The instructions replace the term “hyperlink” with the more evergreen concept of 
“a means of facilitating access,” which will include hyperlinks as well as website 
addresses, QR Codes, or other equivalent methods or technologies.
163
  Expanding 
the types of technology referenced in the instructions will make them more 
relevant as new technologies continue to be developed.  
                                                                                                                                                             
161
  General Instruction 3.C. to Form CRS.  Instructions that firms provide on the use and interpretation of 
interactive graphics or tools would not be subject to the page limitation for relationship summaries under 
General Instruction 1.C to Form CRS, but should be succinct, consistent with General Instruction 2.A. 
162
  Similar to the proposed instructions, the final instructions include the caveat that these graphical and text 
features and electronic media, communications, or tools, (i) must be responsive to and meet the 
requirements in these instructions for the particular item in which the information is placed; and (ii) may 
not, because of the nature, quantity, or manner of presentation, obscure or impede understanding of the 
information that must be included.  General Instruction 3.C. to Form CRS.  Cf. Proposed General 
Instruction 1.(f) to Form CRS (“You may use charts, graphs, tables, and other graphics or text features to 
explain the required information, so long as the information: (i) is responsive to and meets the requirements 
in these instructions (including space limitations); (ii) is not inaccurate or misleading; and (iii) does not, 
because of the nature, quantity, or manner of presentation, obscure or impede understanding of the 
information that must be included.”).  We deleted the reference in the proposed instructions to “is not 
inaccurate or misleading” because it is covered by another instruction. 
163
  See, e.g., General Instruction 3.A. to Form CRS (“You also may include:  (i) a means of facilitating access 
to video or audio messages, or other forms of information (whether by hyperlink, website address, Quick 
Response Code (“QR code”), or other equivalent methods or technologies”); General Instruction 3.B. to 
Form CRS (“In a relationship summary that is posted on your website or otherwise provided electronically, 
you must provide a means of facilitating access to any information that is referenced in the relationship 
summary if the information is available online, including, for example, hyperlinks to fee schedules, 
conflicts disclosures, the firm’s narrative brochure required by Part 2A of Form ADV, or other regulatory 
disclosures.).”  Cf. Proposed General Instruction 1.(g) to Form CRS (“In a relationship summary that is 
posted on your website or otherwise provided electronically, you must use hyperlinks for any document 
that is cross-referenced in the relationship summary if the document is available online.”). 

 
57 
 
A number of commenters suggested different approaches for whether we would treat the 
relationship summary as “incorporating by reference” information provided in  additional 
disclosures or materials that are hyperlinked to or otherwise accessible from the relationship 
summary.
164
  Some of these commenters suggested that we treat certain hyperlinked information 
as “incorporated by reference.”
165
  Other commenters recommended that firms should be 
permitted, but not necessarily required, to incorporate in the relationship summary additional 
information provided in other documents.
166
   
As discussed above, we support the use of layered disclosure and believe that investors 
will benefit greatly from receiving a relationship summary containing high-level information that 
they will be more likely to read and understand, with the ability to access more detailed 
information.  Layered disclosure is an approach that can balance the goal of keeping the 
                                                                                                                                                             
164
  See, e.g., Comment Letter of Cetera Financial Group (Aug. 7, 2018) (“Cetera Letter I”); IRI Letter; Schwab 
Letter I; Schwab Letter III (providing sample Form CRS instructions permitting incorporation of materials 
by reference); Comment Letter of The National Society of Compliance Professionals (Aug. 7, 2018) 
(“NSCP Letter”); Schnase Letter; LPL Financial Letter. 
165
  Schwab Letter I (with respect to broker-dealers, Form CRS should navigate investors to additional 
information readily available on the firm’s website or enclosed with account information, and the additional 
information would be considered incorporated by reference); NSCP Letter (firms should be permitted to 
incorporate by reference public disciplinary disclosure events); Schnase Letter (“Firms that follow the SEC 
rules in filing, posting and linking should get the full anti-fraud benefit of the information in the Firm 
Brochure being deemed “delivered” when the Relationship Summary is delivered, without having to resort 
to arcane and outmoded language and concepts such as “incorporation by reference.”). 
166 
 See Cetera Letter I (suggesting that firms “should be permitted to incorporate other information in Form 
CRS by reference without reproducing the specified information in its’ [sic] entirety, so long as the location 
is reasonably accessible to the public and the other sources of information are sufficient to meet the 
standards of Form CRS”); IRI Letter (the Commission should “permit (but not require) firms to use 
incorporation by reference to satisfy particular components of the disclosures required under Regulation 
Best Interest and/or Form CRS.  In other words, if an investor already receives a particular piece of 
information in an existing disclosure document (including disclosures required under the federal securities 
laws, SEC or FINRA rules, ERISA, or DOL rules) the firm should be permitted to merely reference that 
existing document (with sufficient information for investors to locate or obtain that document.”). 

 
58 
 
relationship summary short and accessible with the goal of providing retail investors with 
fulsome and specific information.  The relationship summary is intended to be a self-contained 
document, however, and firms should be able to meet the instructions’ requirements by 
providing generalized and summary responses to each item, without relying on incorporation by 
reference to other documents providing additional information.  In contrast with other disclosure 
obligations such as prospectuses and registration statements, a firm could not satisfy the 
disclosure requirements set forth in the relationship summary instructions by incorporating 
another document (such as the Form ADV Part 2A brochure) by reference.   
At the same time, we recognize the communicative value of layered disclosure.  The 
instructions provide, as discussed above, that firms may
167
 (and in some cases must)
168
 cross-
reference other documents and use hyperlinks or other tools to give more details about the topic.  
Where firms link to content outside the relationship summary disclosure, whether on a 
permissive or mandatory basis, the information may not substitute for providing any narrative 
descriptions that the instructions require, and the additional information should be responsive 
and relevant to the topic covered by the instruction.  Firms should be mindful that the antifraud 
                                                                                                                                                             
167
  See, e.g., General Instruction 3.A. to Form CRS (“You also may include: (i) a means of facilitating access 
to video or audio messages, or other forms of information (whether by hyperlink, website address, Quick 
Response Code (“QR code”), or other equivalent methods or technologies); (ii) mouse-over windows; (iii) 
pop-up boxes; (iv) chat functionality; (v) fee calculators; or (vi) other forms of electronic media, 
communications, or tools designed to enhance a retail investor’s understanding of the material in the 
relationship summary.”). 
168
  See, e.g., Item 3.A.(iii) of Form CRS (“You must include specific references to more detailed information 
about your fees and costs that, at a minimum, include the same or equivalent information to that required 
by the Form ADV, Part 2A brochure (specifically Items 5.A., B., C., and D.) and Regulation Best Interest, 
as applicable.”). 

 
59 
 
standards under the federal securities laws apply to linked information, as with other securities 
law disclosures.     
All together we believe encouraging the use of electronic and graphical formatting online 
features, and layered disclosures will permit firms to create innovative disclosures that engage 
investors.  
4. Conversation Starters 
Consistent with the proposal, the relationship summary will be required to contain 
suggested follow-up questions for retail investors to ask their financial professional.  The 
relationship summary, however, will not include a separate section of “Key Questions to Ask,” at 
the end of the relationship summary, as proposed.  Instead, firms will be required to integrate 
those “key questions” for retail investors to ask their financial professionals throughout the 
relationship summary as headings to items or as “conversation starters.”   
The proposed relationship summary would have required firms to include ten questions, 
as applicable to their particular business, under the heading “Key Questions to Ask” after a 
statement that the retail investors should ask their financial professional the key questions about 
a firm’s investment services and accounts.
169
  In addition, we proposed to allow firms to include 
up to four additional frequently asked questions.
170
   
Most comment letters that discussed the “Key Questions to Ask” section generally did 
not support the proposed approach of including a separate section of up to fourteen questions at 
                                                                                                                                                             
169
 See Proposed Item 8 of Form CRS. 
170
  See id. 

 
60 
 
the end of the relationship summary.  Commenters who proposed keeping a key questions 
section typically suggested significant substantive or stylistic alterations.
171
  In a separate 
approach, many commenter mock-ups included topics and questions from “Key Questions to 
Ask” in a question-and-response format throughout the relationship summary.
172
  Several 
commenters suggested that the key questions be removed from the relationship summary and 
placed on the Commission’s website with other educational materials.
173
   
 Observations reported in the RAND 2018 report and other surveys and studies, and 
individual investor feedback at roundtables and on Feedback Forms generally indicated, that 
retail investors found the key questions helpful, however.  In the RAND 2018 survey, the “Key 
Questions to Ask” section received the highest support of all sections to “keep as is” when 
investors were asked if they would add more detail, keep as is, shorten, or delete the section, and 
a majority of RAND 2018 survey respondents also indicated that they were either “very 
comfortable” or “somewhat comfortable” with asking each of the key questions.
174
  Surveys and 
studies submitted by commenters also indicated that most investors who reviewed one of the 
                                                                                                                                                             
171
  See, e.g., CFA Institute Letter I (suggesting interspersing questions through sections of Form CRS rather 
than including at the end); SIFMA Letter (suggesting that firms only be required to answer “four to five” 
questions to make the communication “shorter and more meaningful” to investors). 
172
  See, e.g., IAA Letter I; Comment Letter of the Institute for the Fiduciary Standard (Aug. 6, 2018) (“IFS 
Letter”); LPL Financial Letter; Schwab Letter I. 
173
  See, e.g., ACLI Letter; IAA Letter I; LPL Financial Letter.  One commenter representing investors argued 
that the Commission was better-placed to provide information on topics covered in the “Key Questions to 
Ask” section because financial professionals would have “room for obfuscation” in their discussions with 
retail investors.  See CFA Letter I. 
174
 See RAND 2018, supra footnote 13.  RAND 2018 also reports that, in qualitative interviews, “[m]ost 
interview participants said that they liked all of the questions, that they would ask these questions in 
meeting with a financial service provider, and did not suggest dropping any of the questions.” 

 
61 
 
proposed sample relationship summaries found the suggested questions to be useful and said 
they were likely to ask the questions.
175
  In addition, the “Key Questions to Ask” section 
received the most “very useful” ratings from commenters who submitted Feedback Forms, and 
narrative comments on several Feedback Forms specifically indicated that the questions would 
encourage discussion with financial professionals.
176
  Similarly, investors at Commission-held 
roundtables indicated that they viewed the questions as helpful.
177
 
In light of comments, we believe that including questions for investors to ask their 
financial professionals is an important component of the relationship summary.  Several 
commenter mock-ups showed questions throughout the relationship summary grouped by subject 
matter rather than at the end of the document.  Investor studies showed that proximity and 
context are important for questions an investor may have for a financial professional.
178
  In 
                                                                                                                                                             
175
  See Betterment Letter I (Hotspex) supra footnote 18 (82% of respondents viewing a version of the 
investment-adviser relationship summary found the suggested questions to be very or somewhat useful and 
93% were very or somewhat likely to ask the questions); Cetera Letter II (Woelfel) supra footnote 17 (85% 
of survey participants who viewed the sample dual-registrant relationship summary found the key questions 
to be “very” or “somewhat” important to cover, and 84% “strongly” or “somewhat” agreed that the key 
questions described their topics clearly); Kleimann I, supra footnote 19 (“Nearly all participants saw the 
Key Questions as essential.  They felt the questions were straight forward and raised important questions ... 
Many said they would use the set of questions in their next exchange with their broker or adviser.”).   
176
 See Feedback Forms Comment Summary, supra footnote 11 (51 commenters (55%) responded to Question 
2(g) that the Key Questions section was “very useful” and 28 (30%) responded that the Key Questions 
section was “useful”; in comparison, other sections were scored as “very useful” in the range of 31% to 
44%; similarly, more than 75% of Feedback Forms included a narrative response to Question 7 or other 
response indicating that the Key Questions were useful; 11 narrative responses included specific comments 
agreeing that the Key Questions would encourage discussions with financial professionals; and two others 
stated more generally that the relationship summary would encourage dialogue). 
177
  See, e.g., Atlanta Roundtable (three investors responded positively to a question as to whether the key 
questions were helpful, with no dissent to that view); Houston Roundtable (one investor responding that 
“the questions for me are very, very good.”).  
178
  See Kleimann I, supra footnote 19; Kleimann II, supra footnote 19 (each recommending question-and-
answer format in part to place relevant information together).  

 
62 
 
addition, some commenters’ Feedback Forms requested that questions be placed earlier in the 
relationship summary document; one specifically suggested that we put the questions with “the 
appropriate section [with] each section to which it applies.”
179
  We have determined to follow a 
similar approach by replacing the Key Questions to Ask section with specified “conversation 
starters” throughout the document.  We are also using some of the proposed questions as topic 
headings.   
There are required questions as conversation starters in each section other than the 
Introduction.
180
  These conversation starters are intended to cover the same topics as the 
proposed key questions and in many cases are substantially similar in wording to the proposed 
key questions.
181
  For each conversation starter, firms must use text features to make the 
conversation starters more noticeable and prominent in relation to the other discussion text.  For 
example, they may use larger or different font; a text box around the heading or questions; 
bolded, italicized, or underlined text; or lines to offset the questions from other sections.
182
  We 
believe the questions will be more helpful to investors when included throughout the document 
                                                                                                                                                             
179
 See Feedback Forms Comment Summary, supra footnote 1111 (summary of responses to Question 7); 
Hoggan Feedback Form (“Maybe you should question at the end of each section – to help frame the 
issue”); see also Hawkins Feedback Form (commenting on obligations section that “[g]iving some 
examples of types of questions to ask would be beneficial”). 
180
  See Items 2.D. (relationships and services); 3.A.(iv) and 3.B.(iii) (fees, costs, conflicts, and standard of 
conduct); 4.D.(ii) (disciplinary history); and 5.C. (additional information) of Form CRS. 
181
  For example, the proposed Key Question 6 (“How will you choose investments to recommend for my 
account?”) has been included in the final relationship summary as a conversation starter to the 
Relationships and Services section (“How will you choose investments to recommend to me?”).  For 
discussion of additional conversation starter questions, see infra Section II.A.4  See also Proposed Item 8.6 
of Form CRS and Item 2.D.(iv) of Form CRS.  
182
  See General Instruction 4.A. to Form CRS. 

 
63 
 
with formatting highlighting the conversation starters and organizing the conversation starters 
together with the firm’s disclosures about a particular topic, providing retail investors clearer 
context for each question.  However, if a required conversation starter is inapplicable to the 
firm’s business, the firm may omit or modify that conversation starter.
183
  With these changes, 
we believe that the conversation starters will better help retail investors initiate and engage in 
useful and informative conversations with their investment professionals. 
As proposed, investment advisers that provide only automated investment advisory 
services or broker-dealers that provide services only online without a particular individual with 
whom a retail investor can discuss the conversation starters must include a section or page on 
their website that answers each of the conversation starter questions and must provide in the 
relationship summary a means of facilitating access (e.g., by providing a hyperlink) to that 
section or page.
184
  For example, a firm could include a hyperlink, QR Code, or some other 
equivalent methods or technologies that would enable a retail investor to access that information.  
One commenter requested clarification that all firms could provide retail investors with the 
answers to each key question in writing, and then investors could call a call center for follow-up 
questions.
185
  All firms could choose to provide written answers to conversation starters, but the 
                                                                                                                                                             
183
  See General Instruction 2.B. to Form CRS. 
184
  General Instruction 4.B. to Form CRS.  As proposed, such advisers or broker-dealers would have provided 
a hyperlink in the relationship summary to the appropriate section or page.  See Proposed Item 8 of Form 
CRS.  In response to comments supporting electronic access more broadly, we broadened the instruction to 
allow for other means of facilitating access.  We also changed the term “automated advice” from the 
proposed instructions to “automated investment advisory services” in the final instructions to underscore 
the ongoing nature of the investment advisory relationship. 
185
  See LPL Financial Letter.   

 
64 
 
final instructions will only require written responses in these limited circumstances to ensure that 
retail investors receive responses when they do not have access to a financial professional to ask 
questions.  We continue to believe that the requirement as adopted will encourage investor 
engagement and make the conversation starters useful where there is no firm representative to 
answer the question in-person (or by telephone) for the retail investor.  In addition, as proposed, 
if the firm provides automated investment advisory or brokerage services, but also makes a 
financial professional available to discuss the firm’s services with a retail investor, the firm must 
make the financial professional available to discuss the conversation starters with the retail 
investor.
186
 
Six of the proposed key questions will continue to have analogous “conversation starter” 
questions in the final Form CRS, which we discuss in each applicable section below.
187
  These 
questions cover services, fees and costs, conflicts, disciplinary information, and information 
about appropriate contact persons.  As described below, we revised the wording for all of these 
questions.   
We did not replace four of the key questions with analogous “conversation starter” 
questions; the topics raised by these key questions will be addressed in other ways in the 
relationship summary.  First, we have replaced the question requesting financial professionals to 
                                                                                                                                                             
186
  General Instruction 4.B. to Form CRS.   
187
  See infra Sections II.B.2 (relating to Item 2.D. of Form CRS), II.B.3.a (relating to Item 3.A.(iv) of Form 
CRS), II.B.3.b (relating to Item 3.B.(iii) of Form CRS); II.B.4 (relating to Item 4.D.(ii) of Form CRS), and 
II.B.5 (relating to Item 5.C. of Form CRS). 

 
65 
 
“do the math for me” with a different conversation starter.
188
  Commenters raised specific 
concerns about this question for operational and recordkeeping reasons.
189
  We are instead 
requiring that firms include a conversation starter question prompting retail investors to ask their 
financial professional to help them understand how the fees and costs might affect their 
investments and the potential impact of fees and costs on a $10,000 investment.
190
 As we note 
below, our intent with the proposed “Do the math for me” question was that it serve as a prompt 
to encourage retail investors to ask about the hypothetical amount they would pay per year for an 
account, what would make the fees more or less, and what services they would receive for those 
fees.  The question was not intended to require firms to generate individualized cost estimates for 
each particular retail investor.  We believe that the newly worded conversation starter makes that 
more clear.  Additionally, the required discussion of fees, costs, and conflicts, together with the 
conversation starter question, will better serve as an initial basis for understanding how fees 
                                                                                                                                                             
188
  See Proposed Item 8.2 of Form CRS (“Do the math for me.  How much would I pay per year for an 
advisory account? How much for a typical brokerage account? What would make those fees more or less? 
What services will I receive for those fees?”).   
189
  See, e.g., Comment Letter of Edward D. Jones and Co., L.P. (Aug. 7, 2018) (“Edward Jones Letter”) 
(“[G]iven the range of services available, it would be very difficult for financial professionals to fully 
address this question at the outset of the [customer] relationship, particularly for investors selecting 
transaction-based services.”); SIFMA Letter (“[M]ost firms do not currently have systems in place to allow 
the financial professionals to answer questions such as customer-specific ‘Do the math for me’ requests.”); 
John Hancock Letter (“We further believe that the costs and operational hurdles associated with providing 
personalized fee information have been underestimated, and encourage the SEC to provide that any “do the 
math”-type questions may be answered through the use of examples.”).  In part to avoid recordkeeping 
requirements on behalf of a financial professional, one commenter suggested reframing the questions as 
reflecting questions back to an investor with a prompt to ask the representative for help if the investor was 
unsure as to a response to the questions.  See Primerica Letter. 
 For additional discussion of recordkeeping, see infra Section II.E. 
190
  See Item 3.A.(iv) of Form CRS. 

 
66 
 
affect investment returns and the fees that they will pay than the “Do the math for me” key 
question.
191
 
Two other proposed key questions regarding costs associated with an account and how 
firms make money
192
 covered information that the relationship summary as adopted requires to 
be disclosed under the section on fees, costs, conflicts, and standard of conduct.
193
  Specifically, 
firms must (i) summarize the principal fees and costs that retail investors will incur from their 
services (including how frequently they are assessed and the conflicts of interest they create) and 
(ii) describe any other fees related to their brokerage or investment advisory services in addition 
to those principal fees that the retail investor will incur.
194
  Additionally, the new conversation 
starter question included in Item 3 is intended to elicit similar points of discussion with the 
following wording: “Help me understand how these fees and costs might affect my investments.  
If I give you $10,000 to invest, how much will go to fees and costs, and how much will be 
invested for me?”  Finally, unlike the proposal, the relationship summary must include a 
description of the ways in which the firm and its affiliates make money from brokerage or 
investment advisory services and investments it provides to retail investors as well as material 
                                                                                                                                                             
191
  See infra Section II.B.3. 
192
  See Proposed Items 8.3 (“What additional costs should I expect in connection with my account?”) and 8.4 
(“Tell me how you and your firm make money in connection with my account.  Do you or your firm 
receive any payments from anyone besides me in connection with my investments?”) of Form CRS. 
193
  See Item 3 of Form CRS.  The Item 3.C. disclosure combined with the conversation starter included therein 
would similarly cover information intended to be discussed in response to the fifth proposed key question 
(“What are the most common conflicts of interest in your advisory and brokerage accounts?  Explain how 
you will address those conflicts when providing services to my account.”).  See infra Section II.B.3.b. 
194
  See Items 3.A.(i) and 3.A.(ii) of Form CRS; see also infra Section II.B.3. 

 
67 
 
conflicts of interest.
195
  As a result of these disclosure requirements, the separate questions from 
the proposal are not necessary.   
Finally, we are not adopting a conversation starter question analogous to the proposed 
key question asking “How often will you monitor my account’s performance and offer 
investment advice?”, because the Relationships and Services section of the adopted relationship 
summary requires disclosure about the services and advice or recommendations that firms offer 
and whether or not they monitor accounts, including the frequency and any material limitations 
on any such monitoring.
196
 
5. Presentation of Relationship Summaries by Dual Registrants and 
Affiliated Firms   
We are modifying the proposed instructions in order to encourage a dual registrant to 
prepare one combined relationship summary discussing both its brokerage and advisory services, 
but a dual registrant will be permitted to provide two separate relationship summaries, each 
describing one type of service.
197
  The proposal would have required a dual registrant to prepare 
one relationship summary, presenting most of the required items under standardized headings 
and in a tabular format,  with brokerage services described in one column and advisory services 
described in another.
198
  We also are adding a new instruction permitting affiliates to prepare a 
                                                                                                                                                             
195
  See Item 3.B.(ii) of Form CRS; see also infra Section II.B.3. 
196
  See Item 2.B.(i) of Form CRS (“Explain whether or not you monitor the performance of retail investors’ 
investments, including the frequency and any material limitations.  Indicate whether or not the services 
described in response to this Item 2.B.(i) are offered as part of your standard services.”); see also infra 
Section II.B.2. 
197
  General Instruction 5.A. to Form CRS. 
198
  Proposed General Instruction 1.(e) to Form CRS. 

 
68 
 
single relationship summary describing both brokerage and investment advisory services that 
they offer or to prepare separate relationship summaries, one for each type of service.
199
  In 
comparison, the proposed instructions did not permit affiliates to deliver one combined 
relationship summary, but did allow them to state that they offer retail investors their affiliates’ 
brokerage or advisory services, as applicable.
200
   
We are not adopting the definitions of “standalone broker-dealer” and “standalone 
investment adviser” as proposed, because they are no longer necessary given the streamlining of the 
instructions relative to the proposal.
201
  Under the final instructions, however, we are defining a dual 
registrant as “[a] firm that is dually registered as a broker-dealer under section 15 of the Exchange 
Act and an investment adviser under section 203 of the Advisers Act and offers services to retail 
investors as both a broker-dealer and an investment adviser”, substantially as proposed.  To clarify, a 
firm that is dually registered as both a broker-dealer and an investment adviser but does not offer 
both brokerage and investment advisory services to retail investors would not fall within the 
definition of dual registrant.  For example, a firm that is dually registered and offers investment 
advisory services to retail investors, but offers brokerage services only to institutional customers, 
                                                                                                                                                             
199
  General Instruction 5.B. to Form CRS. 
200
  Proposed Item 2.D. of Form CRS. This disclosure only applied in the context of an affiliate of the firm. 
This item was not intended to describe disclosure of a financial professional’s outside business activities, 
such as an outside investment advisory business of a broker-dealer registered representative.  Cf. Comment 
Letter of Northwestern Mutual Life Insurance Company (Aug. 7, 2018) (“Northwestern Mutual Letter”) 
(interpreting Proposed Item 3 to prohibit the mention of affiliate services). 
201
  See supra footnote 8. 

 
69 
 
would be required to prepare, file, and deliver the relationship summary only in accordance with the 
obligations of an investment adviser offering services to retail investors.
202
 
Dual Registrants.  Investor studies and surveys showed mixed results in connection with 
the dual-column, combined relationship summary.  For example, when presented with screen 
shots of each separate section in dual-column format, 85% of RAND 2018 survey respondents 
indicated that the side-by-side comparison format helped them decide whether a broker-dealer or 
investment adviser account would be right for them, but during qualitative interviews, some 
participants had difficulty with the two column format.
203
  On Feedback Forms, some indicated 
that they liked the side-by-side or grid presentation.
204
  One Feedback Form commenter said the 
dual-column format was confusing, however.
205
  An interview-based study also indicated that 
both the formatting and the language in the dual-column format in our proposed sample 
relationship summary contributed to investor confusion about differences between broker-dealers’ 
and investment advisers’ services.
206
  Both industry representatives and commenters representing 
                                                                                                                                                             
202
  See also Advisers Act Rule 204-5; Exchange Act Rule 17a-14(a); General Instructions to Form CRS (“If 
you do not have any retail investors to whom you must deliver a relationship summary, you are not 
required to prepare or file one.”); General Instruction 11.C to Form CRS. 
203
  See RAND 2018, supra footnote 13, at 22; see also id., at 46 (“Some participants grasped that the 
document was organized into two columns, each corresponding to an account type. Some others did not 
realize this immediately but grasped it once it was pointed out by an interviewer.”).     
204
  See, e.g., Anonymous03 Feedback Form (“a side by side chart with u’s [sic] to say which type of account 
offers which service”); Anonymous14 Feedback Form (“recommend chart structure”); Anonymous28 
(“Presenting the differences in parallel columns gives the best chance for people new ot [sic] investing to 
understand what is involved”); Baker Feedback Form (“the double column format, comparing the two 
classes, was clear and easy to follow”); and Smith1 Feedback Form (“I like the side by side comparisons”).   
205
  See Anonymous02 Feedback Form (“Maybe a bit hard to read the columns.”). 
206
  See Kleimann I, supra footnote 19, at 30–31 (“Most participants tried to read the CRS by looking first at 
one column, usually the Broker Dealer Services, and then at the second column ... when they turned to the 
second column they then tried to match the bullets .... Sometimes this matching was relatively easy to do, 
 

 
70 
 
investors also expressed concerns about the proposed formatting requirements for dual 
registrants’ relationship summaries.
207
  Two commenters supported using visual formatting to 
help investors understand the options dual registrants provide, but argued that the proposed 
content or design should be changed.
208
   
Several commenters suggested letting dual registrants choose whether to prepare one 
combined relationship summary or two separate ones.
209
  Commenters argued that providing 
information about both brokerage and investment advisory services as proposed would confuse 
investors.
210
  Another suggested requiring dual registrants to prepare and deliver different 
relationship summaries to retail investors depending on whether the investors enter into an 
advisory or brokerage relationship, and to highlight the availability and link to the relationship 
                                                                                                                                                             
as in the Types of Relationships and Services section because the bullets aligned almost exactly.  They 
struggled and found the misaligned bullets confusing in subsequent sections ... Some participants simply 
took information from the first bullet they read or from bolded words or phrases.”). 
207
  See AARP Letter; CFA Letter I; TIAA Letter; Fidelity Letter; MassMutual Letter; LPL Financial Letter; 
SIFMA Letter; Comment Letter of BlackRock, Inc. (Aug. 7, 2018) (“BlackRock Letter”) (expressing 
concern that investors may be confused if dual registrants were required to disclose all of their advisory and 
brokerage services in a single relationship summary); see also Schwab Letter II (“Dual-registrant firms 
recommend flexibility because of real-world concerns that the side-by-side comparison will not be 
effective.”). 
208
  See AARP Letter (“[a]lthough the visual formatting is helpful, the substantive information laid out within 
the table remains technical and is likely to be confusing to the average retail investor”); CFA Letter I 
(emphasizing that investors must see all available options in order to make an informed decision, and that 
the Commission consult with disclosure design experts toward developing a form that is most likely to 
result in informed investor choice.”). 
209
  See Schwab Letter III (providing sample Form CRS instructions that permit dual registrants either to 
prepare a single, comparative relationship summary, or two separate relationship summaries describing 
each type of service and providing links to each other); TIAA Letter; Fidelity Letter; MassMutual Letter; 
LPL Financial Letter; SIFMA Letter; BlackRock Letter. 
210
  See, e.g., TIAA Letter (a combined relationship summary would confuse customers of dually registered 
firms that provide only one type of service and would overwhelm them with information not relevant to the 
relationship); LPL Financial Letter; SIFMA Letter; BlackRock Letter. 

 
71 
 
summary of the other type of service.
211
  One commenter argued that dual registrants needed 
flexibility to maintain two separate disclosures to allow each financial professional associated 
with the dual registrant to provide a tailored disclosure to his/her customer, without including 
services that he/she is not licensed to provide.
212
 
We encourage dual registrants to prepare a single disclosure, designed in a manner that 
facilitates comparison between their brokerage and advisory services.  Informed by comments, 
we have determined that two separate disclosures might be appropriate, depending on the 
different ways firms and their financial professionals offer services and on the particular facts 
and circumstances.  For example, financial professionals with licenses to offer services as a 
representative of a broker-dealer and investment adviser may offer services through a dual 
registrant, affiliated firms, or unaffiliated firms, or only offer one type of service notwithstanding 
their dual licensing.
213
  Financial professionals who are not dually licensed may offer one type of 
service through a firm that is dually registered.  Accordingly, the final instructions permit dual 
registrants and affiliates to prepare a single relationship summary, or alternatively, two separate 
ones, to describe their brokerage and investment advisory services in a way that accurately 
reflects their business models and will be the most helpful to retail investors.  The instructions 
                                                                                                                                                             
211
   See IAA Letter I. 
212
  See MassMutual Letter. 
213
  See, e.g., LPL Financial Letter.   

 
72 
 
explicitly encourage preparation of a single relationship summary, however, given that a number 
of investors and commenters reacted positively to this presentation.
214
 
A firm preparing a single relationship summary will be required to employ design 
elements of its own choosing to promote comparability; however, we are not prescribing the 
two-column format, as proposed.  We agree that making retail investors aware of a range of 
options is important to help them make an informed choice,
215
 but we recognize the potential 
limits of a tabular format, as illustrated by results from some investor studies and surveys,
216
 and 
we have concluded that firms are generally in a better position than the Commission to determine 
a format and design that facilitates comparison of their specific brokerage and investment 
advisory services.  Whether a firm prepares a single relationship summary or two separate ones, 
the final instructions require a firm to present the information with equal prominence and in a 
manner that clearly distinguishes and facilitates comparison of the two types of services.
217
  For 
example, a  firm could use a tabular format; text features such as text boxes; bolded, italicized, or 
underlined text; or lines to clearly indicate similarities and differences in its services.   
                                                                                                                                                             
214
  See, e.g., RAND 2018, supra footnote 13 (reporting that 85% of survey respondents found the side-by-side 
comparison format to be helpful for purposes of deciding between a broker-dealer and investment adviser); 
see also CFA Letter I (stating it supported using one document to provide comparing brokerage and 
investment advisory services); Fidelity Letter (stating that a single Form CRS for a dual-registered firm 
could accomplish its objective); Schnase Letter (supporting the idea of having a unique form for dual 
registrants). 
215
  See supra footnote 208 and accompanying text; infra footnote 1046 and accompanying text (discussing 
studies concerning the availability and presentation of comparative information on decision making).  
216
  See supra footnotes 203–206 and accompanying text. 
217
  General Instruction 5.A. to Form CRS. 

 
73 
 
While we are providing this flexibility, we believe investors should see a range of options.  
Accordingly, the final instructions provide that a f irm preparing two separate relationship 
summaries must provide a means of facilitating access to each relationship summary (e.g., 
include cross-references or hyperlinks) and deliver both with equal prominence and at the same 
time to each retail investor, whether or not that retail investor qualifies for those retail services or 
accounts.
218
  We disagree with commenters suggesting that dual registrants should have the 
option to deliver to retail investors a relationship summary describing only one type of service if, 
for example, that investor does not qualify for one of the services.
219
  Retail investors should be 
able to learn about and compare the range of options a firm offers to retail investors, even if the 
financial professional does not believe that the retail investor meets the requirements for or is 
considering certain services at that time.  For example, a retail investor may initially seek 
ongoing advice through an advisory account, but after learning about both brokerage and 
advisory services and speaking with a financial professional, may decide that a brokerage 
account is a better choice.  Or a retail investor may not qualify for certain accounts at the time of 
receiving the relationship summary,  e.g., by not being able to meet an account opening minimum, 
but may qualify for them in the future, or may qualify for a particular service at one firm but not 
another.  Furthermore, a retail investor may initially make the financial professional aware of 
only certain asset holdings (for example, he or she approaches a firm to rollover an IRA).  On 
that basis, the firm may believe the investor only qualifies for certain of the firm’s services.  
                                                                                                                                                             
218
  General Instruction 5.A. to Form CRS. 
219
  See IAA Letter I; Fidelity Letter. 

 
74 
 
However, the investor may also have substantial other asset holdings and thus qualify for a 
variety of accounts that the firm offers.  Knowing about the alternative brokerage and investment 
advisory options that a firm offers will help retail investors to compare firms’ offerings and 
consider whether to adjust the relationship or services as investors’ financial circumstances 
change.   
Affiliate Services.  As discussed above, the proposed instructions did not permit affiliates 
to prepare a combined relationship summary, but did permit firms with affiliates offering retail 
investors brokerage or advisory services to disclose these services.
220
  Several commenters 
recommended that affiliates should have the same flexibility to prepare one or two relationship 
summaries as dual registrants.
221
  We agree that this flexibility is appropriate for affiliates and 
are modifying the instructions to permit, but not require, delivery of a single relationship 
summary.  Affiliates preparing a single relationship summary will provide the same comparative 
benefits for investors as dual registrants doing so.  As with dual registrants, some affiliated firms 
market their services together and have financial professionals who hold licenses through each 
                                                                                                                                                             
220
  Proposed Item 2.D. of Form CRS.  
221
  See Fidelity Letter; LPL Financial Letter (“[D]ual-hatted financial professionals may either (i) provide 
brokerage and advisory services on behalf of LPL or (ii) provide brokerage services on behalf of LPL while 
providing advisory services on behalf of an unaffiliated RIA that is separately registered . . . .  [In the latter 
case, an investor] would receive a dual registrant relationship summary from LPL and a standalone 
investment adviser relationship summary from the RIA” without knowing which entity would be providing 
advisory services.”).  Other commenters suggested that the instructions clarify whether the requirements for 
dual registrants apply to affiliated broker-dealers and investment advisers. Comment Letter of State Farm 
Mutual Automobile Insurance Company (Aug. 6, 2018) (“State Farm Letter”) (“[T]he SEC did not provide 
a template or otherwise discuss whether affiliated broker-dealers and investment advisers can use blended 
or combined Form CRS”); Cambridge Letter (requesting that the Commission clarify that all references to 
dual registrants are applicable to broker-dealers and registered investment advisers organized under a single 
corporate structure as affiliated entities). 

 
75 
 
firm.  We recognize, however, that not all affiliates operate in the same way.  Some affiliated 
firms operate independently, do not market their services together, and do not share financial 
professionals.  The different ways in which financial professionals affiliate with firms to provide 
services also warrant this flexibility.  For example, some commenters noted that many financial 
professionals are licensed representatives of a brokerage firm and are also licensed through an 
affiliated investment advisory firm or an unaffiliated investment advisory firm (sometimes as a 
sole proprietor) separately registered with the Commission or one or more States.
222
  Depending 
on the relationship among affiliates and their financial professionals, a single relationship 
summary or two separate summaries may be more appropriate.
223
 
Many dually licensed financial professionals offer services on behalf of two affiliates, 
similar to dually licensed financial professionals offering services for a dual registrant.  One 
commenter requested that the Commission provide clarity that all references to dual registrants 
apply to broker-dealers and investment advisers organized under a single corporate structure as 
affiliated entities.
224
  Consistent with our discussion above, we believe that retail investors 
seeking services from dually licensed financial professionals should receive information about 
all of the services the financial professional offers, even if the services are through two affiliated 
                                                                                                                                                             
222
  See, e.g., LPL Financial Letter. 
223
  One commenter described arrangements in which a dual-hatted financial professional may provide 
brokerage services on behalf of a dual registrant and advisory services on behalf of an unaffiliated 
investment adviser.  The commenter expressed concern that an investor may be confused if the dual 
registrant’s and unaffiliated investment adviser’s relationship summaries both describe investment advisory 
services.  See LPL Financial Letter.  We believe the flexibility for dual registrants and affiliated firms to 
prepare combined or separate relationship summaries under the final instructions should address this 
concern, and firms can determine which presentations are most helpful for investors. 
224
  See Cambridge Letter. 

 
76 
 
SEC-registered firms.  As a result, if two affiliated SEC-registered firms prepare separate 
relationship summaries, and they provide brokerage and investment advisory services through 
dually licensed financial professionals, the final instructions require the firms to deliver to each 
retail investor both firms’ r elationship summaries with equal prominence and at the same time, 
without regard to whether the particular retail investor qualifies for those retail services or 
accounts.  To provide clarity, we have added a definition for dually licensed professionals in the 
final instructions that was not included in the proposal.
225
  The final instructions also provide that 
each of the relationship summaries must cross-reference and link to the other.
226
   If the affiliated 
firms are not providing brokerage and investment advisory services through dually licensed 
financial professionals, they may choose whether or not to reference each other’s relationship 
summary and whether or not to deliver the affiliate’s relationship summary with equal 
prominence and at the same time.
227
 
 Finally, we modified the instructions t o explicitly permit a firm to acknowledge other 
financial services the firm provides in addition to its services as a broker-dealer or investment 
                                                                                                                                                             
225
  General Instruction 11.B. to Form CRS (defining “dually licensed financial professional” as “A natural 
person who is both an associated person of a broker or dealer registered under section 15 of the Exchange 
Act, as defined in section 3(a)(18) of the Exchange Act, and a supervised person of an investment adviser 
registered under section 203 of the Advisers Act, as defined in section 202(a)(25) of the Advisers Act.”). 
226
  General Instruction 5.B. to Form CRS.  As discussed above, as is the case for dual registrants, affiliates 
preparing separate relationship summaries must deliver them to each retail investor with equal prominence 
and at the same time, without regard to whether the particular retail investor qualifies for those retail 
services or accounts.  Each of the relationship summaries must reference and provide a means of 
facilitating access to the other.  General Instruction 5.B.(ii).a. to Form CRS. 
227
  General Instruction 5.B.(ii).b. to Form CRS.  Firms that are unaffiliated will be treated as standalone 
broker-dealers and standalone investment advisers, each with an independent responsibility to create and 
deliver its own relationship summary in accordance with the final instructions. 

 
77 
 
adviser registered with the SEC, such as insurance, banking, or retirement services, or 
investment advice pursuant to state registration or licensing.
228
  Firms may include a means of 
facilitating access (e.g., cross-references or hyperlinks) to additional information about those 
services.
229
  Some commenters encouraged the SEC to allow firms to disclose services of other 
affiliates, even if those services are not regulated by the SEC, such as investment advisory 
services offered by an affiliated thrift savings institution.
230
  In response to our request for 
comment asking whether we should permit firms to include wording regarding other types of 
services and lines of businesses, several commenters submitting mock-ups of relationship 
summaries included language referencing banking and insurance services or products.
231
  We 
found these comments persuasive and believe that permitting firms to reference financial 
services not necessarily regulated by the Commission so that retail investors can see the range of 
options available to them can benefit their decision-making, as discussed above.
232
  This new 
instruction supports and expands upon the commenters’ suggestions.  Given that the focus of the 
relationship summary is on brokerage and/or advisory services, however, information pertaining 
                                                                                                                                                             
228
  General Instruction 5.C. to Form CRS.  This would also permit a broker-dealer that is registered with one 
or more states as an investment adviser to refer to such advisory services. 
229
  General Instruction 5.C. to Form CRS. 
230
  See Northwestern Mutual Letter (seeking flexibility to disclose advisory services offered through an 
affiliated thrift because this would be in the clients’ best interest); ACLI Letter (asserting that Form CRS is 
not flexible enough to describe in a meaningful and accurate way investment advisory services provided by 
insurance affiliates such as banks or thrifts). 
231
  See ASA Letter; Primerica Letter; Comment Letter of Stifel Financial (Aug. 7, 2018) (“Stifel Letter”) 
(referencing bank sweep accounts and also providing: “Banks and insurance brokers and agents may also 
provide access to financial planning and advice services, but these services are beyond the scope of this 
document.”); Cetera Letter I (referencing bank sweep programs). 
232
  See supra footnotes 215, 218– 219, and accompanying text. 

 
78 
 
to other services should not obscure or impede understanding of the information that must be 
disclosed in accordance with the Form CRS instructions.
233
 
 We believe that, together, these requirements for dually registered firms, financial 
professionals, and affiliates will enhance comparability while providing flexibility for them to 
present their services and relationships in the way the firm believes to be the clearest.  
B. Items 
The relationship summary is principally designed to provide succinct information about 
(i) relationships and services the firm offers to retail investors; (ii) fees and costs that retail 
investors will pay, conflicts of interest, and the applicable standard of conduct; and (iii) 
disciplinary history.  The proposed relationship summary included this information as well as 
additional topics that we are eliminating, as explained further below.  In determining the scope of 
the relationship summary, we balanced the need for robust disclosures with the risk of 
“information overload” and reader disengagement, a theme in comment letters, investor feedback 
at roundtables and in the Feedback Forms, and observations reported in the RAND 2018 report 
and other surveys and studies. 
Some of the key changes from the proposal include: 
• We have modified the sections to place substantively related information 
generally together.  We believe this will facilitate comprehension, leading to a 
better-informed decision-making process and selection of a firm, financial 
professional, account type, services, and investments.   
                                                                                                                                                             
233
  See General Instruction 5.C. to Form CRS.  

 
79 
 
• The final instructions simplify the introduction; highlight disciplinary history in a 
separate section; and integrate key questions, now characterized as “conversation 
starters,”  among the remaining sections of the relationship summary.     
• After reviewing the comments and observations reported in the RAND 2018 
report and other surveys and studies, we have determined to remove prescribed 
generalized comparisons between brokerage and investment advisory services.   
1. Introduction 
The relationship summary will include a standardized introductory paragraph.  The 
instructions will require a firm to:  (  i) state the name of the broker-dealer or investment adviser 
and whether the firm is registered with the Securities and Exchange Commission as a broker-
dealer, investment adviser, or both; ( ii)   indicate that brokerage and investment advisory services 
and fees differ and that it is important for the retail investor to understand the differences; and 
(iii) state that free and simple tools are available to research firms and financial professionals at  
the Commission’s investor education website, Investor.gov/CRS, which also provides 
educational materials about broker-dealers, investment advisers, and investing.
234
   
The introduction’s instructions as adopted differ from the proposal, which would have 
required prescribed wording in the introduction that differed for broker-dealers, investment 
advisers, and dual registrants.  Specifically, the prescribed wording in the proposed introduction 
was intended to highlight in a generalized sense and make investors aware that broker-dealers 
                                                                                                                                                             
234
  See Item 1 of Form CRS.  Firms also must include the date prominently at the beginning of the relationship 
summary, for example, in the header or footer of the first page or in a similar location for a relationship 
summary provided electronically.  See id. 

 
80 
 
and investment advisers are different, and that investors needed to carefully consider this choice.  
We received one comment specifically addressing the introduction.  It stated that the prescribed 
wording would not capture the attention of retail investors and failed to adequately convey 
information regarding differences between investment advisers and broker-dealers.
235
   In 
addition, several of the mock-ups commenters submitted included other suggestions for 
beginning the relationship summary, many of which had an introduction that was generally 
shorter and included less discussion about generalized business models than the proposed 
relationship summary.
236
  In response to the comment and the mock-ups, a number of which we 
found conveyed useful information in a more concise manner than the proposed prescribed 
wording, we simplified and standardized the introductory paragraph, eliminating or replacing 
most of the prescribed wording we proposed, as discussed further below.  In addition, we added 
a requirement to provide a link to Investor.gov/CRS in the Introduction to highlight the tools and 
educational resources available to retail investors.  This dedicated page on Investor.gov will 
provide information specifically tailored to educate retail investors about financial professionals, 
including search tools in order to research firms and financial professionals and information 
about broker-dealers and investment advisers and their different services, fees, and conflicts.  We 
believe the changes and the new page will better focus retail investors on how the relationship 
                                                                                                                                                             
235
  See CFA Letter I.  The commenter argued that the introduction would best be used to convey additional 
basic information about the differences between services offered by broker-dealers, investment advisers, 
and dual registrants.  See id. 
236
  See, e.g., Primerica Letter; Schwab Letter I; SIFMA Letter.  

 
81 
 
summary can be most helpful to them, while providing a link to resources to more general 
investor education information at the front of the relationship summary.    
We made the following specific changes to the introduction:  First, the final instructions 
require all firms to include certain information without prescribing the specific words that firms 
must use.
237
  The proposed relationship summary would have required prescribed wording that 
differed for standalone investment advisers, standalone broker-dealers, and dual registrants.
238
  
These changes correspond with the general approach throughout the final instructions of 
permitting more flexibility for firms to tailor the wording of their relationship summaries to 
enhance the relationship summary’s accuracy, clarity, usability, and design.
239
   
Second, we eliminated the proposed requirement that standalone investment advisers 
state that they do not provide brokerage services, and vice versa.
240
  We believe this information 
is more succinctly conveyed by including the firm’s registration status.
241
  Additionally, 
commenters pointed out that the choice of financial services providers is not binary—there are 
                                                                                                                                                             
237
  See Item 1 of Form CRS. 
238
  See Proposed Items 1.B. (standalone broker-dealers); 1.C. (standalone investment advisers); and 1.D. (dual 
registrants) of Form CRS. 
239
  See supra footnote 83 and accompanying text. 
240
  In bold font, a standalone broker-dealer would have been required to state:  “We are a broker-dealer and 
provide brokerage accounts and services rather than advisory accounts and services.”  Proposed Item 1.B. 
of Form CRS.  Likewise, a standalone investment adviser would have been required to state in bold font: 
“We are an investment adviser and provide advisory accounts and services rather than brokerage accounts 
and services.”  Proposed Item 1.C. of Form CRS.  Dual registrants would have included a similar statement 
in bold font:  “Depending on your needs and investment objectives, we can provide you with services in a 
brokerage account, investment advisory account, or both at the same time.”  Proposed Item 1.D. of Form 
CRS.   
241
  As noted and discussed further infra, the Introduction will also refer retail investors to Investor.gov/CRS 
for further information regarding broker-dealers and investment advisers. 

 
82 
 
more than two types of services offered that could apply.
242
  We agree that the proposed wording 
could be viewed as unduly constricting and potentially misleading.   
Third, we excluded the statement for dual registrants that, depending on an investor’s 
needs and investment objectives, the firm can provide services in a brokerage account, 
investment advisory account, or both at the same time.  We believe that this information is 
conveyed more effectively by the statement of a firm’s registration status and the information 
provided elsewhere in the relationship summary, such as in the description of services that the 
firm provides.
243
  In addition, requiring a statement of a firm’s registration status at the 
beginning of the relationship summary helps obviate a need for the Affirmative Disclosures 
under the Exchange Act and the Advisers Act proposed specifically to require a broker-dealer 
and an investment adviser to prominently disclose that it is registered as a broker-dealer or 
investment adviser, as applicable, with the Commission in print or electronic retail investor 
communications.
244
  As discussed below, we are not adopting the Affirmative Disclosures.
245
   In 
response to our request for comment relating to the Affirmative Disclosures,
246
 several 
commenters stated that the proposed rules were duplicative of other disclosure obligations (e.g., 
                                                                                                                                                             
242
  See, e.g., ACLI Letter (describing the “binary approach that the SEC has taken, which is not entirely 
accurate for the distribution of variable annuity and variable life products”). 
243
  See infra  Section II.B.2. 
244
  See Proposing Release, supra footnote 5, at Section III.D. 
245
  See infra Section III. 
246
  See Proposing Release, supra footnote 5, at Section III.D. 

 
83 
 
Form ADV, Regulation Best Interest, Form CRS)
247
 and that such rules were costly and difficult 
to implement and supervise.
248
   
Fourth, we have included an instruction that allows (but does not require) reference to 
FINRA or Securities Investor Protection Corporation (“SIPC”) membership in a manner 
consistent with other rules and regulations (e.g., FINRA rule 2210).
249
   
We are not adopting the proposed requirements to include statements that:  (i) there are 
different ways an investor can get help with investments; ( ii)   an investor should carefully 
consider which types of accounts and services are right for him or her; (iii) the relationship 
summary gives an investor a summary of the types of services the firm provides and how the 
investor pays; and (iv) an investor should ask for more information with a specific reference to 
the key questions.
250
  We believe that this information is not necessary in the introduction and is 
better conveyed through the revised question-and-answer structure of the relationship summary 
and a more streamlined introduction highlighting that it is important for retail investors to 
understand the difference between brokerage and investment advisory services and fees and 
referencing Investor.gov/CRS.
251
  The conversation starters more directly prompt discussion 
                                                                                                                                                             
247
  See, e.g., LPL Financial Letter; SIFMA Letter; IRI Letter; Committee of Annuity Insurers Letter; Trailhead 
Consulting Letter; see also infra Section III. 
248
  See, e.g., LPL Financial Letter; Bank of America Letter; IRI Letter; SIFMA Letter; Comment Letter of 
Altruist Financial Advisors LLC (Aug. 7, 2018) (“Altruist Letter”); see also infra Section III.  
249
  See Item 1.A. of Form CRS. 
250
  See Proposed Items 1.B. (standalone broker-dealers); 1.C. (standalone investment advisers); and 1.D. (dual 
registrants) of Form CRS. 
251
  Similarly, we eliminated the reference to suggested questions on a specified page because the key questions 
are now included throughout the relationship summary. 

 
84 
 
between retail investors and their investment professionals than a generalized statement to ask 
for more information, and the conversation starters relating to the Relationships and Services 
item convey that an investor should carefully consider which types of accounts and services are 
appropriate.    In addition, several commenter mock-ups demonstrated that removing the 
prescribed wording from each of these changes results in a shorter introduction and promotes 
additional white space in the relationship summary.  Our adopted instructions remove required 
text that might be unnecessary for investors, similar to introductions in mock-ups that were 
typically shorter with less discussion about generalized business models than the proposed 
relationship summary.
252
  As a result, we believe these changes will enhance the relationship 
summary’s clarity, usability, and design. 
Finally, we added a requirement to provide a link to Investor.gov/CRS and state that free 
and simple search tools are available at Investor.gov/CRS in order to research firms and financial 
professionals.  Firms also will state that the page provides educational materials about broker-
dealers, investment advisers, and investing. These materials include information about the 
different services and fees that broker-dealers and investment advisers offer.  We believe a focus 
on Investor.gov and specifically the Investor.gov/CRS page at the beginning of the relationship 
summary will be more helpful to retail investors than the proposed relationship summary 
introduction.  Investor.gov provides various resources that can assist with investor education 
relating to firms and their professionals.  Among other components, Investor.gov currently 
provides resources prepared by Commission staff for retail investors to: 
                                                                                                                                                             
252
  See, e.g., Primerica Letter; Schwab Letter I; SIFMA Letter.    

 
85 
 
• Review the background of their investment professional; 
• Educate themselves about investment products, including the risks and unique 
characteristics of many products; 
• Perform fee calculations; 
• Review Investor Alerts and Bulletins; 
• Find contact information for the Commission; and 
• Review educational information regarding broker-dealers and investment 
advisers.
253
   
The Investor.gov/CRS page will bring together these types of educational materials about 
investment professionals, along with broader tools and other content specifically tailored for 
retail investors on Investor.gov, which will help them to more easily learn about different types 
of firms and find information about specific firms and financial professionals.  
As discussed further below, we are removing discussions in the proposed relationship 
summary that were more generalized or educational in nature, including the comparison sections 
for standalone broker-dealers and investment advisers and other statements comparing these two 
different types of financial services and fees.  Many commenters indicated that the Commission 
is generally better-positioned to provide investor education materials as compared to firms.
254
  
                                                                                                                                                             
253
  See Investor Bulletin: Ten Ways to Use Investor.gov (Mar. 8, 2017), available at 
https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-bulletin-ten-ways-use-
investorgov; see also Brokers, available at https://www.investor.gov/research-before-you-invest/methods-
investing/working-investment-professional/brokers; Investment Advisers, available at 
https://www.investor.gov/research-before-you-invest/methods-investing/working-investment-
professional/investment-advisers. 
254
  See supra footnote 40 and accompanying text. 

 
86 
 
As a result, the revised introduction provides the Investor.gov/CRS link at the beginning of the 
relationship summary to direct retail investors to the Commission staff’s resources and highlights 
the importance of investor education.
255
 
Investors and commenters also supported highlighting Investor.gov more generally.  
Investor feedback at roundtables generally indicated that Investor.gov was a useful website for 
retail investors and should be prominent in the relationship summary.
256
  Comment letters were 
supportive of the Commission providing educational materials to retail investors generally and 
Investor.gov specifically.
257
  Observations in surveys and studies also indicated that many retail 
investors would seek information at Investor.gov and would trust that information because it is a 
government site.
258
  Some investor studies, however, indicated that retail investors did not 
                                                                                                                                                             
255
  Certain commenters provided mock-ups that did not include any introductory wording.  E.g., Fidelity 
Letter; IAA Letter I.  In our view, these mock-ups either did not include, or, at minimum, did not 
appropriately highlight, important information regarding the registration status of the firm or the 
availability of additional information for retail investors.  
256
  See Denver Roundtable (Investor Nine: “Yeah, I went there [to Investor.gov], that’s good.”  Ms. Siethoff: 
“Did you think that sort of thing should be highlighted more?” Investor Nine: “More, yes.  More”); 
Philadelphia Roundtable (Investor Four: “I went to those websites [including Investor.gov] and I found 
them very useful.”).  Some Feedback Form commenters also indicated that a link to Investor.gov or a 
similar educational website would be helpful.  See, e.g., Baker Feedback Form (“I found the document 
overall extremely useful and learned, most importantly, to refer to the sec.gov website often”); Shepard 
Feedback Form (“An investing.gov [sic] website seems to be a useful source”); Smith2 Feedback Form 
(“would like to see a link included to a site or sites that contain general investment information”).   
257
  See, e.g., MassMutual Letter (“The SEC provides a wealth of information at www.investor.gov for 
educational purposes... Providing general information about broker-dealers and investment advisers in a 
consistent and readily-accessible [sic] space on the SEC’s website would allow each firm to use the space 
available in Form CRS to accurately describe its brokerage and advisory services, with tailored language to 
reflect its business model, products and services offered and conflicts of interest.”). 
258
  See Kleimann II, supra footnote 19 (“Many participants said that they would use the investor.gov site... 
[and] that they would put a high level of trust in whatever information would be on the site because it was a 
government site.”); RAND 2018, supra footnote 13 (finding that two-thirds of investors would be “very 
likely” or “somewhat likely” to click on a hyperlink for investor education materials). 

 
87 
 
understand what information was available at Investor.gov.
259
  Moving the link to 
Investor.gov/CRS and the related explanation to the front of the relationship summary (from the 
“Additional Information” section at the end of the relationship summary, as proposed) will 
address this issue by making the website more prominent and by concentrating information 
helpful to retail investors on one dedicated page on Investor.gov.   
2. Relationships and Services  
As proposed, after the introduction firms will be required to summarize the relationships 
and services that they offer to retail investors.  They will use a revised heading, “What 
investment services and advice can you provide me?”, which follows the new question-and-
answer format.
260
  Several commenters used this question or a similar heading in mock-ups they 
provided.
261
  Generally as proposed, we are requiring firms to provide information about specific 
aspects of their brokerage and investment advisory services, with modifications from the 
proposal to permit firms to use their own wording to cover these topics.     
We proposed separate instructions for firms to describe brokerage account services and 
investment advisory account services.  Firms would have used a mix of prescribed wording and 
their own wording to provide a  summary overview of fees and certain required topics, including 
                                                                                                                                                             
259
  See Kleimann I, supra footnote 19 (“None [of the study participants] had a clear idea of the information 
that would be provided at Investor.gov.”); see also Kleimann II, supra footnote 19 (“Many participants said 
that they would use the investor.gov site to research the firm, but few knew what specific information 
would be at that site...”).   
260
  Item 2.A. of Form CRS. 
261
  See, e.g., IAA Letter I; LPL Financial Letter; Primerica Letter ; SIFMA Letter; Wells Fargo Letter; Fidelity 
Letter; Schwab Letter I (mock-up). We proposed requiring the heading, “[Types of] Relationships and 
Services.”  As discussed above, many commenters recommended that the relationship summary use a 
question-and-answer format as a more engaging approach for retail investors. 

 
88 
 
the scope of advice services, investment discretion, monitoring, and significant limitations on 
investments available to retail investors.
262
  We received feedback from the observations in the 
RAND 2018 report, other surveys and studies and on Feedback Forms that relationships and 
services is an important area to cover,
263
 and that investors learned important information from 
the prescribed wording on relationships and services.
264
  In addition, the IAC recommended that 
the Commission adopt a uniform, plain English disclosure for retail investors that would include 
basic information “about the nature of services offered,” among other things.
265
 However, some 
commenters expressed concern that, without more educational content, this approach would not 
                                                                                                                                                             
262
  See, e.g., Proposed Item 2.B. of Form CRS (“If you are a broker-dealer that offers brokerage accounts to 
retail investors, summarize the principal brokerage services that you provide to retail investors.”); and 
Proposed Item 2.C. of Form CRS (“If you are an investment adviser that offers investment advisory 
accounts to retail investors, summarize the principal investment advisory services that you provide to retail 
investors.”).   
263
  See RAND 2018, supra footnote 13 (next to fees and costs, survey participants responded the relationships 
and services section was one of the most informative; more than 56% of survey participants said to keep 
the section the same length); see also Cetera Letter II (Woelfel) supra footnote 17 (85% of survey 
participants responded that this section was very or somewhat important); Schwab Letter I (Koski) supra 
footnote 21 (54% of survey participants selected “a description of the investment advice services the firm 
will provide to me” from a menu of 11 subjects as one of the four most important things for firms to 
communicate).  In addition, nearly 90% of Feedback Form commenters graded this section as “very useful” 
or “useful.”  See Feedback Forms Comment Summary supra footnote 11 (summary of responses to 
Question 2(a)).   
264
  See RAND 2018, supra footnote 13 (in qualitative interviews, participants appeared to have “a general 
understanding that this section describes two different services or accounts that a client would choose”); 
Kleimann I, supra footnote 19 (while study authors found that participants had difficulty with “sorting out 
the similarities and differences,” this study also reports that “[n]early all participants easily identified a key 
difference between the Brokerage Accounts and Advisory Accounts as the fee structure either being tied to 
transactions or to assets. Some further identified as a key difference who had the final approval on all 
transactions, seeing the Brokerage Account as giving them more control on making the final decision.”).    
265
  See IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10; and IAC Form CRS 
Recommendation, supra footnote 10. 

 
89 
 
sufficiently inform or would confuse retail investors.
266
  One commenter pointed out that the 
proposed instructions dictated different ways for broker-dealers and investment advisers to 
describe similar services.
267
  These commenters suggested including more explanatory wording 
or definitions to cover what services are typically associated with brokerage accounts and 
investment advisory accounts, to provide more background information to help retail investors 
understand the firm-specific disclosures.
268
  At the same time, commenters noted that summary, 
prescribed wording for this section may not accurately describe the services of every broker-
dealer or investment adviser.
269
  Results of the RAND 2018 survey reflected these concerns and 
                                                                                                                                                             
266
  See CFA Letter I (“We believe the Commission should . . . require firms to be crystal clear about the nature 
of the services they offer. Simply telling [investors] that the account is a brokerage account or an advisory 
account doesn’t necessarily convey useful information.”); CFA Institute Letter I (“Given the similarities to 
what investment advisers offer, CRS disclosure of these additional services will likely confuse investors 
without language clarifying that they are outside of their usual broker-dealer duties and would typically 
require a separate contract.”). 
267
  CFA Letter I. 
268
  See CFA Letter I (suggesting prescribed wording for how typical broker-dealers and investment advisers 
might describe their services); CFA Institute Letter I (suggesting alternative wording for how broker-
dealers might describe their services).  Commenters on Feedback Forms also asked for explanatory 
wording and definitions.  See Feedback Forms Comment Summary, supra footnote 11 (summary of 
responses to Question 4) (seven commenters asked for definitions of terms such as transaction-based fee, 
asset-based fee or wrap fee; 10 asked for a definition or better explanation of the term “fiduciary”); see 
also, Bhupalam Feedback Form (“The definition of a broker dealer [sic] and investment advisory [sic] is 
not very clear.”); Daunheimer Feedback Form (“For a novice investor, all terms that seasoned investors 
take for granted, are new to them. Consider making the language as simple as possible.”); Margolis 
Feedback Form (“wording is very confusing and not very accurate”); Anonymous27 Feedback Form 
(“define better”), but see Baker Feedback Form (“the discussion of differences among the relationships is 
very useful as it describe [sic] the differences in services provided ... and most importantly, the difference 
between a commission-based fee and an ‘asset-value’ fee”); Hawkins Feedback Form (“Summary does a 
good job of explaining the basis [sic] services for a brokerage vs advisory account.  Some clearer examples 
could help.”); Rohr Feedback Form (“Makes clear how a discretionary account differs from a brokerage 
account”).     
269
  See, e.g., MassMutual Letter (explaining that the prescribed wording that a customer will pay a commission 
each time a security is bought and sold is not universally true, e.g., for mutual funds and variable annuities 
with internal exchange programs, which allow a customer to switch from one investment to another without 
paying a commission); CFA Letter I (recognizing that a generalized description of portfolio management 
 

 
90 
 
showed that almost a quarter of survey respondents (22.2%) described the relationships and 
services section as “difficult” or “very difficult” to understand.
270
  Comments from participants 
in qualitative interviews reported in the RAND 2018 report, as well as comments from 
roundtable participants and on Feedback Forms, indicated that prescribed terms such as 
“transaction-based fee,” “asset-based fee,” “discretionary account,”  and “non-discretionary 
account” contributed to this difficulty.
271
  
As discussed in Section II.A.1. above, we are sensitive to the potential inaccuracies and 
confusion that the prescribed wording can create.  We also recognize that in some cases, 
providing instructions that require broker-dealers and investment advisers to describe similar 
services in different ways can create confusion.  Accordingly, we have revised the instructions to 
allow firms to use more of their own wording.  We also eliminated the separate instructions for 
brokerage account services and investment advisory account services, and instead are adopting 
                                                                                                                                                             
services, included for purposes of educating investors, does not apply to all business model among 
registered investment advisers). 
270
  RAND 2018, supra footnote 13.  In the RAND 2018 qualitative interviews, participants noted several 
phrases that raised concerns such as “additional services” and “might pay more” and identified terms that 
needed further definition.  Id. Another interview-based investor study found that “[p]articipants were quite 
mixed in their understanding about the advice and monitoring that was offered in the two accounts” when 
presented with the proposed sample dual registrant relationship summary. Kleimann I, supra footnote 19. 
271
  RAND 2018, supra footnote 13; see also Betterment Letter I (Hotspex) supra footnote 18 (finding that 
“respondents found certain terminology (e.g., ‘fiduciary,’ ‘asset-based,’ ‘ETF’) to be unclear or lack 
sufficient detail”).  Roundtable discussions found similar results.  See, e.g., Philadelphia Roundtable 
(participant finding “transaction-based fee” to be complex); Miami Roundtable (participant stating that 
“most people don’t really understand” what fiduciary duty means); see also Feedback Forms Comment 
Summary, supra footnote 11 (summary of responses to Question 4) (Seven Feedback Forms included 
narrative comments that asked for definitions of terms such as “transaction-based fee,” “asset-based fee” or 
“wrap fee;” 10 asked for explanation or definition of the term “fiduciary”); Anonymous06 Feedback Form 
(“Definitions might not be understood transaction based vs asset based fee”); Baker Feedback Form (“It 
may be more helpful to have detailed definitions (Ex. “transaction-based fee”) that, unfortunately, result in 
a longer document.”); Bhupalam Feedback Form (“definition of a broker dealer [sic] and investment 
advisory [sic] is not very clear”); Starmer2 Feedback Form (“Spell out ... best interest”).   

 
91 
 
one set of instructions that generally applies the same requirements to all firms.
272
  To facilitate 
comparison of firms’ relationships and services, however, we have retained the concept of 
specific sub-topics that each firm must cover in this section.
273
   
Another change from the proposed instructions relates to a concern regarding how 
accounts were delineated.  The proposed instructions would have applied based on whether or 
not broker-dealers and investment advisers offered brokerage accounts or investment advisory 
accounts to retail investors and would have included some prescribed language referencing 
accounts.
274
   Insurance and variable annuity providers commented that this focus on accounts 
would not allow them to accurately describe insurance offerings and would be confusing, 
particularly to investors whose insurance or annuity products are held directly with an issuing 
                                                                                                                                                             
272
  See, e.g., Item 2.B. of Form CRS (requiring all firms to summarize their principal services but requiring 
broker-dealers to state whether or not they offer recommendations and investment advisers to state the 
particular types of advisory services they offer). 
273
  As discussed in Section II.A.2 above, we are not requiring that these sub-topics follow a prescribed order, 
so firms are able to tailor the presentation of their services, as well as include additional information about 
their brokerage or advisory services, so long as the description covers all applicable topics.  See supra 
footnote 121 and accompanying text. 
274
  See, e.g., Proposed Items 2.B.2. (“If you offer accounts in which you offer recommendations to retail 
investors, state that the retail investor may select investments or you may recommend investments for the 
retail investor’s account . . . .”) and 2.C.4. (“If you significantly limit the types of investments available to 
retail investors in any accounts, include the following . . . .”) of Form CRS.  In addition, some of the 
prescribed wording included language specific to accounts.  See, e.g., Proposed Item 2.B.1. of Form CRS.  
Broker-dealers would state, “If you open a brokerage account, you will pay us a transaction-based fee, 
generally referred to as a commission, every time you buy or sell an investment.” 

 
92 
 
insurance company.
275
  We agree and have replaced references to accounts in this section with 
references to “services, accounts, or investments you make available to retail investors.”
276
 
a. Description of Services 
The final instructions have an overarching requirement to state that the firm offers 
brokerage services, investment advisory services, or both, to retail investors, and to summarize 
the principal services, accounts, or investments the firm makes available to retail investors.
277
  A 
firm also must include any material limitations on those services.
278
  The final instructions 
require firms to include certain information in their descriptions.  Similar to the proposal, broker-
dealers must state the particular types of principal brokerage services the firm offers to retail 
investors, including buying and selling securities,  and whether or not they offer 
recommendations to retail investors (i.e., to distinguish execution-only services).
279
   Investment 
advisers must state the particular types of principal advisory services they offer to retail 
investors, including, for example, financial planning and wrap fee programs.
280
  The final 
instructions do not, however, require prescribed wording to describe the particular characteristics 
                                                                                                                                                             
275
  E.g., ACLI Letter; Committee of Annuity Insurers Letter; IRI Letter; MassMutual Letter; New York Life 
Letter; Northwestern Mutual Letter. 
276
  Item 2.B. of Form CRS. 
277
  Item 2.B. of Form CRS. 
278
  Item 2.B. of Form CRS. 
279
  Item 2.B. of Form CRS. 
280
  Item 2.B. of Form CRS.   

 
93 
 
of these services, as did the proposed instructions.
281
  Commenters argued that the proposed 
prescribed wording may not accurately describe the services of every broker-dealer or 
investment adviser.
282
  As discussed in Section II.A.1 above, given that investors may be 
confused by information that does not directly relate to the firm’s offerings, we are allowing 
firms to use their own wording to describe their own services.  Therefore, unlike the proposal, 
the final instructions do not prescribe specific wording for firms to describe the particular 
characteristics of these services.
283
   
Some commenters raised concerns about investor confusion if both broker-dealers and 
investment advisers discuss the advice they provide in the relationship summary.  To mitigate 
that confusion, some commenters called for an explicit statement that broker-dealers are in sales 
relationships.
284
  In response to these concerns, we added the explicit requirement that broker-
                                                                                                                                                             
281
  See, e.g., Proposed Item 2.B.2. of Form CRS (requiring broker-dealers (i) that only offer accounts in which 
they offer recommendations to retail investors to state that the retail investor may select investments or the 
broker-dealer may recommend investments for the retail investor’s account, but the retail investor “will 
make the ultimate investment decision regarding the investment strategy and the purchase or sale of 
investments” and (ii) that do not offer recommendations to state that the retail investor “will select the 
investments” and “will make the ultimate investment decision regarding the investment strategy and the 
purchase or sale of investments”).  
282
  See, e.g., MassMutual Letter (explaining that the prescribed wording that a customer will pay a commission 
each time a security is bought and sold is not universally true, e.g., for mutual funds and variable annuities 
with internal exchange programs, which allow a customer to switch from one investment to another without 
paying a commission); CFA Letter I (recognizing that a generalized description of portfolio management 
services, included for purposes of educating investors, does not apply to all business models among 
registered investment advisers). 
283
  See generally Items 2.B.(i) through 2.B.(v) of Form CRS.     
284
  See, e.g., CFA Institute Letter I; Consumers Union Letter; see also Kleimann II, supra footnote 19 
(alternative wording for redesigned relationship summary described broker-dealer services as a “sales 
relationship”).  

 
94 
 
dealers state that they buy and sell securities, in order to clarify their principal services.
285
  We 
also have included a note in the final instructions that broker-dealers offering recommendations 
should consider the applicability of the Investment Advisers Act of 1940, consistent with SEC 
guidance.
286
   
The final instructions require a ll firms to address the following topics in the description 
of their services: (i) monitoring; (ii) investment authority; (iii) limited investment offerings; and 
(iv) account minimums and other requirements.
287
  As discussed further below, the final 
instructions require firms to include much of the same substantive information as proposed, but 
rely less on prescribed wording and assumptions regarding typical brokerage and investment 
advisory accounts.
288
  In response to comments, we added a new requirement for firms to 
disclose whether or not they have account minimums.
289
  Commenters recommended that we 
include information about account minimums in the relationship summary.
290
  In addition, a 
                                                                                                                                                             
285
  See Item 2.B of Form CRS (“For broker-dealers, state the particular types of principal brokerage services 
you offer, including buying and selling securities, and whether or not you offer recommendations to retail 
investors.”). 
286
  See Item 2.B.(ii) to Form CRS.  See Solely Incidental Release, supra footnote 47. 
287
  Item 2.C. of Form CRS. 
288
  In the proposed instructions, assistance with developing or executing the retail investor’s strategy and 
monitoring the performance of the retail investor’s account were characterized as additional services for 
broker-dealers. The final instructions do not make this distinction and instead permit firms more flexibility 
to describe their services accurately.  See Proposed Item 2.B.3. of Form CRS.   
289
  Item 2.B.(iv) to Form CRS (“Explain whether or not you have any requirements for retail investors to open 
or maintain an account or establish a relationship, such as minimum account size or investment amount.”). 
290
  See, e.g., NASAA Letter (“Form CRS should specify minimum account size and include information on 
miscellaneous fees different categories of investors can expect to pay.”); Cetera Letter I (Form CRS should 
include “[w]hether or not the firm has established standards for the minimum or maximum dollar amount 
of various account types.”). 

 
95 
 
number of commenters submitting mock-ups included disclosures on account minimums in their 
forms.
291
  We agree this information is important to investors when they are deciding on account 
types and services, particularly as they consider the amount of funds they are planning to invest 
and whether they may incur any fees or become ineligible for certain services if their accounts 
fall under certain dollar thresholds.  We also removed requirements to discuss fees at the 
beginning of this section
292
 and are consolidating these requirements with other related ones in 
the fees, costs, conflicts, and standard of conduct section, as discussed below.
293
  We also are not 
adopting a proposed requirement to describe any regular communications with retail investors.
294
  
Neither the RAND 2018 report nor other surveys and studies suggested that this information was 
important to investors, as compared to fees.  Mock-ups submitted by commenters also did not 
include this disclosure, underscoring the relative importance of other topics.  Given the goal of 
limiting the length of the relationship summary so that investors remain engaged and are not 
overwhelmed by the information, we decided to prioritize requiring other information in the 
relationship summary. 
                                                                                                                                                             
291
  See, e.g., Primerica Letter and Cetera Letter I. 
292
  See Proposed Items 2.B.1. (broker-dealers) (“If you open a brokerage account, you will pay us a 
transaction-based fee, generally referred to as a commission, every time you buy or sell an investment.”); 
and 2.C.1. (investment advisers) (“State the type of fee you receive as compensation if the retail investor 
opens an investment advisory account.  For example, state if you charge an on-going asset-based fee based 
on the value of cash and investments in the advisory account, a fixed fee, or some other fee arrangement.  
Emphasize the type of fee in bold and italicized font.  If you are a standalone adviser, also state how 
frequently you assess the fee.”) of Form CRS. 
293
  See infra footnotes 373–375 and accompanying text. 
294
  See Proposed Items 2.B.3. (broker-dealers) and 2.C.2. (investment advisers) of Form CRS (“Briefly 
describe any regular communications you have with retail investors, including the frequency and method of 
the communications.”). 

 
96 
 
Monitoring.  The final instructions require both broker-dealers and investment advisers to 
explain whether or not they monitor retail investors’ investments, including the frequency and 
any material limitations of that monitoring, and if so, whether or not the monitoring services are 
part of the firm’s standard services.
295
  In the proposal, different instructions concerning 
monitoring applied to broker-dealers and investment advisers.  Broker-dealers would have stated 
whether they monitored the performance of retail investors’ accounts, and if so, how frequently 
they performed such monitoring, whether it constituted additional services or was part of the 
broker-dealer’s standard services, and whether a retail investor would pay more for it.
296
  
Investment advisers would have stated how frequently they monitor retail investors’ accounts.
297
     
One commenter objected to the requirement for broker-dealers to describe additional 
services, including monitoring, on the basis that the information would add little value.
298
  On 
the other hand, several commenters suggested that understanding the degree to which firms 
monitor the performance of their investments can be important to investors.
299
  One of these 
                                                                                                                                                             
295
  Item 2.B.(i) of Form CRS. 
296
  Proposed Item 2.B.3. of Form CRS. 
297
  Proposed Item 2.C.2. of Form CRS. 
298
  See Wells Fargo Letter (recommending elimination of broker-dealer description of additional services 
because it could take up substantial space and adds little value for the investor).  
299
  See, e.g., Comment Letter of the St. John’s Law School Securities Arbitration Clinic (Aug. 7, 2018) (“St. 
John’s Law Letter”); CFA Letter I (discussing investors’ expectations of a fiduciary duty based on whether 
and to what degree a firm or financial professional provides monitoring services); Comment Letter of the 
Commonwealth of Massachusetts (Aug. 7, 2018) (“Massachusetts Letter”) (suggesting that the payment of 
ongoing compensation, such as a trail commission, indicates an ongoing relationship and should carry 
ongoing duties to monitor the investment); IAA Letter I (stating that, just as an adviser’s duty to monitor 
extends to all personalized advice it provides a client, so should investors expect a similar duty from 
broker-dealers when providing monitoring services).  

 
97 
 
commenters noted that broker-dealers and investment advisers have different legal obligations to 
monitor accounts, and that differences would remain even under Regulation Best Interest.
300
  
Observations from surveys and studies indicated that investors are interested in or may benefit 
from clarification of monitoring services.
301
  For example, an overwhelming majority of 
participants in the OIAD/RAND study believed that a financial professional required to act in an 
investor’s best interest would monitor the investor’s account on an on-going basis.
302
  In 
qualitative interviews in the RAND 2018 report, participants seemed to distinguish brokerage 
and investment advisory accounts and assess which type of relationship was a better fit for 
different investors based on assumptions concerning monitoring.
303
  Other surveys and studies 
also showed that participants varied in their understanding of monitoring and whether they 
should expect firms to monitor their account.
304
   
                                                                                                                                                             
300
    See CFA Letter II. 
301
  See, e.g., RAND 2018, supra footnote 13 (in qualitative interviews, “participants were sometimes unclear 
on how a financial professional would monitor an account” and “some participants were unclear on how 
frequently monitoring would occur”).  
302
  See OIAD/RAND (finding that 69% of all participants in the survey, 75% of a specialized group defined as 
“investors,” and 86% of a specialized group defined as “investment advice consumers” believed that best 
interest required ongoing monitoring).   
303
  See RAND 2018, supra footnote 13 (in qualitative interviews, “some felt that brokerage accounts are better 
for those with investment expertise and time to dedicate to investing, whereas advisory accounts are better 
for those who have less expertise and/or less time to monitor investments”; one participant was confused by 
a statement that the firm could provide “additional services to assist you and monitor performance” and 
wanted to know up front which services would be included and which would cost extra.). 
304
  See Kleimann I, supra footnote 19 (“Participants assumed that the level of advice and monitoring provided 
in the two accounts would be the same. They defined monitoring as constant looking at the market and their 
accounts and making sure their accounts were making money”); Betterment Letter I (Hotspex) supra 
footnote 18 (among survey participants reviewing a standalone adviser relationship summary designed to 
follow the proposal sample, only 37% correctly identified as “false” a statement that broker-dealers 
typically monitor client’s portfolios and provide advice on an ongoing basis).   

 
98 
 
We disagree with the comment that requiring broker-dealers to describe monitoring 
services would add little value.  As we also state in the Regulation Best Interest Release, we 
believe that it is important for retail customers to understand (1) the types of monitoring services 
(if any) a particular broker-dealer provides, and (2) whether the broker-dealer will be monitoring 
the particular retail customer’s account.
305
  We also agree with commenters that monitoring is an 
important distinguishing feature of different investment services and believe that retail investors 
should have accurate expectations of the types of monitoring firms offer.  We are therefore 
requiring firms to explain whether or not they monitor retail investors’ investments, and if so, the 
frequency, material limitations, and whether or not monitoring is offered as part of the firm’s 
standard services.
306
   
The proposal provided different instructions for broker-dealers and investment advisers 
concerning monitoring, requiring broker-dealers to discuss monitoring of account performance 
only if they offered it, and requiring investment advisers to disclose how frequently they monitor 
retail investors’ accounts, as monitoring is generally part of ongoing advisory services.
307
  Even 
with the different wording for broker-dealers and investment advisers as proposed, some 
participants in investor studies still assumed that the level of monitoring was the same between 
                                                                                                                                                             
305
  See Regulation Best Interest Release, supra footnote 47; see also Solely Incidental Release, supra footnote 
47. 
306
  Item 2.B.(i) of Form CRS. 
307
  See Fiduciary Release, supra footnote 47. 

 
99 
 
broker-dealers and investment advisers.
308
  As discussed above, we believe it is important for 
firms to describe more accurately and precisely the monitoring that they actually do for retail 
investors.  Therefore, we are retaining, with slight modifications, the obligation to disclose 
monitoring services, applying the same instruction to both broker-dealers and investment 
advisers, and eliminating the prescribed wording.    The final instructions pertain to monitoring 
services generally and are not limited to monitoring for account performance only; to the extent 
firms describe monitoring services, they must include the frequency and any material limitations 
on these services and whether or not they are offered as part of the firm’s standard services.  We 
believe that subjecting firms to the same requirements to describe their own monitoring services, 
including a specific statement that they do not provide monitoring, if that is the case, will better 
facilitate investor understanding of whether any monitoring is provided and if so, the scope and 
type of such service.  This approach also may result in more comparable information so that 
retail investors can understand the key differences among monitoring services by different firms 
based on firm-specific descriptions.   
Investment Authority.  The final instructions require investment adviser firms that accept 
discretionary authority to describe those services and any material limitations on that authority.  
Broker-dealers may, but are not required, to state whether they accept limited discretionary 
authority.  Both investment advisers that offer non-discretionary services and broker-dealers 
                                                                                                                                                             
308
  See Kleimann I, supra footnote 19, at 10 (“Some participants assumed that the advice and level of 
monitoring was the same.”); Betterment Letter I (Hotspex) supra footnote 18 (among survey participants 
reviewing a standalone investment adviser’s relationship summary designed to follow the proposal, only 
37% correctly identified as “false” a statement that broker-dealers typically monitor client’s portfolios and 
provide advice on an ongoing basis).  

 
100 
 
must explain that the retail investor makes the ultimate decision regarding the purchase or sale of 
investments.
309
   
Commenters and results from the RAND 2018 qualitative interviews suggested 
modifications to the proposed investment authority disclosures in the relationship summary but 
generally supported including this topic.
310
  In addition, various commenters submitting their 
own mock-ups included disclosures on investment authority in their relationship summaries.
311
  
One commenter also alluded to disputes that can arise when investors misunderstand the 
investment authority the financial professional exercises for different accounts.
312
  One investor 
study indicated that only a few investors understood from the proposed sample dual-registrant 
relationship summary that non-discretionary advisory accounts offer investors the ability to 
                                                                                                                                                             
309
  Item 2.B.(ii) of Form CRS. 
310
  See CFA Letter I (stating that it is necessary for firms to describe the various types of discretionary and/or 
non-discretionary accounts they offer with specificity for such information to be useful to investors in 
choosing among providers for financial services); CFA Institute (suggesting that investment advisers only 
be required to discuss the type of accounts they offer (i.e., discretionary and/or nondiscretionary accounts) 
because discussing both—when not both are offered—would be confusing to customers); Betterment Letter 
I (stating that some of the prescribed language concerning investment authority may lead to more confusion 
than it clarifies); RAND 2018 report, supra note 13 (participants in qualitative interviews stated that it 
would be helpful if the relationship summary provided clearer definitions of “discretionary account” and 
“non-discretionary account”); see also Kleimann I, supra note 19 (noting that some “identified a key 
difference as who had final approval on all transactions, seeing the Brokerage Account as giving them more 
control”  and only a few “recognized that non-discretionary advisory accounts also offer this option.”).  
One Feedback Form commenter also noted that explanation of non-discretionary accounts was not clear.  
See Shaffer Feedback Form (broker-dealer recommendation and investment adviser “non-discretionary” 
account seem very similar. I was asking: “what's the difference.”), but see Asen Feedback Form (“The 
Relationship and Services section for BDs is clear in that the investment decision is the customer’s ...”); 
Rohr Feedback Form (“makes clear how a discretionary account differs from a brokerage account”). 
311
  See, e.g., Stifel Letter; AALU Letter; Wells Fargo Letter; Cetera Letter I; LPL Financial Letter; IAA Letter 
I; Primerica Letter; ASA Letter. 
312
  See St. John’s Law Letter (describing an arbitration case in which investor was not informed of a change in 
investment authority when the account type changed). 

 
101 
 
approve recommendations.
313
  Some RAND 2018 interview participants indicated that further 
definitions of “discretionary account” and “non-discretionary account” would be helpful.
314
   
We continue to believe that it is important for investors to understand whether they or the 
firm or financial professional ultimately makes the investment decision in the relationship or 
service that they are considering.  Accordingly, the final instructions generally require disclosure 
of the same substantive information on this topic as the proposed instructions, but in a less 
prescriptive way.  As discussed in Section II.A.1, above, we believe that allowing firms to use 
their own wording to describe their discretionary and non-discretionary offerings and explaining 
what that means to retail investors in terms of who makes the ultimate investment decisions can 
lead to disclosures that are more meaningful and less confusing.  We recognize that some 
investor feedback suggested that further definitions of “discretionary account” and “non-
discretionary account” would be useful.  While the final instructions do not require prescribed 
wording including these terms, as the proposed instructions would have required, the final 
instructions do require investment advisers that accept discretionary authority to use their own 
wording to explain similar information.
315
   
                                                                                                                                                             
313
  See Kleimann I, supra footnote 19 (noting that some “identified a key difference as who had final approval 
on all transactions, seeing the Brokerage Account as giving them more control”  and only a few 
“recognized that non-discretionary advisory accounts also offer this option.”). 
314
  See RAND 2018, supra footnote 13 (participants in qualitative interviews stated that it would be helpful if 
the relationship summary provided clearer definitions of “discretionary account” and “non-discretionary 
account”). 
315
  Item 2.B.(ii) to Form CRS. 

 
102 
 
The final instructions provide that investment advisers that accept discretionary authority 
will be required to describe these services and any material limitations on that authority.
316
  
Additionally, any such summary must include the specific circumstances that would trigger that 
discretionary authority and any material limitations.
317
  Investment advisers may, for example, 
explain whether they seek the retail investor’s approval before implementing or changing 
investment strategies or executing certain transactions.  In comparison, the proposed instructions 
took a more prescriptive approach.
318
  For example, the proposed instructions prescribed 
wording for investment advisers to include in their relationship summaries if they offer a 
discretionary account.
319
  We believe that the more general final instruction provides investment 
advisers with the flexibility to describe their discretionary offerings more accurately.     
For broker-dealers, the final instructions provide that they may, but are not required to, 
state whether they accept limited discretionary authority.
320
  We have made this disclosure 
                                                                                                                                                             
316
  Item 2.B.(ii) of Form CRS. 
317
   Item 2.B.(ii) of Form CRS. 
318
 Compare Item 2.B.(ii) of Form CRS with Proposed Item 2.C.3 of Form CRS (“State if you offer advisory 
accounts for which you exercise discretion (i.e., discretionary accounts), accounts where you do not 
exercise discretion (i.e., non-discretionary accounts), or both. Emphasize the type of account (discretionary 
and non-discretionary) in bold and italicized font.”). 
319
  See Proposed Item 2.C.3. of Form CRS (“If you offer a discretionary account, state that it allows you to buy 
and sell investments in the retail investor’s account, without asking the retail investor in advance.”). 
320
 Compare Item 2.B.(ii) of Form CRS with Proposed Item 2.B.2, which instructed broker-dealers: “If you 
offer accounts in which you offer recommendations to retail investors, state that the retail investor may 
select investments or you may recommend investments for the retail investor’s account, but the retail 
investor will make the ultimate investment decision regarding the investment strategy and the purchase or 
sale of investments. If you only offer accounts in which you do not offer recommendations to retail 
investors (e.g., execution-only brokerage services), state that the retail investor will select the investments 
and the retail investor will make the ultimate investment decision regarding the investment strategy and the 
purchase or sale of investments.” 

 
103 
 
optional for broker-dealers because of our understanding that these services may not be a 
significant part of broker-dealers’ services.
321
  Accordingly, describing them here may detract 
from disclosure of other items that better characterize the firm’s business and would be more 
helpful to investors.  If limited discretion services are a significant part of a broker-dealer’s 
business, for example, if limited discretion services constitute material facts relating to the scope 
and terms of the relationship with the retail customer that need to be disclosed under Regulation 
Best Interest, that broker-dealer may wish to include in its relationship summary a statement that 
it offers limited discretion services.     
Finally, both broker-dealers and investment advisers that offer non-discretionary services 
must explain that the retail investor makes the ultimate decision regarding the purchase or sale of 
investments.
322
  Under the proposed instructions, firms would have been required to explain 
whether they offer non-discretionary services and what that means, but using prescribed 
wording.  Investment advisers would have been required to state that they give advice and the 
retail investor decides what investments to buy and sell.
323
  Broker-dealers would have been 
required to state that the retail investor will make the ultimate investment decision regarding the 
investment strategy and the purchase or sale of investments, in addition to other prescribed 
wording to distinguish execution-only accounts from those in which the broker-dealer would 
                                                                                                                                                             
321
  See discussion on discretionary authority in Solely Incidental Release, supra footnote 47; see also footnotes 
284– 286 and accompanying text. 
322
   Item 2.B.(ii) of Form CRS. 
323
  See Proposed Instruction to Item 2.C.3. of Form CRS (“If you offer a non-discretionary account, state that 
you give advice and the retail investor decides what investments to buy and sell.”).   

 
104 
 
offer recommendations.
324
  The final instructions require firms to explain to retail investors that 
they make the ultimate investment decision in non-discretionary accounts, but do not include 
requirements to use prescribed wording or references to account types.  This change is consistent 
with our general approach described above that such prescribed wording may be confusing or 
may not sufficiently cover the discretionary and non-discretionary services a firm may offer.
325
   
Limited Investment Offerings.  The final instructions require firms to explain whether or 
not they make available or offer advice only with respect to proprietary products, or a limited 
menu of products or types of investments.  If so, they must also describe the limitations.
326
  In 
comparison, the proposed instructions included prescribed wording for firms to include if they 
significantly limit the types of investments in any accounts.
327
  Specifically, broker-dealers 
would have stated, “We offer a limited selection of investments.  Other firms could offer a wider 
range of choices, some of which might have lower costs.”
328
  Investment advisers would have 
                                                                                                                                                             
324
  See Proposed Item 2.B.2. of Form CRS (“If you offer accounts in which you offer recommendations to 
retail investors, state that the retail investor may select investments or you may recommend investments 
for the retail investor’s account, but the retail investor will make the ultimate investment decision 
regarding the investment strategy and the purchase or sale of investments.  If you only offer accounts in 
which you do not offer recommendations to retail investors (e.g., execution-only brokerage services), state 
that the retail investor will select the investments and the retail investor will make the ultimate investment 
decision regarding the investment strategy and the purchase or sale of investments.”). 
325
  See, e.g., CFA Letter I (suggesting that Form CRS should require advisers to discuss only what they offer 
in terms of discretionary or nondiscretionary accounts, because discussing both types when they offer only 
one would confuse investors); IAA Letter I (suggesting that the proposed prescribed wording would not 
cover sufficiently the variety of discretionary or non-discretionary advisory services a firm may offer and 
offering alternative language). 
326
  Item 2.C.(iii) of Form CRS. 
327
  The Proposed Items stated, “If you significantly limit the types of investments available to retail investors 
in any accounts, include the following . . . .” Proposed Items 2.B.4. and 2.C.4. of Form CRS.   
328
  Proposed Item B.4. of Form CRS. 

 
105 
 
stated, “Our investment advice will cover a limited selection of investments.  Other firms could 
provide advice on a wider range of choices, some of which may have lower costs.”
329
  The 
proposed instructions gave examples of what might constitute a significant limitation on the 
types of investments, specifically, offering only one type of asset (e.g., mutual funds, exchange-
traded funds, or variable annuities); mutual funds or other investments sponsored or managed by 
the firm or an affiliate, i.e., proprietary products; or only a small number of investments.
330
  If 
these limits applied only to certain accounts the proposed instructions would have required firms 
to identify those accounts.
331
   
Comments were mixed on the proposed instruction concerning limited investment 
offerings.  Several commenters acknowledged the importance of investors understanding 
limitations on investments.
332
  Results of RAND 2018 qualitative interviews also indicated that 
investors would like to understand limits on investment offerings.
333
  Some commenters 
expressed concerns that the proposed disclosure would not be of sufficient value to investors.
334
  
A number of commenters, whether or not they supported generally requiring firms to discuss 
                                                                                                                                                             
329
  Proposed Item C.4. of Form CRS. 
330
  Proposed Items B.4. and C.4. of Form CRS. 
331
  Proposed Items B.4. and C.4. of Form CRS. 
332
  See CFA Letter I; CFA Institute Letter I; New York Life Letter; see also mock-ups submitted by 
commenters that included the “limited selection of investments” wording or substantially similar wording. 
See Fidelity Letter; IAA Letter I; IRI Letter.  These mock-ups did not elaborate on what the limitations are. 
333
  See RAND 2018, supra footnote 13 (from qualitative interviews, finding that “[p]articipants reacted 
strongly to the notion of being offered limited investment options”).  
334
  See CFA Letter I (“[W]e fear the proposed disclosure provides too little information to be of value to the 
investor.”); CFA Institute Letter I (suggesting that the disclosure expressly state that performance may be 
lower due to higher costs). 

 
106 
 
limitations on investments, expressed concerns that the scope of “significantly limits” in the 
proposed instructions or “limited selection of investments” was not sufficiently clear.
335
  
Furthermore, a few commenters expressed concern that the prescribed wording (“Other firms 
could offer a wider range of choices, some of which might have lower costs.”) unduly prioritized 
cost over other investment product features or characteristics.
336
 
 
We continue to believe that firms that limit product menus—such as offering only 
proprietary products or a specific asset class—should be required to describe those limitations in 
the relationship summary.
337
  Other examples include limitations based on products that involve 
third-party arrangements, such as revenue sharing and mutual fund service fees.  We agree with 
                                                                                                                                                             
335
  See CFA Letter I (“But simply stating they offer “limited” investments is not enough, as that will mean 
different things to different investors.”); Prudential Letter (“It is unclear what ‘significantly limits’ means 
for firms that offer predominantly, but not exclusively, proprietary products.  It is also unclear what 
constitutes a ‘small choice of investments.’  Additional examples or more prescriptive instructions 
regarding when firms must disclose such limitations would be helpful.”); CFA Letter I (“[F]irms should 
have to describe how they limit the selection of investments.”); Wells Fargo Letter (“This requirement 
appears to be overly broad as no firm can offer all investments and we therefore recommend that this be 
limited to those broker-dealers that only offer one type of product.”). 
336
  See, e.g., New York Life Letter (“[T]he Commission’s exclusive emphasis on cost in this prescribed 
sentence does not provide consumers of insurance products with clear and complete information.”); Mutual 
of America Letter (“We believe that this focus on cost alone is not necessarily in the best interest of retail 
consumers, who may benefit from high-value products, such as variable annuities.”); Lincoln Financial 
Group Letter (suggesting that either the Form CRS or Regulation Best Interest disclosure obligation should 
allow for descriptions of product benefits to retail investors as well as costs).  Another commenter noted 
that the prescribed wording about other firms’ offerings could raise First Amendment concerns.  See CFA 
Letter I (“[R]equiring firms to compare their own services unfavorably to those of their competitors may 
raise First Amendment concerns.”).  See supra footnotes 77–85 and accompanying text.  
337
  The proposed instructions stated, “If you significantly limit the types of investments available to retail 
investors in any accounts, include the following . . .”  Proposed Items 2.B.4. and 2.C.4. of Form CRS.  In 
order to give firms more flexibility to describe limitations on products or investment types in the context of 
their business models, and to avoid potential confusion with the materiality threshold of Regulation Best 
Interest (which requires disclosure of all material facts relating to the type and scope of services provided to 
the retail customer, including any material limitations on the securities or investment strategies involving 
securities that may be recommended to the retail customer), we have eliminated the word “significantly” 
from the final instructions.  Regulation Best Interest Release, supra footnote 47. 

 
107 
 
commenters who advocated for helping investors before entering into a relationship with a firm 
to understand whether a firm limits its product offerings, and to what extent.
338
  In light of 
comments, we have determined, however, that the proposed prescribed wording may not allow 
all firms to describe limited investment offerings, if applicable, in a way that is accurate and 
helpful to investors, and are not requiring it in the final instructions.
339
  Accordingly, we are 
revising the instructions to require firms to address whether or not they make available or offer 
advice only with respect to proprietary products or a limited menu of products or types of 
investments, and if so, to describe such limitations.
340
  We believe that the final instructions 
address the same types of limitations on investments that the proposed instructions sought to 
address, but in a less prescriptive way, and allow firms to describe their investment offerings 
more accurately to reflect their scope of products and services. 
Account Minimums and Other Requirements.  The final instructions also include a 
requirement to explain whether or not the firm has any requirements for retail investors to open 
or maintain an account or establish a relationship, such as minimum account size or investment 
amount, which is a change from the proposal.
341
   In response to our request for comments on 
such possible requirements, commenters recommended that we include this information in the 
                                                                                                                                                             
338
  See CFA Letter I; CFA Institute Letter I. 
339
  See supra footnotes 77–85 and accompanying text. 
340
  Item 2.C.(iii) of Form CRS. 
341
  Item 2.C.(iv) of Form CRS. 

 
108 
 
relationship summary.
342
   In addition, a number of commenters submitting mock-ups included 
disclosures on account minimums in their forms.
343
   
We agree that this is important for retail investors to understand because many firms offer 
a number of services that are only available to investors with higher account balances.
344
  
Furthermore, fee schedules may be tiered based on account balances.
345
  Investors benefit from 
being aware of and seeing a range of options in the same context, as discussed above.  We 
believe investors can use information about different account requirements for both current and 
future decision-making purposes.  Thus, the final instructions require firms to address whether or 
not they have any requirements for retail investors to open or maintain an account or establish a 
relationship, such as a minimum account size or investment amount.   
b. Additional Information  
In a change from the proposal we are requiring firms to provide specific references to 
more detailed information about their services that, at a minimum, include the same or equivalent 
information to that required by the Form ADV, Part 2A brochure (Items 4 and 7 of Part 2A or 
                                                                                                                                                             
342
  See, e.g., NASAA Letter (stating that Form CRS should include a disclosure, specifying the minimum 
account size and include information on miscellaneous fees different categories of investors can expect to 
pay); see also Cetera Letter I (stating that firms should disclose as material conflict of interest whether or 
not they have established standards for the minimum or maximum dollar amount of various account types). 
343
  See, e.g., Primerica Letter; Cetera Letter I.  
344
  See, e.g., SIFMA Letter (stating that investment advisory services typically require a minimum account 
balance); ACLI Letter; Comment Letter of the National Association of Insurance and Financial Advisors 
(Aug. 2, 2018) (“NAIFA Letter”).  
345
  See, e.g., Cetera Letter II (mock-up) (explaining tiered fee schedule). 

 
109 
 
Item 4.A and 5 of Part 2A Appendix 1) and Regulation Best Interest, as applicable.
346
  Broker-
dealers that do not provide recommendations subject to Regulation Best Interest (e.g., execution-
only broker-dealers) are not required to prepare more detailed information about their services, 
but to the extent they do, must include references to such information in their relationship 
summaries.
347
  The final instructions require firms to use text features to make this additional 
information more noticeable and prominent in relation to other discussion text.
348
 
As with other references to additional information, firms may include hyperlinks, mouse-
over windows, or other means of facilitating access to this additional information and to any 
additional examples or explanations of such services.
349
  This allows firms to summarize their 
services while making available more detailed and fulsome information for retail investors, in 
keeping with the design of the relationship summary as a short, succinct disclosure with links to 
additional information, as commenters and investors asked.  We believe that requiring firms to 
make retail investors aware of the services they offer, at a high level, and where retail investors 
can obtain more detailed information through layered disclosure, will best engage retail investors 
and help them make more informed decisions when choosing from among firms, services, or 
accounts.  
                                                                                                                                                             
346
  Item 2.C. of Form CRS. See Regulation Best Interest Release, supra footnote 47, at Section II.C.1. 
347
  Item 2.C. of Form CRS. See Regulation Best Interest Release, supra footnote 47, at Sections II.A., II.C.1. 
348
  General Instruction 4.C. to Form CRS.  For example, firms could use larger or different font; a text box 
around the heading or questions; bolded, italicized, or underlined text; or lines to offset the information 
from other sections. 
349
  Item 2.C. of Form CRS.  

 
110 
 
c. Conversation Starters  
Firms will include in this section of the relationship summary three prescribed 
conversation starters for retail investors to ask their financial professional.
350
  As discussed in 
Section II.A.4, these questions are taken from the Key Questions to Ask section in the proposed 
relationship summary, which a considerable majority of investors indicated were helpful.
351
  
Broker-dealers and investment advisers that are not dual registrants will include, respectively, 
“Given my financial situation, should I choose a brokerage service?  Why or why not?” or 
“Given my financial situation, should I choose an investment advisory service?  Why or why 
not?”
352
  Dual registrants will include “Given my financial situation, should I choose an 
investment advisory service?  Should I choose a brokerage service?  Should I choose both types 
of services?  Why or why not?”
353
  These questions are largely the same as the first    proposed 
Key Question but replace the terms “brokerage account” and “advisory account” with “brokerage 
service” and “investment advisory service,” respectively.
354
  This revision addresses comments 
that the concept of “accounts” may not align with all firms’ business models and may cause 
                                                                                                                                                             
350
  Item 2.D. of Form CRS.  Firms should keep in mind the applicability of the antifraud provisions of the 
federal securities laws, including section 206 of the Advisers Act, section 17(a) of the Securities Act, and 
section 10(b) of the Exchange Act and rule 10b-5 thereunder, in preparing the relationship summary, 
including statements made in response to the relationship summary’s “conversation starters.”  See supra 
footnote 98 and accompanying text. 
351
  See supra footnotes 174–178 and accompanying text. 
352
  Items 2.D.(i) and 2.D.(ii) of Form CRS. 
353
  Item 2.D.(iii) of Form CRS. 
354
  Cf. Proposed Item 8.1 of Form CRS (“Given my financial situation, why should I choose an advisory 
account?  Why should I choose a brokerage account?”).  We did not receive specific comments on this 
question, though some commenters included it or a variation thereof in their mock-ups.  See, e.g., 
Betterment Letter I; IRI Letter. 

 
111 
 
investor confusion.
355
  In addition, some commenters stated that it was inappropriate for the 
Commission to require firms to describe products and services that they do not offer and about 
which they may have limited or no expertise.
356
  Although the proposed instructions permitted 
firms to modify the first Key Question to reflect the type of accounts they offer to retail 
investors, we are replacing it with three formulations that are explicitly tailored to firm type in 
order to clarify that firms are obligated to discuss only the services that they offer.    Finally, we 
have rephrased the questions as “Should I choose [a/an brokerage/advisory] service?  Why or 
why not?” rather than “Why should I choose [a/an brokerage/advisory] service?” to avoid a 
presumption that the relevant service will always be an appropriate service for the retail investor.  
The questions are designed to prompt a conversation relevant to the specific retail investor’s 
circumstances. 
All firms also will include the questions “How will you choose investments to 
recommend to me?” and “What is your relevant experience, including your licenses, education 
and other qualifications?  What do those qualifications mean?”
357
  These questions are nearly 
identical to proposed Key Questions numbers six and nine except, again, for the removal of the 
account concept from proposed Key Question number six, and a minor revision to proposed Key 
Question number nine to encourage retail investors to ask a broader question regarding the 
                                                                                                                                                             
355
  See supra footnote 80 and accompanying text. 
356
  E.g., ACLI Letter; IAA Letter I.   
357
  Items 2.D.(iv) and 2.D.(v) of Form CRS. 

 
112 
 
financial professional’s qualifications.
358
  We believe that answers to these questions will be 
helpful to retail investors as they make their choices.  In addition, a significant majority of 
participants from the RAND 2018 survey indicated that they would feel comfortable asking any 
of the Key Questions.
359
  Although fewer participants indicated that they would feel “very 
comfortable” asking about the financial professional’s experience and qualifications, compared 
with the other two questions,
360
 we believe that including this question serves as a useful 
reminder both to investors who would feel comfortable and as encouragement to those who are 
hesitant that asking such a question is acceptable. 
Requirements Removed from the Proposed I nstructions.  The final instructions do not 
include several specific requirements that were proposed in this item.  First, the proposal would 
have required firms to describe their transaction-based fees and asset-based fees in this section, 
in addition to the more specific fee information required in a separate fee section.
361
  We learned 
                                                                                                                                                             
358 
 Proposed Key Question number six asked “How will you choose investments to recommend for my 
account?”  Proposed Key Question number nine asked “What is your relevant experience, including your 
licenses, education and other qualifications?  Please explain what the abbreviations in your licenses are and 
what they mean.” Proposed Items 8.6 and 8.9 of Form CRS.  
359
  RAND 2018, supra footnote 13 (finding that at least two-thirds and up to 85% of survey participants 
indicated that they would be “somewhat comfortable” or “very comfortable” asking any of the Key 
Questions, including which account to choose and why, how investments would be selected for them, and 
what the financial professional’s experience and qualifications were); see also Betterment Letter I 
(Hotspex) supra footnote 18 (reporting that 93% of survey participants who viewed a version of the sample 
standalone adviser relationship summary in the proposal indicated that they were somewhat or very likely 
to ask the suggested questions.). 
360
  RAND 2018, supra footnote 13. 
361
  See Proposed Items 2.B.1. (“Include the following (emphasis required): “If you open a brokerage account, 
you will pay us a transaction-based fee, generally referred to as a commission, every time you buy or sell 
an investment.”) and 2.C.1. (“State the type of fee you receive as compensation if the retail investor opens 
an investment advisory account. For example, state if you charge an on-going asset-based fee based on the 
value of cash and investments in the advisory account, a fixed fee, or some other fee arrangement. 
 

 
113 
 
from an investor study submitted by commenters that dispersing information on the same topic 
throughout several sections of the relationship summary or separating that information with an 
unrelated topic could confuse investors.
362
  This illustrated the importance of establishing 
sufficient context and increasing the salience of related information by ensuring that it is kept 
together in the relationship summary.  We agree that fee information should be provided 
together, and have eliminated fee disclosures from the Relationship and Services section to 
locate it with other fee information in an effort to reduce investor confusion.  
In addition, the final instructions do not require firms to describe regular communications 
with retail investors, including frequency and method, as proposed.  Comments were mixed on 
the proposed instruction.  One commenter expressed the view that proposed Form CRS 
suggested that firms should contact advisory clients by phone or email every quarter and 
disagreed with this implication.  The commenter recommended that instead of mandating the 
form or frequency of contact with clients, the Commission should continue to give advisory 
clients flexibility to communicate how and when they want, as long as investment advisers are 
meeting their obligations under the Advisers Act.
363
  Another commenter noted that 
misunderstandings concerning broker-dealers’ duty or intention to monitor accounts can be 
                                                                                                                                                             
Emphasize the type of fee in bold and italicized font. If you are a standalone adviser, also state how 
frequently you assess the fee.”) of Form CRS. 
362
  See Kleimann I, supra footnote 19 (“[W]hile the Brokerage Account was defined as using transaction-
based fees and the Investment Advisory Account as using asset-based fees in the first section, in the Costs 
and Fees section, the Investment Adviser Services column also discusses transaction fees.  This 
‘contradictory’ repetition was confusing to participants.”). 
363
  See Edward Jones Letter. 

 
114 
 
avoided by proper communications, most importantly at the time the relationship is formed.
364
  
Mock-ups submitted by commenters generally did not refer to or describe communications 
between the firm or financial adviser and the investor.
365
  The proposal was not designed to 
mandate the form or frequency of contact with clients.  Nonetheless, given these mixed 
responses, our goal of keeping the relationship summary focused on a limited amount of 
information, and to allow more flexibility for firms to describe their services more accurately and 
meaningfully, firms will not be required to describe the frequency and method of their regular 
communications with retail investors.  Firms may include this information, however, to help 
investors better understand the services provided.  
3. Summary of Fees, Costs, Conflicts, and Standard of Conduct  
In response to comments, feedback from investors at roundtables and on Feedback 
Forms, and observations reported by the RAND 2018 report and other surveys and studies, we 
are adopting changes to the relationship summary’s required discussion of fees, costs, conflicts 
of interest, and standard of conduct.  Commenters generally supported the Commission’s goal of 
providing investors with reliable and straightforward information about the fees they pay, the 
standard of conduct applicable to financial professionals, and conflicts of interest relating to 
financial professional compensation.
366
  Some suggested that the fee disclosure should be more 
                                                                                                                                                             
364
  See Schnase Letter. 
365
  But see Cetera Letter II (“Regardless of the program chosen, your IAR is responsible for ongoing review of 
your account(s), regular communication with you . . . .”). 
366
  See, e.g., CFA Institute Letter I (noting that “we support efforts to help retail investors educate themselves 
on the differences between broker-dealers and investment advisers – in terms of services offered, fees they 
charge, conflicts of interest, and importantly, the standard of care under which each operates”); Fidelity 
Letter (“Form CRS should ... inform investors of the types of fees they may incur and direct them, via a 
 

 
115 
 
prominent in the proposed relationship summary and located towards the front of the relationship 
summary and also suggested modifications to sections of the relationship summary addressing 
financial professional conflicts of interest and standards of conduct.
367
  
Results of the RAND 2018 report and other surveys and studies showed that investors 
view information about fees and costs as one of the most important of the proposed sections of 
the relationship summary.
368
  Investor feedback at roundtables and through Feedback Forms also 
showed the importance of fees and cost information to investors.
369
 However, the RAND 2018 
survey and other surveys and studies also indicated that the proposed relationship summary 
                                                                                                                                                             
link, to more detailed disclosure.”); Comment Letter of the Investment Adviser Association (Dec. 4, 2018) 
(“IAA Letter II”) (describing “fees and expenses to be paid, legal obligations, conflicts of interest” as 
disclosure items that are “more critical than others”); Comment Letter of the University of Miami School of 
Law (Aug. 2, 2018) (“Investors should be provided with clear and concise information that fully and fairly 
discloses the specific charges he or she will incur as a result of the particular recommendation.”); NAIFA 
Letter (agrees that clients should receive “early in the client-advisor relationship – all of the information in 
the SEC’s proposal” which would include: “fees and charges ... material conflicts of interest associated 
with a recommendation (to the extent known at the time of disclosure); [and] standards of conduct 
applicable to the services offered”); see also AARP Letter (recommending reformatting of Form CRS to 
meet “critical core components” including that “standard of care should be clear, concise and defined” 
[and] “fee structure should be straightforward and avoid technical jargon”); CCMC Letter (in connection 
with investor polling, noting that investors identify explaining “fees and costs,” “own compensation,” and 
“conflicts of interest” as “issues that matter most” to investors). 
367
  See, e.g., mock-ups in IAA Letter I; Robinson Letter; SIFMA Letter; Fidelity Letter; Schwab Letter I.   
368
  RAND 2018, supra footnote 13 (more than 70% of survey respondents selected the fees and costs section 
as one of the most informative; this section was least likely to be selected as not informative); see also 
Cetera II Letter (Woelfel) supra footnote 17 (reporting that 88% of survey respondents agreed that it is very 
or somewhat important to cover “fees and costs associated with those services”); Schwab Letter I (Koski) 
supra footnote 21 (reporting that 63% of survey respondents ranked “costs I pay for investment advice” as 
one of the four most important things for firms to communicate); CCMC Letter (investor polling) supra 
footnote 21(describing “explaining fees and costs” as one of three issues that “matter most” to investors). 
369
  See, e.g., Houston Roundtable; Atlanta Roundtable; Philadelphia Roundtable; Miami Roundtable; 
Washington, D.C. Roundtable; Denver Roundtable; Baltimore Roundtable; CFA Letter I; see also 
Feedback Forms Comment Summary, supra footnote 11 (responses to Question 2(c)) (over 80% of 
commenters graded the section on fees and costs as “very useful” or “useful”). 

 
116 
 
presentation of fee and cost information could be difficult for investors to understand.
370
  The 
RAND 2018 survey and other surveys and studies also suggested that investors found sections in 
the proposed relationship summary covering the obligations of financial professionals and 
conflicts disclosure less informative,
371
 and indicated that investors could have difficulty 
understanding and synthesizing information about the obligations of financial professionals and 
the impact of conflicts of interest.
372
  As discussed more fully below, we considered all of this 
feedback, as well as comments received, in redesigning the disclosures related to the topics.   
                                                                                                                                                             
370
  RAND 2018, supra footnote 13 (40% of survey respondents rated fees and costs section difficulty as “just 
right” while 35% rated the fees and cost section as difficult or very difficult; in qualitative interviews, 
participants generally found the section to be important, but also overwhelming and had trouble with 
language); see also Kleimann I, supra footnote 19 (“Participants expected to pay for transactions in a 
Brokerage Account or the quarterly fee for an Advisory Account, but they were surprised by the 
proliferation of additional fees  ... commented on the introduction of many new terms and wanted 
definitions...”); Cetera Letter II (Woelfel) supra footnote 17 (78% of survey respondents agreed strongly 
or somewhat agreed that fees and costs were clearly described, well below ratings for clarity of information 
about services and obligations).  
371
  See RAND 2018, supra footnote 13 (almost one quarter of survey respondents selected “our obligations to 
you” as one of the least informative sections, only one third selected the section as one of the two most 
informative; the conflicts of interest section was selected as one of the two most informative by only 15% 
of respondents and as one of the least informative by more than a third); see also Cetera Letter II (Woelfel), 
supra footnote 17 (largest percent of survey respondents (88%) strongly or somewhat agreed that the “our 
obligations to you” topic was important; smallest percent (81%) strongly or somewhat agreed that conflicts 
of interest was important); CCMC Letter (investor polling) supra footnote 21(describing “explaining fees 
and costs,” “explaining own compensation,” and “explaining conflicts of interest” as three issues that 
“matter most” to investors).  
372
  See RAND 2018, supra footnote 13 (in qualitative interviews, some participants struggled with 
understanding differing obligations for different account types and reconciling information in the conflicts 
of interest section with the “our obligations to you” section); Kleimann I, supra footnote 19 (“Few 
participants could define “fiduciary standard”; participants explaining firms’ financial relationships that 
could create potential conflicts “had difficulty explaining how firms earned money from these relationships 
... often absent from these explanations was a discussion of the negative impact that these practices would 
have on them.”); Betterment Letter I (Hotspex), supra footnote 18  (reporting survey results indicating that 
some investors viewing a version of the sample proposed standalone adviser relationship summary had 
difficulty answering correctly questions about financial professional obligations and conflicts of interest).   

 
117 
 
A new Item 3 will require the relationship summary to cover three areas: (i) fees and 
costs; (ii) standard of conduct and conflicts of interest; and (iii) financial professional 
compensation and related conflicts of interest.  Some of the key elements of these disclosures 
include: 
• Integrated sections covering fees, c osts, c  onflicts of interest, and standard of conduct.  
We have modified the proposal by combining the fees and costs section and the 
sections discussing conflicts of interest and standard of conduct into one Item 3 that 
will require three consecutive sections.  These sections will help illustrate the 
interconnectedness of fees, costs, conflicts, and standard of conduct, and will keep 
these related disclosures close in proximity to each other.   
• Distinct summaries of principal fees and costs other fees and costs, and other ways 
the firm makes money.  We are also requiring separate sections discussing certain fees 
and costs, with one section discussing principal fees and costs, another section 
discussing other fees and costs related to the firm’s services and investments, and 
another section discussing other ways the firm and its affiliates make money.  We are 
not requiring firms to discuss all of the fees and costs together as proposed, to address 
comments and feedback that the section was complicated and overwhelming.  We are 
also requiring a firm to include cross-references to more detailed information about 
the firm’s fees.  
• A description of the standard of conduct with conflicts. We are placing the description 
of the standard of conduct under the same heading as a summary of conflicts in order 
to help retail investors better understand the relationship between the standard of 
conduct and conflicts. 

 
118 
 
• Broadening the types of conflicts disclosure.  We are requiring firms to disclose 
information on the topics that were required in the proposal—i.e., proprietary 
products, third-party payments (shelf space and revenue sharing arrangements), and 
principal trading.  But we are requiring firms without these conflicts to disclose at 
least one material conflict.  We are also requiring a firm to include cross-references to 
more detailed information about the firm’s conflicts of interest. 
• Financial professional compensation.  We are adding a separate section that will 
require a firm to highlight how its financial professionals are compensated and the 
conflicts of interest those payments create.  This disclosure will distinguish firm-level 
from financial professional-level conflicts. 
The proposal would have included one section summarizing f ees and costs, one section 
summarizing conflicts of interest, and one section discussing the applicable standards of conduct.  
The principal fees were also discussed at the beginning of the services section, and for 
standalone investment advisers and broker-dealers, the section discussing fees and costs and the 
section discussing conflicts of interest were separated by a section discussing comparisons 
between investment advisers and broker-dealers.  Commenters suggested locating fee and 
conflict disclosures more closely together, and several sample relationship summaries submitted 
by commenters placed the fees and conflicts sections in close proximity to each other.
373
  As 
noted, we learned from an interview-based study submitted by a commenter that investors could 
                                                                                                                                                             
373
  See, e.g.,  LPL Financial Letter; Betterment Letter I; Primerica Letter; SIFMA Letter; Wells Fargo Letter; 
Schwab Letter I. 

 
119 
 
have trouble connecting related information when those sections were not closely located.
374
  
Observations in the RAND 2018 qualitative interviews and comments submitted on Feedback 
Forms also suggested that investors’ level of understanding varied significantly with regard to 
the relationship between the applicable standard of conduct and conflicts, and that investors 
might be more confused by this relationship when the relationship summary placed these 
sections far apart from one another.
375
  We agree that it is important to illustrate the relationship 
between fees,  conflicts, and standards of conduct.   We are therefore combining in Item 3 of the 
final instructions the discussions on fees and costs with discussions of firms’ conflicts of interest, 
and combining the standard of conduct discussion with the discussion of certain other conflicts 
of interest.     
a. Description of Principal Fees and Costs and Other Fees  
Similar to the proposal, firms will be required to summarize the principal fees and costs 
that retail investors incur with respect to their brokerage and investment advisory accounts, and 
the conflicts of interest they create.   
                                                                                                                                                             
374
  See supra footnote 362 and accompanying text. 
375
  See RAND   2018,   supra footnote   13   (in   qualitative   interviews,   participants   struggled   to   reconcile   
information in the conflicts of interest section with obligations section).  Among commenters on Feedback 
Forms  who  indicated  that  the  relationship  summary  was  too  technical  or  that  topics  could  be  improved,  
many  commented  that  sections  addressing  fees  and  costs,  obligations  and  conflicts  of  interest  needed  
clarification or better explanation.  See Feedback Forms Comment Summary, supra footnote 11 (summary 
of  responses  to  Question  4).    Some  Feedback  Form  commenters  suggested  changes  to  the  order  of  
information about fees, conflicts and obligations or offered other comments suggesting that the order of the 
topics  was  confusing.    See Anonymous28  Feedback  Form  (“Conflicts  of  Interest  should  come  right  after  
Obligations  to  You.”);  Asen  Feedback  Form  (“Somewhat  I  would  prefer  to  see  conflicts  before  fees”);  
Lee2  Feedback  Form  (comment  responding  to  Question  3(b),  whether  order  is  appropriate,  “[c]onflicts  
seems  buried  too  deeply”);  Smith1  Feedback  Form  (“The  transactions  comment  in  the  fees  section  seems  
like it would also fall under the conflicts of interst [sic] section”).     

 
120 
 
As noted above, commenters generally supported the Commission’s goal of providing 
investors with reliable and straightforward information about the fees they pay and suggested 
making this information more prominent and located towards the front of the relationship 
summary.
376
  Similarly, observations in the RAND 2018 report, and other surveys and studies, 
and comments from investors at  roundtables and in Feedback Forms, overwhelmingly supported 
including fee disclosure in the relationship summary and showed that investors believe that 
information about fees and costs is important to understanding their relationship with a financial 
professional.
377
  The RAND 2018 survey reported, however, that survey participants were more 
likely to rate the proposed relationship summary section on fees and costs as “difficult” or “very 
difficult” to understand and would add more detail.
378
  In the RAND 2018 qualitative interviews, 
participants generally understood that this section would provide information on the types of fees 
they could possibly pay, but also found the section overwhelming with the number of various 
types of fees and had some difficulty with language, including certain terms.
379
  Some 
participants also did not appear to synthesize information about fees and conflicts of interest to 
                                                                                                                                                             
376
  See supra footnotes 366–367 and accompanying text. 
377
  See supra footnotes 368–369 and accompanying text. 
378
  See RAND 2018, supra footnote 13 (in the RAND 2018 survey about 40% rated the difficulty of the 
section on fees and costs as “just right” and 35% rated the section on fees and costs as “difficult” or “very 
difficult”; about 30% of survey respondents suggested adding more detail). 
379
  See RAND 2018, supra footnote 13 (“Participants struggled with terms in this section. ... Words that 
participants flagged include ‘markup,’ ‘markdown,’ ‘load,’ ‘surrender charges,’ ‘wrap fee’ and 
‘custody.’”).  

 
121 
 
be able to apply it.
380
  Other surveys and studies, and comments provided on Feedback Forms, 
also indicate that investors both want additional information about fees and costs and found this 
information difficult to understand.
381
  Several commenters also said that information on fees 
and costs was not straightforward and used too much technical jargon.
382
   In addition, the IAC 
recommended that the Commission adopt a uniform, plain English document that covers basic 
information about fees and compensation, among other topics.
383
  The Feedback Form 
commenters and observations reported in the RAND 2018 report and other surveys and studies 
reaffirms our view that it is critical for retail investors to better understand the fees and costs 
incurred with their investments and related conflicts of interest.  This section has been revised to 
further our policy objective of helping investors better understand such fees, costs, and conflicts 
of interest. 
                                                                                                                                                             
380
  See RAND 2018, supra footnote 13 (“[O]ne participant could clearly put differences in fees related to each 
type of account [but] when asked about which type of financial professional has an incentive to encourage 
investors to buy and sell securities frequently ... incorrectly answered.”). 
381
  See Kleimann I, supra footnote 19 (finding that “[p]articipants expected to pay for transactions in a 
Brokerage Account or the quarterly fee for an Advisory Account, but they were surprised by the 
proliferation of additional fees.  ... Participants also commented on the introduction of many new terms); 
Cetera Letter II (Woelfel) supra footnote 17 (78% of survey respondents strongly or somewhat agreed that 
information on fees and costs was clearly presented, rating below sections describing the firm’s obligations 
and the services that the firm provides.); Feedback Forms Comment Summary, supra footnote 11 
(summary of responses to Question 4) (41 commenters on Feedback Forms (44%) indicated that one or 
more topics on the relationship summary is too technical or could be improved; 23 included comments 
indicating that information about fees and costs is too technical or needed to be more clear). 
382
  See e.g., IAA Letter I (stating that retail investors are unlikely to understand the use of “technical terms and 
industry jargon” with respect to fees in the relationship summary); see also AARP Letter; Fidelity Letter.   
383
  See IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10. 

 
122 
 
Description of Principal Fees and Costs.  First, using the heading “What fees will I 
pay?”,
384
 firms will summarize their principal fees and costs that retail investors will incur for 
brokerage or investment advisory services, including how frequently such fees are assessed and 
the conflicts of interest they create.
385
  Broker-dealers must describe their transaction-based 
fees
386
 and investment advisers must describe their ongoing asset-based fees, fixed fees, wrap fee 
program fees, or other direct fee arrangements.
387
  The fees described by investment advisers 
should align with the type of fee(s) disclosed in response to Form ADV Part 1A, Item 5.E, but 
they should be summarized in a way that provides retail investors a high-level overview.
388
   
Although the proposal required firms to include information about their principal fees and 
costs, much of the wording was prescribed.  For instance, the proposed instructions included 
prescribed wording to describe transaction-based fees and asset-based fees and the incentives 
that each of those fees create.
389
  The proposed instructions also required firms to use technical 
                                                                                                                                                             
384
  Item 3.A. of Form CRS. 
385
  Item 3.A.(i) of Form CRS. 
386
  Item 3A.(i)(a) of Form CRS. 
387
  Item 3.A.(i)(b) of Form CRS. 
388
  Item 3.A.(i)(b) of Form CRS.  In addition, investment advisers must include information about each type of 
fee they report in Form ADV that is responsive to Item 3.A. of Form CRS. 
389
  Dual registrant broker-dealers, for example, were required to include the following wording on transaction 
based fees: “You will pay us a fee every time you buy or sell an investment.  This fee, commonly referred 
to as a commission, is based on the specific transaction and not the value of your account.”  Proposed Item 
4.B.1. of Form CRS.  Dual registrant investment advisers were required to include the following wording 
on asset-based fees: “You will pay an on-going fee [at the end of each quarter] based on the value of the 
cash and investments in your advisory account.”  If the asset manager charged another type of fee instead 
of an asset-based fee, it was required to briefly describe that fee and how frequently it was assessed. 
Investment advisers that charged an ongoing asset-based fee would have been required to include the 
following: “The more assets you have in the advisory account, including cash, the more you will pay us.  
 

 
123 
 
terms and explain their definitions (e.g., “mark-up” or “mark-down,” “load,” and “custody”).
390
  
Additionally, firms providing advice about investing in wrap fee programs were required to 
include several more prescribed sentences.
391
  Finally, dual registrants were required to state 
when a retail investor may prefer a brokerage or investment advisory service from a cost 
perspective,
392
 and wrap fee program providers had to explain when a retail investor may prefer 
a wrap fee program.
393
  Commenters argued that in many cases the prescribed wording was 
                                                                                                                                                             
We therefore have an incentive to increase the assets in your account in order to increase our fees.  You pay 
our fee [insert frequency of fee (e.g., quarterly)] even if you do not buy or sell.”  Broker-dealers would 
have been required to include the following: “The more transactions in your account, the more fees we 
charge you.  We therefore have an incentive to encourage you to engage in transactions.” Proposed Items 
4.B.5. and 4.C.8. of Form CRS.   
390
  Broker-dealers were required to state the following (emphasis required): “With stocks or exchange-traded 
funds, this fee is usually a separate commission.  With other investments, such as bonds, this fee might be 
part of the price you pay for the investment (called a ‘mark-up’ or ‘mark down’).  With mutual funds, this 
fee (typically called a ‘load’) reduces the value of your investment.”  Proposed Item 4.B.2.(a) of Form 
CRS.  Investment advisers were required to state, if applicable, that “a retail investor will pay fees to a 
broker-dealer or bank that will hold the retail assets and that this is called custody.”  Proposed Item 4.C.6. 
of Form CRS. 
391
  Investment advisers that provided advice to retail investors about investing in wrap fee programs were 
required to include the following (emphasis required): “We offer advisory accounts called wrap fee 
programs.  In a wrap fee program, the asset-based fee will include most transaction costs and fees to a 
broker-dealer or bank that will hold your assets (called ‘custody’), and as a result wrap fees are typically 
higher than non-wrap advisory fees.”  If the investment adviser offered a wrap fee program as well as 
another type of advisory account, it was required to include: “For some advisory accounts, called wrap fee 
programs, the asset-based fee will include most transaction costs and custody services, and as a result wrap 
fees are typically higher than non-wrap advisory fees.” 
392
  Dual registrants were required to include the following: “An asset-based fee may cost more than a 
transaction-based fee, but you may prefer an asset-based fee if you want continuing advice or want 
someone to make investment decisions for you.”  Proposed Item 4.C.10. of Form CRS. 
393
  Investment advisers that provided advice to retail investors about investing in wrap fee programs were 
required to include the following (emphasis required):  “You may prefer a wrap fee program if you prefer 
the certainty of a [insert frequency of the wrap fee (e.g., quarterly)] fee regardless of the number of 
transactions you have.”  Proposed Item 4.C.10. of Form CRS. 

 
124 
 
confusing and not accurate.
394
  For example, several commenters indicated the proposed fee 
discussion was unnecessarily technical and suggested the relationship summary avoid the use of 
jargon (e.g., terms like “asset-based fee” and “load”) in this section.
395
  Several roundtable 
participants also said that they did not understand these terms,
396
 as did some participants in 
investor studies and surveys.
397
  Other commenters noted that the wording in the proposal was 
too binary.
398
  Another commenter argued that certain prescribed wording was obvious to retail 
investors and did not add value to the retail investor.
399
   
In an effort to balance the goal of educating retail investors with the need to provide firms 
with enough flexibility to tailor the disclosure to their services and investments, we have decided 
                                                                                                                                                             
394
  See, e.g., CFA Institute Letter I (suggesting that the Commission revise the proposed wording to reflect the 
effect on costs in a more even-handed manner); ACLI Letter (stating that the prescriptive nature of the 
disclosures does not sufficiently allow for diverse business models to be explained); IAA Letter I (stating 
that the prescribed language comparing investment advisers to broker-dealers does not include important 
information and may confuse retail investors, and that the prescribed language associated with fees based 
on assets under management, while technically correct, misses an important point—namely that an adviser 
earns more when the client’s portfolio performs better and earns less when the portfolio performs less well 
aligns the adviser’s interest with the client’s interest, rather than the reverse); FSI Letter I (stating that 
prescribing language in the relationship summary may confuse retail investors); Comment Letter of Paul 
Hynes (Jul. 31, 2018) (“Paul Hynes Letter”) (stating that the prescribed wording is inaccurate by suggesting 
that investment advisers can sell variable annuities); ACLI Letter (stating that the Fees and Costs section is 
replete with required statements that may be unnecessary/misleading).   
395
  CFA Letter I; AARP Letter; IAA Letter I. 
396
  See, e.g., Miami Roundtable; Houston Roundtable; Philadelphia Roundtable.  
397
 See RAND 2018, supra footnote 13 (in qualitative interviews participants asked for definitions of 
“transaction-based fee,” asset-based fee,” and struggled with terms such as “mark-up,” “mark-down,” 
“load,” surrender “charges” and “wrap fee”); see also Kleimann I, supra footnote 19.   
398
  See, e.g., CFA Letter I; Margolis Feedback Form (stating that the wording assumed that a retail investor 
would pay either a transaction-based fee or an asset-based fee for a brokerage or advisory account, 
respectively, and did not capture other fee structures).  
399
  See Wells Fargo Letter. 

 
125 
 
to remove from the Instructions the prescribed wording we proposed about fees and costs.
400
  
Specifically we are replacing the prescribed wording with a requirement to describe the firm’s 
principal fees and the conflicts of interest they create.  We have also included examples in the 
instructions of statements that would describe certain principal fees.  We have concluded, based 
on consideration of the comments and investor feedback, that the proposed requirements did not 
reflect the fees for all firms and, depending on firms’ business models, could be confusing.  
Instead the relationship summary will focus on a high level summary of fees.  Having considered 
comments, we believe this more flexible approach will better facilitate meaningful disclosure in 
the relationship summary, as well as conversations between the retail investor and his or her 
financial professional, and help the retail investor decide on the types of services that are right 
for him or her.  Additionally, we believe that certain definitions and concepts explained in the 
proposed relationship summary can be better explained in other ways, such as through layered 
disclosure that explain technical terms as appropriate for the specific firm (e.g., “hovers”).
401
  
Further, requiring firms to draft their own descriptions will allow them to tailor the description to 
their particular business models, including the fees their prospective customers and clients will 
most commonly incur, which will make the discussion more accurate and relevant and further 
help facilitate retail investors’ comprehension.   
                                                                                                                                                             
400
  As discussed further below, we are not eliminating all prescribed wording for this section and are requiring 
firms to include the following statement: “You will pay fees and costs whether you make or lose money on 
your investments.  Fees and costs will reduce any amount of money you make on your investments over 
time.  Please make sure you understand what fees and costs you are paying.”.  
401
  Firms are also encouraged to fully explain any technical terms that they use to describe their fees.  We also 
believe that Investor.gov can be a resource for this information, and the relationship summary will highlight 
Investor.gov/CRS where educational material is available.   

 
126 
 
In addition, we are not including the proposed prescribed wording with respect to wrap 
fee programs.
402
  Instead, investment advisers that offer these services to retail investors should 
include disclosure about the relevant fees and conflicts of interest, and explain the program.  We 
are including instructions encouraging investment advisers with wrap fee programs to explain 
that asset-based fees associated with the wrap fee program will include most transaction costs 
and fees to a broker-dealer or bank that has custody of these assets, and therefore are higher than 
a typical asset-based advisory fee.
403
   
We also removed the proposed disclosures about which type of service or account is 
better for a retail investor.  Specifically, the proposal would have required firms to include 
prescribed wording about when a retail investor may prefer paying a transaction-based fee or an 
asset-based fee.
  404
  Although some commenters did not object to the proposed prescribed 
wording and some included it in their mock-ups,
405
 several commenters raised concerns.
406
  For 
                                                                                                                                                             
402
  The proposal required certain prescribed wording describing wrap fee programs.  See Proposed Item 4.C.3. 
of Form CRS. 
403
  Item 3.A.(i)(b) of Form CRS. 
404
  The proposal required standalone investment advisers and standalone broker-dealers to state that a retail 
investor may prefer paying “a transaction-based fee from a cost perspective, if you do not trade often or if 
you plan to buy and hold investments for longer periods of time.” or “an asset-based fee if you want 
continuing advice or want someone to make investment decisions for you, even though it may cost more 
than a transaction-based fee.”  Proposed Items 5.A.4. and 5.B.6. of Form CRS.  Dual registrant broker-
dealers were required to include the following: “From a cost perspective, you may prefer a transaction-
based fee if you do not trade often or if you plan to buy and hold investments for longer periods of time.”  
Proposed Item 4.B.6. of Form CRS.  Dual registrant investment advisers that charged an ongoing asset-
based fee were required to include the following: “An asset-based fee may cost more than a transaction-
based fee, but you may prefer an asset-based fee if you want continuing advice or want someone to make 
investment decisions for you.”  Proposed Item 4.C.10. of Form CRS. 
405
  See, e.g., LPL Financial Letter; Betterment Letter I; IRI Letter. 
406
  See supra footnote 394. 

 
127 
 
example, one commenter argued that the required wording could be false and misleading, noting 
that the required statements do not take into account that transaction-based fees are not 
necessarily more affordable for buy-and-hold investors who do not trade often, many broker-
dealers offer higher-cost investment products (e.g., variable annuities, non-traded REITs, and 
private placements), and many investment advisers recommend investments with lower 
operating expenses than those sold by brokers.
407
  We have concluded that the proposed required 
wording did not capture all of the information that, in certain circumstances, would be necessary 
to help retail investors reasonably assess whether a particular service and its associated fees will 
be better for them.    Instead, the relationship summary provides information about what the firm 
offers and encourages discussion with conversation starters.  Such a discussion—facilitated by 
Form CRS—is more appropriate between the financial professional and the retail investor about 
the firm’s specific offerings and associated fees and conflicts, and the retail investor’s specific 
circumstances.   
The proposal also required firms to state whether their fees vary and are negotiable and to 
describe the key factors that would help a reasonable retail investor understand the fee that he or 
she is likely to pay for services.
408
  In the RAND 2018 qualitative interviews, some participants 
were confused by the statement about fees being negotiable and most mock-ups commenters 
                                                                                                                                                             
407
  See CFA Letter I. 
408
  Proposed Items 4.B.3. and 4.C.5 of Form CRS.  The instructions included examples of such key factors (for 
a broker-dealer, this may be how much the retail investor buys or sells, what type of investment the retail 
investor buys or sells, and what kind of account the retail investor has with a firm; for an investment 
adviser, this may include the services the retail investor receives and the amount of assets in the retail 
investor’s account).  Investment advisers were also required to state that a retail investor could be required 
to pay fees when certain investments are sold (e.g., surrender charges for selling variable annuities). 

 
128 
 
submitted did not include this disclosure.
409
  We did not include this requirement in the final 
instruction.  It is important to instead focus the relationship summary on information about fees 
that retail investors identified as important to their assessment of firms.  Given the comments and 
investor testing results showing that the fee section was technical and difficult to understand, we 
believe that the final instructions will help investors focus on the information the final 
instructions do require.  We believe that removing information about negotiability should help 
achieve this objective.  
In another modification from the proposal, we are requiring firms to discuss the conflicts 
of interest created by their principal fees and costs rather than prescribing specific wording about 
those conflicts.  We are making this change in response to commenters, who pointed out that the 
conflicts of interest created by principal fees can vary in more ways than our prescribed wording 
contemplated.
410
  Instead of prescribed wording, the final instructions include a requirement that 
firms explain the conflict of interest their principal fees create, as well as examples of how a firm 
may communicate certain conflicts of interest.  These examples are the same conflicts the 
proposed instructions required.  For instance, a broker-dealer could disclose its conflicts of 
interest related to transaction-based fees by stating that a retail investor would be charged more 
                                                                                                                                                             
409
  See RAND 2018, supra footnote 13 (noting that the phrase stating that fees are negotiable and may vary 
concerned participants, and many noted that it made them feel as if they pay too much).  Similarly, see 
Anonymous28 Feedback Form (“If fees are negotiable, when is this done?”); see also mock-ups in IAA 
Letter I; Robinson Letter; Primerica Letter; LPL Financial Letter, SIFMA Letter; Schwab Letter I; Fidelity 
Letter. 
410
  See, e.g., Comment Letter of Invesco Advisers, Inc. (Aug. 7, 2018) (“Invesco Letter”); Committee of 
Annuity Insurers Letter; IAA Letter I; see also CFA Institute Letter I (noting that investors “will most 
likely focus on the fees and costs discussion and should be alerted to the fact that in addition to different fee 
arrangements and structures, different practices and conflicts may also result in higher costs.”).  

 
129 
 
when there are more trades in his or her account and that the firm may therefore have an 
incentive to encourage a retail investor to trade often.
411
  Investment advisers that charge an 
asset-based fee could disclose related conflicts of interest by stating that the more assets in a 
retail investor’s advisory account, the more the retail investor will pay in fees, and the firm may 
therefore have an incentive to encourage the retail investor to increase the assets in his or her 
account.
412
  Firms that offer variable annuity and variable life insurance products could disclose 
that they have a financial incentive to offer a contract that includes optional benefit features, 
which may entail additional fees on top of the base fee associated with the contract, that they 
may encourage contract owners to select investment options with relatively higher fees, or that 
they may offer the contract owner a new contract in place of the one that he or she already owns.  
Finally, we also have included a note in the final instructions that an investment adviser 
receiving compensation in connection with the purchase or sale of securities should consider the 
applicability of the broker-dealer registration requirements of the Exchange Act and any 
applicable state securities statutes.
413
 
Description of Other Fees and Costs.  Firms also will be required to describe other fees 
and costs related to their brokerage and investment advisory services and investments, in 
addition to the firm’s principal fees and costs, that the retail investor will pay directly or 
indirectly.  Firms must list examples of the categories of the most common fees and costs that 
                                                                                                                                                             
411
  Item 3.A.(i).a. of Form CRS. 
412
  Item 3.A.(i).b. of Form CRS. 
413
  See Item 3.A.(i).b of Form CRS.  This statement is consistent with Part 2A of Form ADV. 

 
130 
 
their retail investors will pay directly or indirectly.
414
  Those fees and costs may include, for 
example, custodian fees, account maintenance fees, fees related to mutual funds and variable 
annuities, and other transactional fees and product-level fees.
415
  With regard to product-level 
fees, in particular, firms may wish to highlight certain fees such as distribution fees, platform 
fees, shareholder servicing fees and sub-transfer agency fees, in order to enhance the retail 
investor’s understanding of these fees to the extent applicable to the customer’s transactions, 
holdings, and accounts. 
We recognize that the fees and costs that a firm determines to be the most common will 
vary and depend on particular products and services the firm offers and the fee arrangements 
associated with those products and services.  Generally, in making this determination, firms 
should consider, for example, the amount of the fee (including whether the fee varies based on 
options the investor may select such as optional benefits and the investment options that a 
contract owner may select in the context of variable annuities and variable life insurance 
products), the likelihood that the fee will be applicable, whether the fee is ordinarily assessed on 
a significant number of the firm’s clients, whether the fee is associated with a product or service 
that the firm frequently recommends or provides, whether the fee is contingent upon certain 
events the investor should be made aware of, the effect on returns, and the magnitude of the 
conflict of interest it may create.  For example, an investment adviser should consider discussing 
commissions that are charged when an investment is bought or sold.  A firm that commonly 
                                                                                                                                                             
414
  Item 3.A.(ii) of Form CRS.   
415
  Item 3.A.(ii) of Form CRS.   

 
131 
 
offers an investment that includes a surrender fee—for example, a variable annuity or variable 
life insurance contract is sold as a long-term investment that may entail relatively high surrender 
fees—should consider disclosing that a retail investor could be required to pay fees when certain 
investments are sold.   
The proposal similarly required firms to state that retail investors will pay other fees in 
addition to the firm’s principal fees.  Like the final instructions, the proposal required disclosure 
of the other fees related to the services or account such as custodian fees, account maintenance 
fees, and account inactivity fees, and included these other fees in the same section discussing the 
firm’s principal fees.
416
  The proposal also required that all firms disclose that certain 
investments imposed additional fees, including fees that reduce the value of investments over 
time (e.g., mutual funds and variable annuities) and fees paid when an investment is sold (e.g., 
surrender charges for selling variable annuities).
417
  Observations reported from RAND 2018 
qualitative interviews and another study indicated that some investors could become 
overwhelmed with the number of various types of fees and many were surprised that so many 
different types of fees could apply in addition to a firm’s principal fee.
418
  At the same time, 
                                                                                                                                                             
416
  Proposed Items 4.B.4. and 4.C.6. of Form CRS.  Specifically, the proposal required broker-dealers to state, 
if applicable, that a retail investor will pay other fees in addition to the firm’s principal fees, including, but 
not limited to, custodian fees, account maintenance fees and account inactivity fees.  The proposal required 
investment advisers to state, if applicable, that a retail investor will pay transaction-based fees when it buys 
and sells an investment for the retail investor and that retail investors will pay, if applicable, custodian fees, 
and other fees such as those for account maintenance services. 
417
  Proposed Items 4.B.2.(b) and 4.C.4. of Form CRS. 
418
  RAND 2018, supra footnote 13 (qualitative interview results); Kleimann I, supra footnote 19.  Similarly, 
see Anonymous02 Feedback Form (“Do companies charge all these fees? Maybe use words like ‘may 
charge’”); Anonymous28 Feedback Form (“The section on fees might better be presented in a chart—no 
mention is made of front and backend loads.”). 

 
132 
 
investors participating in surveys and studies and investors providing comments on Feedback 
Forms have indicated that more information would be helpful.
419
  Industry commenters, 
commenters representing investors, and commenters on Feedback Forms, and roundtable 
participants supported some disclosure regarding product-level fees, though commenters differed 
in the level of suggested detail on such fees.
420
  For instance, one commenter stated that the 
relationship summary should reveal all fees and commissions for all purchases.
421
 Other 
commenters, however, believed that a link to the prospectus should sufficiently satisfy disclosure 
requirements regarding mutual fund fees and expenses.
422
  Another urged the Commission to 
provide a list of examples of transaction-based fees.
423
   
We agree that understanding these fees is important so that retail investors have the 
necessary information to evaluate between firms, firm types (i.e., investment adviser, brokerage, 
or dually registered), and firm services, accounts, and products so that they can select what is 
                                                                                                                                                             
419
  See RAND 2018, supra footnote 13 (qualitative interview results), Kleimann I, supra footnote 19; 
Kleimann II, supra footnote 19 (in study testing investor reaction to alternate design of relationship 
summary, participants continued to focus on additional fees and wanted additional information on fees); see 
also Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Question 5) (of 48 
Feedback Forms with narrative comments suggesting additional information to be required in the 
relationship summary, 29 suggested that additional information about fees and costs would be helpful).   
420
  See Fidelity Letter; CFA Letter I; see also Anonymous11 Feedback Form (“...disclose specific fees for 
different types of securities”); Caddess Feedback Form (“description of brokers buying one ‘loaded’ fund 
and then selling it soon after to buy a more ‘suitable loaded’ fund is not vivid enough.”); Fontaine 
Feedback Form (“More on the mutual fund loads and class shares Load”); Malone Feedback Form 
(“Suggest fees monthly associated with each fund by type”); Mennella Feedback Form (“In addition to 
paying a management fee what is the cost of the underlying investments such as mutual funds, liquid 
alternatives, seperately [sic] managed accounts, transaction costs, etc.?”); Houston Roundtable; 
Philadelphia Roundtable. 
421
  Comment Letter of Tony Greiner (Jul. 14, 2018).   
422
  Comment Letter of Oppenheimer Funds (Aug. 7, 2018) (“Oppenheimer Letter”); TIAA Letter. 
423
  Comment Letter of the Investment Company Institute (Aug. 7, 2018) (“ICI Letter”).  

 
133 
 
right for them.  We continue to believe drawing retail investors’ attention to these additional fees 
is important because they have an impact on investors’ investment returns over time.  
Accordingly, we are requiring disclosure of these types of fees and listing examples of categories 
as proposed.  The final instructions, however, make clear that firms can use their own wording, 
and only require examples of the most common fees and costs.  As discussed below, firms will 
be required to include cross-references to more specific information, and will be permitted to use 
tools to help investors learn about these fees and costs in an interactive way without 
overwhelming retail investors with the additional information.  We believe that this approach 
balances providing short, understandable disclosures about additional fees and costs with 
investors’ interest in understanding more about fees and costs. 
Additional Information.  Finally, in a change from the proposal, firms will be required to 
state:  “You will pay fees and costs whether you make or lose money on your investments.  Fees 
and costs will reduce any amount of money you make on your investment over time.  Please 
make sure you understand what fees and costs you are paying.”
424
  The first sentence replaces a 
statement in the proposal that some investments impose additional fees that will reduce the value 
of the retail investor’s investment over time.  Given the importance of assisting investors to 
understand the impact of fees and costs, we are requiring prescribed wording in this instruction.  
The prescribed wording discloses to investors a key term under which a service will be offered, 
                                                                                                                                                             
424
  Item 3.A.(iii) of Form CRS. 

 
134 
 
namely the fact that the service will not be free and that the cost of using the service will exist 
regardless of investment performance.
425
 
Firms must also include specific cross-references to more detailed information about their 
fees and costs.
426
  The cross-reference must, at a minimum, include the same information as, or 
contain information equivalent to that required by, the Form ADV Part 2A brochure (specifically 
Items 5.A., B., C., and D.) and Regulation Best Interest, as applicable.
427
  If the firm is a broker-
dealer that does not provide recommendations subject to Regulation Best Interest, to the extent it 
prepares more detailed information about its fees, it must include specific references to such 
information.
428
  The final instructions require firms to use text features to make this additional 
information more noticeable and prominent in relation to other discussion text.
429
  Firms may 
choose to provide a hyperlink, or other means of facilitating access, that leads directly to the 
relevant Regulation Best Interest disclosure or section of Form ADV, or they may choose to 
create an additional page that contains the same or equivalent information.
430
  For example, a 
firm may decide to include information on a different website.   
                                                                                                                                                             
425
  See Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985) (upholding required disclosure of 
factual information about terms of service, including that clients would still be liable to litigation costs even 
if their lawsuits were unsuccessful). 
426
  Item 3.A.(iii) of Form CRS. 
427
  Item 3.A.(iii) of Form CRS. 
428
  Item 3.A.(iii) of Form CRS. 
429
  General Instruction 4.C to Form CRS.  For example, firms could use larger or different font; a text box 
around the heading or questions; bolded, italicized, or underlined text; or lines to offset the information 
from other sections. 
430
  While drafting these disclosures for Form CRS, investment advisers also are encouraged to consider 
whether they can describe the information about fees more clearly in the Form ADV brochure in a more 
 

 
135 
 
The proposed instructions did not include a specific cross-reference to additional fee 
disclosure, but the proposal required a cross-reference in the Additional Information section 
about where the retail investor could find information about the services offered, and we 
requested comment on whether to require firms to include a fee schedule.
431
  In the RAND 2018 
survey, a potential hyperlink to information on fees, however, generated the most interest among 
survey participants.
432
  Some industry commenters suggested that the relationship summary 
should permit hyperlinks to fee schedules, arguing that additional information would be helpful 
for retail investors, but that including the fee schedule itself would be unwieldy.
433
  Another 
commenter, however, suggested requiring a fee schedule that includes typical breakpoints and 
information on likely and/or maximum fees.
434
   
Given the feedback from investors that fee information is important, we believe that 
requiring specific references to more detailed information about fees balances the goals of the 
relationship summary, to highlight information covering several topics, with investors’ interest in 
                                                                                                                                                             
reader-friendly format.  See also General Instructions 3. and 4. of Form CRS (instructions applicable to 
electronic delivery).  For further discussion of these provisions, see supra Section II.A.3. and footnotes 156 
and 158 and accompanying text, and Section II.B.2.(b) and footnotes 348–349. 
431
  Proposed Item 7.E. of Form CRS.  
432
  See RAND 2018, supra footnote 13 (58% of participants selecting “very likely” and another 32% selecting 
“somewhat likely” to click on a hyperlink relating to fees; no other potential hyperlink generated a majority 
with “very likely” usage among any investor or education subgroup).  Other investor studies indicated that 
participants wanted descriptions of the hyperlinks to be more concrete in terms of what information they 
would find, and that, while some participants were interested in additional information, others admitted 
they would not follow the links because it was extra effort, they were uninterested, or the link did not itself 
suggest what would be there.  See Kleimann II, supra footnote 19.  In addition, numerous commenters 
supported layered disclosure.  See supra footnote 31 and accompanying text. 
433
  See CFA Letter I; IAA Letter I; LPL Financial Letter. 
434
  See Morningstar Letter.  

 
136 
 
understanding more about fees.  This approach will give retail investors information about the 
types of fees at a higher level and then offer more details, permitting the relationship summary to 
cover other important topics as well.
435
   Including a fee schedule in the relationship summary 
could make it more difficult to also cover the other topics while maintaining short, digestible 
disclosures.    Instead, we are not including a fee schedule in the relationship summary but are 
requiring cross references to balance providing a shorter document with giving retail investors 
easy access to more detailed information.  
Conversation Starter.  We are also adopting a conversation starter that is designed to 
prompt a more personalized discussion regarding the fees and costs that will impact the 
particular retail investor’s account.  A firm must include the following question for the retail 
investor to ask his or her financial professional: “Help me understand how these fees and costs 
might affect my investments.  If I give you $10,000 to invest, how much will go to fees and 
costs, and how much will be invested for me?”
436
   
As discussed above, the proposal included the following “Key Question,” which was 
intended to serve as a conversation starter between the retail investor and the financial 
professional and to provide the investor an opportunity to receive a quantitative example of the 
impact of fees:  “Do the math for me.  How much would I expect to pay per year for an advisory 
account?  How much for a typical brokerage account?  What would make those fees more or 
                                                                                                                                                             
435
  See supra Section II.A.3. 
436
  Item 3.A.(iv) of Form CRS. 

 
137 
 
less?  What services will I receive for those fees?”
437
  The Proposing Release discussed the 
option of including an example of the impact of fees in the relationship summary, and requested 
comment on whether we should require an example showing how sample fees and charges apply 
to a hypothetical advisory account and a hypothetical brokerage account, as applicable.
438
  We 
also requested comment on what assumptions firms should make in preparing such an example 
and how the information should be presented.
439
   
Feedback from the RAND 2018 report, other surveys and studies, roundtables, and the 
Feedback Forms showed that retail investors want more information about fees and the impact of 
those fees on their investments.
440
  At some of the roundtables, for example, participants 
discussed the utility of adding a hypothetical example in the relationship summary to illustrate 
fees.
441
  Commenters on Feedback Forms also asked for more specific information about the 
                                                                                                                                                             
437
  Proposed Item 8 of Form CRS. 
438
  Proposing Release, supra footnote 5. 
439
  Proposing Release, supra footnote 5. 
440
  See e.g., RAND 2018, supra footnote 13 (noting survey results finding that the fees and costs section was 
“the section for which the largest share of respondents suggest adding more detail” and investors were 
more likely than non-investors to suggest adding more detail to the section on fees and costs (31 percent 
versus 25 percent), and in qualitative interviews, “participants expressed that this section is overwhelming . 
. . and at the same time felt more information would be helpful.” ); Feedback Forms Comment Summary, 
supra footnote 11 (summary of responses to Question 5) (narrative answers on 29 Feedback Forms 
indicated that additional information about fees and costs would be helpful). 
441
  See Washington, D.C. Roundtable (an investor stated that it would be useful for comparing understanding 
costs if hypothetical examples were given about how cost affects the investor’s returns); Atlanta 
Roundtable (an investor stated that it would be helpful to know the cost of investing a hypothetical amount 
of money); and Philadelphia Roundtable (an investor stated that it would be helpful to see hypothetical 
broker and investment adviser fee arrangements for a given investment portfolio to aid in determining 
which arrangement may be more appropriate for the investor). 

 
138 
 
impact of fees on their investments, such as example fee calculations or ranges of fees.
442
  
Commenters supported including a question highlighting fees a retail investor pays.
443
  
Commenters, including commenters representing investors and individual investors, also 
overwhelmingly supported requiring more information to help retail investors understand the 
fees and costs associated with their investments, particularly specific examples about how those 
fees could affect them.
444
  Several commenters, however, objected to the inclusion of the key 
question addressed above because of the operational challenges present in answering such a 
question with respect to a particular retail investor.
445
  Some argued that anticipated fees are 
unknown for broker-dealer customers, while others believed that it is too difficult for firms to 
                                                                                                                                                             
442
  See, e.g., Lee1 Feedback Form (“fees should tell me the fees I can expect to pay”); Anonymous03 
Feedback Form (“Create a calculator . . .  where the investor fills in the amount and the fees for both 
scenarios are calculated”); Anonymous06 Feedback Form (“Provide monetary examples. If you invest 
$100, then your fees are...”); Anonymous24 Feedback Form (requesting “more specific examples showing 
specific costs”); Baker Feedback Form (“Graphic and hypothetical examples could be helpful. Mary invests 
$50,000 with a broker-dealer and Jane invests $50,000 with an investment adviser and present some 
scenarios with each . . . As fees, commissions, etc. may vary and be negotiable, a range of typical, usual, 
main-stream commission charges and asset-based fees would be helpful to alert the client to possible 
overcharges.”); Bhupalam Feedback Form (“What would make it better is if it has samples of costs in 
particular with each firm a client is dealing with.”); Hawkins Feedback Form (“Including some ranges as to 
what to expect in fees could help. Also, including information as to the impact that increased fees have on 
investment returns, long term, would help the average investor.”); Mennella Feedback Form (“I want to 
know what an investment is going to cost me over my time horizon ....”).  
443
  See IAA Letter I; LPL Financial Letter; New York Life Letter; Primerica Letter; RAND 2018, supra 
footnote 13 (91% of participants indicated they were “very likely” or “somewhat likely” to ask a 
supplemental question that addressed the amount of a $1,000 investment that would go to fees and costs 
rather than being invested for them). 
444
  See, e.g., CFA Institute Letter I; CFA Letter I; Betterment Letter I; Morningstar Letter; John Hancock 
Letter; Comment Letter of Barbara Greenwald (Jul. 12, 2018).  See, e.g., Anonymous25 Feedback Form 
(“give examples with numbers, showing examples of hypothetical accounts”); Baker Feedback Form 
(“Graphic and hypothetical examples would be helpful”); Coleman Feedback Form (“Need simple 
examples”); Manella Feedback Form (“I want to know what an investment is going to cost me over my 
time horizon”); Schreiner Feedback Form (“Provide a hypothetical example with industry standard fees 
...”); see also Atlanta Roundtable; Houston Roundtable; Washington, D.C. Roundtable.    
445
  See supra footnote 189. 

 
139 
 
build out systems for individualized fees.
446
  Other commenters suggested eliminating this 
particular key question and instead requiring firms to include links to investor education 
materials prepared by the Commission.
447
  Many commenters were concerned that this key 
question would impose new disclosure or recordkeeping requirements.
448
   
Commenters that supported more fee disclosure had a range of suggestions as to how to 
include the additional information.  For example, one commenter believed that if hypothetical or 
personal fee disclosures are included in the relationship summary, such disclosures should focus 
on helping investors understand the effect expenses have on an investment and should make 
clear that such an example is for educational purposes.
449
  One individual advocated for more 
transparent fee information, suggesting the relationship summary provide individualized fees or a 
specific range of fees.
450
  Another commenter noted that, in response to a previously 
commissioned report revealing participants’ lack of knowledge about fees as well as their desire 
for a better understanding of fees, a general chart or graph that depicts the effects of fees on an 
account would be helpful for investors.
451
  Another commenter included a sample mock 
                                                                                                                                                             
446
  See NSCP Letter; Edward Jones Letter (noting that given the range of services available, it would be very 
difficult for financial professionals to fully address this question at the outset of the relationship, 
particularly for investors selecting transaction-based services); TIAA Letter; LPL Financial Letter; 
Primerica Letter; ICI Letter; SIFMA Letter (noting most firms do not currently have systems in place to 
allow financial professionals to answer customer-specific questions). 
447
  See Prudential Letter. 
448
  See Edward Jones Letter; see also supra Section II.A.4. 
449
  See Invesco Letter (stating that this could be achieved by, for example, a side-by-side bar graph showing 
the growth of an investment gross of costs and net of costs). 
450
  See Wahh Letter. 
451
  See AARP Letter. 

 
140 
 
relationship summary with a numerical example of how the fees might impact a hypothetical 
account.
452
   
Given the importance of fees, we want to encourage retail investors and their financial 
professionals to have a conversation to further discuss the particular fees and costs that would 
apply to the retail investor, and the impact fees and costs could have on the retail investor’s 
investment returns over time, in order to promote investor understanding.  After consideration of 
the comments received, we are adopting a conversation starter that is designed to elicit a more 
personalized discussion regarding the fees and costs that will impact the particular retail 
investor’s account, while mitigating the concerns regarding the proposed “Do the math for me” 
question posed.
453
  We believe that this conversation starter will allow financial professionals to 
tailor the conversation to the particular retail investor even if the financial professional does not 
provide precise fee information for that individual during the conversation.  For instance, if the 
financial professional intends to recommend mutual funds to the retail investor, he or she may 
choose to discuss firm- and product-level fees that may apply.  The financial professional should 
be in a position to explain the fees and costs relevant to that particular retail investor if the 
investor chooses a certain type of account and certain investment, even if the financial 
professional provides examples and estimated ranges rather than a precise prediction of how 
much the investor will pay.  In addition, the financial professional should explain how those fees 
                                                                                                                                                             
452
  See Betterment Letter I (Hotspex), supra footnote 18 (noting that investors who viewed a redesigned 
version of the standalone adviser relationship summary appeared to appreciate the example of how fees 
would impact a hypothetical account). 
453
  See supra Section II.A.4. 

 
141 
 
and costs will work (for example, whether they are upfront charges, taken out of the initial 
investment amount, taken out over time, future charges, or charged in another manner) and how 
the fees and costs could impact the retail investor’s investment returns over time.  Firms may 
consider including calculators, charts, graphs, tables, or other graphics or text features to enhance 
an investor’s understanding of these fees.  Firms may also consider reviewing with their retail 
investors the impact of fees on the retail investor’s account on a periodic basis.
454
 
While we agree that examples are important to illustrate the potential impact of fees, we 
decline to require firms to provide a hypothetical example in the relationship summary.
455
  Our 
intent with the proposed “Do the math for me” question was that it serve as a conversation starter 
and a prompt to encourage the retail investor to ask about the amount she would typically pay 
per year for the account, what would make the fees more or less, and what was included in those 
fees.
456
  We believe that the conversation starter that is being adopted here is consistent with the 
proposal’s intent to prompt retail investors to have a conversation with their financial 
professional about fees that may impact their investments and account while also addressing the 
concerns raised by commenters.  We encourage firms to consider ways to provide more 
personalized disclosures to retail investors, and we will continue to consider whether to require 
more personalized fee disclosure, particularly as operational and technological costs fall.   
                                                                                                                                                             
454
  See Regulation Best Interest Release, supra footnote 47, at Section II.C.1.a. 
455
  See infra Section IV.D.4 (Alternatives to the Relationship Summary) for a discussion on the inclusion of a 
hypothetical fee example. 
456
  Proposing Release, supra footnote 5. 

 
142 
 
b. Other Ways of Making Money, Standard of Conduct, and 
Conflicts of Interest 
 F irms will be required to include disclosure under a single heading describing their 
standard of conduct and a summary of certain firm-level conflicts, including the specific 
conflicts the proposal required.
457
  The proposal required disclosure on both conflicts and the 
standard of conduct, but in separate sections.  The final relationship summary requires discussion 
in one section of other firm-level revenues and conflicts of interest, and the applicable standard 
of conduct.
458
   
We are placing these disclosures together, including the related conversation starter, 
because we believe they will more effectively allow retail investors to understand the standards 
of conduct for broker-dealers and investment advisers.
459
  We are also modifying the 
requirements for the standard of conduct and conflict of interest disclosures, as discussed in more 
detail below. 
We continue to believe it is important to highlight the presence of conflicts and their 
interconnectedness with how the firm makes money.  We recognize that investment advisers, 
                                                                                                                                                             
457
  Item 3.B. of Form CRS.  For broker-dealers, the heading will state “What are your legal obligations to me 
when providing recommendations?  How else does your firm make money and what conflicts of interest do 
you have?”; for investment advisers, the heading will state “What are your legal obligations to me when 
acting as my investment adviser?  How else does your firm make money and what conflicts of interest do 
you have?”; and for dual registrants that prepare a single relationship summary, the heading will state 
“What are your legal obligations to me when providing recommendations as my broker-dealer or when 
acting as my investment adviser?  How else does your firm make money and what conflicts of interest do 
you have?”. 
458
  Id. 
459
  In addition, retail investors may learn more about investment advisers, broker-dealers, and investing at 
Investor.gov/CRS, which will be referenced in a relationship summary’s introduction.  See Instruction to 
Item 1.B. of Form CRS. 

 
143 
 
broker-dealers, and their financial professionals have conflicts that affect their retail investor 
clients and customers and believe it is important to underscore this for retail investors.
460
  
Similarly, we continue to believe that it is important to provide retail investors with disclosure 
regarding a broker-dealer or investment adviser’s legal obligations regarding the required 
standard of conduct in a way that is understandable for retail investors.   
Standard of Conduct.  As proposed, we are adopting a requirement that firms describe 
their legal standard of conduct using prescribed wording (the “standard of conduct 
disclosure”).
461
  In a change from the proposal, however, the final instructions modify both the 
                                                                                                                                                             
460
  See infra footnote 495 and accompanying text. 
461
  Under the proposal, broker-dealers that offer brokerage accounts to retail investors would have been 
required to include the following: “[We must act in your best interest and not place our interests ahead of 
yours when we recommend an investment or an investment strategy involving securities.] When we 
provide any service to you, we must treat you fairly and comply with a number of specific obligations. 
Unless we agree otherwise, we are not required to monitor your portfolio or investments on an ongoing 
basis.”  The bracketed wording would have been included only if the broker-dealer offered 
recommendations subject to Exchange Act Rule 15l-1.  See Proposed Item 3.B.(1) of Form CRS.  In 
addition, such broker-dealers would have had to include the following: “Our interests can conflict with 
your interests. [When we provide recommendations, we must eliminate these conflicts or tell you about 
them and in some cases reduce them].”  The bracketed wording would only have been included if the 
broker-dealer offered recommendations subject to Regulation Best Interest.  See Proposed Item 3.B.(2) of 
Form CRS. 
 Under the proposal, investment advisers that offer investment advisory accounts to retail investors would 
have had to include the following: “We are held to a fiduciary standard that covers our entire investment 
advisory relationship with you. [For example, we are required to monitor your portfolio, investment 
strategy and investments on an ongoing basis.]”  The bracketed wording would have been omitted if the 
investment adviser did not provide ongoing advice.  See Proposed Item 3.C.(1) of Form CRS.  In addition, 
such investment advisers would have had to include the following: “Our interests can conflict with your 
interests. We must eliminate these conflicts or tell you about them in a way you can understand, so that you 
can decide whether or not to agree to them.”  See Proposed Item 3.C.(2) of Form CRS. 
 The section also required a statement that the firm’s interests may conflict with a retail investor’s interests 
and explain the firm’s obligations with respect to those conflicts using prescribed wording.  See Proposed 
Item 3 of Form CRS. 

 
144 
 
content of the standard of conduct disclosure
462
 and its placement in the relationship summary.  
As discussed in more detail below, the final instructions require broker-dealers, investment 
advisers, and dual registrants to include a brief statement of the applicable standard of 
conduct.
463
  In addition, as discussed above, this disclosure is required to be included in the 
conflicts of interest section rather than a separate standard of conduct section.  
Most commenters did not object to the proposal’s requirement that broker-dealers and 
investment advisers provide disclosure regarding their standards of conduct or that such 
disclosure be standardized.
464
  Results of the RAND 2018 report and other investor studies and 
surveys indicate that retail investors view this information as helpful.
465
 Similarly, commenters 
on Feedback Forms indicated that this information was useful.
466
  In addition, the IAC 
recommended that investors would benefit from receiving uniform, plain-English disclosure 
documents with topics, such as, to the extent the Commission does not adopt a uniform fiduciary 
                                                                                                                                                             
462
  Form CRS also includes a conversation starter regarding broker-dealers and investment advisers’ standards 
of conduct.  See infra footnote 495 and accompanying text. 
463
  Item 3.B.(i) of Form CRS. 
464
  See, e.g., AARP Letter; CFA Institute Letter I; IAA Letter II. 
465
  See RAND 2018, supra footnote 13 (almost one third of survey respondents selected this section as one of 
the two most useful; almost 60% would keep the length as is and over 15% would add detail); Cetera Letter 
II (Woelfel), supra footnote 17 (88% of survey respondents somewhat or strongly agreed “the firm’s 
obligations to you” is a “very or somewhat important” topic); see also Schwab Letter I (Koski), supra 
footnote 21 (“obligations of the firm” ranked third where survey participants were asked to identify four 
topics as most important for a firm to communicate”). 
466
  Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Question 2(b)) (36  
commenters (39%) graded the “Our Obligations to You” section of the relationship summary as “very 
useful” and 42 commenters (45%) graded this section as “useful”).  

 
145 
 
standard, “what is your legal obligation to me?”
467
  Certain commenters, however, suggested that 
the Commission discuss generally applicable information, including standards of conduct, in 
investor educational materials instead of requiring firms to do so in their relationship 
summaries.
468
 A number of these commenters argued that this wording might unintentionally 
create an implied contractual relationship subject to a customer’s private right of action.
469
  The 
prescribed language describing the standard of conduct broker-dealers and investment advisers 
owe to their customers and clients is not intended to create a private right of action. 
Many commenters, however, found that the specific wording we proposed
470
 did not 
effectively address investor confusion concerning legal duties applicable to broker-dealers and 
investment advisers.  Commenters indicated that the proposed wording in this section was 
confusing and did not clarify the applicable legal standards.
471
  Some commenters argued that 
this section included legal jargon inaccessible to retail investors.
472
  Others believed that retail 
investors are unlikely to understand the difference between “best interest” and “fiduciary,” with 
some suggesting that relationship summaries more clearly define the applicable legal standards 
                                                                                                                                                             
467
 IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10. 
468
  See, e.g., Primerica Letter.   
469
  See ASA Letter; Primerica Letter; Transamerica Letter (requesting a statement from the Commission that 
any such private right of action was not intended). 
470
  See supra footnote 461. 
471
  See, e.g., AARP Letter; Betterment Letter I; CFA Letter I. 
472
  See Comment Letter of Fisher Investments (Jul. 31, 2018) (“Fisher Letter”); see also Kleimann I, supra 
footnote 19; RAND 2018, supra footnote 13; Kleimann II, supra footnote 19. 

 
146 
 
or communicate the differences between “fiduciary” and “best interest.”
473
  Investment advisers 
also expressed concern that retail investors may “wrongly” view “best interest” as a higher 
standard of conduct as compared to the fiduciary standard.
474
   
Investor feedback through surveys and studies and in comments at roundtables and on 
Feedback Forms also showed some confusion.  For example, some participants in investor 
studies and at one of the roundtables did not understand why conflicts of interest existed if 
broker-dealers and investment advisers were held to the standards of conduct described.
475
  
Investor studies and surveys showed that participants varied in their understanding of differing 
obligations for different account types, some viewing brokerage accounts and advisory accounts 
as subject to similar standards of conduct but others interpreting the section as conveying that the 
two account types are subject to different standards.
476
  Observations reported by the RAND 
2018 report, other surveys and studies and comments received on Feedback Forms demonstrated 
                                                                                                                                                             
473
  See, e.g., AARP Letter; CFA Letter I; Comment Letter of the Financial Planning Coalition (Aug. 7, 2018) 
(“Financial Planning Coalition Letter”).   
474
  See, e.g., Betterment Letter I; Fisher Letter; IAA Letter I; IAA Letter II. 
475
  See RAND 2018, supra footnote 13 (in qualitative interviews, participants felt that the conflicts of interest 
section contradicted the “Our Obligations to You” section); Miami Roundtable. 
476
  See RAND 2018, supra footnote 13; see also Kleimann I, supra footnote 19 (“Most participants did not 
draw a parallel between the ‘best interest standard’ of the Broker-Dealers and the ‘fiduciary standard’ of 
Investment Advisers.  Rather, they drew a parallel between ‘specific obligations’ with Broker-Dealers and 
‘fiduciary standards’ with Investment Advisers ... [and] saw these two as similar regulatory obligations.”); 
Betterment Letter I (Hotspex), supra footnote 18 (in a survey that tested participant’s comprehension after 
viewing a version of the proposed sample standalone adviser relationship summary, only 26% correctly 
identified as false a statement that broker-dealers are held to a fiduciary standard; 71% correctly identified 
as true that an adviser (Betterment) would be held to a fiduciary standard). 

 
147 
 
that many participants did not understand the meaning of the word “fiduciary” in particular.
477
  
Investor studies also further observed that, when presented with alternative mock-ups of a 
relationship summary designed to clarify this section, some investors still struggled with 
understanding the legal obligations of brokers and advisers.
478
 
We proposed this section to address investor confusion concerning legal duties applicable 
to broker-dealers and investment advisers and, in combination with the key questions about the 
financial professional’s legal obligations, to encourage a conversation between the retail investor 
and the financial professional about applicable standards of conduct.
479
  The prescribed wording 
was intended to promote consistency in communicating these standards to retail investors.
480
   
We continue to believe that it is appropriate for the final instructions to require broker-
dealers and investment advisers to describe their standards of conduct to investors, because, as 
discussed above, we believe that it is important to promote retail investors’ understanding of 
these obligations.  We also agree with commenters that requiring these firms to include 
                                                                                                                                                             
477
  See, e.g., RAND 2018, supra footnote 13 (“Some participants had never heard of the word, whereas others 
had heard it but did not know what it meant in this context.  Others thought the word “fiduciary implies 
acting in best interest ...”); Kleimann I, supra footnote 19 (“Few participants could define ‘fiduciary 
standard’”); see also Feedback Forms Comment Summary, supra footnote 11 (summary of responses to 
Question 4) (On 10 Feedback Forms, commenters specifically asked for a definition or better explanation 
of the term “fiduciary.”). 
478
  See, e.g., Kleimann II, supra footnote 19 (explains that, after redesign of obligations section participants 
still struggled to understand the implications of the fiduciary standard for advisers compared to the best 
interest standard for broker-dealers); Betterment Letter I (Hotspex), supra footnote 20 (almost one half of 
survey participants reviewing a version of the standalone adviser relationship summary designed by 
Betterment did not correctly identify as false a statement that broker-dealers are held to a fiduciary 
standard). 
479
  See Proposing Release, supra footnote 5, at n.114 and accompanying text. 
480
  Proposing Release, supra footnote 5, at n.115 and accompanying text. 

 
148 
 
prescribed disclosure regarding these standards of conduct is important in achieving this goal.
481
  
While the final instructions generally do not require prescribed disclosure in other contexts,
482
 
we believe that investors should be provided with a consistent articulation of their firm’s legal 
obligations regarding their standard of conduct and that the rationale for allowing firms 
flexibility to tailor their disclosure in other aspects of the relationship summary does not apply 
with respect to the standard of conduct.  In this regard, some commenters stated that Form CRS 
should be an educational document, which would be a standardized document published and 
maintained by the Commission.
483
  While the content of disclosure regarding a firm’s standard of 
conduct should be uniform, this disclosure should appear in the relationship summary, which 
must be delivered to all retail investors, rather than a separate SEC-staff-created and maintained 
publication.  In addition, prescribing language for this disclosure does not raise the same 
concerns that commenters raised about prescribed language generally.  For example, we are 
permitting more flexibility in how firms describe their fees and services in response to comments 
that some of the prescribed wording, for example, was not necessarily applicable to their 
business and could make investors confused.
484
  
By contrast, a legal standard of conduct, whether through an investment adviser’s 
                                                                                                                                                             
481
  But see footnotes 468–469 and accompanying text. 
482
  As discussed in more detail above, many commenters who believed that the final instructions should not 
require prescribed disclosure focused on other aspects of the relationship summary, such as disclosure 
regarding a description of a firm’s services. See supra Section II.A.1. 
483
  See, e.g., Primerica Letter.   
484
  See supra Section II.A.1. One commenter noted that requiring prescribed disclosure in some circumstances 
may not be accurate for all business models and could mislead investors.  See CFA Letter I. 

 
149 
 
fiduciary duty, Regulation B est Interest, or both, will apply to all firms delivering the 
relationship summary that provide recommendations or investment advice, and prescribing 
language will avoid investor confusion when describing the applicable standard.  Indeed, it may 
be confusing to investors comparing relationship summaries among prospective firms to see the 
same legal standard described differently among these firms.  The required statements about the 
legal standard of conduct are disclosures of purely factual information about the terms under 
which the firms’ services will be made available to investors.
485
 
We have determined, however, that the proposed standard of conduct disclosure may not 
have appropriately addressed investor confusion.  While the proposal was intended to provide 
retail investors with simple, easily understood disclosure, we agree with commenters and results 
from investor studies and surveys,
486
 that the relationship summary could be revised in a manner 
that would be more beneficial to retail investors,
487
 especially in light of the similarity between 
broker-dealers’ and investment advisers’ legal obligations to retail investors with respect to their 
standards of conduct when providing recommendations or advice under the rules and 
interpretations we are adopting concurrently.
488
  In this regard, we have modified the standard of 
conduct disclosure to include it within the conflicts of interest section of the relationship 
summary and to contain simplified wording that is short, plain language, and user-friendly but 
                                                                                                                                                             
485
  See Zauderer, 471 U.S. at 651; Milavetz, 559 U.S. at 250. 
486
  See supra Section II.A. 
487
  See, e.g., AARP Letter. 
488
  See Fiduciary Release, supra footnote 47; Regulation Best Interest Release, supra footnote 47. 

 
150 
 
still describes the key components of a broker-dealer’s or investment adviser’s standard of 
conduct when providing recommendations or advice.
489
   
First, we are modifying the standard of conduct disclosure so that it is required to be 
provided under a modified heading
490
 in the conflicts of interest section.
491
  While broker-dealers’ 
and investment advisers’ legal obligations regarding their standard of conduct apply not just in 
the context of conflicts of interest,
492
 we believe that requiring this disclosure to be included in 
the conflicts of interest section will provide a retail investor with a greater ability to discern how 
a particular legal obligation regarding a standard of conduct may affect him or her by describing 
the application of that obligation in the context of conflicts of interest, which was a primary 
concern for retail investors and commenters alike.
493
  In addition, this placement is supported by 
observations reported in the RAND 2018 qualitative interviews and another study, which 
indicated that some participants struggled with how to reconcile the conflicts of interest section 
with the legal obligations section because they were discussed separately.
494
 
                                                                                                                                                             
489
  The final instructions provide that if a required disclosure or conversation starter is inapplicable or specific 
wording required by the instructions is inaccurate, firms may omit or modify that disclosure or 
conversation starter.  See General Instruction 2.B. to Form CRS.  We note that, like the proposal, the 
standard of conduct disclosure distinguishes between broker-dealers that provide recommendations subject 
to Regulation Best Interest and broker-dealers that do not provide recommendations subject to Regulation 
Best Interest.  See infra footnote 507 and accompanying text. 
490
  Item 3.B. of Form CRS; see also supra footnote 457. 
491
  Item 3 of Form CRS. 
492
  See Regulation Best Interest Release, supra footnote 47 and Fiduciary Release, supra footnote 47.  
493
  See Proposing Release, supra footnote 5, at Section II.B.6; supra footnote 475 and accompanying text. 
494
  See, e.g., RAND 2018, supra footnote 13 (noting that “[s]ome participants expressed appreciation that the 
firm was being transparent about its conflicts of interest, but many participants struggled with how to 
 

 
151 
 
Second, in the conversation starter relating to this section, we are requiring firms to 
include the following question: “How might your conflicts of interest affect me, and how will 
you address them?”
495
  As discussed above, we believe that including questions for investors to 
ask their financial professionals is an important component of the relationship summary.  This 
question also underscores for retail investors that investment advisers and broker-dealers have 
conflicts that may create incentives to put their interests ahead of the interests of their retail 
clients and customers.
496
  As a corollary, it also underscores for retail investors how investment 
advisers and broker-dealers address these conflicts of interest in discharging their legal 
obligations regarding their standards of conduct to these investors.  We believe that this 
requirement will improve a retail investor’s understanding of the standard of conduct owed by 
his or her financial professional by helping the investor to better understand its application to 
him or her.    
Unlike the proposal,
497
 the final instructions do not require prescribed disclosure 
summarizing how a firm’s standard of conduct would require it to address conflicts of interest.  
As discussed above, commenters found the proposal’s standard of conduct disclosure 
confusing.
498
 After considering comments and observations reported in surveys and studies, we 
                                                                                                                                                             
reconcile the information in this section with the previous ‘Our Obligations to You’ section.”); Kleimann I, 
supra footnote 19; see also infra footnote 505 and accompanying text. 
495
  Item 3.B.(iii) of Form CRS. 
496
  See supra Section II.A.4. 
497
  See Proposed Items 3.B.2. and 3.C.2. of Form CRS. 
498
  See supra footnote 471 and accompanying text.  See also RAND 2018, supra footnote 13 (noting that one 
“participant pointed out that the obligations section had said that any conflicts of interest would be reduced 
 

 
152 
 
recognize that the proposed disclosures were confusing, particularly the prescribed disclosure 
attempting to explain concepts of full and fair disclosure, mitigation, and informed consent.
499
  
Accordingly, we are removing this wording to shorten the disclosure and to provide more focus 
on the rest of the disclosure required in this section, as we believe this should improve investor 
comprehension. We believe that clearly disclosing to investors that firms have an obligation to 
act in the best interest of a client or customer and also simultaneously have conflicts of interest is 
more important than describing the particular aspects of firms’ general duty to disclose, mitigate, 
or obtain informed consent to conflicts, as applicable.   Instead of this disclosure, we are requiring 
a conversation starter to encourage firms to discuss with retail investors how their standards of 
conduct require them to address conflicts of interests.    In addition, we believe that the discussion 
prompted by the conversation starter accompanied by examples of conflicts of interest
500
 will 
provide retail investors with specific illustrations of how a firm’s standard of conduct can apply, 
which could encourage investors to ask more detailed questions about how firms address their 
conflicts. 
Finally, we have modified the standard of conduct disclosure for broker-dealers and 
investment advisers to reduce the amount of required disclosure,
501
 to focus the disclosure on the 
                                                                                                                                                             
and disclosed [but] the conflicts of interest section does not mention disclosing or reducing conflicts); 
Kleimann II, supra footnote 19 (“Most participants did not understand how conflicts would be resolved ... 
they read the disclosure as indicating that Brokerage Accounts were under no obligation to notify clients of 
a conflict ...”).  
499
  See Fiduciary Release, supra footnote 47 (discussing the concepts of full and fair disclosure, mitigation, 
and informed consent).  
500
  Item 3.B.(ii) of Form CRS. 
501
  Items 3.B.(i).a. and 3.B.(i).b. of Form CRS. 

 
153 
 
standard of conduct that applies to the provision of recommendations and advice,
502
 and to 
require that portions of the disclosure be presented in bold and italicized font.
503
  We believe that 
streamlining the standard of conduct disclosure and tailoring the disclosure to the type of firm 
providing such disclosure will clarify for retail investors the applicable legal standard of conduct 
to which their particular firm is subject when providing recommendations or advice or when 
providing broker-dealer services without recommendations.   
Most commenters found the proposal’s standard of conduct disclosure confusing because 
it included legal or technical words.  For example, some commenters, and results from investor 
studies and surveys, indicated that many did not understand the meaning of “fiduciary” or had 
never heard of the word.
504
  Accordingly, the modified standard of conduct disclosure both 
eliminates technical words, such as “fiduciary,” and describes the standards of conduct of 
broker-dealers, investment advisers, or dual registrants using similar terminology in a plain-
English manner.  In particular, the final instructions use the term “best interest” to describe how 
broker-dealers, investment advisers, and dual registrants must act regarding their retail customers 
or clients when providing recommendations as a broker-dealer or acting as an investment 
adviser.
505
  We believe that requiring firms—whether broker-dealers, investment advisers, or 
dual registrants—to use the term “best interest” to describe their applicable standard of conduct 
                                                                                                                                                             
502
  Item 3.B. of Form CRS (heading).   
503
  Items 3.B.(i).a., 3.B.(i).b., and 3.B.(i).c. of Form CRS. 
504
  See supra footnote 477 and accompanying text; see also CFA Letter I (citing to “man on the street” 
interviews suggesting that average investors do not understand the term “fiduciary”); Consumer Reports 
Letter (commenting on the RAND 2018 report). 
505
  Item 3.B.(i) of Form CRS. 

 
154 
 
will clarify for retail investors their firm’s legal obligation in this respect, regardless of whether 
that obligation arises from Regulation B est Interest or an investment adviser’s fiduciary duty 
under the Investment Advisers Act.
506
  The modified language, however, highlights a key 
difference in when a firm must exercise its obligation—specifically, when providing a 
recommendation (in the case of a broker-dealer),
507
 or when acting as an investment adviser,
508
 
or either providing a recommendation or acting as an investment adviser (in the case of a dual 
registrant).
509
  Portions of the modified standard of conduct disclosure also are required to be 
                                                                                                                                                             
506
  See Fiduciary Release, supra footnote 47; Regulation Best Interest Release, supra footnote 47. 
507
  Item 3.B.(i).a. of Form CRS (requiring broker-dealers that provide recommendations subject to Regulation 
Best Interest to include (emphasis required): “When we provide you with a recommendation, we have to 
act in your best interest and not put our interest ahead of yours.  At the same time, the way we make money 
creates some conflicts with your interests.  You should understand and ask us about these conflicts because 
they can affect the recommendations we provide you.  Here are some examples to help you understand 
what this means,” and broker-dealers that do not provide recommendations subject to Regulation Best 
Interest to include (emphasis required):  “We do not provide recommendations.  The way we make money 
creates some conflicts with your interests.  You should understand and ask us about these conflicts because 
they can affect the services we provide you.  Here are some examples to help you understand what this 
means.”). 
508
  Item 3.B.(i).b. of Form CRS (requiring investment advisers to include (emphasis required): “When we act 
as your investment adviser, we have to act in your best interest and not put our interest ahead of yours.  At 
the same time, the way we make money creates some conflicts with your interests.  You should understand 
and ask us about these conflicts because they can affect the investment advice we provide you.  Here are 
some examples to help you understand what this means.”). 
509
  Item 3.B.(i).c. of Form CRS (requiring dual registrants that prepare a single relationship summary and 
provide recommendations subject to Regulation Best Interest to include (emphasis required): “When we 
provide you with a recommendation as your broker-dealer or act as your investment adviser, we have to 
act in your best interest and not put our interest ahead of yours.  At the same time, the way we make money 
creates some conflicts with your interests.  You should understand and ask us about these conflicts because 
they can affect the recommendations and investment advice we provide you.  Here are some examples to 
help you understand what this means,” and dual registrants that prepare a single relationship summary and 
do not provide recommendations subject to Regulation Best Interest to include (emphasis required): “We 
do not provide recommendations as your broker-dealer.  When we act as your investment adviser, we have 
to act in your best interest and not put our interests ahead of yours.  At the same time, the way we make 
money creates some conflicts with your interest.  You should understand and ask us about these conflicts 
because they can affect the services and investment advice we provide you.  Here are some examples to 
help you understand what this means.”  Also requiring that dual registrants that prepare two separate 
 

 
155 
 
presented in bold and italicized font.
510
  The final instructions are designed to provide retail 
investors with a clear understanding of when a firm’s legal obligations regarding its standard of 
conduct is required to be discharged.  In addition, with respect to broker-dealers, the modified 
standard of conduct disclosure, like the proposal,
511
 distinguishes between broker-dealers that 
provide recommendations subject to Regulation Best Interest and broker-dealers that do not 
provide recommendations subject to Regulation Best Interest (e.g., execution-only brokers).  The 
modified standard of conduct disclosure also requires that broker-dealers, investment advisers, 
and dual registrants to state that conflicts of interest will remain despite the existence of these 
legal obligations, and to provide examples of these conflicts.
512
  This change is designed to 
address commenters’ concerns that we clarify for retail investors the interaction between broker-
dealers’ or investment advisers’ legal obligations regarding their standards of conduct and their 
conflicts of interest.  
Examples of Ways the Firm Makes Money and Conflicts of Interest.  Following the 
standard of conduct prescribed wording,  a firm must summarize the following ways in which it 
                                                                                                                                                             
relationship summaries follow the instructions for broker-dealers and investment advisers in Items 3.B., 
3.B.(i).a. and 3.B.(i).b.).  
510
  Items 3.B.(i).a. (“When we provide you with a recommendation” and “do not”),  3.B.(i).b. (“When we act 
as your investment adviser”), and 3.B.(i).c. (“When we provide you with a recommendation as your broker-
dealer or act as your investment adviser,” “do not,” and “When we act as your investment adviser”) of 
Form CRS. 
511
  See Proposed Item 3.B. of Form CRS. 
512
  Broker-dealers that do not provide recommendations subject to Regulation Best Interest will be required to 
include substantially the same conflict disclosure, except that it will reflect that conflicts of interest can 
affect the services provided, rather than referring to recommendations.  See Items 3.B.(i).a. and 3.B.i.(c) of 
Form CRS.  

 
156 
 
and its affiliates make money from brokerage or investment advisory services and investments it 
provides to retail investors, to the extent they are applicable to the firm.
513
  The specific wording 
is not prescribed, but firms must include specific information to describe each of the applicable 
conflicts. 
• Proprietary Products: investments that are issued, sponsored, or managed by you or 
your affiliates;  
• Third-Party Payments: compensation received from third parties when a firm 
recommends or sells certain investments;  
• Revenue Sharing: investments where the manager or sponsor of those investments or 
another third party (such as an intermediary) shares with the firm revenue it earns on 
those investments; and  
• Principal Trading: investments the firm buys from a retail investor, and/or 
investments the firm sells to a retail investor, for or from the firm’s own accounts, 
respectively.
514
  
If none of those conflicts apply to the firm, it must summarize at least one of its material 
conflicts of interest that affect retail investors.  Firms will be required to explain the incentives 
created by each of these examples.
515
 
                                                                                                                                                             
513
  Item 3.B.(iv) of Form CRS. 
514
  Items 3.B.(iv)(a) through 3.B.(iv)(d) of Form CRS. 
515
  Item 3.B.(iv) of Form CRS. 

 
157 
 
The proposal would have required a firm to discuss these same enumerated topics, to the 
extent they were relevant.  If none of the four specified conflicts applied to a firm, the firm was 
not required to discuss any other conflicts that applied to its business.  The proposal did not 
require a firm to summarize other ways its affiliates made money from the services and products 
the firm provides to retail investors.   
We are adopting a heading that specifically asks how else the firm makes money in an 
effort to further highlight the firm’s financial incentives and emphasize that they are intertwined 
with conflicts.  In a departure from the proposal, the relationship summary will not include an 
introductory sentence explaining that the firm benefits from the services it provides to the retail 
investor because we believe that the new heading and required content of this item make this 
sentence unnecessary.  We are also expanding the required conflicts disclosures to ensure that 
firms without any of the enumerated conflicts will still summarize at least one other material 
conflict of interest.  Firms will include the four enumerated conflicts (if applicable) that were in 
the proposal, or otherwise at least one material conflict of interest, and a specific cross-reference 
to more detailed information about conflicts.  Firms with none of the enumerated conflicts 
should carefully consider their operations in their entirety when selecting a material conflict to 
disclose to retail investors.  While we think it is unlikely that a firm will not have any material 
conflicts to disclose, if this item is inapplicable, firms may omit or modify this disclosure.
516
  
Commenters generally believed that at least some conflicts disclosure was important to 
include in the relationship summary, but many suggested changes to the approach, including 
                                                                                                                                                             
516
  General Instruction 2.B. of Form CRS. 

 
158 
 
fewer conflicts disclosures and increased use of layered disclosure.
517
  Commenters generally 
supported requiring firms to disclose the types of conflicts of interest related to these financial 
incentives identified in the proposal, specifically disclosure regarding proprietary products,
518
 
compensation received from third parties,
519
 revenue sharing,
520
 and principal trading.
521
   
Investor feedback, however, was mixed.  Results from the RAND 2018 survey and 
another survey indicated that many survey participants did not find this section to be as 
informative as other sections,
522
 and some participants in surveys and studies indicated that this 
section was “difficult” or “very difficult” to understand.
523
  About 75% of Feedback Form 
commenters rated the conflicts of interest section as either “very useful” or “useful,” while 
                                                                                                                                                             
517
  See, e.g., IAA Letter I (suggesting leveraging disclosures made elsewhere on Part 2 of Form ADV); 
SIFMA Letter (suggesting leveraging disclosures that would be required by Regulation Best Interest); 
Fidelity Letter and Schwab Letter I (suggesting using examples of conflicts, with links to additional 
disclosure). 
518
  See Fidelity Letter; Schwab Letter I; SIFMA Letter. 
519
  See, e.g., IFS Letter; IAA Letter I; Wells Fargo Letter; Primerica Letter (suggesting including in additional 
layered disclosure). 
520
  See Fidelity Letter (third-party revenue sharing agreements in mock-up). 
521
  See mock-ups in IAA Letter I; Primerica Letter; Wells Fargo Letter. 
522
  See RAND 2018, supra footnote 13 (conflicts of interest was selected as one of the two most informative 
sections by only 15% of survey respondents and selected as one of the two least informative by 36%); 
Cetera Letter II (Woelfel), supra footnote 17 (81% of survey respondents strongly or somewhat agreed that 
conflicts of interest is an important topic in the relationship summary, fewer than for any other topic); see 
also Margolis Feedback Form (stating that the conflicts of interest section is very confusing, particularly 
with respect to fee-sharing arrangements and referral fees). 
523
  See RAND 2018, supra footnote 13 (about one third of survey respondents found this section to be difficult 
or very difficult to understand; in qualitative interviews, participants demonstrated misunderstanding of 
how this section reconciled with the “obligations to you” section and how conflicts would be resolved); 
Kleimann I, supra footnote 19 (interview participants had difficulty explaining how firms earned money 
from financial relationships that could cause conflicts and were unclear how conflicts would be resolved); 
Betterment Letter I (Hotspex), supra footnote 18 (noting that further improvements could be made to 
improve respondents understanding of differences in conflicts). 

 
159 
 
narrative comments on the Feedback Forms suggested that the conflicts of interest disclosure 
could be clarified or otherwise improved.
524
 
Several commenters suggested that we broaden the disclosures to require a firm to inform 
its retail investors of all of the conflicts related to its business.
525
  Commenters also supported 
highlighting conflicts of interest stemming from affiliates,
526
 and several commenters included 
disclosure about affiliates in their mock-ups.
527
  One industry commenter expressed concern that 
including solely the proposed conflicts in isolation and on a standalone basis may lead investors 
to think these are the only meaningful conflicts.
528
  Other commenters pointed out that if only the 
proposed conflicts were required to be included, then some firms would not include any conflicts 
                                                                                                                                                             
524
  Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Question 2(e) and 
Question 4).  Among the 41 Feedback Forms with narrative comments suggesting that one or more topics 
were too technical or could be improved, 14 included a narrative comment suggesting clarification or more 
information about conflicts of interest.  See, e.g., Baker Feedback Form (“A sampling of possible conflict-
of-interest situations is most desirable”); Bhupalam Feedback Form (“It doesn’t clearly tell me whether the 
company will do this or not.  In fact, it tells me that the company may do this and I should be fine with it.”); 
Lee2 Feedback Form (“What can I expect and not expect about the independence and conflict-free nature 
of the advice”); Margolis Feedback Form (“While I agree that fee-sharing arrangements and referral fees 
need to be disclosed, your wording is confusing”); Schreiner Feedback Form (“highlight implications of 
conflicts of interest”). 
525
  See CFA Institute Letter I; Trailhead Consulting Letter. 
526
  See Comment Letter of Jackson, Grant Investment Advisers, Inc. (Aug. 7, 2018) (“Jackson Grant Letter”) 
(stating that other compensation (such as recommending proprietary products and products of affiliates) 
needs to be addressed for the investor to fully understand the potential for conflicts in any relationship). 
527
  See SIFMA Letter; Wells Fargo Letter; Schwab Letter I; Comment Letter of Ron A. Rhoades, Western 
Kentucky University (Dec. 6, 2018) (“Rhoades Letter”); Stifel Letter (mock-up); Cetera Letter I; 
Betterment Letter I; ASA Letter (mock-up).   
528
  IAA Letter I. 

 
160 
 
disclosures because their conflicts do not fall within the requisite categories.
529
  Furthermore, 
one commenter proposed to allow firms to affirmatively state that they did not have any of these 
conflicts without further disclosure of the firm’s other conflicts of interest.
530
   
We continue to believe that the conflicts we identified in the proposal should be 
highlighted to retail investors in the relationship summary.  Accordingly, we are including in the 
final instructions a requirement that firms describe these four conflicts to the extent that any of 
these conflicts apply to them.  Like other sections in the relationship summary, this section will 
provide firms with more flexibility in the way in which they describe their particular conflicts so 
that they can tailor the summary to more accurately reflect their specific business.  While we are 
maintaining the proposal’s approach of requiring firms to provide information about certain 
types of conflicts applicable to them, we are not requiring firms to state as many specific details 
with respect to such conflicts.
531
  For example, the proposed instructions would have required 
firms to provide specific examples of advising on proprietary or affiliated investments or 
investments paying the firm a share of revenue, and we have removed such requirements from 
the final instructions.  Instead, the relationship summary will focus on four specific ways a firm 
could make money from retail investors’ investments to highlight that firms have conflicts of 
interest and encourage retail investors to ask and learn more about them.   
                                                                                                                                                             
529
  See Paul Hynes Letter; Betterment Letter I (stating that their business model avoids the proposed conflicts 
of interest, and proposing an alternate “alignment of interest” section for the section on conflicts of 
interest). 
530
  Betterment Letter I (indicating that the firm had none of the proposed enumerated conflicts). 
531
  In addition, the IAC recommended that the Commission adopt a uniform, plain English document that 
covers basic information about conflicts of interest, among other topics.  See IAC Broker-Dealer Fiduciary 
Duty Recommendations, supra footnote 10. 

 
161 
 
Additionally, as some commenters pointed out, we agree that not mentioning any 
conflicts, or permitting the firm to affirmatively state that it has none of the enumerated conflicts, 
could lead retail investors to conclude that the particular firm does not have any material 
conflicts.  Accordingly, the instructions require a firm that does not have any of the four required 
categories of conflicts to provide at least one example of the firm’s conflicts of interest.  
Specially, the instructions require a firm to summarize at least one material conflict of interest 
that affects retail investors.
532
  Firms are not expected to disclose every material conflict of 
interest, and should instead consider what would be most relevant for retail investors to know in 
deciding whether to select or retain the particular firm.     
We determined to require an example of a conflict, rather than broadening the instruction 
to include all conflicts, as some commenters suggested.  The language disclosing firms’ standard 
of conduct and existence of conflicts includes wording to make explicit that the conflicts 
described in the relationship summary are examples.  Firms will disclose at least one of their 
material conflicts of interest that impact their retail investors, and such a conflict is not limited 
expressly to financial conflicts.  In addition, with respect to broker-dealers, this conflict 
disclosure (unlike the conflict disclosure obligation in Regulation Best Interest)
533
 is not limited 
to conflicts associated with a recommendation.
534
  To determine whether a conflict of interest 
                                                                                                                                                             
532
  As discussed in Section II.A.1. above, if a required disclosure is inapplicable to a firm’s business, a firm 
would be permitted to omit or modify that disclosure.  General Instruction 2.B.  We believe, however, that 
most firms will have at least one material conflict of interest that they would need to disclose.     
533
  See Regulation Best Interest Release, supra footnote 47, at Section II.C.1 (Disclosure Obligation). 
534
  For instance, broker-dealers may include conflicts that affect product offerings to customers who do not 
obtain recommendations from the firm. 

 
162 
 
should be disclosed, a firm could consider, for example, the benefit to the firm or its affiliate or 
the cost to the retail investor. 
We believe that an exhaustive list of conflicts in the relationship summary would not as 
effectively enhance investor understanding of conflicts.  More details could inundate investors 
with information that makes it difficult for them to focus on the fact that conflicts exist and will 
impact them, and they may not focus on or may not realize the importance of the specific 
conflicts firms are required to summarize.  We also agree with comments that disclosure of all 
conflicts would be too cumbersome
535
 and lengthy for the relationship summary’s intended 
purpose — that is, highlighting certain aspects of a firm and its services to help retail investors to 
make an informed choice and to find additional information about a topic.    The approach we are 
adopting of requiring firms to provide examples will make retail investors aware that these types 
of conflicts exist, but will avoid providing a laundry list of conflicts.  Taking into account all of 
these considerations, we believe that these examples of conflicts of interest should be highlighted 
for the investor.  We recognize that this will be a high-level summary of conflicts and generally 
will not be a complete description.  As discussed further below, we are requiring firms to include 
a link to additional information on their conflicts of interest.
536
  This layered disclosure will 
facilitate investors’ ability to review additional information on conflicts while balancing the 
high-level nature of the relationship summary.   
                                                                                                                                                             
535
  See, e.g., CFA Letter I; SIFMA Letter; Prudential Letter. 
536
  Item 3.B.(iv) of Form CRS (Firms must include specific references to more detailed information about their 
conflicts of interest that, at a minimum, include the same or equivalent information to that required by the 
Form ADV, Part 2A brochure and Regulation Best Interest, as applicable, and broker-dealers that do not 
provide recommendations subject to Regulation Best Interest, to the extent they prepare more detailed 
information about their conflicts, must include specific references to such information.). 

 
163 
 
Conversation Starter and Additional Information.  To promote access to information 
about other firm conflicts, as well as to clarify for retail investors the application of their firms’ 
standard of conduct as discussed above, firms will include a conversation starter prompting 
investors to ask about conflicts and a hyperlink to additional information.  Specifically, firms 
must include the following question as a conversation starter: “How might your conflicts of 
interest affect me, and how will you address them?”
537
   
The proposal included a longer key question asking about the most common conflicts of 
interest in the firm’s advisory and brokerage accounts and how the firm will address those 
conflicts when providing services to the retail investor.
538
  One commenter noted that this key 
question elicited the same information as provided elsewhere in the relationship summary.
539
  
We shortened the question to avoid this duplication.  In addition, the firm’s other conflicts will 
be disclosed as part of the summary of material conflicts or in the additional conflicts disclosure 
that firms will cross-reference.  The new conversation starter is meant to complement these other 
disclosures and elicit more information about how specifically the firm’s conflicts of interest 
could affect the retail investor.   
Firms will also include specific cross-references to more detailed information about 
conflicts of interest that, at a minimum, includes the same or equivalent information to that 
                                                                                                                                                             
537
  Item 3.B.(iii) of Form CRS.  
538
  Proposed Item 8 of Form CRS.  The proposal included the following question: “What are the most common 
conflicts of interest in your advisory and brokerage accounts?  Explain how you will address those conflicts 
when providing services to my account.” 
539
  See LPL Financial Letter. 

 
164 
 
required about a firm by the Form ADV, Part 2A brochure and/or Regulation Best Interest.
540
  If 
a firm is a broker-dealer that does not provide recommendations subject to Regulation Best 
Interest, to the extent it prepares more detailed information about its conflicts, it must include 
specific references to such information.
541
  Firms may include hyperlinks, mouse-over windows, 
or other means of facilitating access to this additional information and to any additional 
examples or explanations of such conflicts of interest.
542
     
Over 60% of RAND 2018 survey respondents indicated that they would be “very likely” 
or “somewhat likely” to click on hyperlinks related to conflicts of interest.
543
  While the proposal 
did not require firms to link to additional information with respect to their conflicts, several 
commenters suggested that the relationship summary include a link to all conflicts.
544
  We 
believe that using layered disclosure through cross-references to a more detailed discussion of 
conflicts balances the Commission’s objective of concise disclosure while providing interested 
investors with tools to easily access additional, useful information. 
Many industry commenters also suggested that Regulation B est Interest’s and Form 
CRS’s conflicts disclosures be coordinated, and that any conflict disclosure obligations under 
                                                                                                                                                             
540
  Item 3.B.(iv) of Form CRS. 
541
  Item 3.B.(iv) of Form CRS. 
542
  Item 3.B.(iv) of Form CRS.  See also General Instructions 3. and 4. of Form CRS (instructions applicable 
to electronic delivery).  For further discussion of these provisions, see supra Section II.A.3. and footnotes 
156 and 158 and accompanying text, and Section II.B.2.(b) and footnotes 348–349 
543
  RAND 2018, supra footnote 13.  But see Kleimann II, supra footnote 19 (only one interview participant 
said he would use the link in the conflicts of interest section). 
544
  See, e.g., Fidelity Letter (mock-up); IAA Letter I (mock-up); see also Kleimann II, supra footnote 19 
(redesigned relationship summary suggests a link to more information about conflicts). 

 
165 
 
Regulation Best Interest should be satisfied upon delivery of the relationship summary.
545
  We 
recognize that broker-dealers may need to disclose additional conflicts or disclose additional 
conflicts at a point in time other than at the beginning of the relationship with an investor or 
other times the relationship summary is required to be delivered.
546
  The relationship summary 
will provide a high-level summary for investors so that they can engage in a conversation with 
their financial professional about investment advisory or brokerage services, and so that the 
investors can choose the type of service that best meets their needs.  Furthermore, as discussed 
above in Section II.A (Presentation and Format),
547
 we believe it is essential to limit the length of 
the relationship summary and keep the disclosures focused, highlighting these topic areas while 
encouraging questions and providing access to additional information.  As a result, we believe 
many firms may not be able to capture all of the necessary disclosures about their conflicts in 
this short summary disclosure.
548
  The layered disclosure approach should strike a balance 
between alerting investors of these conflicts while keeping with the intended purpose of the 
relationship summary. 
                                                                                                                                                             
545
  See, e.g., ACLI Letter; Cambridge Letter; Massachusetts Letter; FSI Letter I; MassMutual Letter; Schwab 
Letter I; SIFMA Letter; Transamerica Letter; see also Regulation Best Interest Release, supra footnote 47, 
at n.438 and accompanying text. 
546
  See Regulation Best Interest Release, supra footnote 47. 
547
  See supra Section II.A (Presentation and Format). 
548
  For example, investment advisers must make full and fair disclosure to all clients of all material facts 
relating to the advisory relationship, including conflicts of interest.  See Fiduciary Release, supra footnote 
47; General Instruction 3 to Form ADV Part 2.  Broker-dealers subject to Regulation Best Interest must 
also provide full and fair disclosure of material facts, including all material facts relating to conflicts of 
interest that are associated with the recommendation.  See Regulation Best Interest Release, supra footnote 
47.   

 
166 
 
Finally, some commenters argued that the relationship summary should require firms to 
explain how conflicts will be mitigated or minimized, or that firms should be permitted to state 
that a particular firm has fewer conflicts than other firms.
549
  While we agree that firms should 
have increased flexibility to describe conflicts, as discussed above, we are not permitting this 
additional disclosure.  The purpose of this section is to highlight for investors that conflicts of 
interest exist.   
c. Payments to Financial Professionals 
Finally, in a change from the proposal, we are adding an additional section to Item 3 that 
requires a firm to include in its relationship summary the heading “How do your financial 
professionals make money?”
550
  A firm will summarize how its financial professionals are 
compensated (including cash and non-cash compensation) and the conflicts of interest those 
payments create.
551
  For example, the firm must, to the extent applicable, disclose whether 
financial professionals are compensated based on factors such as: the amount of client assets they 
service; the time and complexity required to meet a client’s needs; the product sold (i.e., 
differential compensation); product sales commissions; or revenue the firm earns from the 
financial professional’s advisory services or recommendations.
552
      
                                                                                                                                                             
549
  See AARP Letter; Betterment Letter I. 
550
  Item 3.C. of Form CRS. 
551
  Item 3.C.(i) of Form CRS. 
552
  Item 3.C.(ii) of Form CRS. 

 
167 
 
In the Proposing Release, we asked if the relationship summary should include disclosure 
of compensation received by financial professionals and the related conflicts of interest such 
compensation might pose.  Several commenters supported including disclosures related to the 
conflicts of interest that financial professionals’ compensation arrangements create.
553
  Several 
commenters suggested featuring financial professionals’ compensation in the relationship 
summary, including in a separate section.
554
  A number of commenters illustrated the importance 
of these disclosures by including sections discussing financial professionals’ compensation in 
their mock-ups.
555
  These disclosures generally included more detailed information about how 
broker-dealers and investment advisers earn money from various sources, in addition to what the 
retail investor may pay directly.   
We have concluded that disclosure of conflicts of interest related to a financial 
professional’s compensation is useful to highlight for retail investors in the relationship 
summary.
556
  In particular, the commenters’ mock-up disclosures highlighted the benefit of 
                                                                                                                                                             
553
  See Proposing Release, supra footnote 5 (requesting comments on whether there are other considerations 
related to fees and compensation that we should require firms to highlight for retail investors that were not 
captured in the proposal); see also Jackson Grant Letter; Schwab Letter I; SIFMA Letter; Stifel Letter. 
554
  See, e.g., Schwab Letter I; SIFMA Letter; Stifel Letter; Jackson Grant Letter.  One industry commenter also 
stated that we should focus on conflicts that result from a financial professional’s financial compensation. 
SIFMA Letter (also stating this view is consistent with FINRA’s 2013 Conflicts of Interest Report, which 
specifically identified financial compensation as the major source of conflicts of interest for associated 
persons); see also CCMC Letter (investor polling) supra footnote 21 (in connection with investor polling, 
noting that investors identify explaining “own compensation” as one of three “issues that matter most” to 
them).   
555
  See Primerica Letter and ASA Letter (including disclosure stating that financial professional compensation 
is typically affected by the amount of client assets the financial professional is responsible for and the fees 
and commissions those assets generate); see also SIFMA Letter and Schwab Letter I (including disclosure 
on how the firm pays professionals who provide investment advice). 
556
  See Regulation Best Interest Release, supra footnote 47, at Section II.C.1.b. 

 
168 
 
separately summarizing financial professionals’ compensation to help retail investors identify 
and assess these conflicts of interest that may affect the services they receive.
557
  We believe that 
requiring specific information on financial professional compensation and conflicts related to 
that compensation will provide improved clarity from the proposal and better help retail 
investors understand these conflicts and how they might impact a financial professional’s 
motivation.  We also believe it is useful to specifically highlight this conflict for retail investors, 
as it is a different type of payment and a different type of conflict than a conflict at the firm level.  
We further believe that by placing this discussion directly after the discussion on fees, costs and 
conflicts, it will mitigate potential investor confusion.  This approach is also consistent with 
Regulation Best Interest, which treats compensation to financial professionals and the conflicts 
of interest that such compensation creates as material facts that must be disclosed.
558
   
4. Disciplinary History 
The relationship summary will include a  separate section about whether a firm or its 
financial professionals have reportable disciplinary history and where investors can conduct 
further research on these events.
559
  Inclusion of a separate disciplinary history section is a 
change from the proposed relationship summary, where this information was included in the 
Additional Information section.
560
  Certain commenters suggested that we remove the 
                                                                                                                                                             
557
  See, e.g., Primerica Letter; SIFMA Letter; Schwab Letter I. 
558
  See Regulation Best Interest Release, supra footnote 47. 
559
  As proposed, we used the terms “legal or disciplinary events.”  However, we are adopting the terms “legal 
or disciplinary history” for greater precision.  
560
  See Proposing Release, supra footnote 5, at nn.270–71 and accompanying text. 

 
169 
 
requirement that firms disclose whether or not they have disciplinary history.
561
  Similarly, some 
commenters suggested that any disciplinary information should simply direct retail investors to 
resources where they could review a firm’s or a representative’s disciplinary history, without any 
firm-specific information in the relationship summary.
562
 
We have concluded, however, based on consideration of commenters a nd investor 
feedback received through surveys and studies, at roundtables and in Feedback Forms, to include 
the disciplinary history as a separate section of the relationship summary.
563
  These comments 
emphasized the importance of disciplinary history information and advocated that it should be 
placed in a more prominent position than as part of the Additional Information section.
564
  
Commenters also generally supported firm-specific disclosure as to whether the firm has 
disciplinary history.
565
  About 70% of commenters on Feedback Forms responded that they 
                                                                                                                                                             
561
  See, e.g., Wells Fargo Letter (arguing that any firm-based aspect of disciplinary disclosure is not fair to 
representatives of the firm without any history of wrongdoing); see also ACLI Letter; New York Life 
Letter (arguing that any firm-specific disciplinary history disclosure would prejudice large firms). 
562
  See, e.g., LPL Financial Letter (mock-up suggested that “[f]or free tools to research our firm, our financial 
advisors and other firms, including our disciplinary events...” investors should visit BrokerCheck or 
IAPD). 
563
  The IAC also recommended including disciplinary history in the relationship summary.  See IAC Broker-
Dealer Fiduciary Duty Recommendations, supra footnote 10 (“[W]e encourage the Commission to develop 
an approach to disclosure of disciplinary record that makes it easier for investors to assess the significance 
of disclosed events, particularly for firms that may have a large number of relatively insignificant technical 
violations.”). 
564
  See, e.g., CFA Letter I (“The required disclosure regarding disciplinary events does not give adequate 
prominence to this issue.”); NASAA Letter (“The descriptor ‘Additional Information’ is too vague to 
describe the important information in this section [and] should be recast as ‘Disciplinary History and 
Customer Rights and Remedies . . . .”); Trailhead Consulting Letter (“Legal and Disciplinary Actions are 
very important for an investor to consider and should not be ‘hidden’ in an Additional Information section.  
This information deserves its own separate section.”); IAA Letter.   
565
  See, e.g., CFA Letter I (“We believe this information is important enough to be highlighted under its own 
separate heading, ‘Do you have a disciplinary record?’”). 

 
170 
 
would seek out additional information about a firm’s disciplinary history.
566
  Similarly, more 
than 70% of investors surveyed in the RAND 2018 report reported that they were “very likely” 
or “somewhat likely” to look up the disciplinary history of a financial professional.
567
   
However, results from investor studies and surveys and investor comments on Feedback 
Forms supported the concern that the Additional Information section may not provide enough 
salience.  For example, in the RAND 2018 survey, the Additional Information section was most 
often selected as one of the two least useful sections of the proposed relationship summary.
568
  
On Feedback Forms, commenters rated the Additional Information section as “very useful” or 
“useful” less often than any other section of the relationship summary.
569
  One investor study 
                                                                                                                                                             
566
  See Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Question 3(e)). 
Some commented that, before viewing the relationship summary, they had not known that they could ask or 
how to check.  See, e.g., Anonymous02 Feedback Form (“did not know how to do that”); Anonymous03 
Feedback Form (“I looked up my advisor while reading through the summary”); Anonymous26 Feedback 
Form (“Now I know where to go”); Anonymous29 Feedback Form (“I didn’t know if asked – they had to 
answer”); see also Philadelphia Roundtable (investor participant noting that “checking your broker’s 
disciplinary record” is “something that people should do”).  
567
  See RAND 2018, supra footnote 13 (“More than 40 percent of respondents reported being very likely to 
look up the disciplinary history based on the information provided in the Relationship Summary, and 
another 35 percent reported being somewhat likely to look it up.  Only 5 percent reported being not at all 
likely to do so.”); see also Kleimann II, supra footnote 19 (study participants who viewed a redesigned 
form reported that they would research the company they are doing business with”); but see Schwab Letter 
I (Koski), supra footnote 21 (only 20% of survey participants selected “How to find disciplinary 
information about a firm or its representatives” when asked to select the four most important topics for a 
firm to communicate, from a list of 11 topics). 
568
  See RAND 2018, supra footnote 14 (Additional Information section rated as one of the two “least 
informative” sections by 66% of respondents; only 3% selected it as one of the two “most informative”); 
see also Cetera Letter II (Woelfel), supra footnote 17 (84% of survey respondents strongly or somewhat 
agreed that the “how to find additional information about a broker/adviser” and “how to find additional 
information about the firm,” fewer than for most other topics out of a series of nine topic options).   
569
  Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Question 2(f)) 
(Additional Information section rated as “not useful” or “unsure” by more commenters (20%) and “very 
useful” by fewer commenters (32%) relative to other sections of the relationship summary). 

 
171 
 
suggested a reason for these mixed results, finding that participants would skip the Additional 
Information section, in part because they did not understand that the websites in the section 
would allow them to review the disciplinary history of the investment adviser or broker-dealer 
that they were considering.
570
  Comments on Feedback Forms similarly suggest that information 
about how to research a firm’s disciplinary information should be presented more prominently 
and more simply in the relationship summary.
571
  After taking comments into consideration, we 
believe that a separate disciplinary history section is appropriate, with a requirement that firms 
explicitly state whether or not they have legal or disciplinary history so that investors can find 
the information in the summary with ease.    
The section will begin with the heading: “Do you or your financial professionals have 
legal or disciplinary history?”  Firms will answer “yes” or “no,” depending upon whether they or 
one of their financial professionals have a triggering event enumerated in the instructions, as 
discussed below.  The proposed relationship summary required a statement that the firm has 
legal and disciplinary events but did not require an affirmative statement that a firm or its 
financial professionals did not have disclosable events.  We are requiring a “No” answer in the 
                                                                                                                                                             
570
  See Kleimann I, supra footnote 19; see also Kleimann II, supra footnote 19 (noting that interview 
responses to links in the relationship summary “suggest that use is dependent on perceived relevance ... 
Some of that relevance can be built in with more specific descriptions of what can be found at the link.”). 
571
  Some commenters on Feedback Forms suggested moving the Additional Information section forward in the 
relationship summary.  See Anonymous14 Feedback Form (“Recommend add this to beginning of the 
pamphlet”); Durgin Feedback Form (“Additional info needs to be moved up”); Salkowitz Feedback Form 
(“Move this section to near the beginning”); Starmer2 Feedback Form (“put Key Questions and Additional 
Info up front to stimulate a conversation.”). Others commented that the presentation should be clearer.  See, 
e.g., Anonymous28 Feedback Form (“Would be better titled ‘How to find out about us’ or ‘Other 
information you need to know’”); Anonymous29 Feedback Form (“plain language”); Calderon Feedback 
Form (“say expressly where that information is found, with linked URL's”); Shepard Feedback Form (“the 
easier it is to access, the better”); Baker Feedback Form (“Please explain IAPD”).  

 
172 
 
final instructions where applicable, given the importance of disciplinary history and to provide a 
complete answer to the question in the heading.      
Regardless of whether firms report a “Yes” or “No” answer as to whether they or their 
financial professionals have legal or disciplinary history, the relationship summary will direct the 
retail investor to visit Investor.gov/CRS to research the firm and its financial professionals, as 
proposed.
572
  This is responsive to RAND 2018 survey results, which indicated that 37% of 
investors did not know where to research disciplinary history.
573
  Directing retail investors to the 
search tool is also consistent with the Commission’s Office of Investor Education and Advocacy 
initiative to encourage retail investors to do background checks on financial professionals and is 
intended to increase awareness of available search tools.
574
  In addition to disciplinary history, 
the search tools also can provide useful information regarding registration and licensing and 
financial professional employment history.      
                                                                                                                                                             
572
  Item 4.D.(i) of Form CRS.  Investor.gov includes a search function that searches the databases Web CRD
®
 
and IARD, and this search will direct an investor to BrokerCheck and/or IAPD, as appropriate, where the 
investor can research disciplinary history.   
573
  See RAND 2018, supra footnote 13. By contrast, 19% of surveyed investors cited the time and effort 
required and 10% of surveyed investors indicated that they would not look up a firm or financial 
professional’s disciplinary history because the information was not very important to the investor.  Id.  We 
believe this is also consistent with the IAC’s recommendation to “look at whether it might be beneficial to 
adopt a layered approach to [disciplinary history] disclosures, with the goal of developing a more 
abbreviated, user-friendly document for distribution to investors.”  IAC Broker-Dealer Fiduciary Duty 
Recommendations, supra footnote 10. 
574
  See https://www.investor.gov/research-before-you-invest.  

 
173 
 
The triggering events for a statement that a firm does have legal or disciplinary history 
are the same as proposed.
575
  Following the heading, firms will be required to state “Yes” in 
response to the heading questions if they currently disclose or are required to disclose (i) 
disciplinary information per Item 11 of Part 1A or Item 9 of Part 2A of Form ADV,
576 
or (ii) 
legal or disciplinary history per Items 11A–K of Form BD (“Uniform Application for Broker-
Dealer Registration”)
577
 except to the extent such information is not released to BrokerCheck 
pursuant to FINRA Rule 8312.
578
  Regarding their financial professionals, firms will determine 
                                                                                                                                                             
575
  See Proposed Item 7.B. of Form CRS.  In the proposal, firms with such events would have been required to 
state the following: “We have legal and disciplinary events.” Id.  For reasons discussed supra, we believe 
the question-and-answer formatting will make the relationship summary more useful to investors.   
576
  Item 4.B. of Form CRS.  Generally, investment advisers are required to disclose on Form ADV Part 2A any 
legal or disciplinary event, including pending or resolved criminal, civil and regulatory actions, if it 
occurred in the previous 10 years, that is material to a client’s (or prospective client’s) evaluation of the 
integrity of the adviser or its management personnel, and include events of the firm and its personnel.  See 
Amendments to Form ADV, Investment Advisers Act Release No. 3060 (Jul. 28, 2010) [75 FR 49233 
(Aug. 12, 2010)], at 22–27 (“Brochure Adopting Release”).  Items 9.A., 9.B., and 9.C. provide a list of 
disciplinary events that are presumptively material if they occurred in the previous 10 years.  However, 
Item 9 requires that a disciplinary event more than 10 years old be disclosed if the event is so serious that it 
remains material to a client’s or prospective client’s evaluation of the adviser and the integrity of its 
management.   
577
  Item 11 of Form BD requires disclosure on the relevant Disclosure Reporting Page (“DRP”) with respect 
to:  (A) felony convictions, guilty pleas, “no contest” pleas or charges in the past ten years; (B) investment-
related misdemeanor convictions, guilty pleas, “no contest” pleas or charges in the past ten years; (C) 
certain SEC or the Commodity Futures Trading Commission (“CFTC”) findings, orders or other regulatory 
actions (D) other federal regulatory agency, state regulatory agency, or foreign financial regulatory 
authority findings, orders or other regulatory actions; (E) self-regulatory organization or commodity 
exchange findings or disciplinary actions; (F) revocation or suspension of certain authorizations; (G) 
current regulatory proceedings that could result in “yes” answers to items (C), (D) and (E) above; (H) 
domestic or foreign court investment-related injunctions, findings, settlements or related civil proceedings; 
(I) bankruptcy petitions or SIPC trustee appointment; (J) denial, pay out or revocation of a bond; and (K) 
unsatisfied judgments or liens.  Some of these disclosures are only required if the relevant action occurred 
within the past ten years, while others must be disclosed if they occurred at any time.   
578
  Under FINRA Rule 8312, FINRA limits the information that is released to BrokerCheck in certain respects.  
For example, pursuant to FINRA Rule 8312(d)(2), FINRA shall not release “information reported on 
Registration Forms relating to regulatory investigations or proceedings if the reported regulatory 
investigation or proceeding was vacated or withdrawn by the instituting authority.”  We believe it is 
 

 
174 
 
whether they need to include an affirmative statement based on legal and disciplinary 
information on Form U4,
579
 Form U5,
580
 or Form U6.
581
  In particular, firms will be required to 
state “Yes” if they have financial professionals for whom disciplinary history is  reported per 
Items 14 A through M on Form U4, Items 7A or 7C through F on Form U5,
582
 or Form U6 
except to the extent such information is not released to BrokerCheck pursuant to FINRA Rule 
8312.
583
  Firms that do not have disclosable events for themselves or their financial professionals 
in connection with these provisions will state “No” in answer to the heading.
584
   
As noted above, several commenters opposed the approach of requiring firms to indicate 
in their relationship summaries whether they or their financial professionals have disciplinary 
history, questioning the value of the disclosure to retail investors,
585
 or citing to prejudicial or 
                                                                                                                                                             
appropriate to limit disclosure in the relationship summary to disciplinary information or history that would 
be released to BrokerCheck.   
579
  Form U4 (Uniform Application for Securities Industry Registration or Transfer) requires disclosure of 
registered representatives’ criminal, regulatory, and civil actions similar to those reported on Form BD as 
well as certain customer-initiated complaints, arbitration, and civil litigation cases. 
580
  Form U5 (Uniform Termination Notice for Securities Industry Registration) requires information about 
representatives’ termination from their employers. 
581
  Form U6 (Uniform Disciplinary Action Reporting Form) is used by SROs, regulators, and jurisdictions to 
report disciplinary actions against broker-dealers and associated persons.  This form is also used by FINRA 
to report final arbitration awards against broker-dealers and associated persons. 
582
  Item 7(b) of Form BD (Internal Review Disclosure) is not released to BrokerCheck by FINRA, pursuant to 
FINRA Rule 8312(d)(3). 
583
  Item 4.B.(iii) of Form CRS.   
584
  Item 4.C. of Form CRS. 
585
  See NSCP Letter (“NSCP members believe that extending the disclosure of disciplinary history to be 
included in Form CRS would add additional administrative burden and costs outweighing any true benefit 
to the customer.”); Wells Fargo Letter (“such a broad statement will add no value”). 

 
175 
 
competitive concerns.
586
  These firms recommended that the relationship summary include only 
a prompt for investors to research the disciplinary history of the firm or financial professional, 
directing them to Investor.gov/CRS.
587
   
We recognize that the disciplinary history of firms and their financial professionals is 
already publicly available, as commenters have noted.  From studies and investor feedback, 
however, we also understand that investors view disciplinary history as significant to their 
decision of whether or not to engage with a firm or a financial professional, but in many cases 
are unaware of the need for researching or the tools available to research whether disciplinary 
history exists.
588
  Highlighting disciplinary history in this way provides information to retail 
investors before they enter into a relationship with a particular firm and financial professional 
and a “yes” response will alert retail investors that there is disciplinary history they may want to 
                                                                                                                                                             
586
  See Wells Fargo Letter (arguing that the statement will lead clients to draw unfair conclusions about both 
the firm and its financial professionals); New York Life Letter (
arguing that the statement prejudices 
larger, established firms that will usually have a small number of disclosure events to report for 
current or former registered representatives)
; ACLI Letter (same). 
587
  See Wells Fargo Letter; New York Life Letter; ACLI Letter.   
588
  See, e.g., Staff of the Securities and Exchange Commission, Study Regarding Financial Literacy Among 
Investors as Required by Section 917 of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Aug. 2012), at iv, v, xiv, 37, 73, 121–23 and 131–32, at nn.317–19 and accompanying text, available at 
https://www.sec.gov/news/studies/2012/917-financial-literacy-study-part1.pdf (“917 Financial Literacy 
Study”) ([A]bout 76.5% of the online survey respondents reported that, in selecting their current adviser, 
they did not use an SEC-sponsored website to find information about the adviser.  73% of respondents 
stated that they would check IAPD if they were made aware of its existence.  Of that subset—those who 
reported not using an SEC-sponsored website—approximately 85.2% indicated that they did not know that 
such a website was available for that purpose.  Of that majority (i.e., a further subset)—those who were 
unaware of such a website—approximately 73.5% reported that they would review information about their 
adviser on an SEC-sponsored website if they knew it were available); see also RAND 2018, supra footnote 
13 (when investors were asked why they would not look up disciplinary history, 37 percent of all 
respondents indicated that they did not know where to get the information, whereas 19 percent of all 
respondents indicated that it would take too much time or effort). 

 
176 
 
research, review, or discuss with their financial professional.
589
  As there is no required waiting 
period between the delivery of the relationship summary to the retail investor and the time that 
the retail investor may enter into a relationship with or an order placed by a firm, highlighting the 
disciplinary information allows the retail investor time to consider any disciplinary history before 
moving forward or to monitor the relationship or financial professional more closely if the retail 
investor decides to move forward at that time.  By basing this disclosure on information that is 
already reported elsewhere and also requiring the relationship summary to include details about 
where to find more information, we give retail investors the tools to learn more about firms and 
financial professionals. 
We are not persuaded by commenters who believed that these disclosures are unduly 
prejudicial or would have sufficient competitive concerns and argued that we should not require 
this information.  Firms or financial professionals would have the opportunity to provide more 
information about and encourage retail investors to ask follow-up questions regarding the nature, 
scope, or severity of any disciplinary history, so that retail investors have the information they 
need to decide on a relationship.  In particular, financial professionals who themselves have no 
disciplinary history can make clear that a “Yes” disclosure in response to the heading question 
relates to the firm and other personnel (if applicable) and not to them.  While we recognize that 
larger firms might be more likely to respond affirmatively to this question than smaller firms, we 
have determined to require this disclosure because we believe that, on balance, the potential 
benefit to the retail investor of seeing at a glance whether a firm or its financial professionals 
                                                                                                                                                             
589
  See Miami Roundtable (investor noting that she had gone on Investor.gov to learn about the disciplinary 
history of her financial professional and noting that she was “happy when [she] checked” the website). 

 
177 
 
have disciplinary history (which may encourage the investor to conduct further research or 
monitor the relationship or financial professional more closely) justifies requiring the disclosures 
notwithstanding the concerns raised by commenters, particularly given the importance that 
commenters placed on disciplinary history. 
A few commenters suggested revisions to the specific events that would trigger a 
disciplinary event disclosure in the proposed relationship summary.
590
  We have considered 
these comments but have determined to adopt the triggers as proposed.  As noted in the 
Proposing Release, those disclosable events are those that we believe may generally assist retail 
investors in evaluating the integrity of a firm and its financial professionals.
591
  Additionally, 
these triggering events are already disclosed on existing systems for other regulatory purposes.  
As such, there will not be additional regulatory burdens for a determination of disciplinary 
history for the purposes of the relationship summary.    
Different requirements between other aspects of Form ADV or Form BD and the 
relationship summary also could cause confusion and compliance uncertainty.  One commenter 
suggested basing the relationship summary disciplinary disclosure around a standardized set of 
events that would trigger disclosures specific to the relationship summary.
592
  This approach may 
have led to advisers or broker-dealers having publicly listed disclosure events on BrokerCheck or 
                                                                                                                                                             
590
  See CFA Institute Letter I (“For parity and comparability, we suggest requiring that the specific events that 
would trigger disclosure under these requirements be the same for both investment advisers and broker-
dealers”); Comment Letter of the Business Law Section of the State Bar of Texas, Investment Funds 
Committee (Aug. 7, 2018) (advocating that an investment adviser disclose that it has a disciplinary event 
only based on Item 9 of Part 2A of Form ADV, rather than both Items 9 and 11). 
591
  See Proposing Release, supra footnote 5, at nn.271–73 and accompanying text. 
592
  See CFA Institute Letter I. 

 
178 
 
IAPD yet answering “No” to a question of whether they or their financial professionals have 
legal or disciplinary history.  We believe that result could have been confusing or misleading to 
retail investors.  By contrast, the approach we adopt allows for consistency across public 
information as to whether or not a firm or financial professional has a disciplinary event and 
leverages existing disclosure reporting systems.   We believe that this consistency justifies not 
adopting a standardized set of events triggering disclosure on the relationship summary.  
Furthermore, the statement encouraging retail investors to visit Investor.gov/CRS for more 
information will help retail investors to more easily learn and compare additional details from the 
firms themselves and from their existing disclosures.
593
  
Firms also will include the following conversation starter:  “As a financial professional, 
do you have any disciplinary history?  For what type of conduct?”
594
  This conversation starter is 
intended to take the place of a similarly worded key question.
595
  However, because this item’s 
heading asks a similar question about disciplinary history with respect to the firm, we believe 
that the conversation starter would be most useful specifically with respect to the financial 
professional.  This question will allow retail investors to assess that financial professional’s 
disciplinary history as well as engage in further discussion about those events or any events 
applicable to the firm.  In addition, this conversation starter is designed to encourage a discussion 
about any differences between the firm’s disciplinary history and that financial professional’s 
                                                                                                                                                             
593
  Item 4.D. of Form CRS.   
594
  Item 4.D.(ii) of Form CRS.   
595
  See Proposed Item 8.8 of Form CRS (“Do you or your firm have a disciplinary history?  For what type of 
conduct?”); see also supra Section II.A.4 (discussing removal of the “Key Questions to Ask” section). 

 
179 
 
history, if applicable (e.g., if the financial professional has no disciplinary history while his or 
her firm has reportable discipline necessitating a “Yes” response to the heading question). 
5. Additional Information 
At the end of the relationship summary, firms will state where the retail investor can find 
additional information about their brokerage or investment advisory services, as proposed.
596
  
This information should be disclosed prominently at the end of the relationship summary.  
However, unlike the proposed relationship summary, the adopted instructions do not prescribe 
the different references that a broker-dealer and investment adviser must include for such 
direction and do not require a heading for the section.
597
  This approach is consistent with our 
intent to provide firms additional flexibility to provide information most useful to retail 
investors.
598
   In addition, removing the prescribed wording from this section avoids potentially 
duplicative disclosure, as the Introduction now includes a statement that free and simple tools are 
available to research firms and financial professionals at Investor.gov/CRS.    Investor.gov 
                                                                                                                                                             
596
  See Proposed Item 7.E. of Form CRS.  We are also requiring a statement of where retail investors can 
request a copy of the relationship summary.   
597
  As proposed, broker-dealers would have had to state that, to find additional information, retail investors 
should visit BrokerCheck, the firm’s website, and the retail investor’s account agreement.  In addition, 
broker-dealers would link to a portion of their website with up-to-date information and a link to 
BrokerCheck.  If the firm did not have a public website, the broker-dealer would have been required to 
include a toll-free telephone number where retail investors could request up-to-date information.  See 
Proposed Item 7.E.1. of Form CRS. 
 Investment advisers would have had to state that, to find additional information, retail investors should see 
the firm’s Form ADV brochure on IAPD on Investor.gov and any brochure supplement the firm provides.  
If the adviser maintains its current Form ADV on a public website, it would have had to state the website 
address.  If the adviser had no such website, a link to adviserinfo.sec.gov would have had to be provided as 
well as a toll-free telephone number where retail investors could request up-to-date information.  See 
Proposed Item 7.E.2. of Form CRS. 
598
  See supra footnotes 76–83 and accompanying text. 

 
180 
 
provides investors access to search for firms on BrokerCheck and IAPD, references to both of 
which would have been required in prescribed wording in the proposed relationship summary.
599
  
The flexibility is  also responsive to observations reported in surveys and studies and comments 
from investors at roundtables and on the Feedback Forms indicating that investors found the 
proposed “Additional Information” section less helpful compared to other sections in the 
relationship summary.
600
  Consistent with our layered disclosure approach, we encourage 
hyperlinks, QR codes, or other means of facilitating access for retail investors to obtain 
additional information.
601
 
We also are not adopting the proposed requirement that firms include information on how 
retail investors should report complaints about their investments, investment accounts, or 
financial professionals in the relationship summary.
602
  While some commenters supported 
                                                                                                                                                             
599
  See Item 1.A. of Form CRS.  As discussed above, we are requiring firms to include the reference to 
Investor.gov/CRS in the Introduction in part to highlight to retail investors the ability to research firms and 
financial professionals as well as the ability to review educational materials at the website.  See supra 
Section II.B.1. 
600
  See supra footnote 568–569 and accompanying text; see also Philadelphia Roundtable (confusion 
regarding the difference between FINRA and the Commission as well as a statement that there are “too 
many Websites” in the Additional Information section). 
601
  See supra Section II.A.3. 
602
  The proposal included the following instruction in the Additional Information section:  “To report a 
problem to the SEC, visit Investor.gov or call the SEC’s toll-free investor assistance line at (800) 732-0330.  
[To report a problem to FINRA, [ ].]  If you have a problem with your investments, investment account or a 
financial professional, contact us in writing at [insert your primary business address].”  If you are a broker-
dealer or dual registrant, include the bracketed language.  It is your responsibility to review the current 
telephone numbers for the SEC and FINRA no less often than annually and update as necessary.”  
Proposed Item 7.D. of Form CRS. 

 
181 
 
including information on how retail investors could report complaints,
603
 others disagreed with 
this approach
604
 or suggested that it may not be information that is as critical at the beginning of 
a relationship.
605
  Commenters submitting their own mock-ups of the relationship summary 
likewise took different approaches as to whether or not to include this information.
606
 
We are requiring a conversation starter in this part of the relationship summary, which 
incorporates and adapts a key question from the proposal: “ Who is my primary contact person?  
Is he or she a representative of an investment adviser or a broker-dealer?  Who can I talk to if I 
have concerns about how this person is treating me?”
607
  With required text features to highlight 
this conversation starter, as well as information from the Introduction to direct retail investors to 
                                                                                                                                                             
603
  See, e.g., NASAA Letter (suggesting that the Additional Information section be recast as “Disciplinary 
History and Customer Rights and Remedies” and include, among other things, a discussion of the legal 
rights and the remedies available to customers in the event of breach (including whether the customer will 
be subject to mandatory arbitration) and contact information for regulators where investors may file 
complaints or ask questions about disciplinary history); see also Philadelphia Roundtable (investor 
expressing that she would like to know where to file a complaint, but not realizing that the desired 
information was on the proposed relationship summary). 
604
  See Wells Fargo Letter (“We also don’t agree that Form CRS needs to get into details on how an investor 
can report a problem.  Such a disclosure is outside of the overall purpose of the summary and will detract 
from both the readability and length of the document.”). 
605
  See Trailhead Consulting Letter (“[T]his document is encouraged or required to be delivered prior to 
entering into a relationship or transaction, so hopefully problems have yet to occur. The account statements 
or investment adviser reports should include statements informing investors how to report a problem.”).  
But see Cetera Letter II (Woelfel) (86% of survey respondents strongly or somewhat agreed that “how to 
report a problem with your investments” was an important topic to be discussed in the relationship 
summary and 84% of survey respondents strongly or somewhat agreed that “how to report a problem with a 
financial professional” was an important topic; within a range of 88% to 81% of ratings for 9 different 
topics). 
606
  Compare, e.g., LPL Financial Letter (including hyperlinks to BrokerCheck and IAPD in part “to report a 
problem” in mock-up) and IAA Letter I (no reference to problems or reporting complaints in mock-up).   
607
  Item 5.C. of Form CRS.  In comparison, the analogous proposed key question was “Who is the primary 
contact person for my account, and is he or she a representative of an investment adviser or a broker-
dealer?  What can you tell me about his or her legal obligations to me?  If I have concerns about how this 
person is treating me, who can I talk to?”  Proposed Item 8.10 of Form CRS.   

 
182 
 
Investor.gov/CRS, we believe that retail investors will be able to find information on who to 
contact and how to report a complaint to the firm at the appropriate time, and Investor.gov 
includes links to submit questions and complaints to the Commission.  In light of the mixed 
feedback from commenters and the changes to the form designed to enhance flexibility and 
usability, we are not requiring firms to include more detailed information about submitting 
complaints, as proposed, to enable the disclosures in the relationship summary to focus on other 
information about the firm and its services. 
We are also requiring firms to include a telephone number where retail investors can 
request up-to-date information and request a copy of the relationship summary.
608
  This differs 
from the proposal, which required only those firms that do not have a public website to include a 
toll-free number that retail investors may call to request documents.
609
  Some of the commenter 
mock-ups included a telephone number even though the firms maintained a public website.
610
  A 
commenter who recommended including a contact telephone number in the relationship 
summary did not specify that it must be toll-free and we received a mock-up with a placeholder 
for a telephone number that was not specifically toll-free.
611
   
After consideration of these comments and mock-ups, we determined that all firms 
should include a telephone number in the relationship summary.  We continue to believe it is 
important for retail investors to have firm contact information in the event that they would like to 
                                                                                                                                                             
608
  Item 5.B. of Form CRS. 
609
  See Proposed General Instruction 8.(a) to Form CRS.   
610
  See, e.g., Fidelity Letter (mock-up) and Primerica Letter (mock-up).  
611
  See IAA Letter I and Primerica Letter (mock-up). 

 
183 
 
request disclosures and there is no public website for that firm that the investor may easily 
access.    In addition, we anticipate that requiring all firms to include a telephone number will 
more readily accommodate retail investors who prefer communicating with firms over the phone 
and will facilitate their requests for up-to-date information and a copy of the relationship 
summary.   If firms do not already have a toll-free telephone number, they will not be required to 
obtain one to comply with the requirements of the relationship summary.  Firms will have the 
flexibility to decide whether or not the telephone number they provide in their relationship 
summary will be toll-free.   
6. Proposed Items Omitted in Final Instructions 
The proposal included two sections that we are not adopting as separate sections in the 
relationship summary.
612
  As discussed above, the relationship summary will not include a 
separate section for “Key Questions to Ask;” instead, the topics covered by the proposed key 
questions will be integrated throughout the relationship summary as headings to items or as 
“conversation starters.”
613
 
The relationship summary will also not include the Comparisons section for investment 
advisers and broker-dealers, as proposed.  Standalone broker-dealers would have been required 
to include the following information, using prescribed wording, about a generalized retail 
                                                                                                                                                             
612
  In addition to the reasons discussed below, removing these sections also may help alleviate concerns from 
commenters that the proposed relationship summary was trying to “do too much.”  E.g., Schwab Letter I; 
SIFMA Letter; Comment Letter of UBS Global Wealth Management (Aug. 7, 2018) (“UBS Letter”); see 
also AARP Letter (suggesting that the relationship summary be shortened to avoid “information 
overload”); CFA Institute Letter I (the proposed relationship summary is “too wordy, lacks design elements 
that engage the reader, and, in many respects, is too nuanced for the average retail investor who is trying to 
understand the differences between broker-dealers and investment advisers”). 
613
  See supra Section II.A.4.   

 
184 
 
investment adviser:  (i) the principal type of fees; (ii) services investment advisers generally 
provide; (iii) the applicable legal standard of conduct; and (iv) certain incentives based on an 
investment adviser’s asset-based fee structure.  For standalone investment advisers, this section 
would have required them to include parallel categories of information regarding broker-
dealers.
614
    
Many commenters opposed including discussions comparing investment advisers and 
broker-dealers.  Some commenters stated that it was inappropriate for the Commission to require 
firms to describe products and services that they do not offer and about which they may have 
limited or no expertise.
615
  Other commenters had concerns with the prescribed wording, which 
they said may increase investor confusion or be misleading with prescribed wording that would 
not reflect the likely relationship that an investor would have with a specific firm.
616
  Some 
commenters believed that the wording in the comparison section favored broker-dealers over 
investment advisers.
617
  Others indicated that the comparisons should allow for discussions 
regarding insurance products.
618
  As an alternative, some commenters suggested that the 
Commission include the information intended for the proposed Comparison section on the 
                                                                                                                                                             
614
  See Proposed Item 5 of Form CRS. 
615
  See, e.g., ACLI Letter.   
616
  See IAA Letter I (arguing that the wording of the section was “too boilerplate” and would prohibit firms 
from providing useful information about what the specific investor’s relationship would be with a firm). 
617
  See CFA Letter I (arguing that “there are a number of statements ... that many, if not most, advisers would 
likely object to” in the prescribed wording); IAA Letter I. 
618
  See New York Life Letter; Northwestern Mutual Letter. 

 
185 
 
Commission’s website as educational material,
619
 and that firms could link to the educational 
material from their relationship summaries.
620
  Given such concerns and suggestions, a number 
of mock-ups did not include a comparison section.
621
 
Comments on Feedback Forms indicated that this section was less useful than other 
sections of the relationship summary; fewer commenters rated this section as either “very useful” 
or “useful” compared to the other sections of the relationship summary.
622
 Many narrative 
comments on Feedback Forms relating to this section (even from those who graded the section as 
“useful”) indicated that these commenters did not find this section informative and wanted more 
information to help them compare firms.
623
  Feedback on this section from the RAND 2018 
report and other surveys and studies was limited because the RAND 2018 report, and other 
surveys and studies, generally focused on the sample proposed dual registrant relationship 
summary.  However, in a survey that focused on the standalone investment adviser relationship 
                                                                                                                                                             
619
  See IAA Letter I; Schnase Letter; Pickard Djinis and Pisarri Letter.  
620
  See, e.g., SIFMA Letter; Schwab Letter I. 
621
  See, e.g., IAA Letter I; SIFMA Letter; Schwab Letter I.  Other mock-ups included a “first level” disclosure 
that involved generalized comparisons between investment advisers and broker-dealers, with the 
relationship summary including firm-specific information.  See LPL Financial Letter; Primerica Letter. 
622
  Twenty-nine commenters (about 30%) on Feedback Forms rated the comparison section as “Very Useful”; 
39 (about 40%) rated it as “Useful”; 17 (almost 20%) responded that they did not find this section useful or 
were unsure.  See Feedback Forms Comment Summary (responses to Question 2(d), supra footnote 11.  
623
  See, e.g., Anonymous07 Feedback Form (“Any example of how you use either or both for achieving 
goals”); Anonymous13 Feedback Form (“... list what is the same for both, as much is, then only list 
differences in separate columns. What I really want is what's the differences”); Brantley Feedback Form 
(“when is it best to use each type of account - maybe some examples”); Coleman Feedback Form (“...a 
word that suggests when one type of relationship would be more beneficial”); Hawkins Feedback Form 
(“There are so many different account types and investment options.  More information needed”); Murphy 
Feedback Form (“Too complicated to follow”); Schreiner Feedback Form (“highlight differences”).  

 
186 
 
summary, most survey respondents indicated that this section was not useful in helping them to 
understand differences between firms.
624
  
We have determined not to require a separate Comparisons section in the relationship 
summary for broker-dealers and investment advi  sers that are not dual registrants.   In lieu of the 
separate section with prescribed wording, the final instructions include several requirements that 
will help facilitate comparisons among firms.  First, each relationship summary will be required 
to provide answers to the same questions in a standard order.
625
  Second, dual registrants will be 
required to provide either a combined relationship summary describing both brokerage and 
advisory services, presenting the information with equal prominence and in a manner that 
facilitates comparison of the two types of services or, alternatively, will be required to provide 
separate relationship summaries that clearly distinguish and facilitate comparison of the firm’s 
brokerage and investment advisory services.
626
  Similarly, a firm that has an affiliate providing 
brokerage or advisory services may choose to prepare a single relationship summary, or two 
separate relationship summaries, discussing the services provided by both firms, but only if the 
                                                                                                                                                             
624
  See Betterment Letter I (Hotspex), supra footnote 18 (only 23% of survey respondents indicated that the 
disclosure on a version of the sample proposed standalone adviser relationship summary helped them to 
understand how other investment firms differed from Betterment).  
625
  See supra Section II.A.2.  
626
  See supra Section II.A.5.  Additionally, and as noted above, firms that prepare two separate relationship 
summaries must deliver both relationship summaries to each retail investor with equal prominence and at 
the same time, without regard to whether the particular retail investor qualifies for those retail services or 
accounts.  See id.; see also General Instruction 5.A. to Form CRS. 

 
187 
 
relationship summary or summaries are designed in a manner that facilitates comparison of the 
brokerage and investment advisory services.
627
 
These changes enhance the relationship summary’s usability and design and, we believe, 
will improve comparisons among firms by retail investors using the relationship summaries.  The 
relationship summaries will have differentiated, firm-specific information in a comparable 
format as compared to the proposed approach of requiring prescribed and more generalized 
information.  We believe this comparability and differentiation among firm relationship 
summaries will enhance usability for retail investors.  In addition, removing the prescribed 
wording allows firms to describe their services and fees more accurately while simultaneously 
mitigating concerns commenters raised regarding potentially misleading or inappropriate 
prescribed wording.  Investors seeking more general information about investment advisers and 
broker-dealers will know they can refer to educational materials that are available on the 
Commission’s website, Investor.gov, and elsewhere for investor research and education, 
including Investor.gov/CRS, which the relationship summary’s Introduction must reference.
628
   
C. Filing, Delivery, and Updating Requirements  
We are adopting the filing, delivery, and updating requirements with several 
modifications from the proposal.  Firms will file copies of their relationship summaries with the 
Commission, will update the disclosures when the information becomes materially inaccurate, 
and will communicate any changes to retail investors who are existing clients or customers.  The 
                                                                                                                                                             
627
  See General Instruction 5.B.(i) to Form CRS. 
628
  See Item 1.B. of Form CRS. 

 
188 
 
delivery requirements are designed to ensure a relationship summary is provided before or at the 
time a retail investor enters into a relationship with the firm and when changes are made to the 
services the firm provides.   
We made several modifications to the proposed requirements in response to comments, in 
order to make it easier for retail investors to discern changes in updated relationship summaries, 
streamline the filing requirements, and provide greater clarity regarding several of the delivery 
requirements.  As described further below, some of the key revisions include:  
• Broker-Dealer Initial Delivery Obligations.  Broker-dealers will be 
required to deliver the relationship summary before or at the earliest of:  (i) a 
recommendation of an account type,  a securities transaction, or an investment strategy 
involving securities; (ii) placing an order for the retail investor; or (iii) the opening of a 
brokerage account for the retail investor, instead of before or at the time the retail 
investor first engages the broker-dealer’s services, as proposed.  We encourage delivery 
of the relationship summary to new or prospective clients or customers at the first 
possible opportunity, including the initial point of contact. 
• Other Delivery Obligations.  Firms will deliver the relationship summary 
to existing retail investor clients and customers before or at the time firms open a new 
account that is different from the retail investor’s existing account, as was proposed.  In 
addition, firms will deliver the relationship summary when they recommend that the 
retail investor roll over assets from a retirement account, or when they recommend or 
provide a new service or investment outside of a formal account (e.g., variable annuities 
or a first-time purchase of a direct-sold mutual fund through a “check and application” 
process).   In response to commenters’ concerns, these changes are intended to replace the 

 
189 
 
proposed instruction that firms deliver the relationship summary when making changes to 
an existing account that would “materially change the nature and scope” of the firm’s 
relationship with the retail investor with more concrete delivery triggers. 
• Highlighting Changes.   In a change from the proposal, we are adding a 
requirement that firms delivering updated relationship summaries to existing clients or 
customers also highlight the most recent changes by, for example, marking the revised 
text or including a summary of material changes.  This additional disclosure must be filed 
as an exhibit to the unmarked amended relationship summary (but would not be counted 
toward the two-page or four-page limit, as applicable). 
• New Filing Requirements.  As proposed, we are requiring that firms file 
the relationship summary using a text-searchable format.  However, in response to 
comments received, we are also requiring that the filings contain machine-readable 
headings to enhance the ability to compare information submitted by different firms.  
Also in response to comments, which we solicited on this topic, we are changing the 
system that broker-dealers will use to file Form CRS from EDGAR, as proposed, to Web 
CRD
®
.  Dual registrants will be required to file their relationship summaries using both 
IARD and Web CRD
®
. 
Finally, we are revising the definition of retail investor to align more closely with the 
definition of “retail customer” in Regulation Best Interest.  As discussed, below, we do not 
believe that this results in substantive changes in the definition as proposed.   
1. Definition of Retail Investor  
For purposes of Form CRS, “retail investor” is defined as “a natural person, or the legal 
representative of such natural person, who seeks to receive or receives services primarily for 

 
190 
 
personal, family or household purposes.”
629
  The proposal defined the term retail investor as “a 
prospective or existing client or customer who is a natural person (an individual), including trusts 
or other similar entities that represent natural persons, even if another person is a trustee or 
managing agent.”  T his definition was different from the definition of “retail customer” in 
proposed Regulation Best Interest
630
 because the relationship summary was intended for an 
earlier stage of the relationship between an investor and a financial professional, and we thought 
it would be beneficial for all natural persons to receive information to facilitate their account 
choices.
631
   
Many commenters recommended that we use a single definition for both “retail investor” 
and “retail customer” because consistent definitions would facilitate compliance and 
administrative efficiency.
632
  Commenters were concerned that differences between the 
definitions could result in a requirement to deliver the relationship summary to broker-dealer 
                                                                                                                                                             
629
  General Instruction 11.E. to Form CRS. 
630
  Compare Proposed Exchange Act rule 15l-1(b)(1) (defining retail customer to mean “a person, or the legal 
representative of such person, who: (A) Receives a recommendation of any securities transaction or 
investment strategy involving securities from a broker, dealer, or a natural person who is an associated 
person of a broker or dealer; and (B) Uses the recommendation primarily for personal, family, or household 
purposes.”). 
631
  Proposing Release, supra footnote 5, at Section II, at n.29. 
632
  See Committee of Annuity Insurers Letter (“a standardized definition ... would be more efficient and 
enable firms to more easily comply”); ICI Letter (“a single definition ... would provide important 
administrative efficiencies, facilitate compliance, and avoid confusion”); see also Bank of America Letter; 
CFA Letter I; Cetera Letter I; Fidelity Letter; Comment Letter of Franklin Resources, Inc. (Aug. 6, 2018); 
Invesco Letter; Comment Letter of Morgan Stanley Smith Barney, LLC (Aug. 7, 2018) (“Morgan Stanley 
Letter”); Oppenheimer Letter; Comment Letter of Raymond James Financial (Aug. 7, 2018) (“Raymond 
James Letter”); SIFMA Letter; TIAA Letter; Transamerica Letter.  

 
191 
 
customers who may not be “retail customers” for purposes of Regulation Best Interest.
633
  Many 
commenters further recommended that the definitions of “retail investor” and “retail customer” 
should both be conformed to rules issued by FINRA, which use a net worth test to distinguish 
institutional and “retail” customers.
634
  Commenters also asked us to clarify that the relationship 
summary need not be delivered to certain professionals retained to represent a natural person
635
 
and address whether participants in workplace retirement plans will be retail investors who 
should receive the relationship summary.
636
   
In response to comments, the final instructions adopt a definition of retail investor that is 
consistent with the definition of retail customer in Regulation Best Interest, but differs to reflect 
differences between the relationship summary delivery requirement and the obligations of 
broker-dealers under Regulation Best Interest, including that the relationship summary is 
required whether or not there is a recommendation and covers any prospective and existing 
clients and customers (i.e., a person who “seeks to receive or receives services”) of investment 
advisers as well as broker-dealers.
637
  Specifically, under Regulation Best Interest, retail 
                                                                                                                                                             
633
  See, e.g., SIFMA Letter; TIAA Letter.   
634
  See, e.g., SIFMA Letter (referring to FINRA Rule 2210); Cetera Letter I; Investacorp Letter; Morgan 
Stanley Letter; TIAA Letter; UBS Letter; Wells Fargo Letter. 
635
  E.g., Comment Letter of the American Bankers Association (Aug. 7, 2018) (“American Bankers 
Association Letter”); IAA Letter I; ICI Letter; Oppenheimer Letter; Prudential Letter; T. Rowe Letter; 
Wells Fargo Letter.  
636
  E.g., Comment Letter of Empower Retirement (Aug. 2, 2018) (“Empower Retirement Letter”); Fidelity 
Letter; Comment Letter of Groom Law Group (Aug. 7, 2018) (“Groom Law Letter”); IAA Letter I; ICI 
Letter; IRI Letter; Invesco Letter; Comment Letter of the National Association of Government Defined 
Contribution Plans (Aug. 7, 2018) (“NAGDA Letter”); Oppenheimer Letter; Comment Letter of SPARK 
Institute, Inc. (Aug. 7, 2018) (“SPARK Letter”); T. Rowe Letter.   
637
  See Regulation Best Interest Release, supra footnote 47, at Section II.B.3.c. 

 
192 
 
customer will be defined as “a natural person, or the legal representative of such natural person, 
who: (A) receives a recommendation of any securities transaction or investment strategy 
involving securities from a broker, dealer, or a natural person who is an associated person of a 
broker or dealer; and (B) uses the recommendation primarily for personal, family, or household 
purposes.”
638
   Like the definition of retail customer in Regulation Best Interest, the definition of 
retail investor in the final instructions includes natural persons
639
 who seek to receive or receive 
services “primarily for personal, family or household purposes” and the “legal representatives of 
such natural persons.”    In addition, we provide an interpretation on who would be considered to 
be a “legal representative” for purposes of this definition. 
The proposed definition of retail investor did not include the phrase “personal, family or 
household purposes.”  No commenters addressed whether or not to include this phrase in the 
Form CRS definition of retail investor, other than commenting generally that they supported 
conforming both definitions.  Commenters did comment and request clarification of t his aspect 
of the definition of “retail customer” in Regulation Best Interest.
640
  
We believe the final definition of retail investor remains consistent with our objective to 
provide all natural persons with information to facilitate their understanding of their choices 
among firms and types of accounts.    Firms will be required to deliver the relationship summary 
                                                                                                                                                             
638
  Exchange Act Rule 15l-1(b)(1). 
639
  The proposed definition used the language “a natural person (an individual).”  While the final definition 
excludes the parenthetical reference to “an individual,” we do not intend any substantive change because a 
reference to a natural person typically includes any individual.  
640
  See Regulation Best Interest Release, supra footnote 47, at Section II.B.3a (describing comments).   

 
193 
 
to individuals seeking brokerage and investment advisory services in connection with any of the 
many different reasons that an individual may seek these services, including, for example, 
retirement, education and other personal, family or household saving and investing objectives.  
The final definition of retail investor will exclude natural persons seeking these services for 
commercial or business purposes, such as, for example, where an employee seeks services for an 
employer or an individual seeks services for a small business or on behalf of another non-natural 
person entity such as a charitable trust.  However, firms must deliver the relationship summary to 
natural persons who might be seeking services for a mix of personal and commercial or other 
non-personal purposes, such as a sole proprietor or small business owner who may engage a firm 
or financial professional for multiple accounts and for personal as well as business purposes.  
Where firms do not know whether a natural person is seeking services for something other than 
personal, family, or household purposes at the beginning of a relationship,
 
they may treat that 
natural person as a retail investor for purposes of delivery of the relationship summary.
641
 
As in the proposal, the final retail investor definition will capture natural persons without 
any distinction based on net worth.  While a number of commenters argued that firms should not 
be required to deliver a relationship summary to investors that meet certain asset or net worth 
thresholds,
642
 others opposed narrowing the definition based on a net worth test or other test.
643
  
                                                                                                                                                             
641
  As explained in Regulation Best Interest Release, supra footnote 47, at Section II.B.3a, we interpret 
“personal, family or household purposes” as used in the definition of retail customer to mean any 
recommendation to a natural person for his or her account, and we believe that, pursuant to the Care 
Obligation of Regulation Best Interest, broker-dealers are able to obtain sufficient facts to determine the 
purpose for which a recommendation will be used. 
642
  For example, SIFMA’s comments refer to FINRA Rule 2210, which treats accounts of natural persons with 
$50 million or more in assets as institutional investors; SIFMA explains that these investors are “among the 
wealthiest and most sophisticated customers and often have multiple professional fiduciaries and advisers, 
 

 
194 
 
We continue to believe that the retail investor definition should not distinguish based on a net 
worth or other asset threshold test and that all individual investors would benefit from clear and 
succinct disclosure regarding key aspects of available brokerage and advisory relationships.  As 
noted in the proposal, section 913 of the Dodd-Frank Act defines “retail customer” to include 
natural persons and legal representatives of natural persons without distinction based on assets or 
net worth.
644
  Further, we believe that it also may be impractical to include a net worth or other 
test based on asset thresholds in the definition because it could be difficult for firms to determine 
a retail investor’s net worth at the outset of the relationship when the relationship summary must 
be provided. 
To conform definitions, the final definition of retail investor substitutes the language “the 
legal representative of such natural person” for language in the proposal referring to “ a trust or 
other similar entity that represents natural persons, even if another person is a trustee or 
managing agent of the trust.”
645
  We believe this is a clarification and not a substantive change 
from the proposal because it retains coverage of trusts and other similar legal entities that 
                                                                                                                                                             
apart  from  their  broker-dealer  relationships”  and  “do  not  function  as  ‘retail  customers’”;  see  also  Cetera 
Letter  I;  Investacorp  Letter;  Morgan  Stanley  Letter;  TIAA  Letter;  UBS  Letter;  Wells  Fargo  Letter.    Other  
commenters suggested different tests of financial sophistication, e.g., Advisers Act Rule 205-3 definition of 
“qualified clients” (a $2 million net worth test), see Comment Letter of American Investment Council (Aug. 
7,  2018)  (“American  Investment  Council  Letter”);  Comment  Letter  of  Loan  Syndications  and  Trading  
Association  (Aug.  7,  2018);  Comment  Letter  of  the  Managed  Funds  Association  Alternative  Investment  
Management Association (Aug. 7, 2018); or the section 2(a)(51) of the Investment Company Act definition 
of “qualified purchaser” ($5 million net worth test).  See Fidelity Letter; Pickard Djinis and Pisarri Letter.  
643
  See, e.g., Morningstar Letter (“any unequal distribution of this information would be arbitrary”); see also 
AARP Letter; CFA Letter I; Trailhead Consulting Letter. 
644
  Proposing Release, supra footnote 5, at Section II, at text accompanying nn.31–32.  
645
  General Instruction 11.E. to Form CRS. 

 
195 
 
represent natural persons, and the proposal contemplated that certain legal representatives, e.g., a 
trustee or managing agent, would receive a relationship summary on behalf of a trust or other 
similar legal entity.  Further, we clarify that we interpret a “legal representative” of a natural 
person to cover only non-professional legal representatives (e.g., a non-professional trustee that 
represents the assets of a natural person and similar representatives such as executors, 
conservators, and persons holding a power of attorney for a natural person).
646
  In referring to 
non-professional legal representatives, we intend to capture persons who are acting on behalf of 
natural persons and are not regulated financial services professionals retained by natural persons 
to exercise independent professional judgment. This responds to those commenters who argued 
that it should not be necessary to provide a relationship summary to regulated professionals in 
the financial services industry, such as registered investment advisers and broker-dealers, 
corporate fiduciaries (e.g., banks, trust companies and similar financial institutions) and 
insurance companies, and the employees or other representatives of such advisers, broker-dealers, 
corporate fiduciaries and insurance companies.
647
  Accordingly, non-professional legal 
representatives would not include such regulated financial services professionals.  We agree with 
these commenters that delivery of the relationship summary to such regulated financial services 
professionals retained by natural persons to exercise independent judgment will not further our 
                                                                                                                                                             
646
  See ICI Letter (recommending that the Commission “make explicit in the definition of ‘retail investor’ that 
a ‘legal representative’ of a natural person “means an executor, conservator, or a person holding a durable 
power of attorney for a natural person”). 
647
  See, e.g., American Bankers Association Letter; Bank of America Letter; IAA Letter I; Invesco Letter; ICI 
Letter; Oppenheimer Letter; Prudential Letter; T. Rowe Letter. 

 
196 
 
objective of facilitating retail investors’ understanding of their account choices.
648
  Importantly, 
however, this will not relieve firms or financial professionals retained to represent the assets of 
natural persons from their own obligations to deliver the relationship summary to clients or 
customers who are retail investors.   
Commenters offered varying points of view about whether participants of workplace 
retirement plans should be treated as retail investors who receive the relationship summary.  
Some recommended that the definition of retail investor should include plan participants.
649
  
Others argued against delivering a relationship summary to plan participants, explaining that a 
relationship summary would confuse participants and would duplicate other required 
disclosures.
650
  Several commenters suggested that only plan participants that choose to retain a 
firm or financial professional in connection with assets in his or her plan account should receive 
a relationship summary.
651
  Commenters also asked us to clarify whether the definition of retail 
investor would include participants in plans not subject to ERISA, such as governmental or other 
                                                                                                                                                             
648
  See, e.g., American Bankers Association Letter; Bank of America Letter; IAA Letter I; Invesco Letter; ICI 
Letter; Oppenheimer Letter; Prudential Letter; T. Rowe Letter. 
649
  See ICI Letter; Invesco Letter; Oppenheimer Letter; Trailhead Consulting Letter; see also IRI Letter 
(permit delivery of Form CRS using media approved by the plan sponsor). 
650
  See Empower Retirement Letter (noting that plans covered by ERISA “have named fiduciaries responsible 
for ensuring each plan is operated in the best interest of plan participants ... [and who] are already 
obligated pursuant to ERISA §404a-5 to provide participants with detailed disclosures related to those 
investment choices.”); Groom Law Letter (noting that “the decision to engage a broker- dealer for purposes 
of providing services to the plan is made at the plan sponsor level and not at the participant level); 
Comment Letter of Principal Financial Group (Aug. 7, 2018) (“Principal Letter”). 
651
  See T. Rowe Letter (noting that Form CRS should apply “if an individual chooses to retain a broker-dealer 
or advisor to provide recommendations or management regarding his or her retirement plan accounts ... 
[but] “if a plan fiduciary selects a broker-dealer or adviser to provide such services to its plan participants 
... we do not think Form CRS should apply); Prudential Letter; SPARK Letter. 

 
197 
 
non-ERISA workplace retirement plans meeting requirements under section 403(b) or 457 of the 
Internal Revenue Code of 1986, as amended (“Internal Revenue Code” or “Code”), and 
individual retirement accounts (“IRAs”) (including SEPs and SIMPLE IRAs).
652
   
In response to comments, we are clarifying that the relationship summary applies when 
retail investors seek services for their retirement accounts as well as non-retirement accounts 
because retirement savings is a personal, household or family purpose.  Accordingly, the 
definition of retail investor will include a natural person seeking to select and retain a firm to 
provide brokerage or advisory services for his or her own retirement account, including but not 
limited to IRAs and individual accounts in workplace retirement plans, such as 401(k) plans and 
other tax-favored retirement plans.
653
  For example, firms will be required to deliver a 
relationship summary to plan participants seeking advice about whether to take a distribution 
from a 401(k) plan or other workplace retirement plan and how to invest that distribution.  
Similarly, a firm will be required to deliver a relationship summary to a plan participant seeking 
to retain the firm to provide brokerage or advisory services for the participant’s individual 
                                                                                                                                                             
652
  See ICI Letter; Invesco Letter; Oppenheimer Letter; T. Rowe Letter.  
653
  Such IRAs include, for example, individual retirement accounts and individual retirement annuities 
described by section 408(a) and (b) of the Internal Revenue Code, “simplified employee pensions” (or 
(SEPs) described by section 408(k) of the Code, and simple retirement accounts described by section 
408(p) of the Code (SIMPLE IRAs).  In response to commenters, we also clarify that workplace  retirement 
plans include any arrangement available at a workplace that provides retirement benefits or allows saving 
for retirement, including, for example, any 401(k) plan or other plan that meets requirements for 
qualification under Code section 401(a), deferred compensation plans of state and local governments and 
tax-exempt organizations described by Code section 457, and annuity contracts and custodial accounts 
described by Code section 403(b).  Likewise, the definition of retail investor includes natural persons 
seeking brokerage or advisory services for other tax-favored savings arrangements such as an Archer 
Medical Savings Account described by Code section 220(d), a Health Savings Accounts described by 
Internal Revenue Code section 223(d) and any similar tax-favored health plan saving arrangement, a 
Coverdell education savings account described by Code section 530 and a qualified tuition program or “529 
plan” established pursuant to Code section 529. 

 
198 
 
account held in a 401(k) plan or other workplace retirement plan.
654
   
However, participants in 401(k) plans and other workplace retirement plans will not be 
retail investors for purposes of the Form CRS delivery obligation when making certain ordinary 
plan elections that do not involve selecting or retaining a firm to provide brokerage or advisory 
services.  We understand, for example, that participants in workplace retirement plans generally 
do not choose the firm that provides brokerage or advisory services in connection with certain 
ordinary plan elections, such as whether to enroll in the plan, make or increase plan contributions, 
or how to allocate contributions and plan account balances among a designated menu of plan 
investment options.  We designed the relationship summary to assist investors in understanding 
their choices when they seek to engage a firm to provide brokerage and advisory services.  Even 
if a financial professional or other firm representative assists a participant directly, e.g., at an 
enrollment meeting or through a call center interaction, the participant generally would not be 
making the type of account or firm choice contemplated by a relationship summary because the 
plan’s sponsor or another representative designated by the terms of the plan (e.g., a trustee or 
other fiduciary or other responsible party) (a “plan representative”) already has selected the firm, 
has negotiated the terms of service, and remains responsible for supervising the firm.
655
  We 
                                                                                                                                                             
654
  For example, we understand that, although not common, some 401(k) plans and other individual account 
plans provide participants total discretion to choose an investment adviser or broker-dealer to provide 
services for their individual plan account.  See, e.g., 29 CFR 2550.404c-1(f), Example 9.  
655
  This approach differs from our approach to defining retail customer for purposes of Regulation Best 
Interest to recognize differences between the relationship summary requirement and the obligations of 
broker-dealers under Regulation Best Interest.  As discussed in the Regulation Best Interest Release, supra 
footnote 47, at Section II.B.3.a, a participant receiving recommendations for the participant’s individual 
account held in a 401(k) or other workplace retirement plan would be a retail customer for purposes of 
Regulation Best Interest. 

 
199 
 
agree with commenters that delivering a relationship summary under these circumstances could 
be confusing to participants and duplicative of already required disclosures.  Accordingly, plan 
participants should not be viewed as “seeking or receiving services” for purposes of the Form 
CRS definition of retail investor when they are merely electing among plan features offered by 
firms and financial professionals retained and supervised by a plan representative.  This includes 
a participant’s decision to invest his or her account balance through an in-plan self-directed 
brokerage account option or to select an in-plan managed account service option, where a plan 
representative retains and supervises the broker-dealer or investment advisory firm providing 
such services to the plan.       
Finally, commenters asked us to address whether workplace retirement plans and their 
representatives (e.g., plan sponsors, trustees, and other fiduciaries) and service providers will be 
retail investors entitled to receive Form CRS.  In the proposal, we excluded workplace retirement 
plans and their representatives from the definition of retail investor.
656
  Most commenters agreed 
with this approach; some noting that workplace retirement plans and their representatives would 
not benefit from receiving a Form CRS.
657
  Two commenters argued that workplace retirement 
plans and their representatives should receive Form CRS.
658
  
                                                                                                                                                             
656
  Proposing Release, supra footnote 5, at Section II.  
657
  See IAA Letter I (“Institutional trusts such as employee benefit or pension plans ... would not benefit from 
a Form CRS”); T. Rowe Letter (“... where a plan fiduciary selects a broker-dealer or adviser to provide 
such services to its plan participants ... we do not think Form CRS should apply. ERISA and governmental 
plans are already subject to extensive disclosures to participants and rules related to conflicts.  
Consequently, a Form CRS in this context would be duplicative of existing disclosures and cause potential 
confusion, without providing any additional benefits”); see also Comment Letter of the American 
Retirement Association (Aug. 3, 2018) (professional investment experts retained by a plan to perform 
investment advisory services in a fiduciary capacity should not be included); Fidelity Letter (“establish a 
uniform definition ... [that] excludes ERISA and non-ERISA employer sponsored retirement plans 
 

 
200 
 
We understand that plan representatives of workplace retirement plans typically are not 
seeking or receiving services primarily for personal, family or household purposes when they 
consider whether to engage a broker-dealer or investment adviser to provide services to a 
retirement plan established, maintained and operated by an employer to provide pension or 
retirement savings benefits to employees.  Further, the relationship summary—designed to 
provide succinct information relevant to individual retail investors—is not designed to facilitate 
account and firm choices by the representatives of these workplace retirement plans.  In this 
regard, we understand that plan representatives typically seek brokerage and advisory services 
bundled together with, or that will be complimentary with, other services supporting the plan’s 
establishment, maintenance and operation, such as plan design, recordkeeping and other 
administrative services, and compliance services to meet applicable requirements under the 
Internal Revenue Code and ERISA (or applicable state law for non-ERISA governmental 
plans).
659
 
Accordingly, the final definition of retail investor does not include most workplace 
retirement plans or their plan representatives seeking services for a plan established, maintained 
and operated by an employer to provide pension or retirement savings benefits to employees, 
                                                                                                                                                             
regardless of size, as well as their sponsors, trustees and advisers ...”); ICI Letter (a retail investor should 
not include retirement plans, their sponsors or trustees or plan fiduciaries); NAGDA Letter (requesting 
clarification); Prudential Letter (“‘retail investor’ for purposes of Form CRS should not include retirement 
plan representatives”); Transamerica Letter (same).   
658
  See Comment Letter of Fisher Investments (Dec. 13, 2018) (“many individuals overseeing retirement plans 
... would benefit from a better understanding of concepts in proposed Form CRS”); Trailhead Consulting 
Letter. 
659
  See, e.g., Groom Law Letter (describing business models of firms offering brokerage and advice services to 
plans together with other services); SPARK Letter (same). 

 
201 
 
because such plans and their representatives are not seeking services primarily for personal, 
family or household purposes.  We note, however, that some plan representatives may participate 
under their employer’s workplace plan, e.g., in the case of a workplace IRA or other workplace 
retirement plan is established and maintained by a sole proprietor or other self-employed 
individual that includes one or more employees in addition to the plan representative.  If a  plan 
representative who decides the services arrangements for a workplace retirement plan is a sole 
proprietor or other self-employed individual who will participate in the plan, the plan 
representative also would be a retail investor seeking services for personal, family or household 
purposes and must receive a copy of the firm’s relationship summary.
660
  
2. Filing Requirements 
As proposed, all broker-dealers and investment advisers will file their relationship 
summaries with the Commission, and the relationship summaries will be accessible via the 
Commission’s public website,  Investor.gov,
661
 in addition to each firm’s website.  There are 
several reasons we are requiring the relationship summaries to be filed with the Commission.  
First, the public will benefit by being able to access any firm’s relationship summary by using 
one website, Investor.gov.  This should make it easier to make comparisons across firms.  
                                                                                                                                                             
660
  This is consistent with the final definition of retail customer for purposes of Regulation Best Interest, which 
to the extent that the plan representative who decides services arrangements is a sole proprietor or other 
self-employed individual who will participate in the plan, the plan representative will be a retail customer 
for purposes of Regulation Best Interest to the extent that the plan representative receives recommendations 
directly from a broker-dealer primarily for personal, family or household purposes.  See Regulation Best 
Interest Release, supra footnote 47, at Section II.B.3a. 
661
  For broker-dealers, relationship summaries will be filed through Web CRD
®
, and for investment advisers, 
relationship summaries will be filed through IARD.  Investors will be able to access relationship summaries 
using BrokerCheck and IAPD, the public interfaces of Web CRD
®
 and IARD, respectively, and through the 
Commission’s Investor.gov website, which has a search tool that links to both BrokerCheck and IAPD.  

 
202 
 
Second, some firms may not maintain a website, and therefore their relationship summaries will 
not otherwise be accessible to the public.  Third, by having firms file their relationship 
summaries with the Commission, Commission staff can more easily monitor the filings for 
compliance.  Commenters generally supported requiring broker-dealers and investment advisers 
to file their relationship summaries with the Commission.
662
 
We are requiring that the filing be in a text-searchable format, as proposed, and in 
addition, the final instructions will require that the filing be structured with machine-readable 
headings.  Two commenters advocated that the relationship summary should be filed not only in 
a text-searchable, but also machine-readable, format,
663
 in response to our solicitation for 
comment on filing formats.  Both commenters stated that this would allow third parties to 
develop online comparison tools, making it easier for retail investors to compare firms with one 
another, including across key categories, such as fees.
664
  We agree that requiring this formatting 
will enable investors and other data users, industry participants, and the Commission and 
                                                                                                                                                             
662
  See, e.g., CFA Letter I; Schnase Letter; Trailhead Consulting Letter; Institute for Portfolio Alternatives 
Letter. 
663
  See CFA Letter I (“[P]ast experience regarding investors’ limited use of existing databases, such as IARD 
and BrokerCheck, cautions against placing too much reliance on investors’ accessing the documents 
directly.  We therefore urge the Commission to require that the documents be filed, not just in a text-
searchable format, but in a machine-readable format.”); Schnase Letter (“[T]he data contained in the 
Relationship Summary should be required to be filed in a structured data format, so the document can be 
utilized as a stand-alone human-readable document and serve as the source for a machine-readable data 
set.”). 
664
  CFA Letter I (“We can envision a time when third parties could develop online tools to help investors 
search for a firm or account that meets their preferred parameters, much like the tools Kelly Blue Book or 
Edmunds provide to help car buyers narrow their selections.”); Schnase Letter (“Retail investors may not 
be able or inclined to build their own algorithms and spreadsheets to manipulate machine-readable data 
themselves, but third-party providers will likely step in when demand exists to provide investors publicly 
accessible comparison tools fueled by the machine-readable data made available by the SEC.”). 

 
203 
 
Commission staff to better collect and analyze reported information and facilitate the 
development of tools to aggregate and compare the information.  We are requiring that only the 
headings be machine-readable, given that firms will use their own wording in the narrative 
responses for each of the relationship summary items, and the responses will not be uniform.  
The machine-readable, structured headings could, for example, be implemented in PDF by 
creating a bookmark for each of the headings of the relationship summary that matches the text 
of the heading and that has the heading as its destination.  We believe this promotes aggregation 
and comparison of responses to specific items across different relationship summaries but also 
limits the costs of preparing the relationship summary.  This is consistent with the Commission’s 
ongoing efforts to modernize our forms by taking advantage of technological advances both in 
the manner in which information is reported to the Commission and how it is provided to 
investors and other users.
665
  These instructions are not intended to require firms to prepare a 
relationship summary in paper format.  A firm that prepares and delivers a relationship summary 
only in an electronic format could, for example, file a rendering of the electronic disclosures with 
the Commission.   
In a change from the proposal, broker-dealers will file through Web CRD
®
 instead of 
EDGAR.   Investment advisers will file their relationship summaries through IARD in the same 
                                                                                                                                                             
665
 See, e.g., Inline XBRL Filing of Tagged Data, Advisers Act Release No. 10514 (Jun. 28, 2018) [83 FR 
40846] (Aug. 16, 2018); Optional Internet Availability of Investment Company Shareholder Reports, 
Investment Company Act Release No. 33115 (Jun. 5, 2018) [83 FR 29158] (Jun. 22, 2018) (“Shareholder 
Reports Release”); Investment Company Reporting Modernization, Investment Company Act Release No. 
32314 (Dec. 8, 2017) [82 FR 58731 (Dec. 14, 2017)].     

 
204 
 
manner as they currently file Form ADV Parts 1A and 2A, as proposed.
666
  Whether dual 
registrants prepare a single relationship summary or two, they will file their relationship 
summaries using both IARD and Web CRD
®
.
667
  We are requiring filing of the relationship 
summary through Web CRD
®
 and IARD because they are currently used by and familiar to 
broker-dealers and investment advisers, respectively.  This should minimize the systems changes 
firms would need to make, because they would not need to establish new systems in order to file 
their relationship summaries with the Commission.  One commenter supported using EDGAR 
for analyzing and comparing fee information.
668
  Several commenters, however, generally 
preferred Web CRD
®
, arguing that Web CRD
® 
is more accessible for broker-dealers, which 
already make filings through Web CRD
®
, and that Web CRD
®
 data provided on BrokerCheck is 
more familiar to retail investors.
669
  In light of comments, we have determined that requiring 
broker-dealers to file their relationship summaries through Web CRD
®
 should streamline broker-
                                                                                                                                                             
666
  General Instruction 7.A.(i) to Form CRS.  Several commenters supported using IARD as the filing system 
for investment advisers.  See, e.g., Trailhead Consulting Letter; Schnase Letter.  Investment advisers may 
instead file a paper copy of the Form ADV with the Commission if they apply for a hardship exemption by 
filing Form ADV-H. 
667
  General Instruction 7.A.(i) to Form CRS.  Information for investment advisers on how to file with IARD is 
available on the SEC’s website at www.sec.gov/iard.  Information for broker-dealers on how to file through 
Web CRD
® 
is available on FINRA’s website at http://www.finra.org/industry/web-crd/web-crd-system-
links.  See General Instruction 7.A.(ii) to Form CRS. 
668
  See Morningstar Letter (advocating for fee information to be filed in a standard table with brief examples 
“in the EDGAR system in a standardized data format facilitating analysis and comparison”). 
669
  See Schnase Letter (“[I]t is not clear why BDs should be filing their Relationship Summary through a 
different filing system than IAs (IARD, which is operated by FINRA) and through a different filing system 
than BDs already use for Form BD (CRD, also operated by FINRA).”); NASAA Letter (“[B]roker-dealers 
should file Form CRS on the WebCRD platform maintained by FINRA for its BrokerCheck reports (and 
which is related to IARD).”); Institute for Portfolio Alternatives Letter (“CRD and its public-facing 
BrokerCheck is a system familiar to both the brokerage industry as well as investors.  We believe that 
CRD/BrokerCheck will address potential investor confusion and streamline broker requirements.”).    

 
205 
 
dealer filing requirements relative to requiring broker-dealers to file on EDGAR.  Broker-dealers 
already use Web CRD
®
 for filing their own registration records and those of their associated 
persons, and retail investors already can find broker-dealers’ disciplinary history and other 
information on BrokerCheck.  In addition, Investor.gov already has a prominent search tool on 
its main landing page that links to BrokerCheck and IAPD, which investors can use to search for 
information about firms and financial professionals.  This minimizes the implementation changes 
needed to make relationship summaries easily accessible through Investor.gov because new 
search tools would not need to be created and existing search tools could be linked to the 
Investor.gov/CRS webpage referenced in the relationship summary.    
We also received comment that dual registrants should file only on one system, instead of 
on both EDGAR and IARD as proposed.
670
  One commenter, however, implicitly supported the 
requirement that dual registrants file on two systems.
671
  The final instructions require dual 
registrants to file their relationship summaries using both systems— Web CRD
®
 and IARD.
672
  
This approach ensures a complete and consistent filing record for each firm and facilitates the 
Commission’s data analysis, examinations, and other regulatory efforts.  Firms offering 
brokerage or investment advisory services through affiliates will follow the same filing 
requirements as standalone firms. 
                                                                                                                                                             
670
  See, e.g., Prudential Letter (“The Commission should clarify that a single filing [for dual registrants], in 
either IARD or EDGAR, would constitute compliance with the filing requirement.”). 
671
  See Schwab Letter III (providing sample Form CRS instructions for dual registrants to file on IARD and 
EDGAR). 
672
  General Instruction 7.A.(i) to Form CRS. 

 
206 
 
For investment advisers, we are also adopting clarifications in the General Instructions to 
Form ADV that relate to the amending and filing of the relationship summary.
673
  First, 
investment advisers may file an amended relationship summary as an other-than-annual 
amendment or by including the relationship summary as part of an annual updating amendment, 
within the 30 days in which they are required to file the amendment.
674
  Second, the instructions 
provide that advisers may, but are not required to, submit amended versions of their relationship 
summary as part of their annual updating amendment and include additional technical references 
to implement this instruction.
675
  Third, we added provisions to mirror the requirements of the 
General Instructions to Form CRS as to when amendments and exhibits showing changes to Part 
3 must be made and filed.
676
  We believe that investment advisers will benefit from these 
clarifications.  Finally, we are adopting certain amendments to the General Instructions to Form 
ADV to add conforming technical changes and references to the Form ADV, Part 3.
677
 
                                                                                                                                                             
673
  See infra Section II.C.4 generally for a discussion of amendments to the relationship summary. 
674
  See amended General Instruction 4 to Form ADV (revised to add the following language: “If you are 
registered with the SEC, you must amend Part 3 of your Form ADV within 30 days whenever any 
information in your relationship summary becomes materially inaccurate by filing with the SEC an 
additional other-than-annual amendment or by including the relationship summary as part of an annual 
updating amendment.”).  Compare Proposed General Instruction 4 to Form ADV (“You must amend your 
relationship summary and file your relationship summary amendments in accordance with the Form ADV, 
Part 3 (Form CRS), General Instructions, 6.”). 
675
  See amended General Instruction 4 to Form ADV (revised with language that investment advisers must 
update responses to all items “in Part 1A, 1B, 2A and 2B (as applicable),” and “You may, but are not 
required, to submit amended versions of the relationship summary required by Part 3 as part of your annual 
updating amendment.”). 
676
  See infra footnotes 769–774, 781–783, and accompanying text. 
677
  See amended General Instruction 3 to Form ADV (indicating that Form ADV, as amended to add Part 3, 
now contains five instead of four parts); amended General Instruction 4 to Form ADV (“Part 3 requires 
advisers to create a relationship summary (Form CRS) containing information for retail investors.  The 
 

 
207 
 
3. Delivery Requirements 
a. Form of Delivery 
The final instructions provide, as proposed, that firms will be able to deliver the 
relationship summary (including updates) within the framework of the Commission’s existing 
guidance regarding electronic delivery.
678
  This framework consists of the following elements: 
(i) notice to the investor that information is available electronically; (ii) access to information 
comparable to that which would have been provided in paper form and that is not so burdensome 
that the intended recipients cannot effectively access it; and (iii) evidence to show delivery, i.e., 
reason to believe that electronically delivered information will result in the satisfaction of the 
delivery requirements under the federal securities laws.
679
  In the Proposing Release, we also 
provided proposed guidance that a firm would be able to deliver the relationship summary to 
new or prospective clients or customers in a manner that is consistent with how the retail investor 
requested information about the firm or financial professional, and that t his method of initial 
                                                                                                                                                             
requirements in Part 3 apply to all investment advisers registered or applying for registration with the SEC, 
but do not apply to exempt reporting advisers.  Every adviser that has retail investors to whom it must 
deliver a relationship summary must include in the application for registration a relationship summary 
prepared in accordance with the requirements of Part 3 of Form ADV.  See Advisers Act Rule 203-1.”); 
amended General Instruction SEC’s Collection of Information section (removing “promptly” to reflect 
filing requirements for relationship summary changes). 
678
  See Use of Electronic Media by Broker-Dealers, Transfer Agents, and Investment Advisers for Delivery of 
Information; Additional Examples Under the Securities Act of 1933, Securities Exchange Act of 1934, and 
Investment Company Act of 1940, Exchange Act Release No. 37182 (May 9, 1996) [61 FR 24644 (May 
15, 1996)] (“96 Guidance”); see also Use of Electronic Media, Exchange Act Release No. 42728 (Apr. 28, 
2000) [65 FR 25843 (May 4, 2000)] (“2000 Guidance”); and Use of Electronic Media for Delivery 
Purposes, Exchange Act Release No. 36345 (Oct. 6, 1995) [60 FR 53458 (Oct. 13, 1995)] (“95 Guidance”).  
Recognizing the growth of different forms of electronic media, other technological developments, and the 
passage of time since these releases were issued, the Commission plans to revisit its existing guidance 
regarding electronic delivery. 
679
  96 Guidance, supra footnote 678. 

 
208 
 
delivery for the relationship summary would be consistent with the Commission’s electronic 
delivery guidance.
680
  We have included this provision in the final instructions to provide 
additional clarity and certainty on what is permissible for initial delivery of the relationship 
summary.
681
  This approach applies only to the initial delivery of the relationship summary to 
new or prospective clients or customers, and not to any other delivery obligation of any other 
required disclosure.  With respect to existing clients or customers, as proposed, firms should 
deliver the relationship summary in a manner consistent with the firm’s existing arrangement 
with that client or customer and with the Commission’s electronic delivery guidance.  The above 
delivery instructions are based on the assumption that retail investors are able to access and 
prefer to receive communications and disclosures through the same medium in which they 
request information from the firm or financial professional.  If this assumption is not correct, 
retail investors can request a copy of the relationship summary in a format they prefer, as 
discussed below, and can establish their delivery preferences with the firm once they have 
entered into a relationship.   
Numerous commenters expressed support for electronic delivery, including for 
modifications to the instructions to make electronic delivery a more accessible option for the 
                                                                                                                                                             
680
  See Proposing Release, supra footnote 5, at nn.344–45 and accompanying text; see also 2000 Guidance, 
supra footnote 678, at 65 FR 25845–46; 96 Guidance, supra footnote 678, at 61 FR 24647; and 95 
Guidance, supra footnote 678, at 60 FR 53461.  
681
  General Instruction 9.B. to Form CRS (“You may deliver the relationship summary to new or prospective 
clients or customers in a manner that is consistent with how the retail investor requested information about 
you or your financial professional.”). 

 
209 
 
relationship summary as well as other disclosures.
682
  A number of commenters further 
advocated for the “notice plus access” model, in which posting the relationship summary to the 
firm’s website, in combination with a notice to the retail investor that the relationship summary 
is available there, would constitute delivery.
683
  Some of these commenters argued that this 
approach should suffice for delivery, even if the retail investor had not previously consented to 
electronic delivery in an affirmative way.
684
  A few commenters cited to the Commission’s 
recently adopted rule 30e-3 under the Investment Company Act
685
 as a possible model for 
delivering the relationship summary.
686
  Some of these commenters also advocated for a more 
comprehensive updating of the Commission’s guidance concerning electronic delivery, not just 
                                                                                                                                                             
682
  See, e.g., CFA Institute Letter I (“Whatever design is finalized for CRS, it should accommodate electronic 
delivery to investors.  We also believe a design with interactive components is needed in today’s 
electronically savvy investor base.”); TIAA Letter (“the SEC could make the disclosure requirements in . . . 
Form CRS more flexible, such that broker-dealers have more options with respect to the method of delivery 
of required disclosures. . . .”); MassMutual Letter; SIFMA Letter; SPARK Letter; Morgan Stanley Letter; 
Cetera Letter II; Fidelity Letter.  
683
  See, e.g., Primerica Letter; Cetera Letter II; Schwab Letter (advocating a notice plus access model for 
annual or more frequent updates to the relationship summary); Pickard Djinis and Pisarri Letter; IAA Letter 
I; SIFMA Letter; MassMutual Letter; Comment Letter of the Money Management Institute (Aug. 7, 2018) 
(“MMI Letter”); Wells Fargo Letter. 
684
  See, e.g., LPL Financial Letter (supporting an implicit consent model on the basis that, among other things 
“It simply is not feasible to obtain an investor’s affirmative consent to electronic delivery before the 
investor makes a final decision about the [investment relationship]”); FSI Letter I (supporting a negative 
consent model, rather than an opt-in approach); IAA Letter I (supporting an implied consent model).  
685
  17 CFR 270.30e-3 (Internet availability of reports to shareholders); Shareholder Reports Release, supra 
footnote 665. 
686
  See, e.g., T. Rowe Letter (“In cases where no email address is on file with the firm, we think a notice and 
access protocol akin to Rule 30e-3 is appropriate.”); SPARK Letter (“The SEC has recently demonstrated a 
willingness to embrace electronic disclosure as the default delivery method for other disclosures and we 
encourage the SEC to consider whether the disclosures added by the SEC’s Proposal, including Form CRS, 
should be able to tap into the benefits of electronic delivery.”). 

 
210 
 
for the relationship summary but for other disclosures as well.
687
  Commenters advocating for 
more widespread use of electronic delivery cited to arguments including the potential cost 
savings and improved security of delivery to investors.
688
 
On the other hand, some commenters expressed reservations about a notice plus access 
equals delivery approach and supported the Commission’s proposed approach.
689
  The RAND 
2018 survey and another investor survey also showed mixed results relating to electronic 
delivery, with many participants indicating that they would prefer to receive the disclosures in 
paper.
690
  Similarly, the IAC has stated that nearly half of investors (49%) still prefer to receive 
paper disclosures through the mail, compared with only 33% who prefer to receive disclosures 
electronically, either through email (27%) or by accessing them online (6%).
691
  Additionally, we 
                                                                                                                                                             
687
  See, e.g., LPL Financial Letter (“Modern communication practices underscore the need for the Commission 
to provide more flexibility to broker-dealers and investment advisers to satisfy their document delivery 
obligations by delivering materials to customers and clients who have implicitly consented to electronic 
delivery as well as to current customers and clients who have affirmatively consented to electronic delivery 
in a manner contemplated by the existing guidance.”); SPARK Letter (“strongly urges the SEC to permit . . 
. electronic delivery as the default delivery method for satisfying the disclosure requirements under 
[Regulation Best Interest, as well as Form CRS].”); Cetera Letter II (“We believe that adoption of Reg. BI 
and the Form CRS represents something of a watershed moment. . . .”); Pickard Djinis and Pisarri Letter; 
IAA Letter I; MMI Letter. 
688
  See, e.g., Cetera Letter II (asserting that electronic delivery is safer and more environmentally friendly); IRI 
Letter; SPARK Letter; Primerica Letter.  
689
  CFA Letter I (“We greatly appreciate that, in discussing this issue, the Release specifically references the 
obligation to provide ‘evidence to show delivery.’  This should help to clarify that firms could not meet the 
disclosure requirement simply by making the disclosures accessible on a public website and providing 
notice of their availability, under an ‘access equals delivery’ model. . . .”); AARP Letter (“The SEC should 
prohibit advisers from simply providing an electronic address for disclosures. . . .  A paper copy should be 
provided to the retail investor.”).  
690
  See supra footnote 699.  
691
  IAC Electronic Delivery Recommendation, supra footnote 153 (citing FINRA Investor Education 
Foundation, Investors in the United States 2016 (Dec. 2016), available at 
http://www.usfinancialcapability.org/downloads/NFCS_2015_Inv_Survey_Full_Report.pdf).  While the 
 

 
211 
 
are aware, based on our filing data, that a number of firms do not host public websites and would 
not be able to make available an updated, electronic version of their relationship summary for 
their retail investors at all times.
692
  Some commenters noted that some retail investors may lack 
readily available internet access.
693
   
The relationship summary is designed to be delivered when a retail investor selects a firm 
or financial professional and which services to receive, including updated versions upon certain 
events when retail investors are again making decisions about whether to invest through an 
advisory account or a brokerage account.  These selections affect all of the retail investor’s 
subsequent investments under that relationship.  In comparison, documents such as shareholder 
reports and prospectuses typically relate to investment decisions on single products; once the 
product is purchased, reporting is most commonly delivered at regular intervals, unlike the 
relationship summary.  We are preserving an investor’s ability to receive the relationship 
                                                                                                                                                             
FINRA 2016 Investors Study was conducted prior to the Form CRS proposal (and does not specify what 
disclosure materials are contemplated in the survey, e.g., shareholder reports, summary prospectuses, 
statutory prospectuses, account statements, etc.), it presents general investor survey data regarding investor 
disclosure preferences. 
692
  Based on IARD system data, 8.4% of investment advisers with individual clients do not report at least one 
public website. 
693
  See, e.g., Comment Letter of C. Frederick Reish (Sept. 12, 2018); SIFMA Letter (acknowledging that firms 
would need to provide linked disclosures to customers and prospective customers who do not have internet 
access); LPL Financial Letter (citing Investment Company Institute, 2015 Investment Company Fact Book, 
(55
th
 ed. 2015), at 129, available at https://www.ici.org/pdf/2015_factbook.pdf.  The study found the 
following with respect to internet access in mutual fund owning households: (i) head of household age 65 
or older, 14% lack access; (ii) education level of high school diploma or less, 16% lack access; and (iii) 
household income of less than $50,000, 16% lack access.). 

 
212 
 
summary in paper, by maintaining the protections provided by the Commission’s electronic 
delivery guidance.
694
  
We recognize the benefits to retail investors of receiving the relationship summary as 
early as possible when considering a firm or financial professional and that electronic 
communication can facilitate earlier delivery, provided that retail investors can readily access the 
form of communication used.  As noted above, we have adopted the instruction that delivery of 
the relationship summary to new or prospective clients or customers in a manner that is 
consistent with how that retail investor requested information about the firm or financial 
professional would be consistent with the Commission’s electronic delivery guidance.
695
  This 
approach applies only to the initial delivery of the relationship summary to new or prospective 
clients or customers, and not to any other delivery obligation of any other required disclosure.  
Moreover, to ensure that a relationship summary delivered electronically is noticeable for retail 
investors and not hidden among other disclosures, we are adopting a new instruction that a 
relationship summary delivered electronically must be presented prominently in the electronic 
medium and must be easily accessible for retail investors.
696
  For example, a firm can use a 
direct link or provide the relationship summary in the body of an email or message.
697
  We are 
                                                                                                                                                             
694
  See supra footnote 678. 
695
  See Proposing Release, supra footnote 5, at nn.344–45 and accompanying text; see also 2000 Guidance, 
supra footnote 678, at 65 FR 25845-46; 96 Guidance, supra footnote 678, at 61 FR 24647; and 95 
Guidance, supra footnote 678, at 60 FR 53461.  
696
   General Instruction 10.C. to Form CRS. 
697
   General Instruction 10.C. to Form CRS. 

 
213 
 
also requiring firms to post the current version of the relationship summary prominently on their 
public website, if they have one, as proposed.
698
   
We understand that, while many investors prefer receiving disclosures about investment 
advice in electronic format, many also value the option to receive them in paper.
699
  We are 
adopting several additional requirements relating to relationship summaries in paper format.  
First, in a relationship summary that is delivered in paper format, firms may link to additional 
information by including URL addresses, QR codes, or other means of facilitating access to such 
information.
700
  Second, if a relationship summary is delivered in paper format as part of a 
package of documents, the firm must ensure that the relationship summary is the first among any 
documents that are delivered at that time, substantially as proposed.
701
  All firms will be required 
to make a copy of the relationship summary available upon request without charge.
702
  However, 
we are not requiring that firms make the relationship summary available in paper format.  We 
                                                                                                                                                             
698
  Advisers Act rule 204-5(b)(3) and Exchange Act rule 17a-14(c)(3); General Instruction 10.A. to Form 
CRS.  The most recent versions of firms’ relationship summaries will be accessible through Investor.gov.  
Firms will be required to include in their relationship summaries a phone number where investors can 
request up-to-date information and (if applicable) request a copy of the relationship summary.  See Item 
5.B. of Form CRS.  Firms also could include their relationship summaries on other electronic media, such 
as mobile apps and other similar technologies.  
699
  See RAND 2018, supra footnote 13 (when surveyed about how and when they would prefer to receive the 
relationship summary, “two-fifths reported that they would be most likely to view a paper document”); 
Schwab Letter I (Koski) supra footnote 21 (26% of survey participants preferred to receive disclosures 
about investment advice on paper; 46% preferred online or digital disclosures with the option for paper). 
700
  General Instruction 3.B. to Form CRS. 
701
  General Instruction 10.D. to Form CRS.  Cf. Proposed General Instruction 8.(c) to Form CRS (“If the 
relationship summary is delivered on paper and not as a standalone document, you must ensure that the 
relationship summary is the first among any documents that are delivered at that time.”). 
702
  General Instructions 1.C. to Form CRS. 

 
214 
 
understand that some firms’ business models – for example, those of advisers providing 
automated investment advisory services and broker-dealers that provide services only online – 
are based on delivering substantially all disclosures and conducting substantially all 
correspondence with clients and customers electronically.  We do not intend to change these 
practices and believe that retail investors that prefer paper communications will have the 
opportunity to establish relationships with firms that accommodate paper delivery. 
b. Initial Delivery 
The final instructions require an investment adviser registered with the SEC to deliver a 
relationship summary to each retail investor before or at the time the firm enters into an 
investment advisory contract, even if the agreement is oral, as proposed.
703
  The timing for 
standalone investment advisers to deliver the relationship summary to new or prospective retail 
clients generally tracks the initial delivery requirement for Form ADV Part 2A.
704
  As described 
further below, we are changing the instruction for broker-dealers to require delivery before or at 
earliest of one of three triggers.
705
  In comparison, under the proposal, broker-dealers would have 
                                                                                                                                                             
703
  General Instruction 7.B.(i) to Form CRS.  The final instructions for investment advisers are streamlined 
from the proposal, but remain substantively the same.  Compare to Proposed Advisers Act rule 204-5(b)(1) 
and Proposed General Instruction 5.(b) to Form CRS (“You must give a relationship summary to each retail 
investor, if you are an investment adviser, before or at the time you enter into an investment advisory 
agreement with the retail investor, or if you are a broker-dealer, before or at the time the retail investor first 
engages your services.  See Advisers Act rule 204-5(b)(1) and Exchange Act rule 17a-14(c)(1).  You must 
deliver the relationship summary even if your agreement with the retail investor is oral.”).  We replaced the 
word “agreement” with “contract” to mirror the wording in the current Advisers Act rules and Form ADV 
instructions.  See, e.g., Item 5.D of Part 2.A. of Form ADV.  We also clarified that the delivery 
requirements apply to investment advisers registered with the SEC. 
704
  See General Instruction 1 to Part 2A of Form ADV. 
705
  General Instruction 7.B.(ii) to Form CRS (“If you are a broker-dealer, you must deliver a relationship 
summary to each retail investor, before or at the earliest of:  (i) a recommendation of an account type, a 
securities transaction, or an investment strategy involving securities; (ii) placing an order for the retail 
 

 
215 
 
delivered the relationship summary before or at the time the retail investor first engages their 
services.
706
  Under the final rules, dual registrants,  and affiliated broker-dealers and investment 
advisers that jointly offer their services to retail investors, must deliver at the earlier of the initial 
delivery triggers for an investment adviser or a broker-dealer, including a recommendation of 
account type.
707
  This applies whether the dual registrant or affiliated firms prepare one single 
relationship summary describing both brokerage and investment advisory services, or two 
separate relationship summaries describing each type of service. 
Some commenters supported keeping the initial delivery requirements as proposed.
708
  
Other c ommenters expressed concern that under the proposal, the relationship summary would 
be delivered only after the investor has already made a decision about which firm to engage and 
which type of account to open, and recommended variations on the proposed initial delivery 
requirements, including mandating even earlier delivery.
709
  The variations include, for example, 
                                                                                                                                                             
investor; or (iii) the opening of a brokerage account for the retail investor.”).  As described below, dual 
registrants will continue to deliver the relationship summary at the earlier of the requirements for 
investment advisers or broker-dealers.  General Instruction 7.B.(iii) to Form CRS (“A dual registrant must 
deliver the relationship summary at the earlier of the timing requirements in General Instruction 7.B.(i) or 
(ii).”). 
706
  See Proposed Exchange Act rule 17a-14(c)(1); Proposed General Instruction 5.(b) to Form CRS. 
707
  General Instruction 7.B.(iii) to Form CRS (“A dual registrant must deliver the relationship summary at the 
earlier of the timing requirements in General Instruction 7.B.(i) or (ii).”). 
708
  See, e.g., Trailhead Consulting Letter; Schnase Letter (agreeing that the relationship summary should be 
required to be delivered along the lines proposed in the Proposing Release); SIFMA Letter (“For the initial 
delivery most brokerage firms likely will include [the relationship summary] with account applications or 
other account opening materials, while investment advisers will include it with their Form ADV.”). 
709
  See, e.g., CFA Letter I; CFA Institute Letter I; AARP Letter; NASAA Letter; Consumers Union Letter; 
Consumer Reports Letter. In the RAND 2018 survey, supra footnote 13, 70% of respondents reported that 
they would prefer to receive the relationship summary at the outset of the relationship, i.e., “before or at the 
time you first engage the investment professional” and slightly more than 30% of respondents would prefer 
 

 
216 
 
delivery at the point of first contact or inquiry between the retail investor and firm, whenever 
possible;
710
 at the earlier of when a customer contacts the firm or enters into an advisory 
agreement or engagement of services;
711
 and upon the first interaction with a prospective retail 
investor.
712
  For dual registrants, one commenter recommended requiring delivery no later than 
the point at which a recommendation is made regarding which type of account to open.
713
  One 
commenter asserted that the Commission should not permit delivery “at” the time of service but 
rather should always require delivery “before” the provision of service.
714
  The IAC 
recommended providing “a uniform, plain English disclosure document . . . to customers and 
potential customers of broker-dealers and investment advisers at the start of the engagement, and 
periodically thereafter.”
715
 
                                                                                                                                                             
to receive the relationship summary “before the investment professional first recommends a transaction or 
investment strategy”; see also Schwab Letter I (Koski), supra footnote 21 (when asked “[w]hich of the 
following best describes your preference for when you would like to receive information about how a 
Brokerage Firm or a Registered Investment Adviser (RIA) does business with you?”, 41% preferred “[a]t 
or before I open my account, plus any updates on an annual basis,” 22% preferred “[a]vailable on an 
ongoing basis, such as on a firm’s website,” 19% preferred at “[a]t or before I open my account only,” and 
17% preferred “[e]very single time I receive investment advice.”). 
710
  See CFA Letter I. 
711
  See CFA Institute Letter I. 
712
  See AARP Letter. 
713
  See CFA Letter I. 
714
  See NASAA Letter.   
715
  See IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10. 

 
217 
 
A few commenters supported requiring a period of time between delivery of the 
relationship summary and the beginning of the relationship.
716
  One commenter suggested 
allowing time for retail investors to review the relationship summary, subsequent to delivery 
when the firm first interacts with a retail investor.
717
  A number of investors at Commission-held 
roundtables also supported a waiting period.
718
  Other commenters, however, opposed a 
mandated delay between delivery of the relationship summary and engaging in services.
719
     
Various commenters explained logistical and recordkeeping issues if firms were required 
to deliver the relationship summary at first contact or prior to engaging a firm’s services.
720
  For 
example, one commenter stated that it would not be feasible to obtain an investor’s affirmative 
consent to electronic delivery before the investor decides to engage the firm.
721
  Tracking 
whether or not prospective customers had consented to electronic delivery of the relationship 
summary would be difficult because prospective customers who do not open accounts would not 
                                                                                                                                                             
716
  See, e.g., AARP Letter; CFA Institute Letter I; NASAA Letter. 
717
  See AARP Letter. 
718
  See, e.g., Houston Roundtable, at 51 (one investor suggesting a “cool-off period”); Washington, D.C. 
Roundtable, at 58 (at least two investors supporting a “lapse” of time between receipt of a relationship 
summary and having to sign it).   
719
  Comment Letter of John Neil Conkle (Aug. 7, 2018) (arguing that a waiting period is not necessary for the 
relationship summary to fulfill its purpose); Edward Jones Letter (arguing that a waiting period could harm 
investors by preventing them from meeting IRA contribution or rollover deadlines, for example, or at a 
minimum cause frustration); SIFMA Letter (arguing that the relationship summary is designed to be 
contemporaneously read and understood). 
720
  See, e.g., Edward Jones Letter (asserting that requiring firms to record the delivery of the relationship 
summary to prospective clients that subsequently become clients would impose a significant burden 
without providing meaningful benefits to investors); SIFMA Letter (“[I]t would be very burdensome and 
not practical in many instances to keep track of Forms CRS that are provided to retail investors who never 
seek to establish a relationship with a firm.”); Primerica Letter; LPL Financial Letter. 
721
  See LPL Financial Letter. 

 
218 
 
have account numbers or other unique identifiers for the firm’s recordkeeping purposes.
722
  
Other commenters argued that keeping records of when a relationship summary was given to a 
prospective retail investor would be unnecessarily burdensome for firms and would likely 
provide de minimis benefits.
723
  Still other commenters discussed the difficulty of defining when 
a customer first engages the firm’s services, the terminology used in the proposal.
724
   
We encourage investment advisers and broker-dealers to deliver the relationship 
summary far enough in advance of a prospective retail investor’s final decision to engage the 
firm to allow for meaningful discussion between the financial professional and retail investor, 
including by using the conversation starters, so that the retail investor has time to understand the 
relationship summary and to weigh available options.  We believe that prospective clients or 
customers would benefit from receiving the relationship summary as early as possible when 
deciding whether to engage the services of a firm or financial professional.  In response to 
comments on initial delivery, including those relating specifically to broker-dealers, we are 
modifying the broker-dealer initial delivery requirements, as discussed below.  However, we are 
declining to mandate a delivery requirement based on first contact or inquiry, or to impose a 
waiting period.  First, “first contact or inquiry” may include circumstances that are not limited to 
the seeking of investment services, such as business interactions for other purposes or social 
interactions, and therefore could create compliance uncertainty.  Second, we believe the 
                                                                                                                                                             
722
  See LPL Financial Letter. 
723
  See infra footnote 803; see also infra footnotes 798–816 and accompanying text regarding recordkeeping 
requirements. 
724
  See, e.g., Fidelity Letter; SIFMA Letter; Primerica Letter; TIAA Letter. 

 
219 
 
availability of each firm’s relationship summary through Investor.gov and on its own website, if 
the firm has one, helps to address the concern that investors will not have the opportunity to 
review and compare relationship summaries before entering into an investment advisory contract 
or receiving services from a broker-dealer.
725
  Third, some investors may not want to wait to 
begin services,
726
 and those who do can always take as much time as needed to review the 
relationship summary and wait to sign an advisory agreement or begin receiving brokerage 
services at a later time.  Fourth, firms will be permitted to deliver the relationship summary well 
before they enter into an advisory agreement or provide brokerage services, and as noted, we 
encourage firms to deliver the relationship summary early in the process.  Finally, dual 
registrants, and affiliated broker-dealers and investment advisers that jointly offer their services 
to retail investors, must deliver their relationship summaries at the earlier of the delivery triggers 
for broker-dealers or investment advisers.  To the extent the initial delivery requirements for a  
broker-dealer are earlier than the delivery requirements would be for an investment adviser, the 
earlier requirements will apply to an investment adviser that is a dual registrant or that offers 
services jointly with a broker-dealer affiliate.  We believe this will provide a significant benefit 
to retail investors, given the substantial percentage of regulatory assets under management 
                                                                                                                                                             
725
  See CFA Institute Letter I (“We strongly support the requirement that firms with public websites must post 
their CRSs on their sites in an easily accessible location and format. . . .  Investors can review the 
disclosures provided there before deciding on a service provider and showing up for a meeting. Then when 
presented with the CRS ‘before or at the time’ of entering into an agreement or engaging a firm’s services, 
an investor will have already had an opportunity to review the disclosures and come armed with 
questions.”). 
726
  See, e.g., Edward Jones Letter (stating that some investors have a very specific timeframe for opening a 
new account, such as meeting an IRA contribution or rollover deadline); SIFMA Letter (stating that 
requiring a waiting period would frustrate a retail customer’s efforts to begin his or her relationship with a 
financial services provider). 

 
220 
 
(“RAUM”) managed by dual registrants and investment advisers with broker-dealer affiliates, 
relative to the total RAUM managed by investment advisers overall.
727
   
To facilitate earlier delivery, as discussed above, the final instructions allow firms to 
deliver the relationship summary to a new or prospective client or customer in a manner that is 
consistent with how the retail investor requested information about the firm or financial 
professional, clarifying that this approach would be consistent with the SEC’s electronic delivery 
guidance.
728
  We believe this approach alleviates concerns expressed by commenters that 
obtaining the consent of prospective clients or customers to receive electronic delivery and 
maintaining records of that consent would be challenging.
729
  While we recognize recordkeeping 
burdens relating to the delivery of the relationship summary to prospective clients – for example, 
we are not imposing a delivery requirement upon first contact or inquiry by a retail investor, as 
discussed above – we disagree that they are insurmountable and would outweigh the benefits to 
retail investors.  As discussed further in Section II.E. below, investment advisers and broker-
dealers have experience with similar recordkeeping requirements.
730
  Moreover, w e believe there 
is considerable benefit to retail investors in receiving the relationship summary before deciding 
                                                                                                                                                             
727
  As of December 31, 2018, 1,878 SEC-registered investment advisers report in their Form ADV an affiliate 
that is a broker-dealer also registered with the SEC.  These 1,878 SEC-registered investment advisers 
manage approximately $58.48 trillion, or approximately 70% of total RAUM managed by SEC-registered 
investment advisers.  Furthermore, 359 SEC-registered investment advisers that are also dually-registered 
as broker-dealers manage approximately $5.18 trillion, or 6.12% of total RAUM.  Thus, SEC-registered 
investment advisers that report registered broker-dealer affiliates and dual registrants together manage over 
75% of RAUM.  See also infra footnotes 855, 888–889, and accompanying text.   
728
  General Instruction 10.B. to Form CRS. 
729
 See supra footnotes 720–722 and accompanying text. 
730
 See infra footnotes 809–810 and accompanying text. 

 
221 
 
to engage a firm, to allow time for questions and discussion with the financial professional, to 
understand the relationship summary, and to weigh available options.    
Commenters suggested modifications to the proposed initial delivery requirements 
specifically for broker-dealers.  Several commenters requested that we require broker-dealers to 
deliver the relationship summary at the point of first contact, inquiry, or interaction with a retail 
investor.
731
  A number of commenters also raised questions about the meaning of “engaging the 
services” of a broker-dealer, noting that it was unclear when that may ultimately occur and that it 
is a new and undefined concept in the context of a customer relationship with a broker-dealer.
732
  
Other commenters suggested that we exclude or exempt certain types of broker-dealers that 
provide limited services to retail investors from the requirement to deliver the relationship 
summary or from the requirements of Form CRS more generally.
733
    
In response to these concerns, we are modifying the initial delivery requirements for 
broker-dealers.  Instead of “at the time the retail investor first engages a broker-dealer’s 
services,” b roker-dealers will be required to deliver the relationship summary to each retail 
investor before or at the earliest of:  (i) a recommendation of an account type, a securities 
                                                                                                                                                             
731
  See CFA Institute Letter I; AARP Letter; and NASAA Letter.  
732
  See Primerica Letter; SIFMA Letter; and Fidelity Letter. 
733
  See, e.g., Fidelity Letter (recommending “that the SEC exclude limited-purpose broker-dealers acting 
solely as mutual fund general distributors from the obligation to deliver Form CRS to direct mutual fund 
investors that invest on an unsolicited basis, and shareholders investing through an intermediary (such as a 
full service broker-dealer or bank) that has an independent obligation to deliver such information to its 
client” and suggesting “that the SEC explicitly exempt from the Form CRS requirement certain categories 
of broker-dealers, including clearing firms, principal underwriters, and distributors of mutual funds, as 
these firms do not have a direct relationship with the end investor based on their business models”); ICI 
Letter; Wells Fargo Letter; Invesco Letter; ACLI Letter; Comment Letter of Great-West Financial (Aug. 6, 
2018); T. Rowe Letter and Oppenheimer Letter. 

 
222 
 
transaction, or an investment strategy involving securities; (ii) placing an order for the retail 
investor; or (iii) the opening of a brokerage account for the retail investor.
734
  We believe that 
these more concrete initial delivery triggers for broker-dealers avoid the uncertainty of when a 
retail investor first engages a broker-dealer’s services and include scenarios that encompass 
earlier delivery, in response to commenters’ concerns.   
As noted, the proposal would have required broker-dealers to deliver the relationship 
summary before or at the time the retail investor first engages the firm’s services.  This proposed 
requirement was intended to capture the earliest point in time at which a retail investor engages 
the services of a broker-dealer, including instances when a customer opens an account with the 
broker-dealer, or effects a transaction through the broker-dealer in the absence of an account, for 
example, by purchasing a mutual fund through the broker-dealer via “check and application”.  
The proposed rule would not have required delivery to a retail investor to whom a broker-dealer 
makes a recommendation, if that retail investor did not open or have an account with the broker-
dealer, or that recommendation did not lead to a transaction with that broker-dealer.
735
  If the 
recommendation led to a transaction with the broker-dealer who made the recommendation, the 
retail investor would have been considered to be “engaging the services” of that broker-dealer at 
the time the customer places the order or an account is opened, whichever occurred first.   Instead, 
in response to comments advocating for earlier delivery, t  he final requirement expands on the 
proposed initial delivery requirement and potentially pushes it earlier, to require delivery (even 
                                                                                                                                                             
734
  See Exchange Act rule 17a-14(c)(1); General Instruction 6.B.(ii) to Form CRS. 
735
  Proposing Release, supra footnote 5. 

 
223 
 
where a brokerage account has not been established) before or at the time a broker-dealer 
recommends an account type, a securities transaction, or an investment strategy involving 
securities without regard to whether the retail investor acts on the recommendation.  We believe 
that revising the delivery requirement in this way will give retail investors the opportunity to 
consider the information included in the relationship summary earlier in the process of 
determining whether to establish a brokerage relationship with the broker-dealer, as well as in 
evaluating the recommendation.  
Compared to the proposal, the final requirement also pushes earlier the time at which 
broker-dealers must deliver the relationship summary in instances in which the retail investor 
does not open an account but still engages in a securities transaction such as the “check and 
application” example described above.  Under these circumstances, broker-dealers must deliver 
the relationship summary before or at the time an order is placed for the retail investor, instead of 
before or at the time the transaction is effected, as proposed.  This delivery obligation would be 
triggered to the extent this type of transaction were unsolicited, because, as described above, if a 
recommendation preceded this type of transaction, delivery would have been triggered before or 
at the time of the recommendation.   
To the extent the broker-dealer had not already made a recommendation of an account 
type,  a securities transaction or an investment strategy involving securities, or placed an order for 
the retail investor, delivery would be triggered before or at the time the retail investor opens a 
brokerage account with the broker-dealer.  As revised, we believe that the initial delivery triggers 
for broker-dealers avoid the uncertainty of the proposed initial delivery standard and include 
scenarios that encompass earlier delivery, in response to commenters’ concerns. 

 
224 
 
In response to the comments requesting exemptions or exclusions from the relationship 
summary obligations generally and the delivery obligations for certain broker-dealers that 
engage in limited activities, we are clarifying that we do not intend for the Form CRS 
requirements to apply to certain types of relationships between a broker-dealer and a retail 
investor.  Pursuant to Exchange Act Rule 17a-14, the scope of the Form CRS requirement 
applies “to every broker or dealer registered with the Commission pursuant to section 15 of the 
Act that offers services to a retail investor” (emphasis added).  Solely for purposes of Form CRS, 
we are describing here the types of relationships between a broker-dealer and a retail customer 
that we would not consider to be “offer[s] [of] services to a retail investor”.  
Specifically, clearing and carrying broker-dealers that are solely providing services to 
third party or affiliated introducing broker-dealers would not be considered to be offering 
services to a retail investor for purposes of Exchange Act Rule 17a-14, and would not be subject 
to the Form CRS requirements when acting in such capacity.  As described above, the 
relationship summary is designed to make it easier for retail investors to get the facts they need 
when deciding among investment firms or financial professionals and the accounts and services 
available to them.  When a retail investor is establishing or has a relationship with an introducing 
broker-dealer, we believe that the retail investor would benefit most from focusing on that 
broker-dealer’s services, fees, standard of conduct, conflicts of interest and disciplinary history.  
In these circumstances, we believe that receiving an additional relationship summary from a 
clearing or carrying broker-dealer could create confusion and detract from the goals of this 
disclosure.   
Additionally, we would not consider a broker-dealer that is serving solely as a principal 
underwriter to a mutual fund or variable annuity or variable life insurance contract issuer to be 

 
225 
 
offering services to a retail investor for purposes of Exchange Act Rule 17a-14, when acting in 
such capacity.  As with clearing and carrying broker-dealers, broker-dealers serving solely as 
principal underwriters do not typically establish the kind of relationship with retail investors that 
Form CRS has been designed to address.  To the extent such broker-dealers interact with a retail 
customer in a different capacity (beyond serving as a principal underwriter to the mutual fund or 
variable contract that the retail investor owns), we believe the nature of their relationship could 
become one where delivery of the Relationship Summary would be useful.  Accordingly, Form 
CRS’s obligations would apply in those instances.
736
 
We are adopting as proposed the approach to delivery for dual registrants, whereby they 
must deliver the relationship summary to a new or prospective retail investor at the earlier of the 
delivery triggers applicable to investment advisers and broker-dealers.
737
  One commenter 
argued that a dual registrant should be required to deliver the relationship summary at the earlier 
of providing an investment recommendation or the time a retail investor opens an account with 
the firm.
738
  We believe that the broker-dealer initial delivery requirements, as adopted, 
accommodate this comment.  Another commenter asserted that dual registrants should be 
required to deliver the relationship summary no later than when a recommendation is made as to 
                                                                                                                                                             
736
  For example, we would expect the requirements of Form CRS to apply in the event the broker-dealer 
makes a recommendation of an account type, securities transaction or investment strategy involving 
securities, the retail investor places an order for the purchase of different securities, or the retail investor 
opens a new brokerage account with the broker-dealer. 
737
  Advisers Act rule 204-5(b)(1) and Exchange Act rule 17a-14(c)(1); see also General Instruction 7.B.(iii) to 
Form CRS. 
738
  See State Farm Letter. 

 
226 
 
the type of account to open.
739
  We believe that the final initial delivery requirements 
accommodate this comment also.  Broker-dealers will be required to deliver the relationship 
summary before or at the earliest of (i) a recommendation of an account type, a securities 
transaction, or an investment strategy involving securities, (ii) placing an order for the retail 
investor, or (iii) the opening of a brokerage account for the retail investor.
740
  Investment 
advisers will be required to deliver the relationship summary before or at the time of entering 
into an investment advisory contract with the retail investor.
741
  Dual registrants will be required 
to deliver the relationship summary when recommending an account type to the retail investor if 
it is the earliest occurrence among the initial delivery triggers for broker-dealers and investment 
advisers, which we believe will typically precede the opening of a brokerage account or entering 
into an investment advisory contract.
742
 
c. Additional Delivery Requirements to Existing Clients and 
Customers 
We are adopting requirements for firms to re-deliver the relationship summary to existing 
clients and customers under certain circumstances, with some modifications from the proposal.  
We continue to believe that these investors will benefit from being reminded of the information 
contained in the relationship summary, including about the different services and fees that the 
firm offers, when they are again making decisions about whether to invest through an advisory 
                                                                                                                                                             
739
   See CFA Letter I. 
740
  See Exchange Act rule 17a-14(c)(1); General Instruction 7.B.(ii) to Form CRS. 
741
  See Advisers Act rule 204-5(b)(1); General Instruction 7.B.(i) to Form CRS. 
742
  See General Instruction 7.B.(iii) to Form CRS. 

 
227 
 
account or a brokerage account.  Specifically, after an initial delivery of the relationship 
summary to existing clients and customers who are retail investors, firms will be required to 
deliver the most recent version of the relationship summary to a retail investor if they (i) open a 
new account that is different from the retail investor’s existing account(s); (ii) recommend that 
the retail investor roll over assets from a retirement account into a new or existing account or 
investment; or (iii) recommend or provide a new brokerage or investment advisory service or 
investment that does not necessarily involve the opening of a new account and would not be held 
in an existing account, for example, the first time purchase of a direct-sold mutual fund or 
insurance product that is a security through a “check and application” process, i.e., not held 
directly within an account.   
In comparison, as proposed, the instructions would have required a firm to deliver a 
relationship summary to existing clients or customers when: (i) a new account is opened that is 
different from the retail investor’s existing account, or (ii) changes are made to the existing 
account that would materially change the nature and scope of the relationship.  The proposed 
instructions provided that whether a change was material for these purposes would depend on the 
specific facts and circumstances and gave as examples transfers from an investment advisory 
account to a brokerage account, transfers from a brokerage account to an investment advisory 
account, and moves of assets from one type of account to another in a transaction not in the 
normal, customary or already agreed course of dealing.   
In the RAND 2018 survey, 50% of respondents reported that they would like to receive 
an updated relationship summary “whenever there is a material change in the Relationship 
Summary, such as a change in fees or commission structure,” about 30% would prefer to receive 
the relationship summary periodically and almost 40% preferred to receive the summary on 

 
228 
 
request.
743
  One commenter supported the additional delivery requirements to existing clients 
and customers as proposed, agreeing that investors are again making decisions about 
relationships and account types under these circumstances and would benefit from the 
information the relationship summary provides.
744
  Another commenter recognized the value of 
delivering the relationship summary to existing clients and customers but recommended specific 
limitations to the requirements.
745
  One commenter supported once a year or periodic updates 
and continued availability of a current version on a firm’s website,
746
 while another commenter 
opposed any requirement to provide periodic updates.
747
  Several commenters argued that some 
or all of the additional delivery requirements are not necessary, given the prior initial delivery 
and online availability of relationship summaries.
748
  A few commenters argued that the 
                                                                                                                                                             
743
  RAND 2018, supra footnote 13. 
744
  See CFA Letter I (“We support this proposal and agree with the Commission that, in these instances, ‘retail 
investors are again making decisions about whether to invest through an advisory account or a brokerage 
account and would benefit from information about the different services and fees that the firm offers to 
make an informed choice.’”).  
745
  See SIFMA Letter (arguing that a “material change” should be defined as changes from an advisory 
account to a brokerage account or vice versa, and not include asset movements from one type of account to 
another or “other material changes”).  
746
  See Schwab Letter I; Schwab Letter III. 
747
 See CFN Letter. 
748
  See, e.g., LPL Financial Letter (“It is not clear what additional benefits obtain from delivering an identical 
copy of a document an investor has already received.”); SIFMA Letter (“[W]e do not believe these 
additional trigger points [other than changing from one type of account to another] are necessary because 
customers will receive Form CRS at periodic intervals throughout the relationship, and customers will have 
continual online access to a firm’s Form CRS via a website posting, making the need to “push out” the 
Form CRS at additional points unnecessary.”); Institute for Portfolio Alternatives Letter (“We suggest that 
delivery of a new or updated Form CRS with every transaction would be excessive, impractical and without 
commensurate investor benefit”); UBS Letter (“If a client already has both a brokerage account and an 
advisory account and is transferring assets from one to another . . . the client already would have the critical 
disclosures applicable to both account types . . . .”).    

 
229 
 
additional delivery requirements could confuse investors because of either an apparent 
duplication or difference from delivery requirements of existing disclosures.
749
  One commenter 
also stated that the proposed additional delivery requirements could overwhelm investors in a 
counterproductive way.
750
  Furthermore, commenters requested additional guidance or examples 
for what would “materially change” the relationship.
751
   
In addition, some commenters expressed concerns about administrative and operational 
burdens relating to the proposed additional delivery requirements.
752
  For example, one 
commenter asserted that firms would be required to build entirely new operational and 
supervisory processes to identify asset movements divorced from any account opening process 
                                                                                                                                                             
749
  See, e.g., Comment Letter of AXA (Aug. 7, 2019) (“[E]xisting customers have already decided which firm 
to work with, so requiring firms to send the Relationship Summary to those customers is likely to cause 
customer confusion.”); Pickard Djinis and Pisarri Letter (“The disharmony between the existing ADV 
brochure delivery requirements and the proposed requirements under Rule 204-5 are likely to confuse 
clients. . . .”); UBS Letter (“[R]eceiving the Form CRS again in such circumstances would likely lead to 
confusion rather than an improved understanding.”). 
750
  See SIFMA Letter (“Providing Form CRS to investors beyond [changes from one type of account to 
another] could overwhelm them with duplicative or redundant information,” making it “less likely they will 
digest the information.”). 
751
  See, e.g., Prudential Letter (“[M]ore guidance is needed on this point; additional examples of triggering 
events would provide clarity.”); TIAA Letter (“SEC should identify additional instances beyond account 
changes that would trigger re-delivery.”); Cambridge Letter (requesting further guidance on a material 
change to the nature and scope of the relationship and encouraging SEC to provide a broad set of 
examples); SIFMA Letter (“[I]t is not clear what ‘other material’ changes or assets movements ‘not in the 
normal, customary, or already agreed course of dealing’ would be”); Institute for Portfolio Alternatives 
Letter (requesting guidance on what facts and circumstances would trigger a “material” change and require 
delivery of a new, or updated, Form CRS); Comment Letter of Sorrento Pacific Financial, LLC (Aug. 7, 
2018).  
752
  See SIFMA Letter; LPL Financial Letter; Institute for Portfolio Alternatives Letter; Pickard Djinis and 
Pisarri Letter (additional delivery requirements “would impose unjustifiable administrative burdens on 
advisers, the majority of whom are small businesses.”).  

 
230 
 
that could trigger an additional delivery requirement.
753
  This commenter also argued that the 
review that would be required prior to effecting potentially triggering asset movements could 
cause delays that are detrimental to the retail investor.
754
  Similarly, another commenter 
explained that most of the proposed additional delivery triggers would be relatively easy to 
identify and address through existing processes, such as new account openings and when a 
brokerage account is converted to an investment advisory account and vice versa.
755
  Other 
potential delivery triggers, however, such as investments of inheritances or proceeds of a 
property sale, or a significant migration from savings to investment, would present operational 
challenges and compliance costs.
756
  These commenters recommended limiting additional 
delivery requirements to circumstances in which a brokerage account is converted to an 
investment advisory account and vice versa.
757
 
We disagree that delivery of the relationship summary to existing clients and customers is 
unnecessary if the investor has already received one.  As noted above, when investors are again 
making decisions about whether to choose an investment advisory or brokerage account, we 
                                                                                                                                                             
753
  See SIFMA Letter (explaining that, because additional delivery triggers could be divorced from any 
account opening process, entirely new operational and supervisory processes would need to be designed (i) 
to identify potentially triggering asset movements; (ii) to review for whether a proposed asset movement is 
not in the normal, customary, or already agreed course of dealing; and (iii) depending on whether delivery 
were required, create and preserve either a record of the delivery or of the conclusion that no such delivery 
was required). 
754
  See SIFMA Letter. 
755
  See LPL Financial Letter. 
756
  See LPL Financial Letter (explaining that its existing systems are not designed to monitor and record dates 
of non-ordinary course events or to distinguish those events from routine account changes). 
757
  See SIFMA Letter; LPL Financial Letter. 

 
231 
 
believe they will benefit from being reminded that different options are available and where they 
can get more information to inform their choice.  We are not requiring that the relationship 
summary be delivered at periodic intervals or at every transaction; thus we disagree with 
comments that the additional delivery obligations will not provide commensurate benefit to 
investors, or will confuse or overwhelm investors.  We are therefore adopting additional delivery 
requirements that apply to a firm’s existing clients and customers, with some modifications from 
those proposed.   
First, as proposed (and supported by two commenters as noted above), we are adopting 
the requirement that a firm deliver the relationship summary when opening any new account that 
is different from the retail investor’s existing account(s).
758
  Second, in response to comments we 
are replacing the proposed standard of “materially change the nature and scope of the 
relationship” with two, more specific and easily identifiable, triggers that we believe would not 
implicate the same operational or supervisory burdens described by commenters to meet the 
proposed requirement.
759
   Instead, firms will be required to deliver a relationship summary to 
existing clients and customers when recommending that the retail investor roll over assets from a 
retirement account, or recommending or providing a new brokerage or investment advisory 
service or investment that does not necessarily involve the opening of a new account and would 
not be held in an existing account, for example, the first-time purchase of a direct-sold mutual 
fund or insurance product (e.g., variable annuities) that is a security through a “check and 
                                                                                                                                                             
758
  General Instruction 9.A. to Form CRS. 
759
  See supra footnotes 752–757 and accompanying text. 

 
232 
 
application” process, i.e., not held directly within an account.
760
  While these requirements will 
still impose operational and supervisory burdens, we believe they are more easily identified and 
monitored, such that firms will not need to create new systems or processes to the extent that 
commenters said would be necessary to comply with the proposed “material change” standard.  
These more specific triggers are intended to provide investor protection under these 
circumstances in a more cost-effective manner, while still addressing the objectives that the 
“material changes” language sought to address, that is, to ensure that a firm does not switch 
existing customers or clients into accounts or services without explaining or giving them the 
opportunity to consider other available options.
761
  Also, as proposed, we are adopting the 
instruction that firms must deliver the relationship summary to a retail investor within 30 days 
upon the retail investor’s request.
762
  While some commenters requested changes to the proposed 
delivery requirements, they nonetheless supported requiring delivery upon request.
763
 
Finally, delivery of the relationship summary will not necessarily satisfy any other 
disclosure obligations the firm has under the federal securities laws or other laws or regulations, 
as proposed.  The relationship summary requirement will be in addition to, and not in lieu of, 
other disclosure and reporting requirements or other obligations for broker-dealers and 
                                                                                                                                                             
760
  General Instruction 9.A. to Form CRS. 
761
  Recommendations of account types to existing customers and clients also are addressed in the Regulation 
Best Interest Release and Fiduciary Release, supra footnote 47. 
762
  General Instruction 9.B. to Form CRS. 
763
  See Fidelity Letter; SIFMA Letter. 

 
233 
 
investment advisers.
764
  One commenter suggested that we require that the relationship summary 
include a prominent statement that it does not replace, but rather should be read in conjunction 
with, Form ADV or Form BD.
765
  This commenter also suggested that the relationship summary 
should include a hyperlink to the appropriate Form ADV or Form BD, as applicable.
766
  We 
believe that the required links in the Additional Information section, discussed in Section II.B.5. 
above, addresses these comments. 
Some commenters argued that investment advisers should not be required to deliver a 
relationship summary to retail clients because they already deliver a Form ADV Part 2A 
brochure.
767
  We disagree.  By requiring both investment advisers and broker-dealers to deliver a 
relationship summary that discusses at a high level both types of services and their differences in 
a comparable format, the relationship summary would help all retail investors compare not only 
among investment advisory services, but also between investment advisory and brokerage 
services.  We do not believe that existing disclosures provide this level of transparency and 
comparability across investment advisers, broker-dealers, and dual registrants.  Form CRS is a 
summary disclosure designed to provide a high-level overview of services, fees, costs, conflicts 
                                                                                                                                                             
764
  For example, the relationship summary would not necessarily satisfy the disclosure requirements under 
Regulation Best Interest.  See Regulation Best Interest Release, supra footnote 47.  
765
  See Financial Engines Letter. 
766
  See Financial Engines Letter. 
767
  Comment Letter of Registered Advisor Services (Apr. 20, 2018); Comment Letter of Franklin Templeton 
Investments (Aug. 6, 2018); IAA Letter I; Triad Letter; Pickard Djinis and Pisarri Letter; Prudential Letter; 
see also State Farm Letter (arguing that investment advisers should be required to include in their 
relationship summaries only those disclosures that are not otherwise available, provided that a 
representative heading or introductory statement and a hyperlink to such disclosures are provided in the 
Relationship Summary). 

 
234 
 
of interest, standard of conduct, and disciplinary history, to retail investors in order to help them 
decide whether to engage a particular firm or financial professional, including deciding whether 
to seek investment advisory or brokerage services.  Form ADV Part 2A, in contrast, requires 
more detailed disclosures specific to advisory services.   If a firm does not have retail investor 
clients or customers and is not required to deliver a relationship summary to any clients or 
customers, the firm will not be required to prepare or file a relationship summary, as proposed.
768
 
4. Updating Requirements 
We are adopting substantially as proposed a requirement for firms to update the 
relationship summary within 30 days whenever the relationship summary becomes materially 
inaccurate.
769
  Firms also must post the latest version on their website (if they have one), and 
electronically file the relationship summary with the Commission.
770
  Although some 
commenters expressed different views on the requirement to communicate updated information 
to retail investors, as discussed below, most commenters did not object to the proposed 
requirements to update the relationship summary within 30 days of a material change and the 
                                                                                                                                                             
768
  See amended Advisers Act rule 203-1, note to paragraph (a)(1); Exchange Act rule 17a-14(a), (b).  See 
introduction of General Instructions to Form CRS. 
769
  Advisers Act rule 204-1(a)(2) and Exchange Act rule 17a-14(b)(3); General Instruction 8.A. to Form CRS.  
For investment advisers, we are also adopting amendments to the General Instructions to Form ADV to 
mirror this requirement and to clarify the filing type.  See amended General Instruction 4 to Form ADV 
(revised to add the following language:  “If you are registered with the SEC, you must amend Part 3 of your 
Form ADV within 30 days whenever any information in your relationship summary becomes materially 
inaccurate by filing with the SEC an additional other-than-annual amendment or by including the 
relationship summary as part of an annual updating amendment.”); see also supra footnotes 673–677 and 
accompanying text.   
770
 Advisers Act rules 203-1(a)(1), 204-5(b)(3) and Exchange rules 17a-14(b)(2), 17a-14(c)(3); General 
Instructions 8.A., 8.C., and 10.A. to Form CRS.   

 
235 
 
associated posting and filing obligations.
771
  On the other hand, one commenter advocated that 
firms be allowed 60 days to update the relationship summary to address operational issues, but 
did not describe the specific operational challenges.
772
  Based on our experience with other 
similar filings, we believe the proposed approach is consistent with the current requirements for 
investment advisers to update the Form ADV Part 2A brochure,
773
 and with broker-dealers’ 
current obligations, including to update Form BD if its information is or becomes inaccurate for 
any reason.
774
  We continue to believe that allowing 30 days for firms to make updates provides 
sufficient time for firms to make the necessary revisions.  Therefore, we are adopting these 
requirements as proposed. 
The proposed instructions also would have required firms, without charge to the retail 
investor, to communicate updated information by delivering the amended relationship summary 
or by communicating the information another way.
775
  As noted above, commenters expressed 
different views regarding this approach.  Some commenters advocated for posting the 
                                                                                                                                                             
771
  See, e.g., Trailhead Consulting Letter (“If the form is kept to a more generalized and educational nature, 
material changes shouldn’t occur too often.”); NASAA Letter; LPL Financial Letter; Prudential Letter; 
Primerica Letter. 
772
  See Morgan Stanley Letter (30 days “may not be sufficient to address the related operational issues”). 
773
  See, e.g., Advisers Act rule 204-5(b)(4); General Instruction 8 to Form CRS.  Generally, an investment 
adviser registered with the SEC is required to amend its Form ADV promptly if information provided in its 
brochure becomes materially inaccurate.  See Advisers Act rule 204-1(a)(2); General Instruction 4 to Form 
ADV.     
774
 See, e.g., Exchange Act rule 15b3-1. 
775
  See Proposed General Instruction 6.(b) to Form CRS. 

 
236 
 
relationship summary on a firm’s website in order to meet the communication requirement.
776
  
On the other hand, one commenter advocated for requiring firms to deliver updated relationship 
summaries whenever a change is made, rather than permitting firms to communicate the 
information in another way.
777
  We are adopting slightly revised final instructions to eliminate 
the proposed wording “another way” in order to clarify that a firm may communicate the 
information through another disclosure, and that disclosure must be delivered to the retail 
investor.
778
  In other words, merely providing notice of or access to another disclosure or the 
relationship summary would not satisfy this final instruction.  For example, if an investment 
adviser communicated a material change to information contained in its relationship summary to 
a retail investor by delivering an amended Form ADV brochure or Form ADV summary of 
material changes that also contained the updated information, this would support a reasonable 
belief that the information had been communicated to the retail investor, and the investment 
adviser will not be required to deliver an updated relationship summary to that retail investor.  
This requirement provides firms the flexibility to disclose changes to the relationship summary 
without requiring them to incur additional delivery costs.   
                                                                                                                                                             
776
  See, e.g., Fidelity Letter (“We also support the SEC’s position that with respect to material changes of 
information provided in a Form CRS, firms must either provide an updated Form CRS to retail investors or 
communicate the changes in another way such as posting on the firm’s website.”); Morgan Stanley Letter; 
Primerica Letter. 
777
  See NASAA Letter. 
778
  General Instruction 8.B. to Form CRS (“You can make the communication by delivering the amended 
relationship summary or by communicating the information through another disclosure that is delivered to 
the retail investor.”).   

 
237 
 
In another modification from the proposal, the rules as adopted will allow f irms to 
communicate the information in an amended relationship summary to retail investors who are 
existing clients or customers within 60 days after the updates are required to be made, instead of 
30 days as proposed.
779
  Two commenters advocated that allowing 60 days for the 
communication would increase the likelihood that firms could deliver an updated relationship 
summary along with other disclosures that firms commonly deliver on a quarterly basis, rather 
than in a separate delivery.
780
  Delivery with other disclosures is consistent with the instructions 
regarding the way in which relationship summary updates may be communicated.  We are 
clarifying this, as noted above, and adopting the requirement that firms must communicate 
updates to the relationship summary within 60 days after the updates are required to be made.   
In a further change from the proposal, firms must highlight the changes in an amended 
relationship summary by, for example, marking the revised text or including a summary of 
material changes and attaching the changes as an exhibit to the unmarked amended relationship 
summary.
781
  The unmarked amended relationship summary and exhibit must be filed with the 
                                                                                                                                                             
779
  Advisers Act rule 204-5(b)(4) and Exchange Act rule 17a-14(c)(4); Proposed General Instruction 6.(b) to 
Form CRS.  
780
  See LPL Financial Letter; Morgan Stanley Letter.  For example, NASD Rule 2340 requires broker-dealers 
to deliver account statements generally on a quarterly basis. 
781
  General Instruction 8.C. to Form CRS (“Each amended relationship summary that is delivered to a retail 
investor who is an existing client or customer must highlight the most recent changes by, for example, 
marking the revised text or including a summary of material changes.  The additional disclosure showing 
revised text or summarizing the material changes must be attached as an exhibit to the unmarked amended 
relationship summary.”).  As an addition to the proposal, we are also amending General Instruction 4 to 
Form ADV to mirror this requirement (“You must include an exhibit highlighting the most recent changes 
required by Form ADV, Part 3 (Form CRS), General Instruction 8.C.”); see also supra footnotes 673–677 
and accompanying text. 

 
238 
 
Commission.
782
  We believe that including this exhibit is important in assisting retail investors to 
assess changes that may impact their accounts or their relationships with their firm or financial 
professional.  A retail investor will be able to find the latest version of the relationship summary 
through Investor.gov and on the firm’s website, if it has one, and firms will be required to deliver 
a relationship summary within 30 days upon the retail investor’s request, as proposed.
783
   
As discussed in the proposal, for purposes of the requirement to communicate updates to 
the relationship summary, it is important that broker-dealers identify their existing customers 
who are retail investors and recognize that a customer relationship may take many forms.  For 
example, a broker-dealer will be required to provide the relationship summary to customers who 
have so-called “check and application” arrangements with the broker-dealer, under which a 
broker-dealer directs the customer to send the application and check directly to the issuer.  We 
continue to believe this approach will facilitate broker-dealers building upon their current 
compliance infrastructure in identifying existing customers
784
 and will enhance investor 
protections to retail investors engaging the financial services of broker-dealers. 
                                                                                                                                                             
782
  General Instruction 8.A. to Form CRS; see also General Instruction 4 to Form ADV.   
783
  Advisers Act rules 204-5(b)(3) and 204-5(b)(5) and Exchange Act rules 17a-14(c)(3) and 17a-14(c)(5); 
General Instruction 9.B. to Form CRS.  
784
  For example, broker-dealers may already have compliance infrastructure to identify customers pursuant to 
FINRA’s suitability rule, which applies to dealings with a person (other than a broker or dealer) who opens 
a brokerage account at a broker-dealer or who purchases a security for which the broker-dealer receives or 
will receive, directly or indirectly, compensation even though the security is held at an issuer, the issuer’s 
affiliate or custodial agent, or using another similar arrangement.  See Guidance on FINRA’s Suitability 
Rule, FINRA Regulatory Notice 12-55 (Dec. 2012), at Q6(a).  

 
239 
 
D. Transition Provisions 
To provide adequate notice and opportunity to comply with the adopted relationship 
summary filing requirements, firms that are registered, or investment advisers who have an 
application for registration pending, with the Commission prior to June 30, 2020 will have a 
period of time beginning on May 1, 2020 until June 30, 2020 to file their initial relationship 
summaries with the Commission.
785
  On and after June 30, 2020, newly registered broker-dealers 
will be required to file their relationship summary with the Commission by the date on which 
their registration with the Commission becomes effective, and the Commission will not accept 
any initial application for registration as an investment adviser that does not include a 
relationship summary that satisfies the requirements of Form ADV, Part 3: Form CRS.
786
  The 
adopted transition period is longer than we proposed.  The proposal would have required broker-
dealers to comply with their relationship summary obligations beginning six months after the 
effective date of the new rules and rule amendments.
787
  Similarly, in the proposal, investment 
advisers or dual registrants would have been required to comply with the new filing requirements 
as part of the firm’s next annual updating amendment to Form ADV that would have been 
required after six months after the rule’s effective date.
788
  The extended time to comply with the 
                                                                                                                                                             
785
  See Exchange Act rule 17a-14(f), Advisers Act rules 203-1(a)(2) and 204-1(e); Instruction 7.C. to Form 
CRS. 
786
  See Exchange Act rule 17a-14(f) and Advisers Act rule 203-1(a)(2); Instruction 7.C. to Form CRS.  
787
  See Proposed Instruction 5.c. to Form CRS. See Advisers Act proposed rule 203-1(a)(2) and Exchange Act 
proposed rule 17a-14 (f)(1). 
788
  See id. 

 
240 
 
relationship summary requirements reflects our consideration of comments we received from 
firms and the modifications to the proposed requirements of the relationship summary.   
In the proposal, we asked for comment on the proposed implementation requirements and 
whether the six-month period was enough time for newly registered broker-dealers and 
investment advisers to prepare an initial relationship summary.
789
  A number of commenters 
requested a longer implementation period, ranging from 12 to 24 months from the effective 
date.
790
  One commenter suggested a phased-in approach, such that requirements may be effected 
at different points in time.
791
  Commenters cited a number of reasons for a longer 
implementation period, including the time needed to hire additional staff and create and deploy 
new disclosures, procedures, training, and technology,
792
 as well as to have the opportunity to 
apply innovative technology and designs.
793
   
We are mindful of the time needed to create the relationship summary, as well as to 
update a firm’s policies, procedures, and systems in order to provide these new disclosures.  We 
are, however, lengthening the time that firms will have to comply relative to the proposal after 
considering commenters’ suggestions for a longer implementation period.  We expect that 
                                                                                                                                                             
789
  See Proposing Release. 
790
  See, e.g., IAA Letter I (requesting a 12 month implementation period from the effective date); CCMC 
Letter (requesting 18 months); IRI Letter (requesting 18–24 months); Comment Letter of HD Vest 
Financial Services (Aug. 7, 2018) (“HDVest Letter”) (requesting 18 months); Cetera Letter I; SIFMA 
Letter (requesting at least 24 months from the date the final rules are approved).  
791
  See SIFMA Letter. 
792
  See HDVest Letter. 
793
  See IAA Letter I. 

 
241 
 
approximately twelve months will be adequate for firms to conduct the requisite operational 
changes to their systems and to establish internal processes to satisfy their relationship summary 
obligations.   
Some commenters expressed the view that the proposed one-time, initial delivery to 
existing clients and customers is not necessary.
794
  One survey reported, on the other hand, that 
over 90% of survey respondents with an existing financial professional relationship stated that 
they knew more about their relationship with the adviser after reading the proposed relationship 
summary.
795
  We believe the information contained in the relationship summary could improve 
existing investors’ ability to monitor and make more informed decisions related to their existing 
relationships with firms during their duration, including whether to terminate a relationship.  For 
example, as discussed above in Section II.A., retail investors that may learn of account types 
whose minimum requirements they did not meet when they first opened their existing account, 
through a one-time, initial delivery to existing clients and customers.  Upon seeing this range of 
options, existing clients and customers could seek to take advantage of cost savings or additional 
                                                                                                                                                             
794
  See, e.g., Fidelity Letter (existing customers are already familiar with the services offered to them by their 
broker-dealer or investment adviser. . . but can of course access a copy posted on the firm’s website); AXA 
Letter (delivering the relationship summary to existing customers is likely to be confusing); Cetera Letter I 
(firms should not be required to deliver a new or amended Form CRS to [existing] clients except in limited 
circumstances, such as when the client establishes a different type of account than they already have).  
795
  See Cetera Letter II (Woelfel), supra footnote 17 (84% of respondents stated that they knew a lot or a little 
more about their financial adviser after reviewing the Form CRS than they did before; among respondents 
with current relationships with a broker or adviser, over 90% said they knew more); see also CCMC Letter 
(investor polling), supra footnote 21 (in a survey of investors with investments outside of a work sponsored 
401(k), pension or personal real estate, 72% of participants responding to a question describing that new 
rules could require financial professionals to deliver “ a standardized four page document that explains the 
relationship between the financial professional and clients” agreed that the new disclosure document “will 
boost transparency and help build stronger relationships between me and my financial professional” and 
62% indicated that they were “very interested” in reading the document).   

 
242 
 
services offered through these other account types.  We believe that existing clients and 
customers would benefit from this one-time delivery of the relationship summary and therefore 
are adopting the requirement as proposed.  Firms will be required to deliver their relationship 
summary to new and prospective clients and customers who are retail investors as of the date by 
which they are first required to electronically file their relationship summary with the 
Commission.
796
  In addition, as proposed, firms will be required, as part of the transition, to 
deliver their relationship summaries to all existing clients and customers who are retail investors 
on an initial one-time basis within 30 days after the date the firm is first required to file its 
relationship summary with the Commission.
797
  
E. Recordkeeping Amendments 
We are adopting amendments to the recordkeeping and record retention requirements 
under Advisers Act rule 204-2 and Exchange Act rules 17a-3 and 17a-4, as proposed.  These 
rules set forth requirements for firms to make, maintain, and preserve specified books and 
records.  Pursuant to paragraph (a)(14)(i) of Advisers Act Rule 204-2 as amended, investment 
advisers will be required to make and preserve a record of the dates that each relationship 
summary was given to any client or prospective client who subsequently becomes a client.
798
  
New paragraph (a)(24) of Exchange Act Rule 17a-3 as adopted will require broker-dealers to 
create a record of the date on which each relationship summary was provided to each retail 
                                                                                                                                                             
796
  See Advisers rule 204-5(e)(2) and Exchange Act rule 17a-14(f)(4); Instruction 7.C.iii. to Form CRS. 
797
  See Advisers rule 204-5(e)(1) and Exchange Act rule 17a-14(c) and (f)(3); adopted Instruction 7.C.iv. to 
Form CRS. 
798
  See amended Advisers Act rule 204-2(a)(14)(i). 

 
243 
 
investor, including any relationship summary provided before such retail investor opens an 
account.
799
   In addition, paragraph (a)(14)(i) of Advisers Act rule 204-2, as amended, will 
require investment advisers to retain copies of each relationship summary and each amendment 
or revision thereto while paragraph (e)(10) of Exchange Act rule 17a-4, as amended, will require 
broker-dealers to maintain and preserve a copy of each version of the relationship summary as 
well as the records required to be made pursuant to new paragraph (a)(24) of Exchange Act rule 
17a-3 as adopted by the Commission.
800
  The amended rules set forth the manner in which and 
the period of time for which these record must be retained.
801
  These records will facilitate the 
Commission’s ability to inspect for and enforce compliance with the relationship summary 
requirements.     
We received no comments on the proposed manner and time period for records 
preservation or the requirement to maintain a copy of each version of the relationship summary 
                                                                                                                                                             
799
  See Exchange Act rule 17a-3(a)(24). 
800
  The effect of the amended and adopted rules will require both investment advisers and broker-dealers to 
maintain copies of all versions of the relationship summary and the dates they are provided or given to 
existing or prospective retail customers; see also General Instruction 6.A. to Form CRS (requiring firms to 
maintain a copy of each version of the relationship summary and make it available to the SEC staff upon 
request).  The Commission notes that pursuant to Exchange Act rule 17a-3(e), for purposes of transactions 
in municipal securities by municipal securities broker-dealers, compliance with Rule G-8 of the Municipal 
Securities Rulemaking Board (“MSRB”) will be deemed to be in compliance with the recordkeeping 
requirements for broker-dealers.  Accordingly, for purposes of transactions in municipal securities, a 
broker-dealer may satisfy its recordkeeping obligations under Exchange Act rule 17a-3(a)(24), as adopted, 
by complying with Rule G-8 of the MSRB. See Exchange Act rule 17a-3(e). 
801
  Investment advisers will be required to maintain and preserve these records in an easily accessible place for 
a period of not less than five years from the end of the fiscal year during which the last entry was made on 
such record, the first two years in an appropriate office of the investment adviser.  See Advisers Act rule 
204-2(e)(1).  Broker-dealers will be required to maintain these records in an easily accessible place until six 
years after such record or relationship summary is created.  See Exchange Act rules 17a-3(a)(24) and 17a-
4(e)(10) as amended. 

 
244 
 
and each amendment or revision to the relationship summary.
802
  We are adopting these 
requirements as proposed.  Some commenters expressed concern with the potential costs and 
feasibility of complying with the proposed recordkeeping requirements for broker-dealers.
803
  
Several commenters argued that keeping records of when a relationship summary was given to a 
prospective retail investor would be unnecessarily burdensome for firms and would likely 
provide de minimis benefits.
804
  Some investment adviser and broker-dealer commenters stated 
that most firms’ recordkeeping systems and procedures are not designed to maintain records 
relating to prospective clients and that conforming such systems and procedures to the proposed 
rule requirements would be burdensome and costly and would not result in an offsetting 
benefit.
805
  Others noted they may have to retain records for an indefinite length of time because 
their interactions with prospective clients about engaging services often span weeks, months or 
years and may include numerous phone calls, meetings or other forms of contact.
806
   
As an alternative, commenters suggested that firms only be required to maintain a record 
of the most recent date they delivered the relationship summary to a prospective client that 
                                                                                                                                                             
802
  See Exchange Act rule 17a-4(e)(10) as proposed to be amended and Advisers Act rule 204-2(e)(1) (which 
would apply to amended rule 204-2(a)(14)(i) as proposed to be amended).  The recordkeeping requirements 
for investment advisers will mirror the current recordkeeping requirements for Form ADV Part 2.  See 
Advisers Act amended rule 204-2(a)(14)(i) as proposed to be amended and rule 204-2(e)(1). 
803
  See, e.g., CCMC Letter; Committee of Annuity Insurers Letter; Edward Jones Letter; Morgan Stanley 
Letter; Primerica Letter; SIFMA Letter; IPA Letter. 
804
  See id. 
805
  See, e.g., Committee of Annuity Insurers Letter; Edward Jones Letter; Morgan Stanley Letter; Primerica 
Letter; SIFMA Letter. 
806
  See, e.g., Edward Jones Letter; Primerica Letter; SIFMA Letter. 

 
245 
 
becomes an actual client preceding the opening of an account.
807
  Commenters suggested only 
requiring a record t hat the relationship summary was delivered at account opening or when a 
retail investor becomes an investment advisory client.
808
  
Based on our experience with similar recordkeeping requirements for the Form ADV Part 
2A brochure, requiring firms to create and maintain records of the dates they provide or give a 
relationship summary to an existing, new, or potential retail investor will facilitate examiners’ 
ability to inspect and examine for compliance with the relationship summary delivery and 
content requirements.  Specifically, the dates will help examiners to identify the relationship 
summary disclosures that retail investors may have relied on to decide whether to engage a 
firm’s services.  Absent having these dates to examine, we believe that it would be exceedingly 
difficult for examiners to evaluate firms’ compliance with the relationship summary delivery and 
content requirement.  These records also may assist firms in monitoring their compliance with 
the relationship summary delivery requirements. 
Recordkeeping obligations for the relationship summary may be less burdensome if firms’ 
recordkeeping and compliance systems are already capable of creating and maintaining records 
related to communications with prospective clients.  For example, investment advisers are 
required to keep similar records for the delivery of the Form ADV Part 2A brochure
809
 and 
broker-dealers, especially those registered with FINRA, are subject to comparable recordkeeping 
                                                                                                                                                             
807
  See, e.g., CCMC Letter; SIFMA Letter. 
808
  See, e.g., SIFMA Letter; Morgan Stanley; Edward Jones Letter. 
809
  See, e.g., Advisers Act rule 204-2. 

 
246 
 
requirements with respect to communications and correspondence with prospective retail 
investors.
810
  
Several firms also requested clarification and expressed concern regarding the potential 
recordkeeping implications related to the “Key Questions to Ask” provision of the proposal.
811
  
Some commenters stated that requiring firms to make and maintain records of their answers to 
the “Key Questions to Ask” and of supplemental information cross-referenced in or linked from 
the relationship summary would result in substantial and unnecessary burdens and/or might stifle 
potentially beneficial discussions between firms, clients and/or prospective clients.
812
 
Commenters requested clarification that “Key Questions to Ask” are intended to promote dialog 
between firms and clients rather than creating any sort of recordkeeping requirement, which 
commenters believed could lead to less robust discussions between firms and clients.
813
  
                                                                                                                                                             
810
  See, e.g., Exchange Act rule 17a-4(b)(4) requiring broker-dealers to maintain a record of all 
communications sent relating to its business as such; see also, e.g., FINRA Rule 2210(a)(5) (defining 
“retail communication” to mean “any written (including electronic) communication that is distributed or 
made available to more than 25 retail investors within any 30 calendar-day period.”);  FINRA Rule 
2210(b)(4) (requiring all FINRA members to “maintain all retail communications and institutional 
communications for the retention period required by SEA Rule 17a-4(b) and in a format and media that 
comply with SEA Rule 17a-4...[and]...all correspondence in accordance with the record-keeping 
requirements of [FINRA] Rules 3110.09 [on supervision, requiring FINRA members to retain the internal 
communications and correspondence of associated persons relating to the member's investment banking or 
securities business for the period of time and accessibility specified in SEA Rule 17a-4(b)] and 4511 
[establishing general requirements for members to “preserve books and records as required under the 
FINRA rules, the Exchange Act and the applicable Exchange Act rules”]). 
811
  See, e.g., CCMC Letter; TIAA Letter; LPL Financial Letter; IPA Letter; NSCP Letter.  
812
  See, e.g., Edward Jones Letter; CCMC Letter; NSCP Letter; SIFMA Letter; Morgan Stanley Letter; TIAA 
Letter; LPL Financial Letter. 
813
  See, e.g., Edward Jones Letter; CCMC Letter; TIAA Letter; LPL Financial Letter. 

 
247 
 
As discussed above, the “Key Questions to Ask” section of the relationship summary has 
been eliminated, but firms will be required to include “conversation starters” in their relationship 
summary.
814
  We are not establishing new or separate recordkeeping obligations related to the 
conversation starters or the answers provided by firms in response to the conversation starters. 
We are also not adding separate or new recordkeeping obligations related to the use of layered 
disclosure in the relationship summary.  Current recordkeeping rules for investment advisers and 
broker-dealers already impose recordkeeping and retention requirements related to a firm’s 
disclosures and other communications with retail investors, which will include responses to 
conversation starters or information cross-referenced in the relationships summary.
815
  
Responses to conversation starters or hyperlinked material may trigger recordkeeping 
requirements under other federal securities statutes and rules or the rules of self-regulatory 
organizations of which firms are members or registrants.
816
  Further, firms may wish to develop 
scripts for their financial professionals in responding to conversation starters to ensure the 
quality and consistency of responses and then preserve the scripts for compliance purposes. 
                                                                                                                                                             
814
  See supra Section II.A.4. 
815
  For example, with respect to investment advisers, if a conversation starter prompts a written 
communication that includes a recommendation made or proposed to be made or any advice given or 
proposed to be given by the investment adviser, such a communication may be subject to the recordkeeping 
requirements of Advisers Act rule 204-(2)(a)(7).  Also, for example, broker-dealers, under Exchange Act 
Rule 17a-4(b)(4), are required to maintain records of the “[o]riginals of all communications received and 
copies of all communications sent (and any approvals thereof) by the member, broker or dealer (including 
inter-office memoranda and communications) relating to its business as such...”; see also the 
recordkeeping requirements of FINRA Rule 2210. 
816
  See id. 

 
248 
 
III. DISCLOSURES ABOUT A FIRM’S REGULATORY STATUS AND A 
FINANCIAL PROFESSIONAL’S ASSOCIATION  
In connection with Form CRS, we recognized that the education and information that 
Form CRS provides to retail investors could potentially be overwhelmed by the way in which 
financial professionals present themselves to potential or current retail investors, including 
through advertising and other communications.
817
  This concern was particularly acute where 
such communications could be misleading in nature, or where advertising and communications 
precede the delivery of Form CRS and may have a disproportionate impact on shaping or 
influencing retail investor perceptions.
818
  To mitigate these concerns, we proposed additional 
rules as part of the Proposing Release.  One of our proposed rules required disclosure of a firm’s 
regulatory status and a financial professional’s association with a firm.  Specifically, we 
proposed rules under the Exchange Act and the Advisers Act that would have required a broker-
dealer and an investment adviser to prominently disclose that it is registered as a broker-dealer or 
investment adviser, as applicable, with the Commission in print or electronic retail investor 
communications.
819
  The proposed Exchange Act rule also would have required an associated 
natural person of a broker or dealer to prominently disclose that he or she is an associated person 
of a broker-dealer registered with the Commission in print or electronic retail investor 
communications.
820
  Similarly, the proposed Advisers Act rule would have required a supervised 
person of an investment adviser registered under section 203 to prominently disclose that he or 
                                                                                                                                                             
817
  See Proposing Release, supra footnote 5, at footnotes 374–375 and accompanying text.  
818
  See id.  
819
  See id., at footnotes 437–439 and accompanying text. 
820
  See id.  

 
249 
 
she is a supervised person of an investment adviser registered with the Commission in print or 
electronic retail investor communications.
821
  As we discussed in the Proposing Release, we 
believed that requiring a firm to disclose whether it is a broker-dealer or an investment adviser in 
print or electronic retail investor communications would assist retail investors in determining 
which type of firm is more appropriate for their specific investment needs.
822
  For similar 
reasons, we noted that because retail investors interact with a firm primarily through financial 
professionals, it is important that financial professionals disclose the firm type with which they 
are associated.
823
   
Several commenters expressed general support for the proposed Affirmative 
Disclosures.
824
  Some of these commenters believed that the rules could be beneficial in helping 
investors to understand the legal distinctions between broker-dealers and investment advisers.
825
 
Another commenter in support of the Affirmative Disclosures stated that investors would benefit 
more if they were also provided with readily accessible regulatory and disciplinary histories of 
                                                                                                                                                             
821
  See id. 
822
  See Proposing Release, supra footnote 5, at footnotes 440–441 and accompanying text. 
823
  See id.  We also proposed rules that would have restricted broker-dealers and their associated persons from 
using the terms “adviser” or “advisor” as part of a name or title when communicating with retail investors 
in certain circumstances.  We are not adopting those rules, as further discussed in the Regulation Best 
Interest Release.  See Regulation Best Interest Release, supra footnote 47. 
824
  See CFA Letter I; CFA Institute Letter I (stating that “[r]equiring them to call themselves what they legally 
are will enable investors to better understand the distinction”); Better Markets Letter.   
825
  See CFA Institute Letter I; CFA Letter I; LPL Financial Letter. 

 
250 
 
the financial professional.
826
  However, one commenter noted that while “the required disclosure 
could have some modest benefit, ... it is important not to overstate [its] likely value.”
827
    
Several commenters also opposed the Affirmative Disclosures.
828
  Some commenters 
believed that the proposed rules were duplicative, noting that Regulation Best Interest, Form 
CRS, and/or other required disclosure obligations (e.g., Form ADV, FINRA Rule 2210) would 
inform retail investors of the capacity of a firm and its financial professionals, obviating the need 
for the additional rules.
829
  Some of these commenters stated that Form CRS alone or in 
combination with FINRA Rule 2210(d)(3) (providing specific requirements for disclosure of the 
broker-dealer’s name in retail communications and correspondence) would provide retail 
investors with a firm’s capacity and its name, making the Affirmative Disclosures duplicative.
830
  
                                                                                                                                                             
826
  See Better Markets Letter. 
827
  See CFA Letter I.  
828
  Some commenters also opposed the proposed Affirmative Disclosures because investors do not understand 
what it means to be registered or what the legal terms mean.  See Altruist Letter; IRI Letter.  See also LPL 
Financial Letter (noting that regulatory status is not important to an investor when being casually 
introduced for the first time to a financial professional and receiving a business card); Bank of America 
Letter; SIFMA Letter. 
829
  See, e.g., LPL Financial Letter (stating that Form ADV, Form CRS, and Regulation Best Interest already 
“communicate to investors the capacity in which they are acting on behalf of the investor and the material 
facts related to the investor’s relationship with the firm and its financial professionals.”); SIFMA Letter 
(stating that “information regarding regulatory status is contained in Proposed Form CRS, and Proposed 
Form CRS is available at all times on a firm’s website, in addition to periodic distribution to clients.”); IRI 
Letter; Committee of Annuity Insurers Letter; Letter from Mari-Anne Pisarri, Pickard Djinis and Pisarri 
LLP (“Pickard Letter”) (stating “the Commission should determine whether the existing Form ADV 
brochure supplement adequately informs retail investors of the registration status of the advisory 
representatives they deal with....”)  
830
  See, e.g., IRI Letter; Bank of America Letter; Committee of Annuity Insurers Letter.  See also SIFMA 
Letter (noting that Form CRS resolves any confusion that may exist regarding whether a financial 
professional or firm is a broker-dealer or an investment adviser and would be available on a firm website 
and given periodically to investors). 

 
251 
 
Several commenters also opposed the Affirmative Disclosures because they believed the 
costs to implement and comply with the proposed rules did not justify the benefits.
831
  In 
particular, these commenters noted a range of cost-related impacts, such as replacing new and 
existing business cards
832
 and amending numerous electronic and print marketing materials.
833
  
Several commenters also noted the difficultly in implementing and supervising specific types of 
communication including business cards, oral communications, and voice overlay and on-screen 
text in televised or video presentations.
834
 
After considering the comments received and the obligations we are adopting under 
Regulation Best Interest and Form CRS, we have concluded that the capacity disclosure 
requirement in Regulation Best Interest and Form CRS are sufficient to achieve the objectives of 
the proposed Affirmative Disclosures. These rules enhance retail investor awareness of the firm 
and professional type that they are engaging or seeking to engage and would therefore assist a 
retail investor in choosing the type that best suits his or her financial goals.   
As discussed in the Regulation Best Interest Release, as part of its disclosure obligations, 
a broker-dealer and its associated natural persons must disclose when they are acting as a broker-
dealer when making a recommendation.  This type of disclosure is designed to improve 
awareness among retail customers such that a retail customer can more readily identify and 
                                                                                                                                                             
831
  See, e.g., LPL Financial Letter; Bank of America Letter; IRI Letter; SIFMA Letter.  
832
  See IRI Letter.  See also SIFMA Letter (noting also that firms would need to reprint all business cards and 
modify “firm technologies and electronic communications”). 
833
  See LPL Financial Letter (noting “significant financial costs”).  
834
  See Bank of America Letter; IRI Letter; SIFMA Letter; Altruist Letter. See also Committee of Annuity 
Insurers Letter (noting also that there are operational challenges in situations where marketing materials or 
account statements are used or distributed by a product sponsor rather than the firm itself). 

 
252 
 
understand their relationship.
835
  This capacity disclosure requires a broker-dealer and its 
financial professionals to disclose that the firm or the financial professional is acting as a broker-
dealer, as a material fact relating to the scope and terms of the relationship subject to its 
disclosure obligation.
836
  As noted in the Regulation Best Interest Release, a broker-dealer and its 
financial professionals must disclose the required information prior to or at the time of a 
recommendation but Regulation Best Interest does not mandate the form, specific time, or 
method of delivering disclosures pursuant to its disclosure obligation.
837
  In fulfilling this 
obligation, a broker-dealer that is not a dual registrant generally will be able to satisfy the 
requirement to disclose the broker-dealer’s capacity by delivering the Relationship Summary to 
the retail customer.  For broker-dealers who are dually registered, and for associated persons who 
are either dually licensed or are not dually licensed and only offer broker-dealer services through 
a firm that is dually registered, the information contained in the Relationship Summary will not 
be sufficient to disclose their capacity in making a recommendation.
838
  As discussed in the 
Regulation Best Interest Release, although some commenters expressed concerns about potential 
investor confusion caused by “additional” disclosure regarding a dual registrant’s capacity, the 
disclosure obligations of Regulation Best Interest will not duplicate or confuse, but instead will 
                                                                                                                                                             
835
  See Regulation Best Interest Release, supra footnote 47, at Section II.C.1.a. 
836
  See id.  
837
  See id. 
838
  See id.  

 
253 
 
provide clarifying detail on capacity to supplement the information contained in the Relationship 
Summary.
839
     
Additionally, as discussed above, Form CRS includes a requirement for firms to state 
their name and whether they are “registered with the Securities and Exchange Commission as a 
broker-dealer, investment adviser, or both.”
840
  Form CRS is required to be delivered before or at 
the time the financial professional enters into an investment advisory relationship or, for a 
broker-dealer, before or at the earliest of a certain recommendation, the execution of a securities 
transaction, or the opening of a brokerage account.
841
  Additionally, Form CRS will need to be 
prominently posted on the firm’s public website, if it maintains one, in a location and format that 
is easily accessible to retail investors
842
 and must be provided to retail investors 60 days after a 
material change is made.
843
  These requirements highlight for an investor’s attention, and 
promote access to, the capacity information at times that we believe are crucial to a retail 
investor when seeking to make a choice of financial firms.   
We recognize that the proposed Affirmative Disclosures would have included capacity 
requirements on more communications than what is required by Form CRS and capacity 
disclosure requirement in Regulation Best Interest.  Specifically, under the Affirmative 
Disclosures, all forms of communications used by broker-dealers, investment advisers and their 
                                                                                                                                                             
839
  See id. 
840
  See Item 1.A. of Form CRS.  See also supra Section II.B.1.  
841
  See General Instruction 7.B to Form CRS.  See also supra Section II.C. 
842
  See General Instruction 10.A. to Form CRS.  See also supra Section II.C.3.a.  
843
  See General Instruction 8.B. to Form CRS.  See also supra Section II.C.4. In addition, the most recent 
versions of firms’ relationship summaries will be accessible through Investor.gov.  See supra footnote 698 
and accompanying text.  

 
254 
 
financial professionals, such as business cards, letterheads, social media profiles, and signature 
blocks would have included these required capacity disclosures.  However, several commenters 
questioned whether the benefit provided by covering more communications justified the costs of 
implementing the requirements.
844
  While commenters did not provide quantitative data that 
would demonstrate the cost impact on firms, certain commenters did describe the scope of the 
impact along with the operational challenges in implementing the rule.
845
  One commenter stated 
that “the costs of such requirement would be significant” as firms would need to reprint all 
business cards to include this disclosure and make changes to firm technology and electronic 
communications to make the disclosure.
846
  Additionally, another commenter stated that adding a 
voice overlay and on-screen text for video presentations would be difficult to implement, costly, 
and challenging to supervise.
847
  
                                                                                                                                                             
844
  See, e.g., IRI Letter (stating that the costs to amend “tens of thousands of business cards to add the new 
required disclosure outweighs any intended benefit, particularly since the Form CRS already accomplishes 
the same objective...”); Committee of Annuity Insurers Letter (stating that the Affirmative Disclosure rules 
provide little benefit to investors and present operational challenges with respect to marketing materials 
created by product sponsors or issuers); LPL Financial Letter (noting that the benefits of these rules are 
outweighed by the “significant financial cost” to amend “numerous electronic and print marketing 
materials, business cards, and other retail customer communications.”) 
845
  See IRI Letter (noting that a voice overlay and on-screen text may be difficult to implement and to 
effectively supervise.  Additionally, firms will incur “significant costs and resources to monitor such 
presentations” for the required disclosures “even though that same client already received the Form CRS 
disclosure.”); LPL Financial Letter. See also Bank of America Letter (“the [Affirmative Disclosure rules] 
will impose significant costs to implement since tens of thousands of business cards will need to be 
amended in order to add the new required disclosures.”) 
846
          See SIFMA Letter (noting that “we do not believe the regulatory status disclosure would have an obvious 
benefit to investors. At the same time, the costs of such a requirement would be significant.”) 
847
  See Bank of America Letter (stating further that “it would be virtually impossible to supervise whether [the 
required] disclosure was made in oral communications.”); see also Altruist Letter (stating that including the 
disclosure in oral communications would be “awkward for a practitioner to implement.”); Committee of 
Annuity Insurers Letter (stating that “it may not be feasible for a broker-dealer to include this information 
on marketing materials for investment products created and provided by a product sponsor.”) 

 
255 
 
After considering the comments received and the obligations we are adopting under 
Regulation Best Interest and Form CRS, we have concluded that the policy concerns underlying 
the Affirmative Disclosures are addressed by the rulemaking package we are adopting, 
particularly the disclosure obligations in Regulation Best Interest and Form CRS, as discussed 
above.
848
  We therefore believe that the costs of the Affirmative Disclosures do not justify any 
incremental benefit of requiring registration status on all communications and as a result, we are 
not adopting the Affirmative Disclosures.
 
IV. ECONOMIC ANALYSIS 
A. Introduction 
The Commission is sensitive to the economic effects, including the benefits and costs and 
the effects on efficiency, competition, and capital formation that will result from the new rules 
and amendments to existing rules. Whenever the Commission engages in rulemaking and is 
required to consider or determine whether an action is necessary or appropriate in the public 
interest, section 3(f) of the Exchange Act requires the Commission to consider whether the 
action would promote efficiency, competition, and capital formation, in addition to the protection 
of investors.
849
  Further, when making rules under the Exchange Act, section 23(a)(2) of the 
Exchange Act requires the Commission to consider the impact such rules would have on 
competition.
850
 Section 23(a)(2) of the Exchange Act also prohibits the Commission from 
                                                                                                                                                             
848
  See Regulation Best Interest Release, supra footnote 47. 
849
  See 15 U.S.C. 77b(b) and 15 U.S.C. 78c(f). 
850
  See 15 U.S.C. 78w(a)(2).  

 
256 
 
adopting any rule that would impose a burden on competition not necessary or appropriate in 
furtherance of the purposes of the Exchange Act.
851
 
Section 202(c) of the Advisers Act requires the Commission, when engaging in 
rulemaking and required to consider or determine whether an action is necessary or appropriate 
in the public interest, to also consider whether the action will promote efficiency, competition, 
and capital formation, in addition to the protection of investors.
852
 The Commission provides 
both a qualitative assessment of the potential effects and where feasible, quantitative estimates of 
the potential aggregate initial and aggregate ongoing costs. In some cases, however, 
quantification is not feasible due to lack of relevant data, or the difficulty of predicting how 
market participants would act under the conditions of the proposed rules. For example, to the 
extent that the relationship summary will increase retail investors’ understanding of the services 
provided to them, investors are likely to respond differently to the increased understanding.  
Such responses could be transferring to a different financial firm or professional, hiring a 
financial professional for the first time, not taking any action, deciding to invest on their own 
without advice, or entirely abandoning the brokerage or investment advisory market while 
moving their assets to other products or markets (e.g., bank deposits or insurance products). 
Given the number and complexity of assumptions that would be required to be able to estimate 
how the relationship summary will affect investors’ understanding and their decision-making, the 
Commission is not able to estimate the propensity of investors to respond in one way or another.  
                                                                                                                                                             
851
  Id. 
852
  15 U.S.C. 80b-2(c).   

 
257 
 
In the economic analysis that follows, we first examine the current regulatory and 
economic landscape to form a baseline for our analysis. The economic effects of the adopted 
changes are discussed below.   
B. Baseline 
This section discusses, as it relates to this rulemaking, the current state of the broker-
dealer and investment adviser markets, the current regulatory environment, and the current state 
of retail investor perceptions in the market.  
1. Providers of Financial Services
853
 
a. Broker-Dealers  
This rule will affect registrants in the market for broker-dealer services, including dual 
registrants
854
 and broker-dealers offering services to retail investors that are affiliated with an 
                                                                                                                                                             
853
  In addition to broker-dealers and Commission-registered investment advisers discussed below in the 
baseline, there are a number of other entities, such as state registered investment advisers, commercial 
banks and bank holding companies, and insurance companies, which also provide financial advice services 
to retail customers; however, because of unavailability of data, the Commission is unable to estimate the 
number of some of those other entities that are likely to provide financial advice to retail customers. A 
number of broker-dealers (see infra footnote 862) have non-securities businesses, such as insurance or tax 
services. As of December 2018, there are approximately 17,300 state-registered investment advisers. The 
Department of Labor in its Regulatory Impact Analysis identifies approximately 398 life insurance 
companies that could provide advice to retirement investors. See U.S. Department of Labor, Regulating 
Advice Markets: Definition of the Term 'Fiduciary,' Conflicts of Interest, Retirement Investment Advice: 
Regulatory Impact Analysis for Final Rule and Exemptions (Apr. 2016), available at 
https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/rules-and-regulations/completed-
rulemaking/1210-AB32-2/ria.pdf (“Regulatory Impact Analysis”) 
854
  Not all firms that are dually registered as an investment adviser and a broker-dealer offer both brokerage 
and advisory accounts to retail investors. For example, some dually registered firms offer advisory accounts 
to retail investors but offer only brokerage services, such as underwriting services, to institutional clients. 
For the purposes of the relationship summary, we define a dual registrant as a firm that is dually registered 
as a broker-dealer and an investment adviser and offers services to retail investors as both a broker-dealer 
and investment adviser. General Instruction 11.C to Form CRS.  

 
258 
 
investment adviser.
  855
  The market for broker-dealer services encompasses a small set of large 
and medium sized broker-dealers and thousands of smaller broker-dealers competing for niche or 
regional segments of the market.
856
 The market for broker-dealer services includes many 
different markets for a variety of services, including, but not limited to, managing orders for 
customers and routing them to various trading venues; providing advice to customers that is in 
connection with and reasonably related to their primary business of effecting securities 
transactions; holding retail customers’ funds and securities; handling clearance and settlement of 
trades; intermediating between retail customers and carrying/clearing brokers; dealing in 
corporate debt and equities, government bonds, and municipal bonds, among others; privately 
placing securities; and effecting transactions in mutual funds that involve transferring funds 
directly to the issuer. Some broker-dealers may specialize in just one narrowly defined service, 
while others may provide a wide variety of services.  
As of December 2018, there were approximately 3,764 registered broker-dealers with 
over 140 million customer accounts.  In total, these broker-dealers have over $4.3 trillion in total 
                                                                                                                                                             
855
  Some broker-dealers may be affiliated with investment advisers but are not dually registered. From 
Question 10 on Form BD, 2,098 (55.7%) broker-dealers report that directly or indirectly, they control, are 
controlled by, or are under common control with an entity that is engaged in the securities or investment 
advisory business. Comparatively, 2,421 (18.2%) SEC-registered investment advisers report an affiliate 
that is a broker-dealer in Section 7A of Schedule D of Form ADV, including 1,878 SEC-registered 
investment advisers that report an affiliate that is a registered broker-dealer. Approximately 77% of total 
regulatory assets under management of investment advisers are managed by these 2,421 SEC-registered 
investment advisers. 
856
  See Risk Management Controls for Brokers or Dealers with Market Access, Securities Exchange Act 
Release No. 63241 (Nov. 3, 2010) [75 FR 69791 (Nov. 15, 2010)]. For simplification, we present our 
analysis as if the market for broker-dealer services encompasses one broad market with multiple segments, 
even though, in terms of competition, it could also be discussed in terms of numerous interrelated markets. 

 
259 
 
assets, which are total broker-dealer assets as reported on Form X-17a-5.
857
  More than two-
thirds of all brokerage assets and close to one-third of all customer accounts are held by the 17 
largest broker-dealers, as shown in Table 1, Panel A.
858
  Of the broker-dealers registered with the 
Commission as of December 2018, 359 broker-dealers are dually registered as investment 
advisers.
859
  These firms hold over 90 million (63%) customer accounts. Approximately 539 
broker-dealers (14%) report at least one type of non-securities business, including insurance, 
retirement planning, mergers and acquisitions, and real estate, among others.
860
 Approximately 
73.5% of registered broker-dealers report retail customer activity.
861
  
                                                                                                                                                             
857
  Assets are estimated by Total Assets (allowable and non-allowable) from Part II of the FOCUS filings 
(Form X-17A-5 Part II, available at https://www.sec.gov/files/formx-17a-5_2.pdf) and correspond to 
balance sheet total assets for the broker-dealer.  The Commission does not have an estimate of the total 
amount of customer assets for broker-dealers. We estimate broker-dealer size from the total balance sheet 
assets as described above. 
858
  Approximately $4.27 trillion of total assets of broker-dealers (99%) are at firms with total assets in excess 
of $1 billion.  Of the 39 dually registered broker-dealers with total assets in excess of $1 billion, total assets 
for these dually registered broker-dealers are $2.32 trillion (54%) of aggregate broker-dealer assets.  Of the 
remaining 99 broker-dealers with total assets in excess of $1 billion that are not dually registered, 91 have 
affiliated investment advisers. 
859
  Because this number does not include the number of broker-dealers who are also registered as state 
investment advisers, the number undercounts the full number of broker-dealers that operate in both 
capacities.   
860
  We examined Form BD filings to identify broker-dealers reporting non-securities business. For the 539 
broker-dealers reporting such business, staff analyzed the narrative descriptions of these businesses on 
Form BD, and identified the most common types of businesses: insurance (202), 
management/financial/other consulting (99), advisory/retirement planning (71), mergers and acquisitions 
(70), foreign exchange/swaps/other derivatives (28), real estate/property management (30), tax services 
(15), and other (146).  Note that a broker-dealer may have more than one line of non-securities business. 
861
  The value of customer accounts is not available from FOCUS data for broker-dealers.  Therefore, to obtain 
estimates of firm size for broker-dealers, we rely on the value of broker-dealers’ total assets as obtained 
from FOCUS reports.  Retail sales activity is identified from Form BR, which categorizes retail activity 
broadly (by marking the “sales” box) or narrowly (by marking the “retail” or “institutional” boxes as types 
of sales activity).  We use the broad definition of sales as we preliminarily believe that many firms will just 
mark “sales” if they have both retail and institutional activity.  However, this may capture some broker-
dealers that do not have retail activity, although we are unable to estimate that frequency.   

 
260 
 
Panel B of Table 1 is limited to the broker-dealers that report some retail investor activity.  
As of December 2018, there are approximately 2,766 broker-dealers that served retail investors, 
with over $3.8 trillion in total assets (89% of total broker-dealer assets) and almost 139 million 
(97%) customer accounts.
862
  Of those broker-dealers serving retail investors, 318 are dually 
registered as investment advisers.
863
 
Table 1, Panel A: Registered Broker-Dealers as of December 2018 
Cumulative Broker-Dealer Total Assets and Customer Accounts 
 
Size of Broker-Dealer  
(Total Assets) 
Total Num. of 
Broker-Dealers 
Num. of Dually 
Registered Broker-
Dealers 
Cumulative 
Total Assets  
Cumulative 
Number of 
Customer 
Accounts
864
 
> $50 billion  17 10 $2,879 bil. 40,550,200 
$1 billion to $50 billion  114 22 $1,363 bil. 96,037,591 
$500 million to $1 billion  35 7 $23 bil. 397,814 
$100 million to $500 million 105 19 $23 bil. 1,603,818 
                                                                                                                                                             
862
  Total assets and customer accounts for broker-dealers that serve retail customers also include institutional 
accounts. Data available from Form BD and FOCUS data is not sufficiently granular to identify the 
percentage of retail and institutional accounts at firms. 
863
  Of the 31 dually registered firms in the group of retail broker-dealers with total assets in excess of $500 
million, total assets for these dually registered firms are nearly $2.32 trillion (60%) of aggregate retail 
broker-dealer assets (Table 1, Panel B). Of the remaining 81 retail broker-dealers with total assets in excess 
of $500 million that are not dually registered, 69 have affiliated investment advisers. 
864
  Customer Accounts includes both broker-dealer and investment adviser accounts for dually-registered 
firms. 

 
261 
 
Size of Broker-Dealer  
(Total Assets) 
Total Num. of 
Broker-Dealers 
Num. of Dually 
Registered Broker-
Dealers 
Cumulative 
Total Assets  
Cumulative 
Number of 
Customer 
Accounts
864
 
$10 million to $100 million  490 101 $17 bil. 4,277,432 
$1 million to $10 million  1021 130 $3.6 bil. 460,748 
< $1 million 1982 70 $0.5 bil. 5,675 
Total 3,764 359 $4,309 bil. 143,333,278 
865
 
866
 
Table 1, Panel B: Registered Retail Broker-Dealers as of December 2018 
Cumulative Broker-Dealer Total Assets and Customer Accounts 
 
Size of Broker-Dealer (Total 
Assets) 
Total Num. of 
Retail-Facing 
Broker-
Num. of Dually 
Registered Retail-
Facing Broker-
Cumulative 
Total Assets  
Cumulative 
Number of 
Customer 
                                                                                                                                                             
865
  The data is obtained from FOCUS filings as of December 2018. Note that there may be a double-counting 
of customer accounts among, in particular, the larger broker-dealers, as they may report introducing broker-
dealer accounts as well accounts in their role as clearing broker-dealers.  
866
  In addition to the approximately 143 million individual accounts at broker-dealers, there are approximately 
302,000 omnibus accounts (0.2% of total accounts at broker-dealers), with total assets of $32.1 billion, 
across all 3,764 broker-dealers, of which approximately 99% are held at broker-dealers with greater than $1 
billion in total assets. See also infra footnote 872. Omnibus accounts reported in FOCUS data are the 
accounts of non-carrying broker-dealers with carrying broker-dealers. These accounts may have securities 
of multiple customers (of the non-carrying firm), or securities that are proprietary assets of the non-carrying 
broker-dealer. We are unable to determine from the data available how many customer accounts non-
carrying broker-dealers may have. The data does not allow the Commission to parse the total assets in those 
accounts to determine to whom such assets belong. Therefore, our estimate may be under inclusive of all 
customer accounts held at broker-dealers. 

 
262 
 
Dealers Dealers Accounts 
> $50 billion  16 8 $2,806 bil. 40,545,792 
$1 billion to $50 billion  75 18 $990 bil. 91,991,118 
$500 million to $1 billion  21 5 $13 bil. 365,632 
$100 million to $500 million 84 16 $18 bil. 1,603,818 
$10 million to $100 million  378 91 $14 bil. 3,762,620 
$1 million to $10 million  783 120 $2.8 bil. 450,132 
< $1 million 1409 60 $0.4 bil. 5,672 
Total BDs
867
 2,766 318 $3,844 bil. 138,724,784 
868
 
Table 2 reports information on brokerage commissions,
869
 fees, and selling concessions 
from the fourth quarter of 2018 for all broker-dealers, including dually-registered firms.
870
  We 
observe significant variation in sources of revenues for broker-dealers, with large broker-dealers, 
on average, generating substantially higher levels of commission and fee revenues than smaller 
broker-dealers. On average, broker-dealers, including those that are dually registered as 
investment advisers, earn about $5.1 million per quarter in revenue from commissions and nearly 
                                                                                                                                                             
867
  Total Broker-dealers includes all retail-facing broker-dealers, including those dual registrants that have 
both retail-facing broker-dealers and retail-facing investment advisers. 
868
  See infra footnote 1397 for how broker-dealers who engage in retail sales activity are identified. In addition 
to the 318 retail-facing dually registered broker-dealers, we estimate 30 broker-dealers that are registered as 
investment advisers but do not have a retail-facing investment advisory business.  
869
  Mark-ups or mark-downs are not included as part of the brokerage commission revenue in FOCUS data; 
instead, they are included in Net Gains or Losses on Principal Trades, but are not uniquely identified as a 
separate revenue category.   
870
  Source: FOCUS data.  

 
263 
 
four times that amount in fees, although the Commission notes that fees encompass a variety of 
fees.
871
  The level of revenues earned from broker-dealers for commissions and fees increases 
with broker-dealer size, but also tends to be more heavily weighted toward commissions for 
broker-dealers with less than $10 million in assets and is weighted more heavily toward fees for 
broker-dealers with assets in excess of $10 million. For example, for the 114 broker-dealers with 
assets between $1 billion and $50 billion, average revenues from commissions are approximately 
$45 million, while average revenues from fees are approximately $225 million.
872
  
In addition to revenue generated from commissions and fees, broker-dealers may also 
receive revenues from other sources, including margin interest, underwriting, research services, 
and third-party selling concessions, such as from sales of investment company (“IC”) shares. As 
shown in Table 2, Panel A, these selling concessions are generally a smaller fraction of broker-
dealer revenues than either commissions or fees, except for broker-dealers with total assets 
between $10 million and $100 million. For these broker-dealers, revenue from third-party selling 
                                                                                                                                                             
871
  Fees, as detailed in the FOCUS data, include fees for account supervision, investment advisory services, 
and administrative services. Beyond the broad classifications of fee types included in fee revenue, we are 
unable to determine whether fees such as 12b-1 fees, sub-accounting, or other such service fees (e.g., 
payments by an investment company for personal services and/or maintenance of shareholder accounts) are 
included. The data covers both broker-dealers and dually registered firms. FINRA’s Supplemental 
Statement of Income, Line 13975 (Account Supervision and Investment Advisory Services) denotes that 
fees earned for account supervision are those fees charged by the firm for providing investment advisory 
services where there is no fee charged for trade execution. Investment Advisory Services generally 
encompass investment advisory work and execution of client transactions, such as wrap arrangements.  
These fees also include fees charged by broker-dealers that are also registered with the Commodity Futures 
Trading Commission (“CFTC”), but do not include fees earned from affiliated entities (Item A of question 
9 under Revenue in the Supplemental Statement of Income). 
872
  A rough estimate of total fees in this size category would be 114 broker-dealers with assets between $1 
billion and $50 billion multiplied by the average fee revenue of $225 million, or $25.65 billion in total fees.  
Divided by the number of customer accounts, not all of which may pay fees, in this size category 
(96,037,591), each account would be charged on average approximately $267 in fees per quarter, or $1,068 
per year. 

 
264 
 
concessions is the largest category of revenues and constitutes approximately 42% of total 
revenues earned by these firms. 
Table 2, Panel B below provides aggregate revenues by revenue type (commissions, fees, 
or selling concessions from sales of IC shares) for broker-dealers delineated by whether the 
broker-dealer is also a dually-registered firm. Broker-dealers dually registered as investment 
advisers have a significantly larger fraction of their revenues from fees other than commissions 
or selling concessions, whereas commissions are approximately 42% of the revenues of broker-
dealers that are not dually registered.   
 
Table 2, Panel A: Average Broker-Dealer Revenues from Revenue Generating Activities 
 
Size of Broker-Dealer  
in Total Assets 
Number of 
Broker-
Dealers 
Commissions Fees
873
 
Sales of IC 
Shares 
> $50 billion  17 $170,336,258  $414,300,268  $23,386,192  
$1 billion - $50 billion  114 $45,203,225  $225,063,257  $53,671,602  
$500 million - $1 billion  35 $8,768,547  $30,141,270  $5,481,248  
$100 million - $500 million  105 $12,801,889  $33,726,336  $16,610,013  
$10 million - $100 million 490 $3,428,843  $8,950,892  $9,092,971  
                                                                                                                                                             
873
  Fees, as detailed in the FOCUS data, include fees for account supervision, investment advisory services, 
and administrative services. The data covers both broker-dealers and dually registered firms.  

 
265 
 
$1 million - $10 million 1,021 $996,130  $1,037,825  $652,905  
< $1 million 1,982 $197,907  $269,459  $85,219  
Average of All Broker-Dealers 3,764 $5,092,808  $21,948,551  $4,368,823  
874
 
Table 2, Panel B: Aggregate Total Revenues from Revenue Generating Activities for 
Broker-Dealers based on Dually-Registered Status 
Broker-Dealer Type Number 
of 
Broker-
Dealers 
Commissions Fees
875
 
Sales of IC 
Shares 
Dually Registered as IAs 359 $4.52 bil. $17.54 bil. $2.63 bil. 
 Broker-Dealers 3,405 $4.16 bil. $3.25 bil. $2.57 bil. 
All 3,764 $8.68 bil. $20.79 bil. $5.20 bil. 
 
As shown in Table 3, based on responses to Form BD, broker-dealers most commonly 
provided business lines include private placements of securities (62.7% of broker-dealers); retail 
sales of mutual funds (55.4%); acting as a broker or dealer retailing corporate equity securities 
over the counter (52.0%); acting as a broker or dealer retailing corporate debt securities (47.2%); 
acting as a broker or dealer selling variable contracts, such as life insurance or annuities (41.0%); 
acting as a broker of municipal debt/bonds or U.S. government securities (39.8% and 37.4%, 
                                                                                                                                                             
874
           The data is obtained from December 2018 FOCUS reports and averaged across size groups. 
875
  See id.  

 
266 
 
respectively);   acting as an underwriter or selling group participant of corporate securities 
(31.2%); and investment advisory services (26.4%); among others.
876
  
Table 3: Lines of Business at Retail Broker-Dealers as of December 2018 
 Total 
Line of Business 
Number of 
Broker-
Dealers 
Percent of 
Broker-
Dealers 
Private Placements of Securities 1,735 62.7% 
Mutual Fund Retailer 1,533 55.4% 
Broker or Dealer Retailing:   
    Corporate Equity Securities OTC 1,438 52.0% 
    Corporate Debt Securities 1,306 47.2% 
    Variable Contracts 1,132 40.9% 
Municipal Debt/Bonds – Broker 1,101 39.8% 
U.S. Government Securities Broker 1,035 37.4% 
Put and Call Broker or Dealer or Options Writer 993 35.9% 
Underwriter or Selling Group Participant - Corporate Securities 862 31.2% 
Non-Exchange Member Arranging for Transactions in Listed Securities by 
Exchange Member 
785 
28.4% 
Investment Advisory Services 730 26.4% 
                                                                                                                                                             
876
  Form BD requires applicants to identify the types of business engaged in (or to be engaged in) that 
accounts for 1% or more of the applicant’s annual revenue from the securities or investment advisory 
business. Table 3 provides an overview of the types of businesses listed on Form BD, as well as the 
frequency of participation in those businesses by registered broker-dealers as of December 2018.   
 

 
267 
 
Broker or Dealer Selling Tax Shelters or Limited Partnerships – Primary 
Market 
619 
22.4% 
Trading Securities for Own Account 614 22.2% 
Municipal Debt/Bonds – Dealer 475 17.2% 
U.S. Government Securities – Dealer 339 12.3% 
Solicitor of Time Deposits in a Financial Institution 308 11.1% 
Underwriter - Mutual Funds 237 8.6% 
Broker or Dealer Selling Interests in Mortgages or Other Receivables 216 7.8% 
Broker or Dealer Selling Oil and Gas Interests 207 7.5% 
Broker or Dealer Making Inter-Dealer Markets in Corporate Securities OTC 207 7.5% 
Broker or Dealer Involved in Networking, Kiosk, or Similar Arrangements 
(Banks, Savings Banks, Credit Unions) 
197 
7.1% 
Internet and Online Trading Accounts 192 6.9% 
Exchange Member Engaged in Exchange Commission Business Other than 
Floor Activities 
171 
6.2% 
Broker or Dealer Selling Tax Shelters or Limited Partnerships – Secondary 
Market 
164 
5.9% 
Commodities 162 5.9% 
Executing Broker 107 3.9% 
Day Trading Accounts 89 3.2% 
Broker or Dealer Involved in Networking, Kiosk, or Similar Arrangements 
(Insurance Company or Agency) 
88 
3.2% 
Real Estate Syndicator 94 3.4% 
Broker or Dealer Selling Securities of Non-Profit Organizations 71 26% 
Exchange Member Engaged in Floor Activities 61 2.2% 
Broker or Dealer Selling Securities of Only One Issuer or Associate Issuers 43 1.6% 
Prime Broker 21 0.8% 

 
268 
 
Crowdfunding FINRA Rule 4518(a) 21 0.8% 
Clearing Broker in a Prime Broker 14 0.5% 
Funding Portal 8 0.3% 
Crowdfunding FINRA Rule 4518(b) 5 0.2% 
Number of Retail-Facing Broker-Dealers 2,766 
 
 
 
(1) Disclosures for Broker-Dealers  
As discussed above, broker-dealers register with and report information, including about 
their business, affiliates, and disciplinary history, to the Commission, Self-Regulatory 
Organizations (“SROs”), and other jurisdictions through Form BD.
877 
 Form BD requires 
information about the background of the applicant, its principals, controlling persons, and 
employees, as well as information about the type of business the broker-dealer proposes to 
engage in and all control affiliates engaged in the securities or investment advisory business.
878
 
 
Broker-dealers report whether a broker-dealer or any of its control affiliates have been subject to 
criminal prosecutions, regulatory actions, or civil actions in connection with any investment-
related activity, as well as certain financial matters.
879
  Once a broker-dealer is registered, it must 
keep its Form BD current by amending it promptly when the information is or becomes 
                                                                                                                                                             
877
  See Proposing Release, supra footnote 5, at Section IV.A.1.i.; see also generally Form BD. 
878
  See generally Form BD. 
879
  See Item 11 and Disclosure Reporting Pages of Form BD. 

 
269 
 
inaccurate for any reason.
880
   In addition, firms report similar information and additional 
information to FINRA pursuant to FINRA Rule 4530.
881
   
A significant amount of information concerning broker-dealers and their associated 
natural persons, including information from Form BD, Form BDW, and Forms U4, U5, and U6, 
is publicly available through FINRA’s BrokerCheck system.
882
  This information includes 
violations of and claims of violations of the securities and other financial laws by broker-dealers 
and their financial professionals; criminal or civil litigation, regulatory actions, arbitration, or 
customer complaints against broker-dealers and their financial professionals; and the 
employment history and licensing information of financial professionals associated with broker-
dealers, among other things.
883
 
 Broker-dealers are subject to other disclosure obligations under the federal securities laws 
and SRO rules.  For instance, under existing antifraud provisions of the Exchange Act, a broker-
dealer has a duty to disclose material information to its customers conditional on the scope of the 
relationship with the customer.
884
  Disclosure has also been a feature of other regulatory efforts 
related to financial services, including certain FINRA rules.
885 
  
                                                                                                                                                             
880
  See Exchange Act rule 15b3-1(a). 
881
  See Proposing Release, supra footnote 5, at Section II.B.7. Pursuant to FINRA Rule 4530, broker-dealers 
are required to disclose certain information to FINRA that is not reported on Form BD (e.g., customer 
complaints and arbitrations). 
882
  FINRA Rule 8312 governs the information FINRA releases to the public via BrokerCheck. See Proposing 
Release, supra footnote 5, at n.280.   
883
  See Proposing Release, supra footnote 5, at Section II.B.7. 
884
  A broker-dealer also may be liable if it does not disclose “material adverse facts of which it is aware.”  See, 
e.g., Chasins v. Smith, Barney & Co., 438 F.2d 1167, 1172 (1970); SEC v. Hasho, 784 F. Supp. 1059, 1110 
 

 
270 
 
b. Investment Advisers  
As discussed above, SEC-registered investment advisers that offer services to retail 
investors will be subject to the final rule. In addition, although not required to comply with the 
final rule, state-registered investment advisers will also be affected, because the final rule will 
impact the competitive landscape in the market for the provision of financial advice.
886  
This 
section first discusses SEC-registered investment advisers, followed by a discussion of state-
registered investment advisers. 
As of December 2018, there are approximately 13,300 investment advisers registered 
with the Commission.  The majority of SEC-registered investment advisers report that they 
provide portfolio management services for individuals and small businesses.
887
  
 
                                                                                                                                                             
(S.D.N.Y. 1992); In the Matter of RichMark Capital Corp., Exchange Act Release No. 48758 (Nov. 7, 
2003) (“When a securities dealer recommends stock to a customer, it is not only obligated to avoid 
affirmative misstatements, but also must disclose material adverse facts of which it is aware. That includes 
disclosure of “adverse interests” such as “economic self-interest” that could have influenced its 
recommendation.”) (citations omitted).  
885
  See FINRA Requests Comment on Concept Proposal to Require a Disclosure Statement for Retail Investors 
at or Before Commencing a Business Relationship, FINRA Regulatory Notice 10-54 (Oct. 2010).  
Generally, all registered broker-dealers that deal with the public must become members of FINRA, a 
registered national securities association, and may choose to become exchange members. See section 
15(b)(8) of the Exchange Act and Exchange Act rule 15b9-1.  FINRA is the sole national securities 
association registered with the SEC under section 15A of the Exchange Act.  Accordingly, for purposes of 
discussing a broker-dealer’s regulatory requirements when providing advice, we focus on FINRA’s 
regulation, examination, and enforcement with respect to member broker-dealers. FINRA disclosure rules 
include, but are not limited to, FINRA Rules 2210(d)(2) (communications with the public), 2260 
(disclosures), 2230 (customer account statements and confirmations), and 2270 (day-trading risk disclosure 
statement). 
886
  In addition to SEC-registered investment advisers, which are the focus of this section, this rule could also 
affect banks, trust companies, insurance companies, and other providers of financial advice. 
887
  Of the approximately 13,300 SEC-registered investment advisers, 8,410 (63.24%) report in Item 5.G.(2) of 
Form ADV that they provide portfolio management services for individuals and/or small businesses. In 
addition, there are approximately 17,300 state-registered investment advisers, of which 125 are also 
 

 
271 
 
Of all SEC-registered investment advisers, 359 identify themselves as dually registered 
broker-dealers.
888
  Further, 2,421 investment advisers (18%) report an affiliate that is a broker-
dealer, including 1,878 investment advisers (14%) that report an SEC-registered broker-dealer 
affiliate.
889
  As shown in Panel A of Table 4 below, in aggregate, investment advisers have over 
$84 trillion in assets under management (“AUM”).  A substantial percentage of AUM at 
investment advisers is held by institutional clients, such as investment companies, pooled 
investment vehicles, and pension or profit sharing plans; therefore, the total number of accounts 
for investment advisers is only 29% of the number of customer accounts for broker-dealers.  
Based on staff analysis of Form ADV data as of December 2018, approximately 62% of 
registered investment advisers (8,235) have some portion of their business dedicated to retail 
investors, including both high net worth and non-high net worth individual clients,
890
 as shown 
in Panel B of Table 4.
891
  In total, these firms have approximately $41.4 trillion of assets under 
management.
892
  Approximately 8,200 registered investment advisers (61%) serve over 32 
                                                                                                                                                             
registered with the Commission. Approximately 13,900 state-registered investment advisers are retail 
facing (see Item 5.D. of Form ADV). 
888
  See supra footnote 861 and accompanying text.  
889
  Item 7.A.1. of Form ADV. 
890
  Data on individual clients obtained from Form ADV may not necessarily correspond to data on “retail 
customers” as defined in this rule because the data in Form ADV regarding individual clients does not 
involve any test of use for personal, family, or household purposes. 
891
  We use the responses to Items 5.D.(a)(1), 5.D.(a)(3), 5.D.(b)(1), and 5.D.(b)(3) of Part 1A of Form ADV. If 
at least one of these responses was filled out as greater than 0, the firm is considered as providing business 
to retail investors. Part 1A of Form ADV.   
892
  The aggregate AUM reported for these investment advisers that have retail investors includes both retail 
AUM as well as any institutional AUM also held at these advisers. 

 
272 
 
million non-high net worth individual clients and have approximately $4.8 trillion in assets under 
management, while approximately 8,000 registered investment advisers (60%) serve 
approximately 4.8 million high net worth individual clients with $6.15 trillion in assets under 
management.
893
  
Table 4, Panel A: Registered Investment Advisers (RIAs) as of December 2018 
Cumulative RIA Assets under Management (AUM) and Accounts  
 
Size of Investment Adviser 
(AUM) 
Number 
of RIAs 
Number of Dually 
Registered RIAs 
Cumulative AUM 
Cumulative 
Number of 
Accounts 
> $50 billion  270 15 $59,264 bil. 20,655,756 
$1 billion to $50 billion  3,453 121 $22,749 bil. 13,304,154 
$500 million to $1 billion  1,635 47 $1,151 bil. 1,413,099 
$100 million to $500 million 5,927 119 $1,397 bil. 5,135,070 
$10 million to $100 million  1,070 24 $59 bil. 310,031 
$1 million to $10 million  162 3 $0.8 bil. 69,664 
< $1 million 782 30 $0.02 bil. 13,976 
Total 13,299 359 $84,621 bil. 41,081,750 
 
                                                                                                                                                             
893
  Estimates are based on IARD system data as of December 31, 2018. The AUM reported here is specifically 
that of those non-high net worth clients.  Of the 8,235 investment advisers serving retail investors, 318 are 
also dually registered as broker-dealers.  

 
273 
 
Table 4, Panel B: Retail Registered Investment Advisers (RIAs) as of December 2018 
Cumulative RIA Assets under Management (AUM) and Accounts  
 
Size of Investment Adviser 
(AUM) 
Num. of 
RIAs 
Num. of Dually 
registered RIAs 
Cumulative AUM 
Cumulative Number 
of Accounts 
> $50 billion  119  14 $30,291 bil. 20,592,326 
$1 billion to $50 billion  1,614  111 $9,570 bil. 13,224,188 
$500 million to $1 billion  1,007  44 $700 bil. 1,392,842 
$100 million to $500 million 4,548  113 $1,026 bil. 5,287,584 
$10 million to $100 million  706  23 $40 bil. 308,285 
$1 million to $10 million  102  3 $0.5 bil. 69,534 
< $1 million 169  10 $0.02 bil. 13,946 
Total RIAs
894
  8,235 318 $41,434 bil. 40,887,325 
 
In addition to SEC-registered investment advisers, other investment advisers are 
registered with state regulators.
895
  As of December 2018, there are 17,268 state-registered 
                                                                                                                                                             
894
  Total RIAs (1) includes all retail-facing investment advisers, including those dual registrants that have 
retail-facing investment advisers and retail-facing broker-dealers. 
895
  Item 2.A. of Part 1A of Form ADV and the Advisers Act rules 203A-1 and 203A-2 require an investment 
adviser to register with the SEC if it: (i) is a large adviser that has $100 million or more of regulatory assets 
under management (or $90 million or more if an adviser is filing its most recent annual updating 
amendment and is already registered with the SEC); (ii) is a mid-sized adviser that does not meet the 
criteria for state registration or is not subject to examination;  (iii) meets the requirements for one or more 
of the revised exemptive rules under section 203A; (iv) is an adviser (or subadviser) to a registered 
investment company; (v) is an adviser to a business development company and has at least $25 million of 
regulatory assets under management; or (vi) receives an order permitting the adviser to register with the 
 

 
274 
 
investment advisers,
896
 of which 125 are also registered with the Commission.  Of the state-
registered investment advisers, 204 are dually registered as broker-dealers, while approximately 
4.6% (786) report a broker-dealer affiliate.  In aggregate, state-registered investment advisers 
have approximately $334 billion in AUM. Eighty-two percent of state-registered investment 
advisers report that they provide portfolio management services for individuals and small 
businesses, compared to just 63% for Commission-registered investment advisers. 
Approximately 81% of state-registered investment advisers (13,927) have some portion 
of their business dedicated to retail investors,
897
 and in aggregate, these firms have 
approximately $324 billion in AUM.
898
 Approximately 13,910 (81%) state-registered advisers 
serve 14 million non-high net worth retail clients and have approximately $137 billion in AUM, 
while 11,497 (67%) state-registered advisers serve approximately 170,000 high net worth retail 
clients with approximately $169 billion in AUM.
899
 
                                                                                                                                                             
Commission. Although the statutory threshold is $100 million, the SEC raised the threshold to $110 million 
to provide a buffer for mid-sized advisers with assets under management close to $100 million to determine 
whether and when to switch between state and Commission registration. Advisers Act rule 203A-1(a). 
896
  There are 70 investment advisers with latest reported regulatory assets under management in excess of 
$110 million but that are not listed as registered with the SEC. None of these 70 investment advisers has 
exempted status with the Commission. For the purposes of this rulemaking, these are considered potentially 
erroneous submissions 
897
  We use the responses to Items 5.D.(a)(1), 5.D.(a)(3), 5.D.(b)(1), and 5.D.(b)(3) of Part 1A. If at least one of 
these responses was filled out as greater than 0, the firm is considered as providing business to retail 
investors. Part 1A of Form ADV.   
898
  The aggregate AUM reported for these investment advisers that have retail investors includes both retail 
AUM as well as any institutional AUM also held at these advisers. 
899
  Estimates are based on IARD system data as of February 10, 2018. The AUM reported here is specifically 
that of those non-high net worth investors. Of the 13,927 state-registered investment advisers serving retail 
investors, 134 may also be dually registered as broker-dealers.  

 
275 
 
Table 5 details the compensation structures employed by approximately 13,000 SEC-
registered investment advisers. Approximately 96% are compensated through a fee-based 
arrangement, where a percentage of assets under management are remitted to the investment 
adviser from the investor for advisory services.  As shown in the table below, most investment 
advisers rely on a combination of different compensation types, in addition to fee-based 
compensation, including fixed fees, hourly charges, and performance based fees.  Less than 4% 
of investment advisers charge commissions
900
 to their investors.  
Table 5: Registered Investment Advisers Compensation by Type 
 Compensation Type Yes No 
A Percentage of Assets Under Management 
 12,678   614  
Hourly Charges 
 3,914   9,378  
Subscription Fees (For a Newsletter or Periodical) 
 122   13,170  
Fixed Fees (Other Than Subscription Fees) 
 5,800   7,492  
Commissions 
 454   12,838  
Performance-Based Fees 
 4,938   8,354  
Other 
 1,899  11,393  
 
                                                                                                                                                             
900
  Some investment advisers report on Item 5.E. of Form ADV that they receive “commissions.”  As a form 
of deferred sales load, all payments of ongoing sales charges to intermediaries would constitute transaction-
related compensation. Intermediaries receiving those payments should consider whether they need to 
register as broker-dealers under section 15 of the Exchange Act.  

 
276 
 
As discussed above, many investment advisers participate in wrap fee programs. As of 
December 31, 2018, more than 8.5% of the SEC-registered investment advisers sponsor a wrap 
fee program and more than 13.1% act as a portfolio manager for one or more wrap fee 
programs.
901
 From the data available, we are unable to determine how many advisers provide 
advice about investing in wrap fee programs, because advisers providing such advice may be 
neither sponsors nor portfolio managers. 
(1) Disclosures for Investment Advisers  
As discussed more fully in the Fiduciary Release, investment advisers have a duty to 
provide full and fair disclosure of all material facts about the advisory relationship to their clients 
as well as to obtain informed consent from their clients.
  902
 SEC- and state-registered investment 
advisers are also subject to express disclosure requirements in Form ADV. Consistent with this 
duty and those requirements, investment advisers file Form ADV to register with the 
Commission or state securities authorities, as applicable, and provide an annual update to the 
form.
903
 Part 1 of Form ADV provides information to regulators about the registrants’ ownership, 
investors, and business, and it is made available to clients, prospective clients, and the public. 
Advisers also prepare a Form ADV Part 2A narrative brochure that contains information about 
                                                                                                                                                             
901
  A wrap fee program sponsor is as a firm that sponsors, organizes, or administers the program or selects, or 
provides advice to clients regarding the selection of, other investment advisers in the program. See General 
Instructions to Form ADV. 
902
  See Fiduciary Release supra footnote 47.     
903
 See Advisers Act rules 203-1 and 204-1. Part 1 of Form ADV is the registration application for the 
Commission (and state securities authorities). Part 2 of Form ADV consists of a narrative “brochure” about 
the adviser and “brochure supplements” about certain advisory personnel on whom clients may rely for 
investment advice. See Brochure Adopting Release, supra footnote 576.   

 
277 
 
the investment adviser’s business practices, fees, conflicts of interest, and disciplinary 
information,
904
 in addition to a Part 2B brochure supplement that includes information about the 
specific individuals, acting on behalf of the investment adviser, who actually provide investment 
advice and interact with the client.
905
 T he Part 2A brochure is the primary client-facing 
disclosure document,
906
 however, Parts 1 and 2A are both made publicly available by the 
Commission through IAPD,
907
 and advisers are generally required to deliver Part 2A and Part 2B 
to their clients.   
c. Trends in the Relative Numbers of Providers of Financial 
Services 
Over time, the relative number of broker-dealers and investment advisers has changed. 
Figure 1 presented below shows the time series trend of growth in broker-dealers and SEC-
registered investment advisers between 2005 and 2018.  Over the last 14 years, the number of 
broker-dealers has declined from over 6,000 in 2005 to less than 4,000 in 2018, while the 
                                                                                                                                                             
904
  Part 2A of Form ADV contains 18 mandatory disclosure items about the advisory firm, including 
information about an adviser’s: (i) range of fees; (ii) methods of analysis; (iii) investment strategies and 
risk of loss; (iv) brokerage, including trade aggregation polices and directed brokerage practices, as well as 
the use of soft dollars; (v) review of accounts; (vi) client referrals and other compensation; (vii) disciplinary 
history; and (viii) financial information, among other things. Much of the disclosure in Part 2A addresses 
an investment adviser’s conflicts of interest with its investors, and is disclosure that the adviser, as a 
fiduciary, must make to investors in some manner regardless of the form requirements. See Brochure 
Adopting Release, supra footnote 576.   
905
  Part 2B, or the “brochure supplement,” includes information about certain advisory personnel that provide 
retail client investment advice, and contains educational background, disciplinary history, and the adviser’s 
supervision of the advisory activities of its personnel. See General Instruction 5 to Form ADV. Registrants 
are not required to file Part 2B (brochure supplement) electronically, but must preserve a copy of the 
supplement(s) and make the copy available upon request. 
906
  See Brochure Adopting Release, supra footnote 576.   
907
  See Investment Adviser Public Disclosure, available at https://adviserinfo.sec.gov/.    

 
278 
 
number of investment advisers has increased from approximately 9,000 in 2005 to over 13,000 in 
2018. This change in the relative numbers of broker-dealers and investment advisers over time 
likely affects the competition for advice, and potentially alters the choices available to retail 
investors regarding how to receive or pay for such advice, the nature of the advice, and the 
attendant conflicts of interest.   
Figure 1: Time Series of the Number of SEC-Registered Investment Advisers  
and Broker-Dealers (2005–2018) 
 
An increase in the number of investment advisers and a decrease in the number of broker-
dealers could have occurred for a number of reasons, including anticipation of possible 
regulatory changes to the industry, other regulatory restrictions,
908
 technological innovation (i.e., 
                                                                                                                                                             
908
  See Hester Peirce, Dwindling Numbers in the Financial Industry, Brookings Center on Markets and 
Regulation Report (May 15, 2017), at 5, available at https://www.brookings.edu/research/dwindling-
 
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
20052006200720082009201020112012201320142015201620172018
Investment AdvisersBroker-Dealers

 
279 
 
robo-advisers and online trading platforms), product proliferation (e.g., index mutual funds and 
exchange-traded products), and industry consolidation driven by economic and market 
conditions, particularly among broker-dealers. Commission staff has observed the transition by 
broker-dealers from traditional brokerage services to also providing investment advisory services 
(often under an investment adviser registration, whether federal or state), and many firms have 
been more focused on offering fee-based accounts that provide a steady source of revenue rather 
than accounts that charge commissions and are dependent on transactions.
909
  Broker-dealers 
have indicated that the following factors have contributed to this migration: provision of revenue 
stability or increase in profitability,
910
 perceived lower regulatory burden, and provisions of more 
services to retail customers.
911
   
                                                                                                                                                             
numbers-in-the-financial-industry (“Brookings Report”) which notes that “SEC restrictions have increased 
by almost thirty percent [since 2000],” and that regulations post-2010 were driven in large part by the 
Dodd-Frank Act.  Further, the Brookings Report observation of increased regulatory restrictions on broker-
dealers only reflects CFTC or SEC regulatory actions, but does not include regulation by FINRA, SROs, 
National Futures Association, or the MSRB. 
909
  See id. at 7. Beyond Commission observations, the Brookings Report also discusses the shift from broker-
dealer to investment advisory business models for retail investors. Declining transaction-based revenue due 
to declining commission rates and competition from discount brokerage firms has made fee-based products 
and services more attractive to providers of such products and services. Although discount brokerage firms 
generally provide execution-only services and do not compete directly in the advice market with full 
service broker-dealers and investment advisers, entry by discount brokers has contributed to lower 
commission rates throughout the broker-dealer industry. Further, fee-based activity generates a steady 
stream of revenue regardless of the customer trading activity, unlike commission-based accounts; see also 
Angela A. Hung, et al., Investor and Industry Perspectives on Investment Advisers and Broker-Dealers, 
RAND Institute for Civil Justice Technical Report (2008), available at 
https://www.rand.org/content/dam/rand/pubs/technical_reports/2008/RAND_TR556.pdf (“RAND 2008”), 
which discusses a shift from transaction-based to fee-based brokerage accounts prior to recent regulatory 
changes.   
910
  Commission staff examined a sample of recent Form 10-K or Form 10-Q filings of large broker-dealers, 
many of which are dually registered as investment advisers, that have a large fraction of retail customer 
accounts to identify relevant broker-dealers.  See, e.g., The Jones Financial Companies, L.L.L.P., Form 10-
K (Mar. 14, 2019), available at 
https://www.sec.gov/Archives/edgar/data/815917/000156459019007788/ck0000815917-
 

 
280 
 
Further, there has been a substantial increase in the number of retail clients of investment 
advisers, both high net worth clients and non-high net worth clients as shown in Figure 2.  
Although the number of non-high net worth retail customers of investment advisers dipped 
between 2010 and 2012, since 2012, more than 12 million new non-high net worth retail clients 
have been added. With respect to assets under management, we observe a similar, albeit more 
pronounced pattern for non-high net worth retail clients as shown in Figure 3. For high net worth 
retail clients, there has been a pronounced increase in AUM since 2012, although AUM has 
leveled off since 2015. 
Figure 2: Time Series of the Number of Retail Clients of  
Investment Advisers (2010 – 2018) 
                                                                                                                                                             
10k_20181231.htm; Raymond James Financial, Inc., Form 10-K (Nov. 21, 2018), available at 
https://www.sec.gov/Archives/edgar/data/720005/000072000518000083/rjf-20180930x10k.htm;  Stifle 
Financial Corp., Form 10-K (Feb. 20, 2019), available at 
https://www.sec.gov/Archives/edgar/data/720672/000156459019003474/sf-10k_20181231.htm; Wells 
Fargo & Co., 10-K (Feb. 27, 2019) available at 
https://www.sec.gov/Archives/edgar/data/72971/000007297119000227/wfc-12312018x10k.htm; and 
Ameriprise Financial Inc., Form 10-K (Feb. 23, 2018), available at 
https://www.sec.gov/Archives/edgar/data/820027/000082002718000008/amp12312017.htm.  Discussions 
in Form 10-K and 10-Q filings of this sample of broker-dealers here may not be representative of other 
large broker-dealers or of small to mid-size broker-dealers.  Some firms have reported record profits as a 
result of moving clients into fee-based accounts, and cite that it provides “stability and high returns.” See 
Hugh Son, Morgan Stanley Wealth Management fees climb to all-time high, Bloomberg (Jan. 18, 2018), 
available at https://www.bloomberg.com/news/articles/2018-01-18/morgan-stanley-wealth-management-
fees-hit-record-on-stock-rally. Morgan Stanley increased the percentage of client assets in fee-based 
accounts from 37% in 2013 to 44% in 2017, while decreasing the dependence on transaction-based 
revenues from 30% to 19% over the same time period (Morgan Stanley, Strategic Update (Jan. 18, 2018), 
available at https://www.morganstanley.com/about-us-ir/shareholder/4q2017-strategic-update.pdf); see 
also Lisa Beilfuss & Brian Hershberg, WSJ Wealth Adviser Briefing: The Reinvention of Morgan and 
Merrill, Adviser Profile, The Wall Street Journal (Jan. 25, 2018), available at 
https://blogs.wsj.com/moneybeat/2018/01/25/wsj-wealth-adviser-briefing-the-reinvention-of-morgan-and-
merrill-adviser-profile/.    
911
  See Regulation Best Interest Release, supra footnote 47, at Section III.B.2.e.ii, which discusses industry 
trends. 

 
281 
 
 
 
 -
 5,000,000
 10,000,000
 15,000,000
 20,000,000
 25,000,000
 30,000,000
 35,000,000
2010-092011-092012-092013-092014-092015-092016-092017-092018-09
Estimated Non-HNW ClientsEstimated HNW Clients

 
282 
 
Figure 3: Time Series of the Retail Clients of  
Investment Advisers Assets under Management (2010 – 2018) 
 
 
d. Registered Representatives of Broker-Dealers, Investment 
Advisers and Dually Registered Firms   
We estimate the number of associated natural persons of broker-dealers through data 
obtained from Form U4, which generally is filed for individuals who are engaged in the 
securities or investment banking business of a broker-dealer that is a member of a SRO 
(“registered representatives”).
912
  Similarly, we approximate the number of supervised persons of 
                                                                                                                                                             
912
  The number of associated natural persons of broker-dealers may be different from the number of registered 
representatives of broker-dealers because clerical/ministerial employees of broker-dealers are associated 
persons but are not required to register with the firm.  Therefore, the registered representative number does 
not include such persons.  However, we do not have data on the number of associated natural persons and 
 
 -
 1,000,000,000,000
 2,000,000,000,000
 3,000,000,000,000
 4,000,000,000,000
 5,000,000,000,000
 6,000,000,000,000
 7,000,000,000,000
 8,000,000,000,000
2010-092011-092012-092013-092014-092015-092016-092017-092018-09
Estimated Non-HNW Client RAUMEstimated HNW Client RAUM

 
283 
 
registered investment advisers through the number of registered investment adviser 
representatives (or “registered IAR”s), who are supervised persons of investment advisers who 
meet the definition of investment adviser representatives in Advisers Act rule 203A-3 and are 
registered with one or more state securities authorities to solicit or communicate with clients.
913
 
We estimate the number of registered representatives and registered IARs, including 
dually registered financial professionals, (together “registered financial professionals”) at broker-
dealers, investment advisers, and dual registrants by considering only the employees of those 
firms that have Series 6 or Series 7 licenses or are registered with a state as a broker-dealer agent 
or investment adviser representative.
914
  We only consider employees at firms who have retail-
facing business, as defined previously.
915
  We observe in Table 6 that approximately 60% of 
registered financial professionals are employed by dually registered entities.  The percentage 
                                                                                                                                                             
therefore are not able to provide an estimate of the number of associated natural persons.  We believe that 
the number of registered representatives is an appropriate approximation because they are the individuals at 
broker-dealers that provide advice and services to customers.  
913
  See 17 CFR §275.203A-3.  However, the data on numbers of registered IARs may undercount the number 
of supervised persons of investment advisers who provide investment advice to retail investors because not 
all supervised persons who provide investment advice to retail investors are required to register as IARs.  
For example, Commission rules exempt from IAR registration supervised persons who provide advice only 
to non-individual clients or to individuals that meet the definition of “qualified client.” In addition, state 
securities authorities may impose different criteria for requiring registration as an investment adviser 
representative.  
914
  We calculate these numbers based on Form U4 filings. Representatives of broker-dealers, investment 
advisers, and issuers of securities must file this form when applying to become registered in appropriate 
jurisdictions and with SROs. Firms and representatives have an obligation to amend and update information 
as changes occur. Using the examination information contained in the form, we consider an employee a 
financial professional if he has an approved, pending, or temporary registration status for either Series 6 or 
7 (RR) or is registered as an investment adviser representative in any state or U.S. territory (IAR).  We 
limit the firms to only those that do business with retail investors, and only to licenses specifically required 
for an RR or IAR. 
915
  See supra footnotes 864 and 893. 

 
284 
 
varies by the size of the firm.  For example, in firms with total assets between $1 billion and $50 
billion, 67% of all registered financial professionals are employed by dually registered firms.  
Focusing on dually registered firms only, approximately 62.7% of total licensed representatives 
at these firms are dually registered financial professionals, approximately 36.9% are only 
registered representatives; and less than one percent are only registered investment adviser 
representatives.  
 
Table 6: Total Registered Representatives at Broker-Dealers, Investment Advisers, and 
Dually Registered Firms with Retail Investors  
Size of Firm 
(Total Assets for 
Standalone BDs 
and Dually 
Registered 
Firms; AUM for 
Standalone IAs) 
Total 
Number of 
Reps 
% of Reps in 
Dually 
Registered 
Firms 
% of Reps in 
Standalone 
BD w/ an IA 
Affiliate 
% of Reps in 
Standalone 
BD w/o an IA 
Affiliate 
% of Reps in 
Standalone 
IA w/ a BD 
Affiliate 
% Reps in 
Standalone 
IA w/o a BD 
Affiliate 
>$50 billion 84,461 73% 7% 0% 19% 1% 
$1 billion to $50 
billion 
170,256 67% 11% 0% 15% 7% 
$500 million to 
$1 billion 
29,874 71% 5% 1% 7% 16% 
$100 million to 
$500 million 
66,924 51% 27% 0% 4% 18% 
$10 million to 
$100 million 
106,178 55% 42% 1% 1% 1% 
$1 million to $10 
million  
33,790 35% 54% 11% 0% 0% 
< $1 million 12,522 8% 52% 36% 3% 1% 

 
285 
 
Total Licensed 
Representatives 
504,005 60% 23% 2% 9% 6% 
916
 
In Table 7 below, we estimate the number of employees who are registered 
representatives, registered investment adviser representatives, or both (“dually registered 
representatives”).
917
  Similar to Table 6, we calculate these numbers using Form U4 filings. Here, 
we also limit the sample to employees at firms that have retail-facing businesses as discussed 
previously.
918
  
In Table 7, approximately 25% of registered employees at registered broker-dealers or 
investment advisers are dually registered representatives. However, this proportion varies 
significantly across size categories. For example, for firms with total assets between $1 billion 
and $50 billion,
919
 approximately 35% of all registered employees are both registered 
                                                                                                                                                             
916
  The classification of firms as dually registered, standalone broker-dealers, and standalone investment 
advisers comes from Forms BD, FOCUS, and ADV as described earlier. The number of representatives at 
each firm is obtained from Form U4 filings. Note that all percentages in the table have been rounded to the 
nearest whole percentage point.  
917
  We calculate these numbers based on Form U4 filings.  
918
  See supra footnotes 864 and 893. 
919
  Firm size is defined as total assets from the balance sheet for broker-dealers and dually registered firms 
(source: FOCUS reports) and as assets under management for investment advisers (source: Form ADV). 
We are unable to obtain customer assets for broker-dealers, and for investment advisers. We can only 
obtain information from Form ADV as to whether the firm assets exceed $1 billion. We recognize that our 
approach of using firm assets for broker-dealers and customer assets for investment advisers does not allow 
for direct comparison; however, our objective is to provide measures of firm size and not to make 
comparisons between broker-dealers and investment advisers based on firm size. Across both broker-
dealers and investment advisers, larger firms, regardless of whether we stratify on firm total assets or assets 
under management, have more customer accounts, are more likely to be dually registered, and have more 
representatives or employees per firm, than smaller broker-dealers or investment advisers. 

 
286 
 
representatives and investment adviser representatives.  In contrast, for firms with total assets 
below $1 million, 13% of all employees are dually registered representatives.  
 
Table 7: Number of Employees at Retail Facing Firms who are Registered Representatives, 
Investment Adviser Representatives, or Both  
 
Size of Firm (Total Assets for 
Standalone BDs and Dually 
Registered Firms; AUM for 
Standalone IAs) 
Total Number 
of Employees 
Percentage of 
DuallyRegistered 
representatives 
Percentage of 
Registered 
Representatives 
Only 
Percentages of 
IARs Only 
>$50 billion 218,539 19% 16% 1% 
$1 billion to $50 billion 328,842 35% 12% 4% 
$500 million to $1 billion 43,211 18% 40% 10% 
$100 million to $500 million 119,214 23% 24% 9% 
$10 million to $100 million 176,559 20% 39% 1% 
$1 million to $10 million 56,230 17% 39% 1% 
< $1 million 18,334 13% 46% 3% 
Total Employees at Retail 
Facing Firms 
960,929 25% 23% 4% 
920
 
                                                                                                                                                             
920
  See supra footnotes 918 and 919. Note that all percentages in the table have been rounded to the nearest 
whole percentage point.  

 
287 
 
Approximately 87% of investment adviser representatives are dual-hatted as registered 
representatives. This percentage is relatively unchanged from 2010.  According to information 
provided in a FINRA comment letter in connection with the 913 Study,
921
 87.6% of registered 
investment adviser representatives were dually registered as registered representatives as of mid-
October 2010.
922
  In contrast, approximately 52% of registered representatives were dually 
registered as investment adviser representatives at the end of 2018.
923
  
Broker-dealers and investment advisers must report certain criminal, regulatory, and civil 
actions and complaint information and information about certain financial matters in Forms 
U4
924
 and U5
925
 for their representatives. SROs, regulators and jurisdictions report disclosure 
events on Form U6.
926
  FINRA’s BrokerCheck system and IAPD discloses to the public certain 
information on registered representatives and investment adviser representatives, respectively, 
                                                                                                                                                             
921
  See Staff of the Securities and Exchange Commission, Study on Investment Advisers and Broker-Dealers as 
Required by Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Jan. 2011), 
available at www.sec.gov/news/studies/2011/913studyfinal.pdf (“913 Study”).   
922
  Comment Letter of FINRA to File Number 4-606; Obligations of Brokers, Dealers and Investment 
Advisers (Nov. 3, 2010), at 1, available at https://www.sec.gov/comments/4-606/4606-2836.pdf.  
923
  In order to obtain the percentage of IARs that are dually registered as registered representatives of broker-
dealers, we sum the representatives at dually registered firms and those at investment advisers across size 
categories to obtain the aggregate number of representatives in each of the two categories.  We then divide 
the aggregate dually registered representatives by the sum of the dually registered representatives and the 
IARs at investment adviser-only firms.  We perform a similar calculation to obtain the percentage of 
registered representatives of broker-dealers that are dually registered as IARs. 
924
  Form U4 requires disclosure of registered representatives’ and investment adviser representatives’ criminal, 
regulatory, and civil actions similar to those reported on Form BD or Form ADV as well as certain 
customer-initiated complaints, arbitration, and civil litigation cases. See generally Form U4. 
925
  Form U5 requires information about representatives’ termination from their employers.   
926
  See FINRA, Current Uniform Registration Forms for Electronic Filing in Web CRD
®
, available at 
http://www.finra.org/industry/web-crd/current-uniform-registration-forms-electronic-filing-web-crd.  

 
288 
 
such as principal place of business, business activities, owners, and criminal prosecutions, 
regulatory actions, and civil actions in connection with any investment-related activity.  
e. Investor Account Statistics   
Investors seek financial advice and services to achieve a number of different goals, such 
as saving for retirement or children’s college education.  The OIAD/RAND survey estimates that 
approximately 73% of adults live in a household that invests.
927
 The survey indicates that non-
investors are more likely to be female, to have lower family income and educational attainment, 
and to be younger than investors.
928
 Approximately 35% of households that do invest do so 
through accounts such as broker-dealer or advisory accounts.
929
   
As shown above in Figures 2 and 3, the number of retail investors and their assets under 
management associated with investment advisers has increased significantly, particularly since 
2012.  According to the Investment Company Institute (“ICI”), as of December 2016, nearly 
$24.2 trillion is invested in retirement accounts, of which $7.5 trillion is in IRAs.
930
 A  total of 
43.3 million U.S. households have either an IRA or a brokerage account, of which an estimated 
20.2 million U.S. households have a brokerage account and 37.7 million households have an IRA 
                                                                                                                                                             
927
  See OIAD/RAND, supra footnote 3 (defining “investors” as persons “owning at least one type of 
investment account, (e.g., an employer-sponsored retirement account, a non-employer sponsored retirement 
account such as an IRA, a college savings investment account, or some other type of investment account 
such as a brokerage or advisory account), or owning at least one type of investment asset (e.g., mutual 
funds, exchange-traded funds or other funds, individual stocks, individual bonds, derivatives, and 
annuities)”). 
928
  OIAD/RAND, supra footnote 3. 
929
  Id.. 
930
  See Sarah Holden & Daniel Schrass, The Role of IRAs in US Households’ Saving for Retirement, 2016, 23 
ICI R
ES. PERSP. 23-1 (Jan. 2017), available at https://www.ici.org/pdf/per23-01.pdf. 

 
289 
 
(including 72% of households that also hold a brokerage account).
931
  With respect to IRA 
accounts, one commenter, the ICI, documents that 43 million U.S. households own either 
traditional or Roth IRAs and that approximately 70% are held with financial professionals, with 
the remainder being direct market.
932
  Further, ICI finds that approximately 64% of households 
have aggregate IRA (traditional and Roth) balances of less than $100,000, and approximately 
36% of investors have balances below $25,000. As noted in one study, the growth of assets in 
traditional IRAs comes from rollovers from workplace retirement plans; for example, 58% of 
traditional IRAs consist of rollover assets, and contributions due to rollovers exceeded $460 
billion in 2015 (the most recently available data).
933
   
While the number of retail investors obtaining services from investment advisers and the 
aggregate value of associated assets under management has increased, the OIAD/RAND study 
also suggests that the general willingness of investors to use planning or to take financial advice 
regarding strategies, products, or accounts is relatively fixed over time.
934
  With respect to the 
account assets associated with retail investors, the OIAD/RAND survey also estimates that 
                                                                                                                                                             
931
  The data is obtained from the Federal Reserve System’s 2016 Survey of Consumer Finances (“SCF”), a 
triennial survey of approximately 6,200 U.S. households and imputes weights to extrapolate the results to 
the entire U.S. population. As noted, some survey respondent households have both a brokerage and an 
IRA account. See Board of Governors of the Federal Reserve System, Survey of Consumer Finances 
(2016), available at https://www.federalreserve.gov/econres/scfindex.htm. The SCF data does not directly 
examine the incidence of households that could use advisory accounts instead of brokerage accounts; 
however, some fraction of IRA accounts reported in the survey could be those held at investment advisers. 
932
  See Sarah Holden & Daniel Schrass, The Role of IRAs in US Households’ Saving for Retirement, 2018, ICI 
R
ES. PERSP. 24-10 (Dec. 2018), available at https://www.ici.org/pdf/per24-10.pdf.  
933
  See id. 
934
  OIAD/RAND, supra footnote 3 (noting that this conclusion was limited by the methodology of comparing 
participants in a 2007 survey with those surveyed in 2018). 

 
290 
 
approximately 10% of investors who have broker-dealer or advisory accounts hold more than 
$500,000 in assets, while approximately 47% hold $50,000 in assets or less. Altogether, many 
investors who have brokerage or advisory accounts trade infrequently, with approximately 31% 
reporting no annual transactions and an additional approximately 30% reporting three or fewer 
transactions per year.
935
 
With respect to particular products, commenters have provided us with additional 
information about ownership of mutual funds and IRA account statistics.  For example, ICI 
stated that 56 million U.S. households and nearly 100 million individual investors own mutual 
funds, of which 80% are held through 401(k) and other workplace retirement plans, while 63% 
of investors hold mutual funds outside of those plans.
936
  Of those investors that own mutual 
funds outside of workplace retirement plans, approximately 50% rely on financial professionals, 
while nearly one-third purchase direct-sold funds either directly from the fund company or 
through a discount broker.
937
   
Table 8 below provides an overview of account ownership segmented by account type 
(e.g., IRA, brokerage, or both) and investor income category based on the SCF.
938 
 
Table 8: Ownership by Account Type in the U.S. by Income Group 
                                                                                                                                                             
935
  OIAD/RAND, supra footnote 3. 
936
  See ICI Letter; see also Sarah Holden, Daniel Schrass & Michael Bogdan, Ownership of Mutual Funds, 
Shareholder Sentiment, and Use of the Internet, 2018, ICI R
ES. PERSP. 24-8 (Nov. 2018), available at 
https://www.ici.org/pdf/per24-08.pdf. 
937
  See id. 
938
  Id.  To the extent that investors have IRA accounts at banks that are not also registered as broker-dealers, 
our data may overestimate the numbers of IRA accounts held by retail investors that could be subject to this 
rulemaking. 

 
291 
 
(as reported by the 2016 SCF) 
 
Income Category % Brokerage Only % IRA Only % Both Brokerage and IRA 
Bottom 25% 1.2% 7.6% 2.4% 
25% - 50% 3.2% 14.5% 5.4% 
50% - 75% 4.1% 21.4% 11.4% 
75% - 90% 7.5% 33.4% 16.5% 
Top 10% 12.0% 24.7% 43.9% 
Average 4.4% 18.3% 11.6% 
 
With respect to the nature of the accounts held by investors and whether they are 
managed by financial professionals, the OIAD/RAND survey finds that 36% of its sample of 
participants report that they currently use a financial professional and approximately 33% receive 
some kind of recommendation service.
939
  Of the subset of those investors who report holding a 
brokerage, advisory, or similar account, approximately 33% self-direct their own account, 25% 
have their account managed by a financial professional, and 10% have their account advised by a 
professional.
940
  For those investors who take financial advice, the OIAD/RAND study suggests 
                                                                                                                                                             
939
  OIAD/RAND, supra footnote 3. In a focus group preceding the survey, focus group participants provided a 
number of reasons for not using a financial professional in making investments, including being unable or 
unwilling to pay the fees, doing their own financial research, being unsure of how to work with a 
professional, and being concerned about professionals selling products without attending to investors’ plans 
and goals. 
940
  Id. 

 
292 
 
that they may differ in characteristics from other investors.  Investors who take financial advice 
are generally older, retired, and have a higher income than other investors, but also may have 
lower educational attainment (e.g., high school or less) than other investors.
941
 
Similarly, one question in the SCF asks what sources of information households’ 
financial decision-makers use when making decisions about savings and investments. 
Respondents can list up to fifteen possible sources from a preset list that includes “Broker” or 
“Financial Planner” as well as “Banker,” “Lawyer,” “Accountant,” and a list of non-professional 
sources.
942
  Panel A of Table 8 below presents the breakdown of where households who have 
brokerage accounts seek advice about savings and investments. 
  
The table shows that of those 
respondents with brokerage accounts, 23% (4.7 million households) use advice services of 
broker-dealers for savings and investment decisions, while 49% (7.8 million households) take 
advice from a “financial planner.”  Approximately 36% (7.2 million households) seek advice 
from other sources such as bankers, accountants, and lawyers.  Almost 25% (5.0 million 
households) do not use advice from the above sources. 
 Panel B of Table 9 below presents the breakdown of advice received for households who 
have an IRA. 15% (5.7 million households) rely on advice services of their broker-dealers and 
                                                                                                                                                             
941
  Id. 
942
  The SCF, supra footnote 931, specifically asks participants “Do you get advice from a friend, relative, 
lawyer, accountant, banker, broker, or financial planner? Or do you do something else?” (see Federal 
Reserve, Codebook for 2016 Survey of Consumer Finances (2016), available at 
https://www.federalreserve.gov/econres/files/codebk2016.txt).  Other response choices presented by the 
survey include “Calling Around,” “Magazines,” “Self,” “Past Experience,” “Telemarketer,” and “Insurance 
Agent,” as well as other choices.  Respondents could also choose “Do Not Save/Invest.” The SCF allows 
for multiple responses, so these categories are not mutually exclusive.  However, we would note that the 
list of terms in the question does not specifically include “investment adviser.” 

 
293 
 
48% (18.3 million households) obtain advice from financial planners. Approximately 41% (15.5 
million households) seek advice from bankers, accountants, or lawyers, while the 25% (9.5 
million households) use no advice or seek advice from other sources. 
 
Table 9, Panel A: Sources of Advice for Households who have a Brokerage Account in the 
U.S. by Income Group  
 
Income Category 
% Taking Advice 
from Brokers 
% Taking Advice 
from Financial 
Planners  
% Taking Advice 
from Lawyers, 
Bankers, or 
Accountants 
% Taking no 
Advice or from 
Other Sources 
Bottom 25% 20.55% 53.89% 35.64% 24.30% 
25% - 50% 22.98% 38.03% 43.92% 32.36% 
50% - 75% 20.75% 52.00% 31.42% 23.61% 
75% - 90% 22.56% 48.94% 32.25% 28.10% 
Top 10% 25.29% 50.53% 38.47% 21.06% 
Average 23.02% 49.02% 35.99% 24.94% 
943
 
Table 9, Panel B: Sources of Advice for Households who have an IRA in the U.S. by 
Income Group  
 
                                                                                                                                                             
943
  Id. 

 
294 
 
Income Category 
% Taking Advice 
from Brokers 
% Taking Advice 
from Financial 
Planners  
% Taking Advice 
from Bankers,  
Accountants, or 
Lawyers 
% Taking no 
Advice or from 
Other Sources 
Bottom 25% 12.14% 38.30% 43.69% 31.85% 
25% - 50% 9.79% 43.82% 40.67% 32.74% 
50% - 75% 14.93% 45.20% 41.23% 25.23% 
75% - 90% 14.68% 52.14% 41.65% 24.26% 
Top 10% 21.40% 55.40% 40.03% 18.56% 
Average 15.25% 48.45% 41.17% 25.28% 
944
 
The OIAD/RAND survey notes that for survey participants who reported working with a 
specific individual for investment advice, 70% work with a dually registered firm, 5.4% with a 
broker-dealer, and 5.1% with an investment adviser.
945
 
2. Investor Perceptions about the Marketplace for Financial Services 
and Disclosures 
Our proposal discussed a number of studies providing information on investors' 
perceptions of the market for financial services and advice, including those conducted by Siegel 
& Gale
946
 in 2005, RAND
947
 in 2008 and CFA in 2010.
948
  Commenters to the proposal provided 
                                                                                                                                                             
944
  Id.  
945
  OIAD/RAND, supra footnote 3.  As documented by OIAD/RAND, retail investors surveyed had difficulty 
in accurately identifying the type of relationship that they have with their financial professional. 
946
  Proposing Release, supra footnote 5, at n.555. 
947
  Id., at n.556. 

 
295 
 
their own studies or survey evidence conducted by third party research firms, which we have 
discussed throughout the release.
949
  In addition, the Commission’s Office of the Investor 
Advocate collaborated with RAND to prepare the OIAD/RAND study,
950
 which included focus 
groups and a  survey about the retail market for investor advice. The Commission’s Office of the 
Investor Advocate also engaged RAND to conduct investor testing of the proposed relationship 
summary using the dual registrant sample in the proposal.  The report, RAND 2018,
951
 discusses 
both larger sample survey results and smaller sample in-depth interview results.  Finally, the 
proposal solicited public feedback from individual investors on a feedback form issued with the 
Proposing Release.
952
  Responses and data from these sources inform our understanding of how 
investors approach the marketplace for financial services and how investors respond to 
disclosures about financial services generally.  
                                                                                                                                                             
948
          Id., at n.557.  
949
  See supra footnotes 17-21.  
950
  OIAD/RAND consisted of focus group discussions with 35 participants in total.  OIAD/RAND caveats in 
its report that the participants in its focus groups were neither nationally representative nor randomly 
selected and that their results are anecdotal. OIAD/RAND also included a nationally representative 
probability based survey to allow researchers to reliably construct population estimates. OIAD/RAND, 
supra footnote 3.  
951
  For RAND 2018, a sample of 1,816 individuals from the ALP Survey Panel were invited to complete the 
survey, and 1,460 (80.4%) actually completed the survey. 26% of respondents are categorized as non-
investor. Median time spent going through the initial five screens of the relationship summary text was 4 
minutes. RAND 2018, supra footnote 13.  
952
  Proposing Release, supra footnote 5; see also Feedback Forms Comment Summary, supra footnote 13. 
More than 90 individuals answered with a response or comment relevant to at least one of the questions on 
the form, using an online version of the feedback form or by submitting a copy of the feedback form to the 
comment file in PDF format. 

 
296 
 
a. How investors select financial firms or professionals 
A number of surveys show that retail investors predominantly find their current financial 
firm or financial professional from personal referrals by family, friends, or colleagues.
953 
 For 
instance, the RAND 2008 st udy reported that 46% of survey respondents indicated that they 
located a financial professional from personal referral, although this percentage varied depending 
on the type of service provided (e.g., only 35% of survey participants used personal referrals for 
brokerage services).  After personal referrals, RAND 2008 survey participants ranked 
professional referrals (31%), print advertisements (4%), direct mailings (3%), online 
advertisements (2%), and television advertisements (1%), as their source of locating individual 
professionals.  The RAND 2008 study separately inquired about locating a financial firm,
954
 in 
which respondents reported selecting a financial firm (of any type) based on: referral from family 
or friends (29%), professional referral (18%), print advertisement (11%), online advertisements 
(8%), television advertisements (6%), direct mailings (2%), with a general “other” category 
(36%). 
The 917 Financial Literacy Study provides similar responses, although it allowed survey 
respondents to identify multiple sources from which they obtained information that facilitated the 
selection of the current financial firm or financial professional.
955
 In the 917 Financial Literacy 
                                                                                                                                                             
953
  See RAND 2008, supra footnote 912; 917 Financial Literacy Study, supra footnote 589. 
954
  The Commission notes that only one-third of the survey respondents that responded to “method to locate 
individual professionals” also provided information regarding locating the financial firm. 
 
955
  See 917 Financial Literacy Study, supra footnote 589.   

 
297 
 
Study,
956
 51% of survey participants received a referral from family, friends, or colleagues.  
Other sources of information or referrals came from: referral from another financial professional 
(23%), online search (14%), attendance at a financial professional-hosted investment seminar 
(13%), advertisement (e.g., television or newspaper) (11.5%), other (8%), while approximately 
4% did not know or could not remember how they selected their financial firm or financial 
professional. Twenty-five percent of survey respondents indicated that the “name or reputation 
of the financial firm or financial professional” affected the selection decision. 
The OIAD/RAND focus group study notes that among the factors that group participants 
report for not working with a financial professional was participants being unsure how they 
would go about working with a professional.
957
 
b.  Investor confusion 
As discussed in the Proposing Release and by commenters to the proposal, many sources 
indicate that retail investors do not understand or find confusing the distinctions between broker-
dealers and investment advisers, particularly in terms of services provided and applicable 
standards of conduct.
  958
    
                                                                                                                                                             
956 
 The data used in the 917 Financial Literacy Study comes from the Siegel & Gale, Investor Research Report 
(Jul. 26, 2012), available at https://www.sec.gov/news/studies/2012/917-financial-literacy-study-part3.pdf.   
957
 OIAD/RAND, supra footnote 3. 
958
  See generally supra Section II.B.2 (discussing benefits of including disclosure on individualized firm 
services); Section II.B.6 (discussing removal of generalized comparisons between advisers and broker-
dealers); see also Proposing Release, supra footnote 5 (discussing commenters in response to Chairman 
Clayton's 2017 request for comment and commenters to the 913 Study). 

 
298 
 
Studies such as those conducted by Siegel & Gale
959
 in 2005, RAND
960
 in 2008, and 
CFA in 2010,
961
 discussed in the Proposing Release, support findings that retail investors are 
confused about the roles and titles of financial professionals. The OIAD/RAND study assessed 
survey and focus group participants’ understanding of the types of financial services and 
financial professionals they used.
962
  Specifically, the authors of the OIAD/RAND study asked 
survey participants who were investors to identify which type of financial professional they 
worked with (investment adviser, broker-dealer, or dually-registered firm). The authors 
compared the types of financial professiona  ls reported by the survey participants with the actual 
status of those financial professionals as verified on the IAPD database, and found that the 
                                                                                                                                                             
959
  Proposing Release, supra footnote 5, at Section IV.A.3.h. (stating that the Siegel & Gale Study found that 
focus group participants did not understand that the roles and legal obligations of broker-dealers differed 
from investment advisers’ roles and legal obligations, and were further confused by different labels or titles 
used by advice providers (e.g., financial planner, financial advisor, financial consultant, broker-dealer, or 
investment adviser).  More specifically, participants in the Siegel & Gale Study focus groups believed that 
brokers executed trades and were focused on “near-term” advice, while financial advisors and consultants 
provided many of the same services as brokers, but also provided a greater scope of long-term planning 
advice (e.g., portfolio allocation).  “Investment adviser,” on the other hand, was a term unfamiliar to many 
participants, but financial professionals using this label were perceived to provide similar services to 
financial advisors and financial consultants.  Financial planners were viewed to provide services related to 
insurance and estate planning in addition to investment advice, and encompassed long-term financial 
planning including college, retirement, and other long-term savings and investment goals. The Siegel & 
Gale Study focus group participants assumed that financial advisors/consultants, investment advisers, and 
financial planners provided planning services, while brokers, financial advisors/consultants, and investment 
advisers provided trade execution services); see also id., at n.5.  
960
  Similarly, the RAND 2008 study generally concluded that investors did not understand the differences 
between broker-dealers and investment advisers and that common job titles contributed to investor 
confusion. RAND 2008, supra footnote 909. 
961
  Infogroup/ORC, U.S. Investors & The Fiduciary Standard, National Opinion Survey (Sept. 15, 2010), 
available at https://www.cfp.net/docs/public-policy/us_investors_opinion_survey_2010-09-16.pdf (“CFA 
Survey”). The CFA Survey suggested that respondents were confused about differences between broker-
dealers and investment advisers as described by the study's authors to the respondents. 
962
  OIAD/RAND, supra footnote 3. 

 
299 
 
verified types of financial professionals in many cases did not match the types of financial 
professionals that were reported by the survey participants.
963
  For example, when financial 
professionals were verified to be dually registered, only 34% were reported by survey 
participants to be dually registered (and 56% were reported to be only investment advisers).  In 
addition to the survey, the OIAD/RAND authors also asked a small focus group of participants 
that used financial professionals to identify which type of professional they were using, which 
was then verified by IAPD. Only one of the twelve participants was able to identify the correct 
type of financial professional unambiguously (although it was not clear if clients of verified 
dually-registered firms were only utilizing one type of that professional’s services). The study 
authors concluded that this showed low awareness of the classification of investment advisers 
and broker-dealers. 
Further, the OIAD/RAND survey asked all survey recipients w he  ther they could identify 
the type of financial professional that would typically exhibit certain business practices (such as 
executing transactions or being paid by commission), and concluded that at least a significant 
minority of participants could not do so for any of the typical practices.  Between 13% and 21% 
of survey participants incorrectly answered “none of the above” for each of the business 
practices offered by the survey, although those practices were aligned with either investment 
advisers or broker-dealers in the marketplace. Moreover, only 36% of participants were able to 
identify that investment advisers were typically paid by a percentage of assets, whereas 43% of 
                                                                                                                                                             
963
  OIAD/RAND, supra footnote 3.  Note that the authors caveated that it was unclear if survey participants 
who were customers of verified dually registered firms had misidentified the type of financial professional 
because they only received one type of service (brokerage or advisory) from the dually registered firm. 

 
300 
 
participants thought that practice was typical of broker-dealers. Twenty-six percent of 
participants incorrectly indicated that investment advisers execute transactions for clients.
964
 In 
all, the study authors concluded that the survey participants’ knowledge of the marketplace for 
financial professionals appeared to be incomplete. 
The OIAD/RAND study authors draw further conclusions from their focus group study, 
where after being offered explanations of the differences between investment advisers and 
broker-dealers, some focus group participants continued not to be able to understand the 
distinctions between the two types of professionals.  For the OIAD/RAND study authors, the 
focus group exercise underscored the difficulty of the topic for some investors. 
Investors are also confused about financial professionals’ standards of conduct and legal 
obligations. As discussed in the Proposing Release, the Siegel & Gale and RAND 2008 studies 
found that focus group participants generally did not understand legal terms, such as “fiduciary” 
or “best interest.”
965
  In addition, the RAND 2008 study noted that the confusion about titles, 
services, legal obligations, and compensation persisted even after a fact sheet on broker-dealers 
and investment advisers was provided to participants.
966 
 
Similarly, many survey respondents in the OIAD/RAND study had difficulty 
understanding the basic relational aspects of financial advice and the responsibility for taking 
                                                                                                                                                             
964
  OIAD/RAND, supra footnote 3.  The study authors also concluded that “an investor who works with an 
investment adviser because he or she is unaware that broker-dealers can execute transactions, and who 
seeks a professional solely to execute transactions on their behalf, might not necessarily be matched with 
the most appropriate professional.” 
965
  Proposing Release, supra footnote 5. 
966
  RAND 2008, supra footnote 909. 

 
301 
 
risk in any form.
967
  Thirty percent of survey respondents believed that financial professionals 
would get paid only if an investor made money on an investment, and another quarter of 
respondents indicated that they did not know if financial professionals would get paid only if an 
investor made money on an investment.
968
  A majority of survey respondents expected that a 
financial  professional acting in the client’s best interest would monitor the account, help the 
client choose the lowest cost products, disclose payments they receive, and avoid taking higher 
compensation for selling one product over another when a similar but less costly product is 
available.
969
  OIAD/RAND focus group discussions about the distinctions between investment 
advisers and broker-dealers also suggested that some focus group participants were not able to 
distinguish investment advisers from broker-dealers.  The study’s authors concluded that 
comments of those focus group participants also suggest that some individuals might value 
having a clear distinction between professionals who do act in the client’s best interest and 
professionals who do not act in the client's best interest.
970
  Similarly, in RAND 2018 and in 
interview-based studies submitted by a group of commenters that test the proposed sample dual-
registrant relationship summary, it was observed that investors could have difficulty 
understanding distinctions between the standard of conduct applicable to broker-dealers and 
investment advisers.
971
 
                                                                                                                                                             
967
  OIAD/RAND, supra footnote 3.   
968
  OIAD/RAND, supra footnote 3. 
969
  OIAD/RAND, supra footnote 3. 
970
  OIAD/RAND, supra footnote 3. 
971
  See supra Section II.B.3.b at footnotes 470-479 and accompanying text.  

 
302 
 
With respect to investor perceptions of financial advisers’ fees and potential conflicts of 
interest, the OIAD/RAND study revealed that “some participants seemed unconcerned with 
conflicts or took it as a good sign if their professional had not disclosed a conflict to them ... In 
all three groups that had experience using a financial professional... participants reported that 
their professional had not disclosed any conflicts.”
972
  The OIAD/RAND study also found that 
almost a half of the investors who received investment advice in the study believed that their 
investment professional receives commissions.  About a third believed the provider received 
payments from product companies (e.g., mutual funds); another 20% of participants believed the 
provider received   a bonus.  Altogether, more than half of the participants believed the provider 
received some sort of compensation whether through commission, bonus or product payment.
973
  
The study concluded that “awareness of the nature of provider payments could help investors to 
recognize conflicts of interest...” and thus it could potentially improve investors’ decision 
making.  Potential investor recognition of the importance of the conflicts of interest is reflected 
in that 51% of the OIAD/RAND study respondents said that it was important or extremely 
important that the financial professional receive all compensation from the customer, and only 
15% reported that it was not important at all.
974
   
With respect to investor trust, one commenter discussed the results of an online survey it 
had initiated that found that 96% of survey respondents mostly or completely trusted their 
                                                                                                                                                             
972
  OIAD/RAND, supra footnote 3. 
973
  OIAD/RAND, supra footnote 3. 
974
  OIAD/RAND, supra footnote 3. 

 
303 
 
financial professional.
975
  The vast majority of survey respondents (97%) also believed that their 
financial professional always or mostly has their investors' best interest in mind.
976
 
3. Investor Responses to Disclosures about Financial Professionals and 
Firms 
a. Retail investors and financial disclosures generally 
Commenters provided conclusions based on studies of potential limitations to the 
efficacy of financial disclosures, as discussed below.
977
  With respect to the particular areas of 
disclosure that retail investors find helpful, commenters provided us with information about the 
usefulness of such disclosures to retail investors from surveys or assessments.  We generally note 
that the RAND 2018 survey and other surveys that were provided by commenters gathered 
participants’ subjective views and were not designed to objectively assess whether any sample 
disclosures improved participant comprehension.
978
 However, the RAND 2018 qualitative 
interviews included some general questions to participants about comprehension and helpfulness 
of the sample proposed relationship summary, which provided some insight into participants' 
understanding of concepts introduced, as did another survey and two interview-based studies 
with respect to sample relationship summaries.
979
  Further, the RAND 2018 report and surveys 
and studies submitted by commenters reported that their participants subjectively thought that 
they were informed from the sample disclosures that they were provided.  The RAND 2018 
                                                                                                                                                             
975
  CCMC Letter (investor polling), supra footnote 21. 
976
  Id. 
977
 See infra Section IV.C for a discussion of this research.   
978
  See generally supra footnote 14. 
979
  See supra footnotes 14 and 20 and accompanying text. 

 
304 
 
study authors found that nearly 90% of respondents stated that the sample proposed relationship 
summary that they reviewed would help them make informed decisions about investment 
accounts and services.
980
 Likewise, the RAND 2018 study authors also observed that interview 
participants demonstrated that they learned new information from the proposed relationship 
summary that they were provided.  However, there was variation in understanding among 
participants and the interviews also revealed areas of confusion.
981
  Similarly, the Woelfel survey 
authors noted that after survey respondents were given time to read a sample proposed dual 
registrant relationship summary, the majority, regardless of their current investments or 
relationship with an investment adviser or broker-dealer, believed that they knew a “little more” 
about investment advisers and broker-dealers.
982
 
Several commenters suggest that generally not all investors fully read or are able to digest 
information from disclosures about financial professionals.  One commenter reports that almost 
half of its survey participants said they selectively skim the disclosures and eight percent said 
they rarely or do not ever read them.
983
  Along similar lines, commenters pointed to observations 
that investors may be overconfident in their ability to read and understand disclosures and that 
investors are unable to understand disclosures relating to compensation arrangements and 
conflicts of interest. 
984
 Similarly, the RAND 2008 study highlighted that participants’ confusion 
about titles, services, legal obligations, and compensation persisted even after a fact sheet on 
                                                                                                                                                             
980
  See RAND 2018, supra footnote 13. 
981
  Id. 
982
  See Cetera Letter II (Woelfel) supra footnote 17. 
983
  Schwab Letter I (Koski), supra footnote 21. 
984
  See, e.g., AARP Letter.  See also Better Markets Letter, CFA Letter I; Consumers Union Letter. 

 
305 
 
broker-dealers and investment advisers was provided to participants.
985
  
With respect to what type of disclosures from firms or financial professionals retail 
investors find helpful, c  ommenters provided two surveys of retail investors’ general views of 
disclosures about financial professionals in response to the Proposing Release.
986
 One 
commenter reported results from an online survey that provides support for the idea that retail 
investors value at least some disclosures from financial professionals.  From the a survey of 801 
individuals, a majority of the survey participants (62%) said they would be interested in reading 
a hypothetical standardized document provided to all new clients that explained the relationship 
between a financial professional and clients and thought that such a document would “boost 
transparency and help build stronger relationships between me and my financial professional” 
(72%).
987
 Separately, with respect to what aspects of financial disclosures retail investors might 
find most helpful, Koski Research conducted an investor survey on behalf of another commenter 
and reported that the “majority of retail investors want communications that are relevant to them 
(91%), short and to the point (85%), and visually appealing (79%).”
988
 The survey also reported 
that the top four things retail investors wanted communicated were the costs for advice, 
                                                                                                                                                             
985
  See RAND 2008, supra footnote 909. The fact sheet provided to RAND 2008 study participants included 
information on the definition of broker and investment adviser, including a description of common job 
titles, legal duties and typical compensation.  Participants in the focus groups indicated that they were 
confused over common job titles of broker-dealers and investment advisers, thought that because brokers 
are required to be licensed, investment advisers were not as qualified as brokers, deemed the term 
“suitable” too vague, and concluded that it would be difficult to prove whether or not an investment adviser 
was not acting in the client’s best interest. 
986
   See Schwab Letter I (Koski), supra footnote 21 and CCMC Letter (investor polling), supra footnote 21.  
987
  See CCMC Letter (investor polling), supra footnote 21. 
988
 See Schwab Letter I (Koski), supra footnote 21.  

 
306 
 
description of advice services, the obligations of the firm and its representatives, and the 
conflicts of interest.
989
  Additionally, approximately 70% of the participants in the 917 Financial 
Literacy Study indicated that they would read disclosures on conflicts of interest if made 
available.
990
 
b. Investor perceptions about specific disclosures concerning 
financial professionals 
(1) Conflicts of Interest 
As discussed in the Proposing Release, previous studies have found that investors 
consider conflicts of interest to be an important factor in disclosures from firms and financial 
professionals.
991
  For example, in the 917 Financial Literacy Study, approximately 52.1% of 
survey participants indicated that an essential component of any disclosure would be their 
financial intermediary’s conflicts of interest, while 30.7% considered information about conflicts 
of interest to be important, but not essential.
992
  Investors also were asked to rate their level of 
concern about potential conflicts of interest that their adviser might have.
   
Approximately 36% of 
the investors expressed concerns that their adviser might recommend investments in products for 
which its affiliate receives a fee or other compensation, while 57% were concerned that their 
adviser would recommend investments in products for which it gets paid by other sources.  In 
addition to conflicts directly related to compensation practices of financial professionals, some 
                                                                                                                                                             
989
  Id.  For similar evidence, see also CCMC Letter (investor polling), supra footnote 21 (reporting that issues 
that “matter most” to investors include: “explaining fees and costs,” explaining conflicts of interest” and 
“explaining own compensation”). 
990
  917 Financial Literacy Study, supra footnote 588 
991
  See Proposing Release, supra footnote 5, at Section IV.A.3.c. 
992
  917 Financial Literacy Study, supra footnote 588. 

 
307 
 
investors were concerned about conflicts related to the trading activity of these firms.  For 
example, more than 26% of participants were concerned that an adviser might buy and sell from 
its own account at the same time it is recommending securities to investors; and more than 55% 
of investors were also concerned about their adviser’s engaging in principal trading.   
Among those participants in the 917 Financial Literacy Study who indicated that they 
would read disclosures on conflicts of interest if made available, 48% would request additional 
information from their adviser, 41% would increase the monitoring of their adviser, and 33% 
would propose to limit their exposure of specific conflicts.  The majority of participants (70%) 
also wanted to see specific examples of conflicts and how those related to the investment advice 
provided.  
(2) Fees 
With respect to disclosures about fees, the Proposing Release also discussed the 917 
Financial Literacy Study as well as the FINRA Investor Study
993
 regarding the importance that 
investors place on disclosures about fees and compensation of financial professionals, and how 
those disclosures should be presented.
994
  Similar to the findings regarding conflicts of interest, 
the 917 Financial Literacy Study found that a majority participants indicated that disclosure of 
the fees and compensation of investment advisers was an essential element to any disclosure.
995
  
                                                                                                                                                             
993
   FINRA Investor Education Foundation, Investors in the United States 2016 (Dec. 2016), available at 
http://www.usfinancialcapability.org/downloads/NFCS_2015_Inv_Survey_Full_Report.pdf (“FINRA 
Investor Study”).   
994
  See Proposing Release, supra footnote 5, at Section IV.A.3.c. 
995
   917 Financial Literacy Study, supra footnote 588. 

 
308 
 
(3) Disciplinary History  
As discussed in the Proposing Release, survey evidence in the 917 Financial Literacy 
Study indicate that knowledge of a firm’s and financial professional’s disciplinary history is 
among the most important items for retail investors deciding whether to receive financial 
services from a particular firm.
996
  Despite this, most investors do not actively seek disciplinary 
information for their advisers and broker-dealers.  For example, a FINRA survey in 2009, found 
that only 15% of survey respondents checked their financial professional’s background, although 
the Commission notes that the study encompasses a wide group of advisers, such as debt 
counselors and tax professionals.
997
  The FINRA Investor Study found that only 7% of survey 
respondents use FINRA’s BrokerCheck and approximately 14% of survey respondents are aware 
of the Investment Adviser Public Disclosure (IAPD) website.
998
  
C. Broad Economic Considerations 
We are adopting a requirement for broker-dealers and investment advisers and firms that are 
dually registered to deliver a relationship summary to retail investors because, 
as discussed in the 
baseline,
999
 many retail investors can be confused about their choices in the market for brokerage 
                                                                                                                                                             
996
  See 917 Financial Literacy Study, supra footnote 588, at nn.311 and 498 and accompanying text 
(Approximately 67.5% of the online survey respondents considered information about an adviser’s 
disciplinary history to be absolutely essential, and about 20.0% deemed it important, but not essential, and 
“When asked how important certain factors would be to them if they were to search for comparative 
information on investment advisers, the majority of online survey respondents identified the fees charged 
and the adviser’s disciplinary history as the most important factors.”). 
997
    FINRA Investor Education Foundation, Financial Capability in the United States: Initial Report of 
Research Findings from the 2009 National Survey (Dec. 1, 2009), available at 
http://www.usfinancialcapability.org/downloads/NFCS_2009_Natl_Full_Report.pdf   
998
     See FINRA Investor Survey, supra footnote 993  
999
  See supra Section IV.B. 

 
309 
 
and investment advisory services.  To that end, the relationship summary is meant to assist retail 
investors with both the process of deciding whether to engage or remain with a particular firm or 
financial professional and whether to establish or maintain an investment advisory or brokerage 
relationship.  Specifically, low financial literacy,  lack of knowledge about the market for 
financial advice, and lack of information about important aspects of the relationship between 
particular firms and their customers or clients,
1000
 may harm retail investors by deterring them 
from seeking brokerage or investment advisory services even if they could potentially benefit 
from it,
1001
 or by increasing the risk of a mismatch between the investors’ preferences and 
expectations and the actual brokerage or advisory services they receive from a firm or 
professional.
1002
  To ameliorate this potential harm, the relationship summary is intended to 
reduce investor confusion and search costs in the process of (i) deciding whether to engage a 
particular firm or financial professional, (ii) whether to establish an investment advisory or 
brokerage relationship, and (iii) whether to terminate or switch the relationship or specific 
service provided.  The relationship summary is expected to provide significant benefit to retail 
                                                                                                                                                             
1000
  Examples of such aspects of the relationship include the services and fees of particular firms, and conflicts 
of interest that may arise between particular firms and customers or clients.   
1001
  The potential loss to investors with low financial literacy from not seeking advice is illustrated by, e.g., the 
study by Hans-Martin von Gaudecker, How Does Household Portfolio Diversification Vary with Financial 
Literacy and Financial Advice?, 70 J.
 FIN. 489 (2015), which showed that investors with low financial 
literacy that do not seek financial advice on average incur significantly larger losses (by more than 50 basis 
points) from underdiversification compared to investors who seek financial advice (irrespective of financial 
literacy) and investors with higher financial literacy who do not seek advice.   
1002
  Studies provide results of investor misunderstanding that is consistent with some investors being at risk of 
entering into a mismatched relationship. For example, survey results in OIAD/RAND, supra footnote 3 
suggest that a non-trivial subset of retail investors may misunderstand the type of their financial 
professional, the type of services the professional offers, and how the professional is compensated.   

 
310 
 
investors by focusing their attention on salient features of their potential relationship with a 
particular broker-dealer or investment adviser and highlighting the most important elements of 
this relationship in a single, succinct, and easy-to-understand document. The relationship 
summary also allows for comparability among broker-dealers and investment advisers by 
requiring disclosures on the same topics under standardized headings in a prescribed order to 
retail investors.
1003
  As we discuss above in Section I, we do not believe that existing disclosures 
provide this level of transparency and comparability across investment advisers, broker-dealers, 
and dual registrants.    
Below, we discuss in more detail the nature of the potential harm faced by retail investors 
from confusion about the market for brokerage and investment advisory services.
  
We also 
discuss considerations involved in creating disclosures for retail investors that may reduce the 
potential for investor harm by increasing their knowledge about the market for brokerage and 
investment advisory services and facilitating their search for a firm or financial professional.
1004
 
                                                                                                                                                             
1003
  See supra discussion in Section II.A.2.  
1004
   We are extending our discussion on broad economic considerations from the Proposing Release in response 
to concerns about the economic analysis in the Proposing Releases  by commenters; see, e.g.,  Letter from 
Charles Cox, Former SEC Chief Economist, et al. (Feb. 6, 2019), available at 
https://www.sec.gov/comments/s7-07-18/s70718-4895197-177769.pdf. (“Former SEC Senior Economists 
Letter”).  The Former SEC Senior Economists Letter raised three main concerns about the economic 
analysis in the proposed Regulation Best Interest and the Proposing Release: 1) the discussion of the 
potential problems in the customer-advisor relationship was incomplete and identified other features of the 
market for ongoing retail investment advice that might be problematic; 2) there was inadequate discussion 
and analysis of the existing economic literature on financial advice; and 3) there were questions of whether 
the disclosure requirements in the proposing release would provide meaningful information for customers.  
These concerns more directly focused on the economic analysis of the proposed Regulation Best Interest.  
However, concerns 1) and 3) appear to also apply to the economic analysis of the Proposing Release to 
some extent, and we address those concerns in this economic analysis.  For instance, with respect to 1), this 
section provides a more in depth discussion compared to the Proposing Release of the harm that may arise 
when retail investors lack knowledge or are confused about the market for investment advisory and 
brokerage services, including a discussion of why additional disclosure may be useful to investors.  With 
 

 
311 
 
Academic studies have documented a multitude of potential benefits that accrue to retail 
investors as a result of seeking investment advice, including, but not limited to:  higher 
household savings rates, setting long-term goals and calculating retirement needs, more efficient 
portfolio diversification and asset allocation, increased confidence and peace of mind, facilitation 
of small investor participation, improvement in financial situations, and improved tax 
efficiency.
1005
  Further, financial professionals may also explain to retail investors the 
informational asymmetries between product providers and their customers.  Retail investors 
might not be able to disentangle such information asymmetries on their own. 
 
 Studies also find 
that low financial literacy is negatively associated with the propensity to seek financial 
                                                                                                                                                             
respect to 3), the discussion in this section expands on the discussion already provided in the Proposing 
Release on the potential limits to the effectiveness of disclosure to address the identified investor harm, but 
also discusses how disclosure should be designed to be effective, including how appropriately designed 
disclosures can help overcome some of the identified potential limitations of disclosure.  The latter 
discussion provides a framework that informs our analysis in Section IV.D of the anticipated economic 
impacts of the relationship summary.  In addition, the Former SEC Senior Economists Letter stated that 
“[w]e feel (preliminarily) that the new CRS forms would provide some helpful information. But we would 
far prefer for there to be evidence that the intended targets of these disclosures feel the same.”  Our 
discussion takes into account the various investor surveys and studies that were conducted after the 
Proposing Release that reported that large majorities of investors believed the relationship summary would 
help them make more informed decisions about types of accounts and services.  See, e.g., RAND 2018. 
1005
  See, e.g., Mitchell Marsden, Catherine Zick, & Robert Mayer, The Value of Seeking Financial Advice, 32 J. 
FAM. & ECON. ISSUES 625 (2011); Jinhee Kim, Jasook Kwon, & Elaine A. Anderson, Factors Related to 
Retirement Confidence: Retirement Preparation and Workplace Financial Education, 16 J.
 FIN. 
COUNSELING & PLAN. (2005); Daniel Bergstresser, John Chalmers & Peter Tufano, Assessing the Costs 
and Benefits of Brokers in the Mutual Fund Industry, 22 R
EV. FIN. STUD. 4129 (2009); Ralph Bluethgen, 
Steffen Meyer, & Andreas Hackethal, High-Quality Financial Advice Wanted!, E
URO. BUS. SCH., Working 
Paper, (Feb. 2008), available at 
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.596.2310&rep=rep1&type=pdf; Neal M. 
Stoughton, Youchang Wu, & Josef Zechner, Intermediated Investment Management, 66 J.   F
IN. 947 (2011).  
Francis M. Kinniry, et al., Putting a value on your value: Quantifying Vanguard Advisor's Alpha, 
Vanguard Research (Sept. 2016) estimates the value to investors associated with obtaining financial advice 
of approximately 3% in net returns to investors, associated with suitable asset allocation, managing expense 
ratios, behavioral coaching, alleviating home bias, among others.    

 
312 
 
advice.
1006
  These findings collectively suggest that retail investors of low level financial literacy 
might be harmed because they might be less likely to seek financial advice in spite of the 
potential benefit from it. 
For a retail investor who decides to enter a relationship with a financial services provider, 
a low level of knowledge about the market for financial services might reduce the investor’s 
ability to accurately identify whether any given firm or financial professional offers a type of 
relationship that matches his or her preferences and expectations.  This, in turn, increases the risk 
that the firm or financial professional is a poor match for the retail investor when compared to an 
alternative financial services provider.  A relationship that represents a poor match between an 
investor and a firm or financial professional can leave an investor worse-off, relative to a better 
match, or no match at all, because the relationship could result in a cost of services that is higher 
than the investor expects or a level or type of service that is different than the investor expects, 
such as episodic recommendations versus continuing advice.   
A retail investor might search across a set of financial service providers to find a financial 
professional that best meets his or her needs.
1007
  For an investor who is able to acquire 
information from the financial service providers the investor chooses to evaluate, the more 
extensive a search the investor engages in, the more likely the investor will locate a good match. 
                                                                                                                                                             
1006
  For a discussion of the academic research on the role of financial literacy in seeking financial advice see, 
e.g., OIAD/RAND, supra footnote 3 at 8. 
1007
  The evidence discussed in supra Section IV.B.2.a on how investors select a financial professional or firm 
suggests that a large majority of retail investors rely on personal or professional referrals, which may 
indicate that they evaluate very few, if any alternative providers. One potential reason for this reliance on 
referrals could be that investors currently perceive their search costs to be high. Another possible reason, 
among others, could be that investors value the information derived from other people’s experiences more 
than other sources of information.   

 
313 
 
However, conducting such a search is costly and requires time, effort, and access to resources.  
Investors likely balance the benefits of evaluating each additional provider against the 
incremental cost of doing so, ending their search when the expected marginal cost of the search 
is greater than the expected marginal benefit from the search.
1008
   Moreover, some investors 
may experience higher-level of uncertainty about the benefits or costs of a search.   For example, 
investors who are less knowledgeable about the general differences between different types of 
financial professionals, the services these professionals provide, and the factors they should 
consider in their choice, may not fully appreciate the benefits of searching for a provider that 
best meets their needs.  To the extent such investors perceive a search as burdensome because 
they underestimate the benefits of searching, they might refrain from conducting a search or 
conduct a less extensive search to learn about potential alternatives, thereby increasing their risk 
of entering a relationship with a firm or financial professional that is a poor match with their 
expectations and preferences or not engaging in a relationship even if one might be 
beneficial.
1009
 
                                                                                                                                                             
1008
   This assumes a sequential search process, but an analogous argument can be made if an investor instead 
searches by deciding ex ante on a fixed number of alternatives to evaluate, in which case the marginal 
decisions then relates to what this number will be. See, e.g., Babur De los Santos, et al., Testing Models of 
Consumer Search Using Data on Web Browsing and Purchasing Behavior, 102 A
M. ECON. REV. 2955 
(2012).  We have expanded our discussion on search costs in response to main concern 1) of the Former 
SEC Senior Economists Letter; see supra footnote 1004.   
1009
    This argument assumes that less knowledgeable investors can learn at least some information from 
engaging in an initial search or a continued search that could be used to evaluate fit (albeit imperfectly so).  
If less knowledgeable investors cannot learn from a search at all, the choice of a firm or financial 
professional becomes similar to a random draw and a search, no matter how extensive, will not decrease the 
risk of a mismatch.   

 
314 
 
General trust (in the sense of confidence) in financial markets can help alleviate certain 
behavioral biases and encourage participation in, for example, the stock market.
1010
  Trust at an 
interpersonal level may be less beneficial in certain circumstances.  Research suggests that lower 
financial literacy among investors is positively associated with higher personal trust in their 
financial professionals.
1011
  However, to the extent retail investors substitute trust for knowledge 
in their relationship with a financial professional, overreliance on trust may induce some 
investors to maintain a mismatched relationship longer than they otherwise would if they had 
higher financial literacy and a better understanding of the costs and benefits of the financial 
advice they receive from the professional, as well as awareness of alternative services or 
providers.
1012
  That is, particularly for less-knowledgeable investors, a high level of trust in a 
particular financial professional or firm may exacerbate the potential harm of a mismatched 
relationship.  Similarly, some retail investors that select a firm or financial professional based on 
                                                                                                                                                             
1010
  See, e.g., the literature review in discussion in OIAD/RAND, supra footnote 3, at 11. 
1011
  See, e.g., Thomas Pauls, Oscar Stolper, & Adreas Walter, Broad-Scope Trust and Financial Advice, 
Working Paper (Nov. 2016), available at https://www.researchgate.net/publication/314235638_Broad-
scope_trust_and_financial_advice.  
1012
  We acknowledge commenters’ concerns that higher financial literacy and more disclosures alone may not 
fully address the risk that retail investors would rely on trust in their financial services providers over other 
factors, such as knowledge about financial services industry participants, practices and products. See CFA 
Letter I (“We’ve seen anecdotal evidence in our own personal encounters with investors of their tendency 
to trust their “financial adviser” without actually verifying how or how much they are paying or how their 
investments are performing.  Even investors who would be considered sophisticated by any reasonable 
measure can exhibit a level of trust and confidence in their financial professional that isn’t based on data.  
Any disclosures about their financial professional’s services, duties, costs, and conflicts are unlikely to 
change those views”); AARP Letter (“Recent behavioral science studies have shown that disclosures are 
largely ineffective because they tend to increase conflict in advisers and make the investor more likely to 
trust the adviser and thus follow biased advice”); see also Regulation Best Interest Release, supra footnote 
47, (discussing how that rulemaking addresses the limitations of disclosure for customers of broker-
dealers). 

 
315 
 
referrals from friends and family may do so solely on the basis of a high level of trust in these 
referring parties.
1013
 This can exacerbate the potential harm of a mismatched relationship in 
particular for less sophisticated investors and/or for investors who relied on referrals from less 
financially sophisticated parties.
1014
 
Further, investors may endure a mismatched relationship for a longer period of time than 
they would absent switching costs, including the cost of a new search and any transaction costs 
involved in moving assets from one firm to another.  These costs lower a retail investor’s 
incentive to look for a new firm or financial professional even if the current relationship turns out 
to be a poor match.  Both overreliance on trust and the presence of switching costs increase the 
ex-ante value of avoiding a mismatched relationship in the first place. 
Retail investors could increase their knowledge about the market for brokerage and 
investment advisory services, and thereby engage in a more efficient search, by accessing 
information and disclosures currently provided directly by firms or available in a number of 
existing regulatory forms and platforms.  Current sources of information include, among others, 
Form ADV (and IAPD) and BrokerCheck.
1015
  However, because existing disclosures are made 
on multiple and sometimes lengthy forms, and are obtained in different ways, it can be difficult 
                                                                                                                                                             
1013
  We recognize that trust is not the only reason to rely on referrals; for example, there is informational value 
in other people’s personal experiences. 
1014
        See supra Section IV.B.2.a for survey evidence on the role of personal referrals in retail investors’ choice of 
financial professionals. 
1015
  See Proposing Release, supra footnote 5, at n.280.  Investment advisers and broker-dealers may also 
provide additional information to retail investors through the firm’s website and the retail investor’s 
account agreement.  Additionally, investment advisers and broker-dealers may provide information to retail 
investors through marketing materials (e.g., brochures) and other customer communications (e.g., fee 
schedules). 

 
316 
 
for investors to grasp the most important features of the financial services from reading these 
materials.
1016
     In addition, the information available to retail investors about broker-dealers on 
BrokerCheck does not include the same information that investment advisers provide in the 
Form ADV brochure and brochure supplement, which makes direct comparisons between 
broker-dealers and investment advisers more difficult.   
Voluntary disclosures and educational efforts made by financial services providers such 
as broker-dealers and investment advisers can potentially inform investors about the specific 
relationships they can have with providers and the types of services providers offer, but also 
about the overall market for financial advice and the different types of service providers and 
relationships available in the market.  And such voluntary disclosure could, in principle, facilitate 
investor search.  However, financial services providers may lack incentives to voluntarily 
disclose salient information or make the effort needed to educate investors about the various 
alternatives available to them because it is costly to do so.  In addition to the costs of producing 
disclosures and training employees to deliver disclosures, providers may also perceive a risk that 
competitors would take advantage of disclosed information.  Furthermore, disclosures that are 
not tailored to the provider and have more general educational value to retail investors have the 
features of a public good.  If providers rely on their competitors to educate potential clients 
generally about the market for financial advice, there is an inefficiently low level of general 
educational material available to investors.  Underprovision might occur even if such disclosures, 
                                                                                                                                                             
1016
  There is some evidence suggesting investors are not reading current disclosures. For example, RAND 2018 
reports that 13% of surveyed investors said that they had viewed Form ADV (11% said they viewed both 
an ADV and broker account opening document, 2% had only reviewed Form ADV). RAND 2018, supra 
footnote 13. 

 
317 
 
were they to be provided, would increase the overall efficiency of the market for financial advice 
and thus benefit financial services providers as a group in the long run, for example, by 
sufficiently reducing confusion among the general investing public that more investors are 
willing to search for a financial services provider.  
Additionally, some broker-dealers and investment advisers may even privately gain from 
a lack of knowledge among retail investors to the extent they profit from attracting and retaining 
customers and clients who would be a better match with another provider.
1017
  For example, a 
customer of a broker-dealer who has a preference for active investing may actually be better off 
being a client of an investment adviser and paying a fixed percentage of assets per year as a fee 
for the advice instead of broker commissions each time she receives a recommendation that 
results in a transaction.  However, this investor is likely a profitable customer for the broker-
dealer.  Similarly, a client of an investment adviser who prefers buy-and-hold investments in a 
few index funds could potentially be better off in a relationship with a broker-dealer, by only 
paying a few one-time sales charges and commissions instead of a recurring percentage fee on 
the assets, which is likely more profitable to the investment adviser.  In both of these cases, the 
firm has little incentive to provide the investor with information about available advice 
relationships that could persuade the investor to seek advice elsewhere or to switch to a different 
business line. 
                                                                                                                                                             
1017
         See, e.g., CFA Letter I (stating that “[t]he problem is that investors are being misled into relying on biased 
sales recommendations as if they were objective, best interest advice and that they are suffering significant 
financial harm as a result. Investor confusion is relevant only because it limits the tools the Commission 
has available to address that harm...”).  

 
318 
 
In the presence of the frictions described above, requiring firms and financial 
professionals to furnish a short summary disclosure like Form CRS can benefit retail investors by 
reducing information asymmetry between investors and firms and financial professionals and 
turning investor attention to more salient aspects of a firm and its services.  In addition, as 
discussed above, no current required disclosure allows for comparability among broker-dealers 
and investment advisers by requiring disclosures on the same topics under standardized headings 
in a prescribed order to retail investors.  A reduction in information asymmetry and improved 
comparability may reduce search costs for investors and increase their understanding about 
differences in offered relationships across firms and financial professionals, thereby reducing the  
risk of investors’ hiring a provider that is a poor match for their needs.  However, for the 
relationship summary to be effective for retail investors it must be understandable.  Studies have 
found that the format and structure of disclosure may improve (or decrease) investor 
understanding of the disclosures being made.
1018 
 We discuss these studies below. 
Some commenters questioned the general efficacy of disclosure in the context of 
investment advice to retail investors.
1019
  We do not share this view.  As we discussed above, we 
                                                                                                                                                             
1018
     See, Justine S. Hastings & Lydia Tejeda-Ashton, Financial Literacy, Information, and Demand Elasticity: 
Survey and Experimental Evidence from Mexico, NBER Working Paper 14538 (Dec. 2008) (finding that 
providing fee disclosures to Mexican investors in peso rather than percentage terms caused financially 
inexperienced investors to focus on fees); see Richard G. Newell & Juha Siikamaki, Nudging Energy 
Efficiency Behavior, Resources for the Future Discussion Paper 13-17 (Jul. 10, 2013) (finds that providing 
dollar operating costs in simplified energy efficiency labeling significantly encouraged consumers to 
choose higher energy efficiency appliances, while another related study presents similar evidence from 
payday loans).  
1019
  See, e.g., AARP Letter (stating that “[r]ecent behavioral science studies have shown that disclosures are 
largely ineffective because they tend to increase conflict in advisers and make the investor more likely to 
trust the adviser and thus follow biased advice”); Comment Letter of Economic Policy Institute (Aug. 7, 
2018) (“EPI Letter”) (stating that “Disclosure requirements can be onerous, and disclosure may not only be 
 

 
319 
 
believe a short summary disclosure like Form CRS can provide benefits to retail investors. 
However, as we also discussed in the Proposing Release,
1020
 we recognize that there may be 
limits to the efficacy of disclosure in some circumstances.  For example, the documented low 
level of financial sophistication of many retail investors can make it harder for them to process 
the implications of disclosure.
1021
  Another limitation of the efficacy of disclosure documented in 
research is that investors may have various behavioral biases, such as anchoring
1022
 and over-
confidence,
1023
 which could affect how the disclosed information is interpreted.
1024
  This could in 
turn lead investors to misinterpret, under-weight, or over-weight the implications of disclosures.  
                                                                                                                                                             
ineffective, but counterproductive. For example, detailed disclosures can serve to bury important 
information, or disclosure of conflicts can be interpreted by consumers as evidence of honesty. Disclosure 
can make sellers more comfortable recommending products and services that are not in buyers’ best 
interests, and it can make clients less comfortable rejecting these recommendations at the risk of giving 
offense”).  
1020
  See Proposing Release, supra footnote 5, at Section IV.B.1. 
1021
 See, e.g., L.E. Willis, Decision making and the limits of disclosure: The problem of predatory lending: 
Price, 65 M
D. L. REV. 707 (2006) (“Willis Study”). Commenters discussed similar issues, see, e.g., 
Comment Letter of Charles Ryan (Aug. 7, 2018); CFA Letter I; American Investment Council Letter. 
1022
      Anchoring bias implies undue reliance on a particular information signal at the expense of other signals. 
See, e.g., Robert A. Prentice, Moral Equilibrium: Stock Brokers and the Limits of Disclosure, 2011 W
IS. L. 
R
EV. 1059, at 1083 (2011) (explaining “people tend to anchor on the first information they receive, and 
then revise their judgments in the face of new information, but to an insufficient degree”).   
1023
  Over-confidence bias implies over-estimation of probabilities of certain outcomes over objective 
probabilities. Id., at 1072, explains that “studies indicate that people tend, in mathematically impossible 
percentages, to believe that they are above average in driving, auditing, and teaching.”  
1024
    See, e.g., Jorgen Vitting Anderson, Detecting Anchoring in Financial Markets, 11 J. BEHAV. FIN. 129 
(2010).  

 
320 
 
Limited attention problems can also impede investors’ ability to effectively process the 
implications of some disclosures.
1025
 
In addition, academic studies find that sometimes certain disclosures may result in 
unintended consequences.  In particular, existing research has found that conflict of interest 
disclosures can increase the likelihood that the disclosing party would act on the conflict of 
interest.
1026
  This bias can be caused by “moral licensing,” a belief that the disclosing party has 
already fulfilled its moral obligations in the relationship and therefore can act in any way 
(including to the customer’s detriment), or it can be caused by “strategic exaggeration,” aimed at 
compensating the disclosing party for the anticipated loss of profit due to the disclosure.  
Experimental evidence also suggests that disclosure could turn some clients or customers into 
“reluctant altruists.”
1027
  For example, if financial professionals disclose that they earn a referral 
fee if a customer enrolls in a program, the customer may implicitly feel that they are being asked 
to help their financial professional receive the fee.  One study also found evidence that disclosure 
of a professional's financial interests (particularly in face-to-face interactions) can induce a 
“panhandler effect,” whereby customers may face an implicit social pressure to meet the 
                                                                                                                                                             
1025
  See, e.g., David Hirshleifer & Siew Hong Teoh, Limited Attention, Information Disclosure, and Financial 
Reporting, 36 J. A
CCT. & ECON. 337 (2003) (“Hirshleifer and Teoh Study”). 
1026
     See, Daylian M. Cain, George Loewenstein, & Don A. Moore, The Dirt on Coming Clean: Perverse Effects 
of Disclosing Conflicts of Interest, 34 J. L
EGAL STUD. 1 (2005) (“Cain 2005 Article”); Daylian M. Cain, 
George Loewenstein & Don A. Moore, When Sunlight Fails to Disinfect: Understanding the Perverse 
Effects of Disclosing Conflicts of Interests, 37 J. C
ONSUMER RES. 836 (2011); Bryan K. Church & Xi 
(Jason) Kuang, Conflicts of Disclosure and (Costly) Sanctions: Experimental Evidence, 38 J. L
EGAL STUD. 
505 (2009); Christopher Tarver Robertson, Biased Advice, 60 E
MORY L.J. 653 (2011).  These papers study 
conflicts of interest in general, experimental settings, not specialized to the provision of financial advice.   
1027
     See Jason Dana, Daylian M. Cain, & Robyn M. Dawes, What You Don’t Know Won’t Hurt Me: Costly (but 
Quiet) Exit in Dictator Games, 100 O
RGANIZATIONAL BEHAV. & HUM. DECISION PROCESSES 193 (2006). 

 
321 
 
professional's financial interests.
1028
  The above literature indicates that conflicts of interest 
disclosures may interact with psychological biases to produce unintended effects that undermine 
the intended benefits of the disclosures.  However, these studies also suggest certain factors that 
may mitigate the unintended consequences.  For example, in the case of the “panhandler effect,” 
researchers have found that distancing the client or customer from the financial professional 
either in the decision or disclosure phase can dampen this effect.
1029
   
Academic research has identified a set of characteristics that may increase the 
effectiveness of a disclosure document to consumers.  These characteristics, discussed below, 
frame our analysis of the economic impacts of the proposed rule.
1030
 
Studies have found that the structure or format of disclosure may improve (or decrease) 
investor understanding of the disclosures being made.
1031
  Every disclosure document not only 
presents new information to retail investors but also provides a particular structure or format for 
this information that affects investors’ evaluation of the disclosure.
1032
  This “framing effect” 
could lead investors to draw different conclusions depending on how information is presented.  
                                                                                                                                                             
1028
  Sunita Sah, George Loewenstein, & Daylian M. Cain, The Burden of Disclosure: Increased Compliance 
With Distrusted Advice, 104(2) J. P
ERSONALITY & SOC. PSYCHOL. 289-304 (2013).  
1029
     See id. 
1030
      See George Loewenstein, Cass R. Sunstein, & Russell Golman, Disclosure: Psychology Changes 
Everything, 6 A
NN. REV. ECON. 391 (2014). The paper provides a comprehensive survey of the literature 
relevant to disclosure regulation.    
1031
  To that end, in order to facilitate more effective processing of disclosures by investors, some commenters 
emphasized the need to incorporate “design thinking” into the structure of the relationship summary. See, 
e.g., Fidelity Letter.  See also supra footnotes 58–59. 
1032
  See Amos Tversky & Daniel Kahneman, The Framing of Decisions and the Psychology of Choice, 211 SCI. 
453 (1981).  

 
322 
 
For example, if the disciplinary history information is presented first, it could affect the way 
investors perceive all subsequent disclosures in the relationship summary and, possibly, discount 
more heavily the information provided by firms with disciplinary history relative to firms with 
no disciplinary history.  If, instead, disciplinary history information were provided at the end of 
the relationship summary, the effect of the information could be moderated because it would no 
longer frame the other information provided to investors.  Because of such framing effects, it is 
important that the structure of a disclosure document supports the intended purpose of the 
disclosure. 
Because individuals can exhibit limited ability to absorb and understand the implications 
of the disclosed information, for example due to limited attention or low level of 
sophistication,
1033
 more targeted and simpler disclosures may be more effective in 
communicating information to investors than more complex disclosures.  Academic studies 
suggest that costs, such as increased investor confusion or reduced understanding of the key 
elements of the disclosure, are likely to increase as disclosure documents become longer, more 
convoluted, or more reliant on narrative text.
1034
  Consistent with such findings, other empirical 
evidence suggests that disclosure simplification may benefit consumers of disclosed 
information.
1035
  In general, academic research appears to support the notion that shorter and 
                                                                                                                                                             
1033
  See, e.g., Hirshleifer and Teoh Study, supra footnote 1025; and Willis Study, supra footnote 1021.  
1034
  See, e.g., Samuel B. Bonsall & Brian P. Miller, The Impact of Narrative Disclosure Readability on Bond 
Ratings and the Cost of Debt, 22 R
EV. ACCT. STUD. 608 (2017) and Alistair Lawrence, Individual Investors 
and Financial Disclosure, 56 J. A
CCT. & ECON. 130 (2013); see also CCMC Comment Letter. 
1035
    See, e.g., Sumit Agarwal, et al., Regulating Consumer Financial Products: Evidence from Credit Cards, 
NBER Working Paper No. 19484 (Jun. 2014), available at https://www.nber.org/papers/w19484 (fi nding 
 

 
323 
 
more focused disclosures could be more effective at increasing investors understanding than 
longer, more complex disclosures.   
Another characteristic of effective disclosures documented in academic research is 
disclosure salience.
1036
  Salience detection is a key feature of human cognition allowing 
individuals to focus their limited mental resources on a subset of the available information and 
causing them to over-weight this information in their decision making processes.
1037
  Within the 
context of disclosures, information disclosed to promote greater salience, such as information 
presented in bold text, or at the top a page, would be more effective in attracting attention than 
less saliently disclosed information, such as information presented in a footnote.     Limited 
attention among individuals also increases the importance of focusing on salient disclosure 
signals.  Some research finds that more visible disclosure signals are associated with stronger 
stakeholder response to these signals.
1038
  Moreover, research suggests that increasing signal 
salience is particularly helpful in reducing limited attention of consumers with lower education 
                                                                                                                                                             
that a series of requirements in the Credit Card Accountability Responsibility and Disclosure Act (CARD 
Act), including several provisions designed to promote simplified disclosure, has produced substantial 
decreases in both over-limit fees and late fees, thus saving U.S. credit card users $12.6 billion annually).  
1036
   This is a view also supported by commenters. See, e.g., AARP Letter (“A good disclosure statement will 
highlight the information most important to the consumer.”). 
1037
      Daniel Kahneman,    THINKING, FAST AND SLOW (2013).  Susan Fiske & Shelley E. Taylor, SOCIAL 
COGNITION: FROM BRAINS TO CULTURE (3
rd
 ed. 2017).  
1038
 See Hirshleifer and Teoh Study, supra footnote 1025. Commenters also addressed the benefit of visible 
disclosure signals. For example, the Fidelity Letter refers to Stanford Law School Design Principles stating 
“[u]se visual design and interactive experiences, to transform how you present legal info to lay people.”  
Also, Kleimann II states that “[f]or good design, we want to build upon this tendency by identifying the key 
questions investors should or are likely to ask and featuring them prominently in the text, thus easing the 
cognitive task for readers....” Kleimann II, supra footnote 19.    

 
324 
 
levels and financial literacy.
1039
  There is also empirical evidence that visualization improves 
individual perception of information.
1040
  For example, one experimental study shows that 
tabular reports lead to better decision making and graphical reports lead to faster decision 
making (when people are subject to time constraints).
1041
  Overall these findings suggest that 
problems such as limited attention may be alleviated if key information in Form CRS is 
emphasized, is reported closer to the beginning of the document, and is visualized in some 
manner.  This is also consistent with the recommendation of several commenters.
1042
  However, 
it is also important to note that given a choice, registrants may opt to emphasize elements of the 
disclosure that are most beneficial to themselves rather than investors, while deemphasizing 
elements of the disclosure that are least beneficial to them.  As discussed further in the economic 
analysis below and discussions above, the final instructions of the relationship summary include 
requirements that are designed to mitigate this risk.  For example, the final instructions require 
standardized headers in a prescribed order, certain other prescribed language (including for the 
required conversation starters), page limits, and certain text features, which mitigate providers’ 
incentives to behave opportunistically. 
                                                                                                                                                             
1039
  See, e.g., Victor Stango & Jonathan Zinman, Limited and Varying Consumer Attention: Evidence from 
Shocks to the Salience of Bank Overdraft Fees, 27 R
EV. OF FIN. STUD. 990 (2014). 
1040
  See John Hattie, VISIBLE LEARNING. A SYNTHESIS OF OVER 800 META-ANALYSES RELATING 
TO ACHIEVEMENT (2008). 
1041
  See Izak Benbasat & Albert Dexter, An Investigation of the Effectiveness of Color and Graphical 
Information Presentation Under Varying Time Constraints, 10-1 MIS Q. 59 (1986).  However, one 
commenter noted that participants in the RAND 2018 qualitative interviews did not appear to process side-
by-side tabular disclosures effectively.  See Schwab Letter II.  
1042 
 See, e.g., CFA Letter I; Morgan Stanley Letter.  

 
325 
 
There is also a trade-off between allowing more disclosure flexibility and ensuring 
disclosure comparability (e.g., through standardization).
1043
  Greater disclosure flexibility 
potentially allows the disclosure to reflect more relevant information, as disclosure providers can 
tailor the information to firms’ own specific circumstances.
1044  
Although disclosure flexibility 
allows for disclosure of more decision-relevant information, it also allows registrants to 
emphasize information that is most beneficial to themselves rather than investors, while 
deemphasizing information that is least beneficial to the registrants.  Economic incentives to 
present one’s services in better light may drive investment advisers and broker-dealers to 
deemphasize information that may be relevant to retail investors.
1045   
Moreover, although 
standardization makes it harder to tailor disclosed information to a firm’s specific circumstances, 
it also comes with some benefits.  For example, people are generally able to make more coherent 
and rational decisions when they have comparative information that allows them to assess 
relevant trade-offs.
1046
  The final rules are intended to strike a balance between the relative 
                                                                                                                                                             
1043 
 See CFA Institute Letter I.  
1044
 See, e.g., Cambridge Letter; FSI Letter I; Mutual of America Letter; Northwestern Mutual Letter; SIFMA 
Letter; Vanguard Letter; Primerica Letter; TIAA Letter. 
1045 
 Commenters had similar concerns, see, e.g., EPI Letter; Regulatory Impact Analysis, supra footnote 853; 
CFA Letter I. 
1046
      See, e.g., JR Kling, et al., Comparison Friction: Experimental Evidence from Medicare Drug Plans, 127 Q. 
J.   E
CON. 199 (2012) (finding that in a randomized field experiment, in which some senior citizens choosing 
between Medicare drug plans that were randomly selected to receive a letter with personalized, 
standardized, comparative cost information (“the intervention group”) while another group (“the 
comparison group”) received a general letter referring them to the Medicare website; plan switching was 
28% in the intervention group, but only 17% in the comparison group, and the intervention caused an 
average decline in predicted consumer cost of about $100 a year among letter recipients); CK Hsee, et al., 
Preference Reversals Between Joint and Separate Evaluations of Options: A Review and Theoretical 
Analysis, 125 P
SYCHOL. BULL. 576 (1999).  

 
326 
 
benefits and costs of disclosure standardization versus disclosure flexibility; for example, by 
requiring standardized headings and a prescribed order of topics but allowing some flexibility in 
the firm’s own wording and the order of presentation within each topic. 
D. Economic Effects of the Relationship Summary  
1.  Retail Investors 
a. Overall Anticipated Economic Effects of Form CRS 
Overall, we expect that these final rules requiring firms to deliver a relationship summary 
will benefit retail investors in several ways, including by reducing information asymmetry 
between investors and firms (and their financial professionals), reducing search costs and 
facilitating easier comparisons between and among brokerage and investment advisory firms, 
and increasing understanding of, and confidence in, the market for financial services more 
generally.     
First, in the specific context of a retail investor considering a firm or financial 
professional, the relationship summary will reduce the information asymmetry between the 
investor and the firm or professional by increasing transparency to that investor about a firm’s 
services, fees, conflicts of interest, standard of conduct, and disciplinary history.
1047
  Some—
though not all—of this information is currently available in the marketplace.  The relationship 
summary, however, will require all firms to provide information on these topics in one summary 
disclosure, which will be available on firms’ websites, if they have one, at BrokerCheck and 
                                                                                                                                                             
1047
  These aspects of the relationship summary are consistent with, for example, the disclosure items identified 
in the 917 Financial Literacy Study as essential for retail investors: adviser’s fees (76%), disciplinary 
history (67%), adviser’s conflicts of interest (53%), and adviser’s methodology in providing advice (51%); 
see 917 Financial Literacy Study, supra footnote 588. 

 
327 
 
IAPD, and through Investor.gov.  Current disclosure requirements do not provide this level of 
transparency and comparability for both broker-dealers and investment advisers.  In addition, 
through the use of layered disclosure, the relationship summary will facilitate investors’ access to 
additional, more detailed, information.  The relationship summary is also the first narrative 
disclosure for broker-dealers’ retail customers that will be filed with the Commission and widely 
available to the public.  We believe providing this overview of information in one place will 
enhance the accessibility of this information for the retail investor reviewing it relative to the 
baseline.  Moreover, some information, such as the payments to financial professionals, is not 
currently required to be publicly disclosed, making that information available for the first time. 
The relationship summary may also benefit investors by helping them separate “hard” 
information about services and fees from marketing communications.  To the extent the 
relationship summary will be effective at informing retail investors,
1048
 it should improve their 
ability to assess whether a relationship offered by a particular firm is a good match with their 
preferences and expectations.  Moreover, a reduction in information asymmetry may also help 
retail investors increase the value from any given relationship they enter with a firm or financial 
professional by potentially increasing their ability to monitor the relationship and to make more 
informed decisions related to the relationship during its duration, including whether to terminate 
the relationship.  
                                                                                                                                                             
1048
   As discussed supra, in Sections I and II, we commissioned the RAND 2018 report and received several 
surveys and studies provided by commenters.  See supra footnotes 13-21 and accompanying text. Results 
of the RAND 2018 survey and other surveys or studies submitted to the comment file indicate that survey 
and study participants indicated their subjective view that a relationship summary would be useful for retail 
investors; see supra Section I and IV.B.3.b. 

 
328 
 
Second, Form CRS will provide benefits to those retail investors that want to compare 
more than one provider or service, including those that want to compare brokerage and advisory 
services, relative to the baseline.  Form CRS is distinct from other required disclosures as it is a 
standardized disclosure to retail investors that is broadly uniform between investment advisers 
and broker-dealers, or that requires dual registrants to describe both brokerage and advisory 
services.  In facilitating this comparability, the relationship summary may promote competition 
between financial service providers along dimensions such as fees, costs, and conflicts, in ways 
that improve retail investor welfare.  The comparative benefits discussed above could increase 
further should third-party data aggregators enter the market and use the information disclosed in 
relationship summaries to provide consolidated data on firms, as search and processing costs 
could be reduced even further for retail investors.
1049
   
Third, we also believe that requiring all broker-dealers and investment advisers that serve 
retail investors to provide a relationship summary, along with the other initiatives we are 
adopting, will increase understanding of, and confidence in, the market for financial advice more 
generally.  Specifically, because of confusion about the market for brokerage and advisory 
services or a general lack of confidence in the market, some retail investors are potentially 
discouraged from seeking a relationship with a financial provider and do not participate in the 
market for financial services.
1050
  The relationship summary may help spread awareness and 
understanding about the market for financial services by increasing transparency about the 
                                                                                                                                                             
1049
  The requirement that the headings should be machine-readable may facilitate such entry by third-party data 
aggregators.  
1050
   See, e.g., OIAD/RAND, supra footnote 3, for a review of the academic evidence on such effects. 

 
329 
 
services, fees, conflicts and standard of conduct of financial professionals; reducing confusion 
among investors generally; and increasing the general level of confidence.  This general increase 
in understanding and confidence should, in turn, make it more likely that investors participate in 
the market for financial services when participation is likely to benefit them.  
Some commenters suggested the general benefits to investors of the proposed 
relationship summary would be limited.
1051
  More specifically, several commenters were 
concerned that retail investors may be subject to information overload from reading the 
relationship summary, reducing the potential benefits to investors because of the cognitive costs 
of digesting the information.
1052
 
 We acknowledge that there are limits to investor cognition with 
respect to lengthy and detailed disclosures,
1053
 however the relationship summary is shorter and 
more concise than disclosures currently available to investors, which should reduce the 
likelihood of information overload.  Moreover, we have modified the relationship summary from 
the proposal to further streamline and shorten it, and minimize the use of legal or technical 
jargon, thereby further reducing the potential that the relationship summary poses a cognitive 
burden for retail investors that undermines the overall benefit of the disclosure.  
                                                                                                                                                             
1051
  See, e.g., CFA Letter I and EPI Letter. 
1052
  Such concerns are raised in, e.g., AARP Letter; ACLI Letter; Rhoades Letter. Relatedly, some commenters 
argued that the relationship summary is duplicative of other disclosures and is unnecessary.  See, e.g., supra 
footnote 33. 
1053
  See supra footnote 1034 and accompanying text.  

 
330 
 
We also recognize that the relationship summary, as with other required disclosures, has 
costs.
1054
  For example, as discussed above, there is a risk that disclosure of conflicts of interest 
can actually increase costs to investors by, for example, providing a perceived “moral license” to 
financial professionals to act on disclosed conflicts and encourage them to provide more 
conflicted advice at the expense of investors.
1055
   In addition, some commenters expressed a 
belief that the disclosures in the proposed relationship summary, particularly due to the 
prescribed wording, may increase investor confusion
1056
 or may “create misimpressions, and 
may even constitute outright misstatements, inaccuracies, or misrepresentations” in certain 
contexts.
1057
  In consideration of these comments, t  he final requirements for Form CRS permit 
firms, within the parameters of the instructions, largely to describe their services, investment 
offerings, fees, and conflicts of interest using their own wording.  The final requirements also 
incorporate many other changes in response to commenters’ concerns and suggestions and 
insights from investor surveys and roundtables, which are intended to increase the benefits and 
reduce the costs to investors relative to the proposed disclosure.  Additionally, as with required 
disclosures generally, we recognize that the relationship summary alone likely would not fully 
alleviate investor confusion or risk of mismatched relationships in the marketplace.   
                                                                                                                                                             
1054
  See the discussion on the limits and potential costs of disclosures to retail investors in supra Section IV.C.  
1055
        Some commenters raised similar concerns.  See, e.g., CFA Letter I. 
1056
  See, e.g., Financial Planning Coalition Letter (expressing concern that Form CRS may exacerbate investor 
confusion).  See supra footnotes 77 and 80 and accompanying text. 
1057
  Committee of Annuity Insurers Letter.  See supra footnotes 76–81 and accompanying text. 

 
331 
 
Moreover, firms may attempt to pass through some of the direct compliance costs we 
discuss further below to retail investors, for example, by charging higher commissions, asset-
based management fees, or other fees.  However, we believe such pass through of costs is likely 
to be limited because we expect these direct expenses to be relatively small in the context of the 
overall size of the brokerage and investment advisory industries.
1058
  Additionally, to the extent 
the relationship summary may promote competition between financial service providers, as 
discussed above, any increase in competition both among and between broker-dealers and 
investment advisers could reduce the pricing power of firms, and thereby reduce the ability to 
pass through the compliance costs associated with the relationship summary. 
The magnitude of the anticipated economic effects discussed above will depend on a 
number of factors, including the extent to which the relationship summary will increase investors’ 
understanding about their potential or current relationships with firms and financial professionals, 
and in what ways such an increase in understanding would affect their behavior.  Given the 
number and complexity of assumptions that would be required to be able to estimate how the 
relationship summary will affect investors’ understanding and their decision-making, and the 
lack of data on relevant characteristics of individual firms and their prospective and existing 
retail investors, the Commission is not able to meaningfully quantify the magnitude of these 
anticipated economic effects. 
We discuss the benefits and costs to retail investors of certain elements of the relationship 
summary requirements below, including requirements regarding length and presentation, 
                                                                                                                                                             
1058
  See infra Section IV. D.2.b.(4) for a summary of estimates of certain compliance costs developed for the 
purpose of the Paperwork Reduction Act analysis.     

 
332 
 
standardization, content (including layered content), delivery, and filing.  As part of these 
discussions, we also discuss certain changes from the proposal and how we anticipate those 
changes affect the benefits and costs of the final relationship summary relative to the proposed 
requirements. 
b. Presentation and Format    
The presentation and format of the relationship summary are designed to facilitate retail 
investors’ processing of the provided information to help them compare information about firms’ 
relationships and services, fees and costs, specified conflicts of interest and standards of conduct, 
and disciplinary history, among other things.  The relationship summary is also designed to 
promote effective communication between firms and their retail investors.  Several features of 
the relationship summary should reduce some of the limitations discussed above that may 
undermine the efficacy of disclosures, such as cognitive limitations and disclosure overload, as 
discussed further below.   
The magnitude of the anticipated benefits and costs to retail investors discussed below 
will depend on a number of factors, including the extent to which the presentation and formatting 
requirements for the relationship summaries will help increase investors’ understanding about 
the content of the relationship summaries, and in what ways such an increase in understanding 
would affect their behavior. 
(1) Length and Amount of Information 
Unlike many other required disclosures by financial firms, the relationship summary has 
a page limit.  We believe that limiting the disclosure length and prescribing certain elements of 
the relationship summary’s content could benefit investors relative to the baseline by forcing 
firms to provide concise and clear investor-relevant information, thereby reducing information 

 
333 
 
overload and increasing the likelihood that investors will focus their attention on the relationship 
summary.  The optimal length of the relationship summary for investors may vary from investor 
to investor based on  individual limits to attention and ability to process a lengthier document, 
though investor and commenter feedback indicated many investors preferred a relationship 
summary no longer than, and in some cases shorter than, what was proposed.
1059
  We have also 
reduced the page limit for standalone broker-dealers’ and standalone investment advisers’ 
relationship summaries from four to two, thereby potentially increasing the benefits of a shorter 
document relative to the proposal. 
However, we recognize that there are potential costs to requiring a page limit.
1060
  For 
example, as pointed out by commenters, a prescribed page limit may make it more difficult for 
some firms to effectively describe the nature or range of the relationships and may prompt them 
to exclude details that investors might find important.
1061
  To the extent the provided disclosure 
becomes too abbreviated it may confuse investors rather than inform them about the relationship, 
which could increase search costs and increase the risk of a mismatched relationship relative to 
the baseline.  The relationship summary includes several elements to mitigate the potential costs 
of providing less comprehensive information by utilizing layered disclosure, which includes 
encouraging, and in some cases requiring, hyperlinks to additional information and other textual 
                                                                                                                                                             
1059
  For example, 57% of RAND 2018 survey respondents indicated that the relationship summary was too 
long, 41% said it was about right, and roughly 2% said it was too short.  RAND 2018, supra footnote 13.  
See also supra footnotes 129–139. 
1060
  Just as reducing the maximum page length from four to two for standalone broker-dealers and investment 
advisers could increase the benefits relative to the proposal; this change could also increase these costs 
relative to the proposal. 
1061
  See supra Section II.A.2 for examples of commenters raising this concern.  

 
334 
 
features, such as hovers, to provide descriptions or definitions of terms.
1062
  The relationship 
summary also includes conversation starters that are designed to elicit more substantial 
conversations on certain topics.  Such conversations could further mitigate the costs of less 
comprehensive information by encouraging the providers to elaborate on topics that investor may 
find confusing.  
Finally, we believe that allowing only the required and permitted information will 
promote standardization of the information presented to retail investors, minimize information 
overload, and allow retail investors to focus on information that we believe is particularly helpful 
in deciding among firms.  However, we acknowledge that the potential cost of this level of 
standardization is that firms will not be able to include other information that might also be 
helpful to investors. 
(2) Organization of Information and Text Features 
As discussed above, academic research has documented how individual perceptions of 
information can change depending on the framing of the information.
1063
  The relationship 
summary’s requirement to use standardized questions as headings should help retail investors 
frame the information that follows the question by establishing sufficient context and increasing 
salience of the information presented.
1064
  
                                                                                                                                                             
1062
  See generally supra Section II.A.4 for examples of graphical features encouraged by the Relationship 
Summary instructions.   
1063
  See supra footnote 1032 and accompanying text.  
1064
  The proposal had required headings to frame the information, but did not require they be in the form of 
questions.  See supra Section II.A.2 for a discussion of comments related to the question-and-answer 
format, including its potential utility to investors’ understanding, and our decision to require this format. 

 
335 
 
The final instructions include an instruction encouraging the use of electronic and 
graphical features in the relationship summary.
1065
  Additionally, the relationship summary 
requires the use of text features for certain information, such as the conversation starters, which 
should increase the salience of this particular information and increase the likelihood that 
investors will review it.  Based on academic research on disclosure readability,
1066
 we believe the 
use of text features, whether voluntary or required, will facilitate retail investors’ absorption of 
the provided information.  Additionally, certain electronic features, such as embedded hyperlinks 
and hovers, should facilitate retail investors’ access to additional information if they are 
interested, thereby reducing their costs in locating the information.    
We recognize that because we are encouraging, but not requiring, firms to use graphical 
and electronic features, some firms might not use text features beyond what is required, 
potentially reducing their use and the attendant benefits.  We believe, however, that providing 
some flexibility in design to firms may provide a benefit to retail investors, because firms 
competing for retail investors likely have incentives to use graphical and electronic features to 
enhance the retail investor’s experience.  Moreover, flexibility also allows firms to continuously 
improve their use of graphical and electronic features as they learn over time what features are 
the most effective.  We recognize, however, that one potential cost of allowing this flexibility is 
that firms may also have incentives to use certain text features to increase the salience of the 
                                                                                                                                                             
1065
  For a non-exclusive list of features the instructions encourage firms to use, see supra Section II.A.3  Some 
features are exclusive to electronic versions of the disclosure, such as hovers, while others could be used as 
part of a paper disclosure, such as comparison boxes.  The benefits and attendant costs of any electronic 
features will generally be limited to those retail investors that access the document electronically. 
1066
  See, e.g., supra footnote 1034  and accompanying text. 

 
336 
 
portions of the disclosed information that they prefer to highlight, rather than the information 
that may be the most useful to investors to highlight.  
The final instructions do not include certain presentation requirements that we had 
proposed.  For example, we proposed requiring that dual registrants present their information in a 
single relationship summary, using a two-column format.  The final instructions permit dual 
registrants (or affiliated broker-dealers and investment advisers) to prepare either a single 
relationship summary describing both brokerage and investment advisory services, or two 
separate relationship summaries describing each service.
1067
  Additionally, we are requiring such 
firms to use standardized headings in a prescribed order, and to design their relationship 
summary in a manner that facilitates comparison, but the final instructions do not specifically 
require a two-column format.  We believe this modification could increase the benefits relative 
to the proposal to investors of the relationship summary by permitting firms to choose design 
elements that might facilitate comparison more effectively than a two column format.  We 
recognize, however, that absent a specific design requirement, some firms might present this 
information in a manner that is less effective at facilitating investors’ understanding than the 
proposed two-column format.  We believe, however, that the potential benefits of allowing firms 
with differing business models to determine the design methods most effective at facilitating 
comparability justifies the change from a single, prescribed design element.  Additionally, the 
final rule does not adopt the proposed restrict ions on paper size, font size, or margin width, and 
instead requires them to be “ reasonable.”  We believe that these modifications from the proposal 
                                                                                                                                                             
1067
  See generally Section II.A.5 for a discussion of specific instructions, as well as comments received. 

 
337 
 
will incentivize firms to design relationship summaries that most effectively and accurately 
communicate their disclosed information to the benefit of investors, as well as encourage firms 
to make interactive, electronic disclosures available. 
c. Standardization 
(1) Standard Question-and-Answer Format and Standard Order 
of Information 
The final rules require that firms present information under standardized headings and 
respond to all the items in the final instructions in a prescribed order.
1068
 We expect that 
requiring the same set of headings in a prescribed order for each relationship summary will 
facilitate retail investors’ ability to compare relationship summaries across firms.   In addition, 
the prescribed wording of the headings reduces the risk that firms would use the headings to 
“frame” each topic in ways that would be less useful for retail investors’ understanding of the 
disclosed information.  As discussed above, academic research has documented how individuals’ 
perceptions of information can change depending on the framing of the context of the 
information.
1069
  
We expect retail investors to benefit from this standardization to the extent they review 
relationship summaries from more than one firm, as the standardized headings in the prescribed 
                                                                                                                                                             
1068
  See generally infra Section II.A.2 for discussion of the specific instructions, as well as comments received. 
In terms of specifically adopting a question-and-answer format for the standardized headings, we believe 
that adopting this format is likely to increase the salience of the information under each heading and 
improve investors’ cognitive engagement with the document, which should facilitate their understanding of 
the disclosed information. 
1069
  See supra footnote 1032 and accompanying text.  

 
338 
 
order will allow them to compare firms’ responses.
1070
  Additionally, the requirement that firms 
structure the headings in machine-readable format could reduce the cost of third party data 
aggregators to analyze relationship summaries across many firms and display comparisons of 
responses, ultimately reducing search costs for investors.
1071
  
Because firms will be given very limited flexibility in terms of language for headings and 
the order of the sections,
1072
 some firms may find it more difficult to effectively present the 
information specific to their business and circumstances they believe should be made salient to 
retail investors.  To the extent that the headings and the specified order do not specifically 
promote such information for a particular firm, and this information is relevant to investment 
decisions, investors may potentially find the relationship summary less useful in evaluating the 
specific firm.  To mitigate this potential cost and provide some flexibility to firms, the final rules 
allow firms to discuss the required sub-topics within each item in an order that firms believe best 
promotes accurate and readable descriptions of their business.
1073
  The final rules also allow 
firms to omit or modify a disclosure or conversation starter that is inapplicable to their business 
or specific required wording that is inaccurate.  The benefit of such flexibility is that it allows 
                                                                                                                                                             
1070
  See Morningstar Letter (commenting on the importance of standardized disclosure, that “[f]urther, it is 
extremely important for conflict-mitigation disclosures to be standardized... The Commission could require 
a table, as we discuss below, for the Client Relationship Summary that standardizes how all broker/dealers 
list their relevant fees, making the costs of opening and maintaining an account transparent and 
comparable”).  
1071
  Two commenters argued for machine-readability to allow for third party development of comparison tools.  
See supra footnotes 663 and 664. 
1072
  See supra footnote 91. 
1073
    The proposed instructions prescribed the order of information within each item.  See supra footnote 121.  

 
339 
 
firms to increase saliency of and direct investor attention to the more relevant disclosures.  We 
believe the mix of requiring standardized headings and a prescribed order of topics but allowing 
some flexibility in the order of presentation within each topic strikes an appropriate balance in 
the inevitable trade-off, discussed further below, between the relative benefits and costs of 
disclosure standardization versus disclosure flexibility.   
The magnitude of the anticipated benefits and costs to retail investors discussed above 
will depend on a number of factors, including the extent to which the standardized headings and 
prescribed order of information will help increase investors’ understanding about the content of 
the relationship summaries, and in what ways such an increase in understanding would affect 
their behavior. 
(2) Prescribed wording 
The final instructions include a mixture of limited prescribed wording that firms must 
include and requirements for firms to draft their own descriptions that comply with instructions 
about topics they must address.
1074
  As with any disclosure document, there are inevitable trade-
offs between prescribing specific wording for firms to use (when applicable) and providing 
discretion to firms to use their own wording.  We describe those trade-offs, as they relate to the 
final instructions, below.   
The proposed instructions would have required prescribed wording in several items of the 
relationship summary, including fees and costs and a comparison section for standalone broker-
dealers and investment advisers.  We explained in the Proposing Release that prescribed wording 
                                                                                                                                                             
1074
  See generally supra Section II.A.1 for a discussion of these instructions, comments received on the 
proposal, and changes made regarding the amount of prescribed wording. 

 
340 
 
for these items could benefit investors through standardization and by improving comparability 
across relationship summaries, while at the same time could impose costs on investors if 
prescribed wording does not accurately represent a firm’s services.
1075
  We are adopting final 
instructions that largely eliminate prescribed wording for most of these items and instead permit 
firms, within the parameters of the instructions, to respond to the relationship summary items 
using their own wording.
1076
  We continue to prescribe wording for headings, conversation 
starters, and the standard of conduct, as well as a factual disclosure concerning the impact of fees 
and costs on investments over time.
1077
  However, firms may omit or modify required disclosures 
or conversation starters that are inapplicable to their business or specific wording required by the 
final instructions that is inaccurate.
1078
  Based on feedback from commenters and observations 
reported by investor studies and surveys, this change will increase the benefits of the relationship 
summary to investors relative to the proposal.  Specifically, several commenters suggested that 
some of the prescribed wording would not only reduce the accuracy of the information provided 
by firms but could also confuse investors about a firm’s offerings, and we have made changes in 
light of those comments.  We believe the final rules strike an appropriate balance between 
comparability between firms and the accuracy and relevance of information contained in 
relationship summaries, increasing potential benefits to investors relative to the proposal. 
                                                                                                                                                             
1075
  See Proposing Release, supra footnote 5, at Section IV.B.2.a. 
1076
  See generally Section II.A.1. 
1077
  See generally Section II.A.1.  We discuss the benefit and costs of these items, including related to the 
prescribed wording, below, in Section IV.A.c. 
1078
  See supra footnote 91. 

 
341 
 
We nevertheless recognize reductions in benefits relative to the proposal stemming from 
this approach.  It decreases the degree of standardization of the information which could impact 
comparability across relationship summaries, as suggested by some academic research.
1079
  
However, to the extent some of the prescribed language in the proposed rules would be 
considered “boilerplate” by investors or would not be applicable to a particular firm’s services or 
business, the reduction of such prescribed wording in the final rules is not likely to come at a 
cost to investors (and in fact is likely to benefit investors).  The risk of lower standardization and 
comparability also is mitigated because, while not prescribing specific wording, the final 
instructions require prescribed topics that all firms must include in each item.  For example, in 
their description of services, all firms must address monitoring, investment authority, limited 
investment offerings, and account minimums.
1080
  Moreover, increased flexibility for firms to 
describe their services and offerings relative to the proposal could impose costs on retail 
investors if it increases the potential ability of some firms to provide information in a less useful 
or clear way in their own words than when required to use prescribed wording.
1081
 
One section proposed for standalone broker-dealers and investment advisers, which we 
referred to as the Comparisons section, had entirely prescribed wording.
1082
  We are not adopting 
                                                                                                                                                             
1079
  See generally supra Section IV.C. 
1080
  See generally supra Section II.A.3. 
1081
  We also acknowledge there is a risk that some firms could use the flexibility to strategically omit or 
obscure information.  Such action, however, would risk liability under Form CRS or the antifraud 
provisions of the Advisers Act.  See, e.g., General Instruction 2.B. to Form CRS.  
1082
  See generally supra Section VI for a discussion of the proposed requirements as well as comments 
received. 

 
342 
 
this proposed section.  Additionally, we removed prescribed wording from the proposed 
introduction, which would have noted that brokerage and advisory services were distinct.
1083
  On 
one hand, omission of the Comparisons section potentially could reduce the risk of information 
overload for investors.  On the other hand, omitting this section might reduce benefits relative to 
the proposal by reducing the salience of potentially valuable comparative information available 
to retail investors at the point of forming a relationship, particularly if a retail investor does not 
review relationship summaries of multiple firms.  We have taken specific measures to maintain 
some of the benefits we had intended to achieve in the proposed Comparisons section by using 
other methods to enable retail investors to continue to view comparative information and access 
more general educational information.  For example, all firms must provide at the beginning of 
the document a link to Investor.gov/CRS, which offers educational information about investment 
advisers, broker-dealers, financial professionals and other information about investing in 
securities.  In addition, dual registrants and affiliated firms that offer their brokerage and 
investment advisory services together are required to provide information about both types of 
services with equal prominence and in a manner that clearly distinguishes and facilitates 
comparison.  This instruction applies regardless if they prepare a single relationship summary or 
two separate relationship summaries describing each type of service.  If dual registrants prepare 
two separate relationship summaries, they must cross-reference or link to the other and deliver 
both with equal prominence and at the same time.  Affiliates offering brokerage and investment 
advisory services together have similar presentation and delivery requirements.  
                                                                                                                                                             
1083
  See supra Section I. 

 
343 
 
The magnitude of the anticipated benefits and costs to retail investors discussed above 
will depend on a number of factors, including the extent to which the specific requirements 
regarding wording will help increase investors understanding about the content of the 
relationship summaries, and in what ways such an increase in understanding would affect their 
behavior. 
d. Content 
The final instructions require firms to include specific items in the relationship summary.  
Below we discuss the anticipated benefits and costs to retail investors from these items.
1084
  The 
magnitude of these anticipated benefits and costs to retail investors will depend on a number of 
factors, including the extent to which the specific items of disclosure will help increase investors 
understanding about their potential or current relationships with firms and financial professionals, 
and in what ways such an increase in understanding would affect their behavior. 
(1) Relationship and Services 
The relationship summary requires an overview of the services that the firm provides to 
retail investors.
1085
  The topics that the firm must discuss include principal brokerage and 
advisory services, monitoring, investment authority, limited investment offerings, as proposed, 
and, new to the adopting release, account minimums and other requirements.  The services firms 
provide to retail investors vary widely.  These differences exist not only between broker-dealers 
and investment advisers, but also within different types of broker-dealers and investment 
                                                                                                                                                             
1084
  See supra Section II.B.  
1085
  See supra Section II for a discussion of the requirements and comments received on the proposal. 

 
344 
 
advisers.  We believe that this section will increase the transparency, saliency, and comparability 
of information about the types of services, accounts, and investments provided by firms, which 
should likewise improve matching between firms and retail investors.
 
 
 We have made some changes from the proposal intended to increase the potential 
matching benefit.  In particular, instead of using prescribed wording, firms will describe their 
services using their own wording.    Firms must also describe account minimums, which could 
improve matching with the provider and may reduce investor search costs, especially for 
investors that fall short of required minimums so that retail investors can be aware of potential 
limitations on their initial or continued eligibility for services.
1086
  Because all firms must 
describe particular topics, we believe investors can also use this information to compare firm 
services if they review multiple relationship summaries.  We believe the approach of firms using 
their own wording to describe their services will increase the benefit to investors relative to the 
proposal by allowing firms to provide descriptions that are a better match for their particular 
services.  This approach also avoids the cost of firms being required to make inaccurate or 
confusing disclosures given their specific business models, as raised by commenters.
1087
  This 
potential increase in benefit, however, comes with attendant potential increases in costs to the 
extent that firms do not present the most relevant aspects of their services or their descriptions 
are unclear, as discussed in the considerations regarding prescribed wording above.  On balance, 
                                                                                                                                                             
1086
  Disclosures of account minimums could also help make retail investors more focused on their future 
planning needs, for example, by incentivizing them to target minimal future investment levels to reach an 
asset value level that will make lower fees or additional services available from a particular provider.  
1087
  See, e.g., supra footnote 269. 

 
345 
 
we believe that allowing for a description that is accurate and better matched to a firm’s services 
likely would be more beneficial and less confusing to investors.  
(2) Fees and Costs, Standard of Conduct, and Conflicts of 
Interest 
The relationship summary requires several prescribed questions and required responses 
about fees, conflicts of interest, and the standard of conduct.
1088
  Some of this information will 
be required to be provided to investors for the first time, such as an articulation of the standard of 
conduct.  Other information, while currently available in various sources, will be presented 
centrally in the relationship summary, with links to more detailed, layered information about fees 
and conflicts.  Additionally, providing retail investors with context for the more detailed 
information could potentially pique their interest and lead retail investors to seek more 
information about fees and conflicts through the required links.  We believe both the information 
not previously required and the consolidated summary of information already available 
elsewhere will benefit investors by increasing salience, transparency, and comparability, and 
reducing information asymmetry compared to the baseline.  More specifically, including these 
disclosures prominently, in one place, in a digestible manner, at or before the start of a retail 
investor’s relationship with a firm or financial professional could facilitate meaningful disclosure 
in the relationship summary, as well as conversations between the retail investor and his or her 
financial professional, and help the retail investor decide on the types of services that are right 
for him or her.  In addition, to the extent that the specified conflicts of interest disclosures could 
                                                                                                                                                             
1088
  See supra Section III for a discussion of the requirements and comments received on the proposal. 

 
346 
 
draw retail investors’ attention to conflicts, they may improve retail investors’ ability to select 
and monitor firms and financial professionals.  
The fees, costs, and conflicts disclosure also potentially has costs for investors.  In 
particular, and as discussed above,
1089
 the perception that an investor has been warned (via the 
disclosure) of a firm’s and financial professional’s potential bias may lead some financial 
professionals to believe that they are less obligated to provide unbiased advice.  Further, the 
standard of conduct and conflict disclosures could make firms and financial professionals appear 
more trustworthy and as a result reduce the incentives for retail investors to examine additional 
information more carefully.  Conversely, a potential cost for investors of such disclosures is that 
some investors may mistakenly leave the market for financial services or choose to not engage 
with a financial professional because they infer from the discussion of conflicts of interest and 
fees that a financial professional could provide bad advice or recommend products that will 
reduce their financial well-being.  However, the placement of the prescribed standard of conduct 
disclosure immediately preceding the conflicts disclosure may alleviate the risk that investors 
will overreact to the conflicts of interest disclosure in this manner, because the standard of 
conducts disclosure clarifies that the firm or financial professional must act in the investor’s best 
interest.     
We received significant comments about the potential efficacy of the proposed 
disclosures related to fees and costs, conflicts, and the standard of conduct, and the ultimate 
benefit of such disclosures to investors.  Likewise, feedback from investors through surveys and 
                                                                                                                                                             
1089
  See supra footnote 1026 and accompanying text. 

 
347 
 
studies and in Feedback Forms revealed confusion about the proposed standard of conduct 
section in particular.
1090
  Results reported in investor surveys and studies also showed that the 
proposed conflicts section was rated one of the least useful sections, which may suggest that 
some investors did not understand the role of conflicts based on the disclosure as presented by 
the sample proposed dual registrant relationship summary.
1091
  We have made several changes 
from the proposed relationship summary designed to increase the clarity and salience of the 
disclosures, thereby increasing the potential benefit and reducing the potential costs discussed 
above relative both to the baseline and the proposal.  We also believe the changes will reduce the 
risk that investors will not read the section or will misinterpret it, increasing the effectiveness of 
these disclosures and therefore the potential benefit.   
 First, by integrating the section covering fees, costs, conflicts of interests, standard of 
conduct, and how representatives are paid,
 1092
 we believe retail investors may be more primed to 
process implications of these disclosures in a more integrated fashion due to their proximity. In 
particular, providing these disclosures in the same section could increase the salience of this 
information for investors,
1093
 both relative to the proposal and the baseline, and may potentially 
improve investor cognitive processing of how conflicts of interest can have an impact on the 
services and advice provided and costs paid by investors. 
                                                                                                                                                             
1090
   See supra footnotes 475–478 and accompanying text.  
1091
  See supra footnotes 522–524 and accompanying text.   
1092
  See supra discussion in Section II.A.4. 
1093
  This is also consistent with some commenters’ suggestions and the organization of several sample 
relationship summaries submitted by commenters.  See supra footnote 373 and accompanying text.  

 
348 
 
 Second, with respect to fees, the relationship summary requires firms to discuss under 
separate question headers (i) the principal fee and the incentive that it creates and (ii) other fees 
and costs that the investor will pay.  We are requiring firms to summarize, in their own words, 
the principal fees and costs that retail investors will incur, including how frequently they are 
assessed and the conflicts of interest that they create.  We think investors will be better able to 
process the implications of the principal fee disclosure through this requirement. Additionally, 
requiring firms to describe other fees and costs investors will pay, distinct from the principal fee, 
will clarify for investors that they pay not only a principal fee for advice, but also additional fees 
and costs.  This may potentially prompt investors to use the required link to learn more 
information, ask follow-up questions, or monitor for such fees and costs. 
 Third, the instructions require that the standard of conduct disclosure be placed under the 
same header as the summary of firm-level conflicts. The expected benefit of placing these 
conflicts of interest and standard of conduct disclosures together is to improve investor 
processing of the implications of conflicts of interest disclosure and legal obligations underlying 
the particular standard of conduct (i.e., best interest for broker-dealers and fiduciary duty for 
investment advisers) as well as to prevent investor misinterpretation of these disclosures. We 
continue to prescribe wording for the standard of conduct, which we believe will have greater 
benefits than giving firms flexibility to describe the standard of conduct.  Unlike other areas 
where we are allowing firms to use their own words, the standard of conduct, whether a fiduciary 
duty for an investment adviser or Regulation Best Interest for a broker-dealer, applies during the 
course of the adviser’s relationship or where a broker-dealer makes recommendations. We also 
changed from the proposal the specific wording in an effort to simplify the disclosure relating to 
the standard of conduct and thereby increase understanding by investors.  We believe reducing 

 
349 
 
the length and the complexity of the prescribed wording for the standard of conduct will increase 
the salience and comprehension of the required standard of conduct disclosure, because a more 
readable and shorter disclosure is less likely to be ignored by investors due to information 
overload and limited attention.   
While retail investors may benefit from understanding the standard of conduct that firms 
and financial professionals are subject to when providing investment advice or recommendations, 
discussing the standard of conduct in connection with conflicts of interest may benefit investors 
by making it clear that the standard of conduct does not mean that advice is conflict-free. 
 Regarding the conflicts disclosure itself, we have added a new requirement that if none of 
the enumerated conflicts required to be disclosed by the instructions is applicable to a firm, the 
firm must select at least one of its material conflicts to describe.  This was designed to eliminate 
the potential that firms would not have to disclose any conflicts, which would have been costly 
to investors if it caused them to believe that the firm had no conflicts.  The relationship summary 
does not require disclosure of all conflicts but does require firms to include a link to additional 
information about their conflicts.  We believe this will benefit investors relative to the baseline 
by providing sufficient information about certain conflicts to increase their understanding of 
incentives generally and potentially inducing them to review the linked information, which also 
minimizes the potential for information overload.  
 Finally, in addition to requiring firm-level conflicts, the relationship summary includes a 
separate question and required response about how financial professionals are compensated and 
the conflicts of interest those payments create.  This disclosure will distinguish firm-level from 
financial professional-level conflicts, which we believe will benefit retail investors by helping 

 
350 
 
them better understand the role of conflicts and how these conflicts might impact a financial 
professional’s motivation when providing investment advice.     
Despite the changes to presentation of fees, costs, conflicts, and standard of conduct 
relative to the proposal to increase clarity, we recognize the complexity of these issues.  
Accordingly, we recognize benefits to investors could be limited by investors’ potential lack of 
ability to comprehend the disclosure.
1094
   In the extreme, standards of conduct disclosure may 
also have a reverse effect of unduly enhancing investor trust in providers because investors may 
misperceive providers as holding themselves to a standard higher than legally required, and 
making investors discount the severity of the disclosed conflicts.
1095
  Because firms have some 
flexibility to decide what additional fees and costs to describe and, in the case of a firm with 
none of the enumerated conflicts, which conflict to use as an example, benefits could be reduced 
to the extent that they choose examples that are not informative to the retail investor. 
Additionally, there could be a cost to investors to the extent they believe the enumerated fees and 
conflicts in the relationship summary are the only fees and conflicts the firm has, although we 
believe that the required wording that explains the summarized conflicts are examples, as well as 
the required links to more information about fees and conflicts, mitigate the risk of this 
misperception.   
                                                                                                                                                             
1094
  See supra footnotes,    378–382, 475–478, 522–524, and accompanying text, for a discussion of comments 
and investor survey results on the comparative difficulty for investors to comprehend these disclosures.  
1095
  See, e.g., Betterment Letter I (Hotspex), supra footnote 18 (reporting that only 26% of participants 
correctly identified as false a statement that broker-dealers are held to a fiduciary standard). 

 
351 
 
In addition, referencing academic research on the potential negative effects of conflicts of 
interest disclosure, several commenters expressed concerns that the proposed required disclosure 
of conflicts of interest in the relationship summary could lead to a “moral license” for financial 
professionals to provide even more biased advice and thus take unfair advantage of investors, or 
lead investors to fail to discount biased advice, trust their providers even more or make them feel 
pressured to remain in a potentially disadvantageous relationship, i.e., the panhandler effect.
1096
 
Despite the changes we have made from the proposal to the required conflicts of interest 
disclosure in the final instructions, we acknowledge that there is still some risk for such negative 
unintended consequences.  
(3) Disciplinary History 
As proposed, the relationship summary will contain a section where firms must state in 
binary fashion whether or not they have disciplinary history, as well as include a reference to 
Investor.gov/CRS, where investors can conduct further search for additional information on 
those events.
1097
  We have made a change to increase the salience of this information relative to 
the proposal by making a separate Disciplinary History section, including its own question and 
required response, rather than—as proposed—including it with other content in an Additional 
Information section, which should increase any benefits or costs relative to the proposal.   
The primary benefit of the disciplinary history disclosure relative to the baseline is that 
investors will be alerted to a potential need to search and review their provider’s disciplinary 
                                                                                                                                                             
1096
  See, e.g., Better Markets Letter; AARP Letter; Warren Letter; CFA Letter I; see also supra Section IV.C 
for a discussion of moral license. 
1097
  See supra Section II.B.4 for a discussion of the requirements and comments received on the proposal. 

 
352 
 
information and will have a mechanism to find more information about any disciplinary history.  
Although this information already exists publicly, clearly linking to Investor.gov/CRS for further 
information about disciplinary history at the time investors are selecting a firm or financial 
professional will help retail investors know where to find additional information about those 
events, which should reduce search costs and is an improvement relative to the baseline.
1098
  The 
conversation starters also will provide investors with a cue to the importance of understanding 
the disciplinary history and could trigger more information gathering and ultimately more 
effective cognitive processing of this disclosure.  As a result, an investor may choose to not 
engage a firm or financial professional if the disciplinary history is considered to be too 
problematic, or, if an investor chooses to proceed with a provider that has some concerning 
disciplinary history, awareness of those events could provide incentives to the investor to 
monitor his or her account more carefully than if she were not aware.   
The potential cost is that investors may overreact to the “yes” or “no” response reported 
in the Disciplinary History section.    Investors may attribute the disciplinary history of one or few 
financial professionals at a firm to the entire firm, and thus choose not to select a provider that 
could be a good match for them (for example, a larger firm with more employees and thus a 
greater likelihood of disclosable events)
1099
 or avoid hiring a financial professional altogether.  
Retail investors may also misinterpret a higher baseline rate of disciplinary history for broker-
                                                                                                                                                             
1098
  See, e.g., RAND 2018, supra footnote 13 (when investors were asked why they would not look up 
disciplinary history, 37% of all respondents indicated that they did not know where to get the information, 
whereas 19% of all respondents indicated that it would take too much time or effort). 
1099
  See supra Section II.B.4. 

 
353 
 
dealers than for investment advisers, given that the scope of events that trigger a disclosure event 
is arguably broader for broker-dealers than for investment advisers.
1100
  As a result, retail 
investors may avoid choosing a broker-dealer, even when such a relationship would be a better 
match for the investors.  Relatedly, investors may over-rely on lack of disclosure of disciplinary 
history as evidence of more ethical conduct; however, lack of such disclosures may be due to 
unrelated factors such as a comparatively short history of a particular firm or fewer employees 
(and thus less likelihood of having employees with disclosable events).  However, the risk of 
some investors misinterpreting, or over-relying on, the disciplinary history should be mitigated to 
the extent firms or financial professionals provide more information about and encourage retail 
investors to ask follow-up questions regarding the nature, scope, or severity of any disciplinary 
history.  On balance, we believe the benefits to investors from including the disclosure on 
disciplinary history, as discussed above, justify any potential negative effects.
1101
  
(4) Additional Information 
The relationship summary will conclude with a section where registrants will let investors 
know where investors can find additional information about their services and request a copy of 
the relationship summary, which should benefit investors relative to the baseline by providing 
this general resource, in addition to the links or references provided throughout the document.
1102
  
In a change from the proposal, the Additional Information section eliminates the proposed 
                                                                                                                                                             
1100
  See id. 
1101
  This view is supported by survey evidence that suggests that investors consider disciplinary history to be an 
important factor when searching for a provider of investment advice. See supra footnote 996; see also 
supra footnotes 566 and 567. 
1102
  See supra Section II.B.5 for a discussion of the requirements and comments received on the proposal. 

 
354 
 
requirement to provide information on how investors should report complaints about their 
investments, accounts, or financial professionals.  Instead, we are requiring a conversation starter 
on whom investors should contact about their concerns.  The benefit of this approach is that it 
improves readability of the form by reducing prescribed wording and potentially facilitates a 
conversation between investors and their financial professionals; the cost of this approach is that 
some investors will not have access to direct instructions on how to report their complaints.  
Finally, investors with limited or no access to internet (e.g., due to costs of internet access or due 
to a disability) will also benefit from a requirement that firms provide a number through which 
retail investors can request up-to-date information or a copy of the relationship summary.  
(5) Conversation Starters 
Disclosures currently required by investment advisers and broker-dealers generally do not 
have suggested questions for investors to ask their financial professional.  The relationship 
summary will require firms to incorporate suggested follow-up questions for the investor to ask, 
which the instructions refer to as “conversation starters.”
1103
 
Conversation starters should benefit investors relative to the baseline by improving the 
potential to match investors with providers that provide services more suitable to the investors’ 
preferences and needs. We believe that this is accomplished through enabling the investor to be 
more engaged, potentially assisting the investor with comprehension of relevant disclosures, and 
assisting the investor in receiving more personalized information than the firm-level disclosure 
documents, such as Form ADV or documents issued by broker-dealers.  That is, to the extent that 
                                                                                                                                                             
1103
  See supra Section II.B.2.c for a discussion of the requirements and comments received on the proposal. 

 
355 
 
these conversation starters promote more transparency and better communication between 
investors and financial professionals, retail investors are more likely to understand the 
information and select the right firm or financial professional to meet their preferences and 
expectations.  In addition, to the extent the conversation starters help increase investors’ 
engagement in a selected relationship it may also increase their monitoring of their relationship 
and more critically evaluate any advice or recommendations they receive.  However, a closer 
personal engagement between retail investors and financial professionals may cause some 
investors to feel social pressure to act on the advice or recommendations of the professional due 
to a panhandler effect,
1104
 which may attenuate some of the benefits of the conversation starters.   
A potential cost associated with the conversation starters is that the particular required 
questions may anchor the attention of retail investors to those prescribed questions and reduce 
the likelihood that they would explore other potential questions that could be important to them 
based on their individualized circumstances.   In response, we have reframed the proposed 
questions, which were at the end of the proposed relationship summary as “Key Questions,” and 
instead have integrated them within the relevant information item throughout the relationship 
summary to reduce the risk that investors only focus on this set of questions in their 
discussions.
1105
  Moreover, many of the conversation starter questions are broad and open-ended, 
which could further mitigate the risk of investors’ anchoring on the content of these questions at 
the expense of the other disclosures in the relationship summary.   
                                                                                                                                                             
1104
  See supra footnote 1028 and accompanying text. 
1105
  See supra Section II.A.4. for discussion on conversation starters.   

 
356 
 
As pointed out by one commenter, unless the “Key Questions” in the relationship 
summary are provided to investors in advance, some retail investors may entirely ignore these 
questions.
1106
  As discussed above, the final rules incorporate the questions as “conversation 
starters” directly in the different sections of the relationship summary, which should increase 
their salience and reduce the risk of them being ignored by investors compared to the proposal. 
In addition, because the relationship summaries will be available to investors online on firms’ 
websites or through Investor.gov/CRS, the relationship summaries may be downloaded and 
accessed by some investors prior to meeting a financial professional, which would give such 
investors the opportunity to review the conversation starters before meeting a financial 
professional.    
e. Filing, Delivery, and Updating Requirements 
(1) Filing Requirements 
The final instructions require firms to file their relationship summaries with the 
Commission ( using IARD, Web CRD
®
, or both, as applicable), and make their relationship 
summaries available on their websites.  In addition to firms’ websites, firms’ most recent 
relationship summaries will be accessible to the public through IAPD and BrokerCheck, public 
interfaces of IARD and Web CRD
®
, respectively.  Investors also will be able to use the 
Commission’s website Investor.gov, which has a search tool on its main landing page and at 
Investor.gov/CRS that links to BrokerCheck and IAPD.  If investors prefer, they may request 
copies of firms’ relationship summaries by calling the numbers that firms must include in their 
                                                                                                                                                             
1106
  See CFA Institute Letter I. 

 
357 
 
relationship summaries.  We expect that making firms’ relationship summaries accessible in 
these ways should reduce investor search costs in connection with selecting investment firms or 
financial professionals.  We also believe that retail investors could benefit from their ability to 
access the relationship summaries independently through the companies’ websites, BrokerCheck, 
IAPD, or Investor.gov prior to any contact with a financial professional.  Such access could 
increase retail investors’ understanding about differences between firms and financial 
professionals even before approaching a particular firm or financial professional, which could 
reduce search costs for investors early on in the search process and further reduce the risk of a 
mismatched relationship.  The online availability of the relationship summaries will also enable 
investors who are currently not participating in the market to become better informed about the 
market for financial advice and the particular relationships provided without the need to incur the 
cost of actively contacting a firm or financial professional, which may ultimately encourage them 
to seek out a relationship with a provider. 
In addition, the online availability of the relationship summaries in central locations and 
the machine-readable headers of the summaries will allow third-party data aggregators to more 
easily collect relationship summaries and facilitate the development of comparison tools for the 
investing public.  To the extent such tools and metrics are developed, it could facilitate investors’ 
searches by helping them narrow the set of available financial service providers to those that are 
most likely to provide a good match.  However, the benefits to investors from the development 
of such tools will be mitigated by any fees charged by third-party aggregators for access to the 
tools. 

 
358 
 
(2) Delivery and Updating Requirements 
Firms will deliver a relationship summary to each new or prospective retail investor 
based on the initial delivery triggers specific to investment advisers, broker-dealers, and dual 
registrants.
1107
  Firms also must deliver the relationship summary to existing clients and 
customers who are retail investors in certain circumstances.
1108
  For these existing clients and 
customers, the final rules require that firms deliver the relationship summary (including updates) 
in a manner consistent with the Commission’s electronic delivery guidance and the firm’s 
existing arrangement with that client or customer.
1109
  
Because retail investors may face substantial switching costs when they move from one 
financial professional to another, the benefits associated with finding a good match may be 
particularly significant.  Accordingly, investors’ benefits should increase in accordance with 
their ability to understand and compare relationship summaries, which may take time.  We 
recognize that, as some commenters noted, if a financial professional delivers the relationship 
summary at the time of service, retail investors may not have sufficient time to thoroughly 
evaluate the financial professional or may have already made a preliminary decision to engage 
the particular financial professional by the time they receive the relationship summary.  As 
discussed above, however, there are compliance uncertainties and other costs associated with 
requiring a relationship summary be delivered at first contact or requiring a waiting period, as 
                                                                                                                                                             
1107
  See supra Section II.C.3.b. 
1108
  See supra Section II.C.3.c. 
1109
  See supra Section II.C.3.a. 

 
359 
 
suggested by some commenters.
1110
  First contact between an investor and a financial 
professional may include circumstances that are not limited to the seeking of investment advice, 
such as business interactions for other purposes or social interactions.  In addition, as noted by 
commenters, a waiting period may prevent investors from meeting certain deadlines.
1111
  As we 
discuss above, the availability of relationship summaries online may mitigate the concern that 
retail investors will not have enough time to review them, to the extent that it provides retail 
investors an opportunity to compare firms before contacting them to obtain services. 
We expect that the rules regarding form of delivery—electronic or paper—generally will 
be beneficial for retail investors relative to the baseline by enabling a form of delivery that is a 
good match for the particular retail investor.  For retail investors who prefer electronic delivery, 
electronic forms of delivery should facilitate both the engagement with and the processing of the 
disclosed information, particularly the required and optional hyperlinks and other features.  For 
the investors who prefer paper documents, paper delivery should result in greater likelihood of 
the investor paying attention to the relationship summary disclosures.  We believe that 
maintaining the mode of delivery consistent with the way information was requested for new 
customers and consistent with existing arrangements for existing customers will help to further 
ensure that the investors will not miss and will process the information contained in the 
relationship summaries.  Customers requesting the relationship summary in paper format may be 
less likely to access the additional information available through the electronic means of access 
                                                                                                                                                             
1110
  See supra footnotes 720–724 and accompanying text. 
1111
  See supra footnote 719 and accompanying text. 

 
360 
 
discussed above, which could result in their inability to process potentially important additional 
information.  
We also believe that existing clients and customers of broker-dealers and investment 
advisers that are retail investors will benefit from the requirement that firms deliver the 
relationship summary again if they:   (i) open a new account that is different from the retail 
investor’s existing account(s); (ii) recommend that the retail investor roll over assets from a 
retirement account into a new or existing account or investment; or (iii) recommend or provide a 
new brokerage or investment advisory service or investment that does not necessarily involve the 
opening of a new account and would not be held in an existing account, for example, the first 
time purchase of a direct-sold mutual fund or insurance product that is a security through a 
“check and application” process, i.e., not held directly within an account.   
This requirement should have the benefit of increasing retail investors’ attention to 
disclosures provided in the relationship summary and the implications of new services or account 
options at the time of that decision.  Additionally, the instructions require firms to update their 
relationship summaries to existing retail clients or customers if the existing relationship summary 
becomes materially inaccurate, which would include information that is materially outdated or 
materially incomplete.  Firms must communicate the changes by delivering the amended 
relationship summary or by communicating the information through another disclosure that is 
delivered to the retail investor.  Firms delivering the amended relationship summary must 
highlight the most recent changes by, for example, marking the revised text or including a 
summary of material changes and attaching the changes as an exhibit to the unmarked amended 
relationship summary.    Investors should benefit from receiving updated relationship summaries 
under these circumstances because this information is relevant to the decision of whether to enter 

 
361 
 
into new services or continue existing services, based upon whether the new or existing services 
match or continue to match their preferences and expectations.  The requirement to attach 
revised text or a summary of material changes to the amended relationship summary should 
benefit retail investors by helping them to process the new information quickly.  However, we 
recognize that to the extent that retail investors with established financial professional 
relationships tend to remain in such relationships, it may attenuate the benefits of receiving the 
relationship summary again.    
 
2. Broker-Dealers and Investment Advisers ( Registrants) 
a. Benefits to Registrants 
Beyond benefits to retail investors, we also expect broker-dealers and investment advisers 
potentially to benefit from the relationship summary.  Some retail investors, who could benefit 
from obtaining advice and other services from financial professionals, currently may choose to 
stay out of the market for financial services because they do not understand what type of firm or 
financial professional they require.  The relationship summary may provide a clear and concise 
document that may draw new investors to the market.  If the relationship summary draws new 
retail investors to the market for financial services, both broker-dealers and investment advisers 
may gain new customers and clients, respectively.  An increase in new retail investors could 
enhance revenues for firms and financial professionals, although firms and financial 
professionals could also bear additional costs, which are discussed below.   
Moreover, the relationship summary could provide additional benefits to firms and 
financial professionals by improving the efficiency of the search process in the market for 
financial advice.  For example, retail investors will be able to access and obtain relationship 

 
362 
 
summaries for any number of firms online, including both broker-dealers and investment 
advisers.  To the extent investors use this feature at the start of their search for a firm, they are 
more likely to opt to approach only firms that ex ante meet their preferences and expectations.  
Thus, broker-dealers and investment advisers may be less likely to expend time and effort 
meeting and discussing their business model and services with prospective customers and clients, 
who are seeking a different kind of relationship and that would ultimately not engage in a 
relationship with the firm or financial professional.  Instead, firms and financial professionals 
can devote their efforts to acquiring customers and clients that are more likely to contract for 
their services. In addition, to the extent the relationship summary leads to fewer retail investors 
entering or remaining in a mismatched relationship that does not meet their expectations, it may 
benefit firms by reducing costly customer complaints and arbitrations. 
While some commenters suggested that brokers have incentives to provide ineffective 
disclosures,
1112
 academic studies show that sellers can benefit from better disclosure of product 
quality information to the buyers, and competitive sellers thus have incentives to disclose better 
information.
1113
  While some disclosure documents may contain topics of material that investors 
may not understand or prioritize, the relationship summary has been designed to focus on issues 
already identified by retail investors to be of first-order importance with respect to their 
                                                                                                                                                             
1112
  See, e.g., CFA Letter; Warren Letter. 
1113
  Steven Tadelis & Florian Zettelmeyer, Information Disclosure as a Matching Mechanism: Theory and 
Evidence from a Field Experiment, 105 A
M. ECON. REV. 886 (2015); see also Tao Zhang, et al., 
Information disclosure strategies for the intermediary and competitive sellers, 271 E
UR. J. OPERATIONAL 
RES. 1156 (2018). 

 
363 
 
relationship with their financial professional,
1114
 such as fees and costs, conflicts of interest, and 
disciplinary history of firms and financial professionals, among other items.
1115
  Further, the 
relationship summary is intended to be clear, concise, and readable, while permitting firms the 
flexibility to provide information pertinent to their business model and services offered.  Finally, 
firms may benefit from providing more clear and understandable disclosures to the extent it will 
facilitate a more efficient matching process with prospective investors.  Firms could also bear 
potential legal liability
1116
 and reputational costs as a result of providing potentially less 
transparent disclosures.  For these reasons we believe registrants will generally have incentives 
to use the discretion permitted in the final instructions to design a relationship summary that is 
effective at informing retail investors about the nature of their business and offerings.  
The magnitude of the anticipated benefits discussed above will depend on a number of 
factors, including the extent to which investors’ will change their behavior as a result of 
receiving the relationship summary and how firms and financial professionals will react to such a 
change.  Given the number and complexity of assumptions that would be required to be able to 
estimate how the relationship summary will affect investors’ understanding and their decision-
making, and the lack of data on relevant characteristics of individual firms and their prospective 
and existing retail investors, the Commission is not able to meaningfully quantify the magnitude 
of these anticipated benefits. 
                                                                                                                                                             
1114
  RAND 2018, supra footnote 13 (survey results re: importance of each topic to respondents).   
1115
  See supra Section IV.B.3.b. 
1116
  See supra footnotes 92–105 and accompanying text (discussing the parameters for the scope of information 
expected within the relationship summary and the antifraud standard as applied to the relationship 
summary). 

 
364 
 
b. Costs to Registrants 
The final rule will also impose costs on affected broker-dealers and investment advisers, 
including: costs associated with preparation, filing, delivery, and firm-wide implementation of 
the relationship summary; costs of the associated recordkeeping rules; and as well as training, 
monitoring, and supervision for compliance. We expect that these costs may differ across firms 
depending on their type (broker-dealer or investment adviser), size, and complexity of business.  
We discuss these costs in more detail below.  The Commission has, where possible, quantified 
the costs expected to result from the final rules in the analysis below.  However, we are unable to 
quantify some of the potential costs discussed below, because of the number and complexity of 
assumptions that would be required to be able to estimate how the relationship summary will 
affect investors’ understanding and choice of financial services provider and the lack of data on 
relevant characteristics of individual firms and their prospective and existing retail investors.    
(1) Preparation, Implementation, and Content  
Registrants will incur costs in connection with preparing and implementing the 
relationship summary.  With respect to aggregate compliance costs, as discussed in more detail 
below, some commenters suggest these costs could be high.
1117
  One commenter provided a 
survey of financial professionals that indicate that 79% of survey participants agree that 
implementation costs may be higher at first but will likely lessen over time, and 40% of firms in 
                                                                                                                                                             
1117
  See infra Sections V.A.1 and V.D.1 for examples of commenters discussing the costs. 

 
365 
 
the same survey anticipate moderate or substantial time to implement the requirements of Form 
CRS (and Regulation Best Interest).
1118
  
Broker-dealers currently are not required to prepare a consolidated disclosure document 
for their customers similar to the Form ADV, Part 2A brochure and may incur comparatively 
greater costs in preparing the relationship summary than investment advisers, given that 
investment advisers can draw on their experience with preparing and distributing Form ADV 
Part 2A.  The Commission believes that costs of preparation would also fall differently across 
firms with relatively smaller or larger numbers of retail investors as customers or clients.  For 
example, to the extent that developing the relationship summary entails a fixed cost, firms with a 
relatively smaller number of retail investors as customers or clients may be at a disadvantage 
relative to firms with a larger number of such customers or clients since the former would 
amortize these costs over a smaller retail investor base.   
The relationship summary requires the use of standardized headings in a prescribed order, 
while permitting some flexibility in other aspects of the relationship summary’s wording and 
design within the parameters of the instructions.   There is a trade-off in terms of preparation 
costs to registrants between requirements that prescribe specific wording and formats for 
disclosures and requirements that do not provide any prescribed language and format.  For 
example, we would expect that the more extensively the relationship summary would rely on 
prescribed format and wording, the lower the preparation costs for providers, because there 
                                                                                                                                                             
1118
  See CCMC Letter (Survey conducted by FTI Consulting of 30 individuals at 15 broker-dealers and dually-
registered firms representing $23.1 trillion in assets under management and administration (AUM/AUA), 
and 78.54 million investment accounts). 

 
366 
 
would be less need for them to devote resources to construct their own format and wording.  On 
the other hand, the more extensively the relationship summary would rely on prescribed format 
and wording, the more likely it would  turn into a “one-size-fits-all   ” document with largely 
boilerplate language, and firms would lose the benefit of being able to more precisely and 
accurately describe their own business and offerings to investors.  We believe the final 
instructions strike an appropriate balance in this trade-off, with some higher-level prescribed 
format and language, such as the standardized language and order of headings, while firms 
generally will be able to (and have to) choose their own wording and organization of the required 
information under each heading. 
The final instructions provide for more flexibility than the proposed instructions.  We 
acknowledge that this change could increase certain compliance costs relative to the proposal, as 
firms will have to develop more of their own wording and organization of the information that is 
required to be included.  However, the flexibility permitted by the final instructions is mainly in 
terms of the wording while the topics and sub-topics of information that are required to be 
discussed are largely proscribed.  This narrows the field of subjects that firms could choose to 
discuss and potentially mitigates the cost increase from additional flexibility.  Moreover, we 
believe that the expected benefits of this additional flexibility justify this cost increase.  In 
particular, we expect this change from the proposal to benefit firms by allowing them to more 
accurately describe their services and offerings to retail investors.
1119
  We also expect the 
                                                                                                                                                             
1119
  See, e.g., SIFMA Letter requesting greater flexibility for this reason (stating that “greater flexibility is 
needed to accommodate various business models, given that different firms offer different products and 
services”).   

 
367 
 
additional flexibility to benefit both firms and retail investors to the extent it results in 
disclosures that are more engaging and useful to investors and mitigates the possibility of a 
mismatch.    In addition, several commenters requested greater flexibility to provide accurate 
descriptions of their business models and services, noting the potential for liability for prescribed 
disclosures in the proposal that might not be accurate for a particular registrant’s business.
1120
  
Some topics, however, will require firms to use prescribed wording, such as the headings, 
conversation starters, statement of their legal standard of conduct, and two statements related to 
fees and costs, for the reasons generally discussed in Section II.A.1.
1121
   
In a change from the proposed instructions, the final instructions encourage rather than 
require dual registrants and affiliates to prepare one single relationship summary, but also allow 
them to instead prepare two separate relationship summaries.
1122
  In addition, if firms prepare 
one combined relationship summary, the final instructions required them to employ design 
elements of their own choosing to promote comparability, rather than the two-column format, as 
prescribed in the proposed instructions.  This increased flexibility in presentation relative to the 
proposal can benefit dual registrants and affiliates because it allows them to design disclosures 
more suitable to their business models.  For example, a firm which generally is marketing both 
sides of its business to retail investors may find it less costly and/or more beneficial to provide a 
combined summary.  However, dual registrants for which either the brokerage or investment 
                                                                                                                                                             
1120
  See generally footnotes 76–83 and accompanying text. 
1121
  See supra footnotes 85–90 and accompanying text. 
1122
  See supra Section II.A.5. 

 
368 
 
advisory side of their business is not generally marketed to most customers or clients may find it 
more beneficial to provide two separate relationship summaries.  If a firm chooses to prepare two 
distinct relationship summaries, it may incur an extra cost of preparing the second summary, but 
we expect firms will only elect to prepare two separate summaries if they believe the benefits of 
separate summaries justify such additional preparation costs.  
Beyond the more general costs discussed above from the prescribed formatting and 
wording requirements, some specific requirements may be costly for certain firms.  For example, 
because the relationship summary requires information to be organized by standardized headings 
in a prescribed order, some firms may find it difficult to effectively present the most salient 
information specific to their business and services.  As such, certain firms may incur costs 
associated with trying to fit their business model and other relevant information into the 
standardized headings.  This is mitigated by the fact they have flexibility to present the required 
sub-topics of information in the order of their choosing within each subtopic and by firms’ 
ability to omit irrelevant information.  Firms and financial professionals also may bear costs in 
providing additional information to potential or existing investors to clarify any information that 
is salient to their business but does not fit into the standardized headings of the relationship 
summary.  These costs are mitigated by firms’ ability to supplement their relationship summaries 
with cross-references or hyperlinks to additional information. 
The page limit for the relationship summary also has potential costs, particularly for firms 
with complex business models, even under the increased flexibility provided by the final 
instructions, because they would have to distill the complexity of their business into the same 
space as less complex firms.  The use of layered disclosure, through mediums such as hyperlinks, 

 
369 
 
will permit firms to provide more detailed information that may ameliorate this cost to some 
extent, while still adhering to the formatting requirements of the relationship summary.     
Firms will also incur costs associated with the production and verification of information 
in the relationship summary. Although some of the information that will be summarized in the 
relationship summary is contained in other disclosures that firms already provide, firms will bear 
the cost of editing this information for the relationship summary and cross-referencing or 
hyperlinking to additional information.  For example, to the extent that some firms do not 
already have in place a concise description of how fees, costs, conflicts, and standards of conduct 
are potentially connected, that also will allow for meeting the relationship summary’s space 
constraints, firms will have to expend time and effort to develop an accurate, clear, and concise 
description of these items, written in plain English, for insertion into the relationship summary, 
and cross-referencing or hyperlinking to additional information about these items.  These costs 
may be larger for broker-dealers than for investment advisers, who can directly draw on the  
disclosures of fees, costs, and conflicts they have to provide to retail investors  in Part 2 of Form 
ADV.  Also, to the extent the costs of developing this section have a fixed component, the 
relative burden of developing this section may be higher for smaller firms. On the other hand, 
smaller firms are likely to have fewer types of fees, costs, and conflicts to report compared to 
larger firms, potentially making it less burdensome for them to summarize the required 
information.          
In addition, the relationship summary requires “conversation starters” as part of each 
section, and the conversation starters must be highlighted through text features to improve their 
prominence relative to other discussion text.  Firms will incur costs associated with the 
conversation starters, particularly with respect to preparation and training on how financial 

 
370 
 
professionals provide accurate and complete responses to the “conversation starters” when asked.  
We do not have access to data and information that would allow us to estimate these costs to 
firms, but we expect them to be comparatively greater for firms with more complex business, a 
wider range of offered services and products, because training and supervision costs for such 
firms could be more extensive.  For firms that provide automated investment advisory or 
brokerage services, those firms will incur burdens to prepare answers to each conversation starter 
question and make those available on the firm’s website (while providing in the relationship 
summary a means of facilitating access, e.g., by providing a hyperlink, to that section or 
page).
1123
  
We also anticipate that firms will bear some costs in the production of the electronic 
format as well as other graphical elements, such as charts and tables, which may make important 
information more salient to investors.  Smaller firms may disproportionately incur costs 
associated with electronic and graphical formatting, particularly if they do not have an existing 
web presence or currently produce brochures or other disclosures that make use of graphical 
formatting.  However, because the final instructions encourage, but do not require electronic 
formatting and graphical, text, and online features, firms would only bear these costs if they 
expected these features to provide benefits that justify these costs.  
Finally, there could also be some indirect costs to firms from some of the required 
content in the relationship summary.  In particular, to the extent that including disciplinary 
history information in the relationship summary increases the propensity of retail investors to 
                                                                                                                                                             
1123
  See supra footnote 184  

 
371 
 
consider this information when selecting firms and financial professionals, firms that affirm they 
have one or more reportable disciplinary events may face a loss in competitiveness compared to 
firms that have no event to report.  This can in particular be costly for firms that have few or less 
serious disciplinary events
 
that may be overlooked by investors that do not research the nature of 
the disciplinary history in more detail.
1124
  We also recognize larger firms might be more likely 
to incur such competitive costs, because larger firms are more likely to have at least one 
reportable disciplinary event than smaller firms.  Similarly, holding size constant, older firms, by 
virtue of having a longer business history, are more likely to have one or more reportable events 
than younger firms.  Although we acknowledge the potential for firms to incur competitive costs 
from having to affirm they have reportable disciplinary history, those costs are justified by the 
potential benefits to investors from this disclosure, as discussed above. 
(2) Filing, Delivery, and Updating Requirements 
As proposed, the final instructions require firms to file their relationship summaries with 
the Commission and make them available on firms’ publicly available websites, if they have one. 
The relationship summary must be filed in a text-searchable format with machine-readable 
headings.  Further, the final instructions will require investment advisers to file their relationship 
summaries using IARD, as proposed; however, the final instructions—in a change from the 
proposal—will require broker-dealers to file through Web CRD
®
 instead of EDGAR.  This 
should reduce overall burdens relative to the proposal as broker-dealers already have extensive 
experience filing on Web CRD
®
, which is more accessible for broker-dealers.  As proposed, dual 
                                                                                                                                                             
1124
  Commenters raised similar concerns. See supra footnote 586 and accompanying text.  

 
372 
 
registrants will be required to file on two systems.  Instead of filing on EDGAR and IARD, as 
proposed, dual registrants will be required to file using both Web CRD
®
 and IARD.  We 
recognize that requiring dual registrants to file using both Web CRD
®
 and IARD may be more 
costly than filing through just one system; however, we believe that any such cost is justified to 
ensure a complete and consistent filing record for each firm and to facilitate the Commission’s 
data analysis, examinations, and other regulatory efforts.   
As discussed above, the firms that deliver relationship summaries electronically must do 
so within the framework of the existing Commission guidance regarding electronic delivery.
1125
  
With respect to initial delivery of the relationship summary to new or prospective investors, firm 
are required to deliver the relationship summary in a manner consistent with how the retail 
investor requested information, consistent with the Commission’s electronic delivery 
guidance.
1126
  Flexibility in the method of delivery, consistent with Commission guidance, could 
promote efficiency by allowing firms to communicate with retail investors in the same medium 
by which they typically communicate other information.
1127
  Regardless of the method of 
delivery (e.g., paper or electronic delivery), firms will incur costs associated with delivering the 
relationship summary to retail investors.   
Moreover, requiring firms to make a copy of the relationship summary available upon 
request without charge will require firms to incur costs.  For example, firms that provide a paper 
                                                                                                                                                             
1125
  See supra Section II.B.3 and footnote 678. 
1126
  See supra footnotes 679–681 and accompanying text.  
1127
  See supra Section II.B.3 and footnote 680. 

 
373 
 
version of the relationship summary to retail customers that request it will incur printing and 
mailing costs when such requests are made.  Further, firms may incur additional costs associated 
with systems for tracking customer delivery preferences. 
Firms will also incur costs for updating and filing the relationship summary within 30 
days of whenever any information becomes materially inaccurate.
1128
  Firms could communicate 
this information by delivering the amended relationship summary or by communicating the 
information another way to the retail investor.  For example, if an investment adviser 
communicated a material change to information contained in its relationship summary to a retail 
investor by delivering an amended Form ADV brochure or Form ADV summary of material 
changes containing the updated information, the ability to disclose material changes by 
delivering another required disclosure containing the updated information should mitigate the 
cost of the requirement to communicate updated information in the relationship summary to 
investors.  Firms could also incur costs to keep records of when the initial or updated relationship 
summary was delivered; however, we believe that firms will be able to leverage their current 
compliance infrastructures in maintaining such information.  
The Commission anticipates that the costs associated with delivery for an average broker-
dealer or average dual registrant will be higher than the costs for the average investment adviser.  
As Table 1 and Table 3 in Section IV.A.1 indicate, broker-dealers maintain a larger number of 
accounts than investment advisers; therefore, delivery costs for broker-dealers could exceed 
those of investment advisers, if the number of accounts is a good indicator of the number of retail 
                                                                                                                                                             
1128
  Along this line, firms could also incur some costs in modifying certain referenced disclosures per the 
parameters of General Instruction 3.B to Form CRS.  

 
374 
 
investors.
1129
  Similarly, given that the average dual registrant has more customer accounts than 
the average investment adviser, and that the preparation of relationship summaries and any 
updates for dual registrants may require more effort than for standalone broker-dealers or 
investment advisers, the compliance costs could be larger for those firms.  
Firms will be required to deliver the relationship summary to retail investors.  The final 
instructions have adopted a definition of retail investor that is similar to the definition of retail 
customer in Regulation Best Interest, but differs to reflect the differences between the 
relationship summary delivery requirement and the obligations of broker-dealers under 
Regulation Best Interest, including that the retail investor definition covers prospective as well as 
existing clients and customers and natural persons who seek services from investment advisers as 
well as broker-dealers.  This definition of retail investor relative to the proposal may reduce 
uncertainty for broker-dealers and investment advisers about which customers should obtain 
relationship summaries.  We do not believe this changes the scope of retail investors that will 
benefit collectively from the final rules.    
(3) Recordkeeping Amendments 
As adopted and discussed above, firms will be required to make and preserve records of 
each version of their relationship summary and each amendment filed with the Commission. 
Firms will also be required to make and preserve a record of the dates that each relationship 
summary was given to any client, customer, or prospective client or customer who subsequently 
                                                                                                                                                             
1129
  The Commission is unable to obtain from Form BD or FOCUS data information on broker-dealer numbers 
of customers, and instead, is only provided with the number of customer accounts. The number of customer 
accounts will exceed the number of customers as a customer could have multiple accounts at the same 
broker-dealer.  

 
375 
 
becomes a client or customer and such records will be maintained in the same manner, and for 
the same period of time, as other books and records under the applicable recordkeeping rules. As 
previously discussed, commenters stated that they believe the requirement to maintain records of 
the dates that the relationship summary was given to prospective clients or customers may 
impose significant and unnecessary costs and burdens.
1130
  Commenters stated that firms do not 
have compliance and recordkeeping systems in place that could, without substantial and costly 
modification, maintain records of related to prospective clients or customers who might not 
become actual clients or customers of the firms for weeks, months or years after firms begin 
communicating with such individuals.  As an alternative, commenters suggested that firms only 
be required to maintain a record of the most recent date they delivered the relationship summary 
to a prospective client that becomes an actual client preceding the opening of an account.  
Commenters suggested only requiring a record that the relationship summary was delivered at 
account opening or when a retail investor becomes an investment advisory client.  
The inclusion of the recordkeeping requirements in the amended rules will impose costs on firms 
in the form of revised recordkeeping policies and procedures and possible modifications to their 
recordkeeping systems.  The record requirements, however, may be less burdensome if their 
recordkeeping and compliance systems are already capable of creating and maintaining records 
related to communications with prospective clients.  For example, investment advisers are 
required to keep similar records for the delivery of the Form ADV Part 2 brochure and broker-
dealers are subject to comparable recordkeeping requirements with respect to communications 
                                                                                                                                                             
1130
  See, e.g., Edward Jones Letter. 

 
376 
 
and correspondence with prospective retail investors.
1131
  Further, these recordkeeping 
requirements may benefit firms by assisting them in monitoring their compliance with the 
relationship summary delivery requirements.  Finally, these records will facilitate the 
Commission’s ability to inspect for and enforce compliance with the relationship summary 
requirements. 
(4) Estimates of certain compliance costs  
Although we are unable to quantify all costs discussed above, we quantify certain direct 
compliance costs based on the estimates developed for the purpose of the Paperwork Reduction 
Act analysis in Section V.  These costs, which we discuss below, are estimated separately for 
investment advisers and broker-dealers that are required to prepare and file a relationship 
summary.  We note that all aggregate cost estimates for either category of firms include the 318 
dually registered firms.
1132
  In addition, the costs estimates are calculated for the average 
investment adviser or average broker- dealer.  We recognize that the actual compliance costs 
burdens for some firms will exceed our estimates and the burden for others will be less because 
firms vary in the size and complexity of their business models.   
First, we quantify certain one-time costs associated with the initial preparation and filing 
of the relationship summary.  The cost burden for an average investment adviser to initially 
prepare and file the proposed Form CRS for the first time is estimated to range between 
                                                                                                                                                             
1131
  See supra footnote 810. 
1132
  See supra footnote 863 and accompanying text. 

 
377 
 
approximately $5,460 and $9,165, depending on the extent to which external help is used.
1133
  
The estimated aggregate non-amortized combined internal and external costs for all current 
investment advisers of initially preparing and filing the relationship summary will be 
approximately $65.3 million.
 1134
  In addition, based on IARD system data, the Commission 
estimates that each year approximately 656 newly investment advisers will be required to 
prepare and file the relationship summary with us.
1135
  The aggregate non-amortized initial 
preparation and filing costs of the relationship summary for these new investment advisers is 
estimated to be approximately $5.2 million.
1136
  Similarly, for broker-dealers, the cost to an 
average broker-dealer for preparing Form CRS for the first time is estimated to range between 
approximately $10,920 and $14,625.
1137
  We estimate the aggregate non-amortized aggregate 
                                                                                                                                                             
1133
  The lower end estimate is based on the assessment that, without additional external help, it will take an 
average investment adviser 20 hours to prepare the relationship summary for the first time, see infra 
Section V.A.2.a. We assume that performance of this function will be equally allocated between a senior 
compliance examiner and a compliance manager at a cost of $237 and $309 per hour, (see infra footnote 
1232 for how we arrived at these costs). Thus, the cost for one investment adviser to produce the 
relationship summary for the first time is estimated at $5,460 (10 hours x $237 + 10 hours x $309 = $5,460) 
if no external help is needed. In addition, we estimate that if the investment adviser needs external help, the 
average cost to an investment adviser for the most expensive type of such help (i.e., compliance consulting 
services) would be $3,705, see infra footnote 1239, which brings the total cost to $9,165.     
1134
  We estimate that the aggregate internal cost of initial preparation and filing of the relationship summary for 
existing investment advisers is $44,963,100 (= $5,460 per investment adviser x 8,235 existing investment 
advisers). The aggregate external cost for existing investment advisers is estimated to be $20,371,331. See 
infra Sections V.A.2.a and V.A.2.b for more detailed descriptions of how we arrived at these estimates. 
1135
  See infra footnote 1227 and accompanying text. 
1136
   We estimate that the aggregate internal cost of initial preparation and filing of the relationship summary for 
expected newly registered investment advisers is $3,3,581,760 (= $5,460 per investment adviser x 656 
expected new investment advisers). The aggregate external cost for expected new investment advisers is 
estimated to be $1,622,780. See infra Sections V.A.2.a and V.A.2.b for more detailed descriptions of how 
we arrived at these estimates.  
1137
  The lower end estimate is based on the assessment that, without additional external help, it will take an 
average broker-dealer 40 hours to prepare the relationship summary for the first time, see infra Section 
V.D.2.a. We assume that performance of this function will be equally allocated between a senior 
 

 
378 
 
combined internal and external costs to all current broker-dealers of initially preparing and filing 
the relationship summary will be approximately $38.8 million.
1138
  We do not expect any new 
broker-dealer firms based on the secular decline in broker-dealer firms we have seen in recent 
years.
1139
    
Firms will also incur one-time costs of the initial delivery of relationship summaries to 
their existing retail investors.  We expect the non-amortized initial delivery costs to be 
approximately $4,941 for the average investment adviser.
 1140
 In total, we estimate that the 
aggregate non-amortized initial delivery costs to existing retail investors will be approximately 
$40.7 million for all current investment advisers,
1141
 and $3.2 million for newly registered 
investment advisers.
1142
  For the average broker dealer, we expect costs for the initial delivery to 
                                                                                                                                                             
compliance examiner and compliance manager at a cost of $237 and $309 per hour, respectively (see infra 
footnote 1365 for how we arrived at these costs). Thus, the cost for one broker-dealer to produce the 
relationship summary for the first time is estimated at $10,920 (20 hours x $237 + 20 hours x $309   = 
$10,920) if no external help is needed. In addition, we estimate that if the broker-dealer needs external help, 
the average cost to a broker-dealer for the most expensive type of such help (i.e., compliance consulting 
services) would be $3,705, see infra footnote 1378, which brings the total cost to $14,625.    
1138
  We estimate that the aggregate internal cost of initial preparation and filing of the relationship summary for 
existing broker-dealers is $30,204,720 (= $10,920 per broker-dealer x 2,766 existing broker-dealers). The 
aggregate external cost for existing broker-dealers is estimated to be $8,560,770. See infra Sections V.D.2.a 
and V.D.2.b for more detailed descriptions of how we arrived at these estimates. 
1139
  See infra Section IV.B.c for a discussion of this decline. 
1140
  See supra Section V.C.2.b.(1) for a description of how this is estimated.   
1141
  Calculated as $4,941 per firm x 8,235 current firms= $40,689,135. 
1142
  Calculated as $4,941 per firm x 656 expected new firms = $3,241,296. 

 
379 
 
existing retail investors to be approximately $45,801.
1143
  The aggregate non-amortized initial 
delivery cost for all current broker-dealers is estimated to be approximately $126.7 million.
1144
    
Moreover, firms are required to post a current version of their relationship summary 
prominently on their public website (if they have one). We estimate that the initial posting will 
cost approximately $93 per firm (whether an investment adviser or a broker-dealer).
1145
  In 
aggregate we expect the initial cost of posting the relationship summary to firms’ websites to be 
approximately $686,437 for existing investment advisers,
1146
 $54,682 for newly registered 
investment advisers,
1147
 and $257,238 for broker-dealers.
1148
  
In addition to the estimates of one-time costs discussed above, for the purposes of the 
Paperwork Reduction Act analysis, we have also developed estimates of certain expected 
ongoing compliance costs of the final rules.  For example, firms will incur costs each year due to 
the requirement to re-deliver the relationship summary to existing retail investors in certain 
situations.  We estimate that the annual average cost to re-deliver the relationship summary will 
be approximately $992 for an average investment adviser and in aggregate approximately $8.8 
                                                                                                                                                             
1143
  Calculated as $126,684,600 (the estimated aggregate costs)/ 2,766 (number of broker-dealers with retail 
customers).  See infra Section V.D.2.d. (1) for how the aggregate cost is estimated.  
1144
  Id.  
1145
  See infra sections V.C.2.a (for investment advisers) and V.D.2.a (for broker-dealers) for how the average 
cost per firm is estimated.  
1146
  Based on IARD system data, 91.6% of investment advisers with individual clients report having at least 
one public website; see infra Section IV.B.2.a. Therefore the aggregate cost for existing investment 
advisers is estimated as: 91.6% x $91(average cost per firm) x 8,235 (number of existing investment 
advisers) = $686,437.  
1147
  Assuming that the fraction of firms with at least one public website is the same for newly registered 
investment advisers as it is for existing investment advisers (see id), we estimate the aggregate costs as: 
91.6% x $91(average cost per firm) x 8,235 (excepted number of new investment advisers ) = $54,682.    
1148
  See infra footnote 1370 and accompanying text.  

 
380 
 
million annually for all investment advisers.
1149
  For broker-dealers, we estimate that the annual 
average cost to re-deliver the relationship summary will be approximately $9,222 for the average 
firm, and in aggregate approximately $25.5 million annually for all broker-dealers.
1150
   Firms 
will also be required to deliver relationship summaries to new and prospective retail investors.  
Based on the Commission’s projections of future client and customer account growth, we 
estimate that the annual costs to current firms of delivery to new and prospective retail investors 
would be between approximately $223 for an average investment adviser and $5,072 for an 
average broker-dealer, or approximately $1.8 million annually in aggregate for investment 
advisers and approximately $14.0 million annually in aggregate for broker-dealers.
1151
 The 
difference in cost estimates between investment advisers and broker-dealers is mainly due to the 
fact that investment advisers serving retail investors generally have fewer clients than broker-
dealers serving retail investors have customer accounts, but also because we project a lower 
growth rate for retail clients for investment advisers (4.5%)
1152
 than for retail customer accounts 
for broker-dealers (11.0%).
1153
   In addition, firms will also incur costs associated with making 
paper copies of the relationship summary available upon request.  We estimate that such annual 
costs would be approximately $31 for the average firm (whether investment adviser or broker-
                                                                                                                                                             
1149
  See infra Section V.C.2.b.(2). 
1150
  See infra Section V.D.2.d.(2).  
1151
  See infra section V.C.2.c for how we estimate the costs to investment advisers, and see infra Section 
V.D.2.e for how we estimate the costs for broker-dealers.     
1152
  See infra footnote 1341 and accompanying text. 
1153
  See infra footnote 1415 and accompanying text. 

 
381 
 
dealer), and the aggregate annual costs for investment advisers and broker-dealers combined 
would be approximately $338,272.
1154
 
In Section V, for the purposes of the Paperwork Reduction Act analysis, we also estimate 
the quantifiable expected ongoing costs associated with updating the relationship summary.  
These costs would be associated with preparing updated relationship summaries when 
information becomes materially inaccurate, re-posting updated relationship summaries to a 
public website, and communicating changes to the relationship summary through re-delivery to 
existing retail investors.  We estimate that the annual costs for firms to update and file amended 
relationship summaries will be approximately $467 for the average investment adviser, or 
approximately $3.8 million in aggregate for all investment advisers.
1155
  For investment advisers 
with a public website, we estimate the average annual costs of re-posting amended relationship 
summaries to be approximately $53.32 per adviser, or $402,207 in aggregate for all investment 
advisers with public websites.
1156
  Finally, we expect investment advisers will incur quantifiable 
costs of communicating changes to amended relationship summaries, if they choose to do so by 
delivery.  We estimate the average annual costs of communicating changes to amended 
relationship summaries by delivery will be $8,450 per adviser that to choose to do so, and in 
aggregate approximately $34.8 million for all investment advisers that  we expect to choose 
delivery to communicate updated information.
1157
  For broker-dealers, we estimate the annual 
                                                                                                                                                             
1154
  See infra footnote 1339 and accompanying text for how we estimate the costs for investment advisers, and 
see infra footnote 1413 and accompanying text for how we estimate the costs for broker-dealers.  
1155
  See infra Section V.A.2.c for how we estimate these costs.  
1156
  See infra Section V.C.2.b.(3) for how we estimate these costs. 
1157
  Id.   

 
382 
 
costs to update, file, and post amended relationship summaries will be approximately $608 for 
the average firm and approximately $1.7 million in aggregate for all broker-dealers.
1158
  We 
estimate annual delivery costs will be approximately $ 91,602 for the average broker-dealer that 
will choose delivery to communicate updated information, and in aggregate approximately 
$126.7 million annually for all broker-dealers that we expect to choose delivery.
1159
 
Finally, for the purposes of the Paperwork Reduction Act analysis, we also developed 
estimates of certain compliance costs associated with the recordkeeping requirements in the final 
rules. We estimate that the annual costs to firms related to these recordkeeping requirements will 
be $12.67 for an average investment adviser and approximately $104,354 in aggregate for all 
investment advisers.
 1160
  For broker-dealers, we estimate annual recordkeeping and record 
retention costs to be approximately $39 for an average broker-dealer, and $107,017 in aggregate 
for all broker-dealers.
1161
 
3. Impact on Efficiency, Competition, and Capital Formation  
In addition to the specific benefits and costs discussed in the previous section, we expect 
that the relationship summary could produce a number of broader long-term effects on the 
                                                                                                                                                             
1158
  See infra Section V.D.2.c for how we estimate these costs. 
1159
   See infra Section V.D.2.d.(3) for how we estimate these costs. 
1160
  For investment advisers we estimate 0.2 additional burden hours related to the recordkeeping requirements 
in the final rule; see infra footnote 1280 and accompanying text.  We expect that this incremental burden 
will most likely be allocated between compliance clerks and general clerks, with compliance clerks 
performing 17% of the function at a total cost of $70 per hours, and general clerks performing 83% of the 
function at total cost of $62 per hour; see infra footnote 1282. The average costs per investment adviser is 
then estimated as (17% x 0.2 hours x $70) + (83% x 0.2 hours x $62) = $12.672. The aggregate cost is then 
$12.672 x 8,235 (number of investment advisers) = $104,354. 
1161
  See infra Section V.E for the estimation of recordkeeping costs (estimated at $32 annually per broker-
dealer, or $87,627 in aggregate), and see infra section V.F.1  for the estimation of record retention costs 
(estimated at $7 annually per broker-dealer, or $19,390 in aggregate). 

 
383 
 
market for financial advice.  Below, we elaborate on these potential effects, in particular as they 
pertain to their impact on efficiency, competition, and capital formation. 
a. Efficiency 
The final rule requiring broker-dealers, investment advisers, and dually registered firms 
to produce a relationship summary could result in increased informational or allocative 
efficiency for retail investors by reducing the risk of matching with a firm or financial 
professional that is different from the investor’s expectations and preferences.  As discussed 
above, the risk of mismatch potentially imposes costs on investors, financial professionals, and 
firms.  Investors may inadvertently, in the absence of information provided by the relationship 
summary, select the wrong type of financial professional or account, leading to increased costs 
(direct and indirect) and potentially suboptimal outcomes as it pertains to meeting the investor’s 
financial goals.  For firms and financial professionals, cultivating relationships with potential 
investors requires resources in terms of time and effort.  If an investor and financial professional 
or firm is mismatched, then both sides of the relationship can incur costs.  For example, the 
financial professional may devote time and resources to develop a relationship with a retail 
investor that is comparatively costly to maintain because of a mismatch between the investor’s 
expectations and the services offered by the professional,
1162
 and the investor incurs costs 
associated with obtaining services that do not fit his or her needs.  As such, the relationship 
summary may reduce the costs associated with mismatch for investors, firms, and financial 
                                                                                                                                                             
1162
   However, as discussed previously in, e.g., supra Section IV.B, a mismatch from the retail investors’ 
perspective may be advantageous for firms in certain circumstances, in which case firms may not overall 
benefit from a decrease in the number of mismatched investors.    

 
384 
 
professionals and increase the efficiency of the market for financial advice.  We expect these 
efficiency gains particularly in the initial matching between investors and firms and financial 
professionals.  For some retail investors, receipt of the relationship summary from their existing 
firm or financial professional could highlight that they are mismatched in their current 
relationship.  Those investors may benefit from terminating the mismatched relationship and 
looking for a more appropriate match, but such gains are likely to only be realized to the extent 
investors anticipate the long-term benefits from a better match will be greater that the short-run 
switching and search costs.  Moreover, these efficiency benefits may be attenuated to the extent 
that investors tend to stay in relationships with financial professionals once investors are 
committed to the relationship, even if the relationship is mismatched. 
Informational efficiencies could also be enhanced with the relationship summary because 
key information is focused on information that has been previously identified as important to 
retail investors, salient and consistently disclosed across broker-dealers and investment advisers.  
The relationship summary will provide concise, user-friendly information which will allow retail 
investors to better understand the relationship that they will have with their financial 
professionals and will allow them to seek services commensurate with their expectations.    In 
addition, to the extent the information asymmetry between investors and financial professionals 
is reduced, investors may make more informed investment decisions, or become more able to 
critically evaluate any investment advice they receive.  Further, the use of layered disclosure and 
conversation starters will allow retail investors to access additional information that may be 
relevant to them when selecting their firm or financial professional, further reducing the risk of 
mismatch. 

 
385 
 
The firm-specific nature of the relationship summary required by the final rules about a 
particular firm will enhance retail investors’ information set about each firm, providing them 
with a more concise and simple document, which should alleviate potential investor confusion 
about the key elements of the relationship that the investor could expect to have with that firm.   
However, such improved efficiency could be lower than that expected under the proposal 
because, unlike the proposed relationship summary, the adopted relationship summary will 
include less prescribed language and greater flexibility.  For example, the relationship summary 
will not include a comparison between general broker-dealer and investment adviser standards 
and services.
1163
  The elimination of this proposed requirement will likely reduce (relative to the 
proposal) the usefulness to retail investors from obtaining this general information from a single 
source (e.g., any firm’s relationship summary) and instead will require effort from investors in 
the form of search costs to provide an adequate comparison across firms within a given type of 
firm (e.g., investment advisers).  Moreover, for investors that may not know which type of firm 
is likely to best meet their preferences and expectations with respect to financial services, a less 
general relationship summary requires that investors that expend search costs also select the 
correct types of firms in order to make such a comparison.  This may be difficult for some retail 
investors, and could increase the costs of search and the risk of mismatch.  Also, allowing dual 
registrants the flexibility to prepare two separate relationship summaries rather than one 
combined document may result in some efficiency loss in terms of less direct comparability. 
Nonetheless, we believe that investors having access to  specific and tailored information about 
                                                                                                                                                             
1163
  See supra Section II.B.6 for why the generalized comparison discussion was not included in the 
relationship summary. 

 
386 
 
the firms, as provided in the final rules, is more important for reducing  investors search costs 
and risk of mismatch, thereby justifying the potential efficiency losses (relative to the proposal) 
discussed above.   
Beyond informational efficiencies that could arise, the relationship summary also may 
lead to more efficient investor allocation of assets within their portfolios relative to the baseline.  
Some retail investors that previously avoided the market for financial services because they did 
not understand the material characteristics of either broker-dealers or investment advisers may be 
more likely to hire a financial professional if the costs associated with the acquisition of this 
information are reduced relative to the baseline.  The relationship summary is a simple, concise 
document providing investors information about key elements of the investor-provider 
relationship that could incent some investors to seek the services of a financial professional.  As 
such, for some investors that previously abstained from hiring a financial professional, portfolio 
efficiency could be improved, for example, through increased portfolio diversification.
1164
  
Furthermore, because of being provided the relationship summary, some current investors may 
realize that other services provided by their financial professional could be more appropriate for 
them.  For example, an advisory client of a dual registrant may learn more about the broker-
dealer services offered by the firm and realize that those services better match his or her 
preferences and make a switch, which may ultimately improve portfolio efficiency for the client. 
                                                                                                                                                             
1164
  As discussed above, academic studies have identified several potential benefits to retail investors from 
seeking investment advice, including increased diversification; see supra footnote 1005 and accompanying 
text.  

 
387 
 
 However, as noted in Regulation Best Interest, certain studies suggest that for some 
financial professionals, the improvements to portfolio efficiency could be limited if the financial 
professionals are subject to the same behavioral biases, such as limited attention or anchoring, as 
retail investors in their portfolio allocation decisions.
1165
  Further, to the extent the relationship 
summary makes the conflicts of interest of financial professionals more salient to retail investors 
relative to the baseline, there is a risk that some professionals would feel they have a “moral 
license” to act on their conflicts,
1166
  which c ould harm the efficiency of retail investors’ 
portfolio allocations. 
 
Despite such potential negative effects related to conflicts of interest 
disclosure, we believe that, on balance, retail investors will benefit from the inclusion of this 
disclosure in the relationship summary.  In particular, the conflicts of interest disclosure should 
enhance investors’ ability to evaluate which relationship is best for them and also help them 
more critically evaluate the recommendations or investment advice they receive, which should 
ultimately improve the efficiency of their portfolio allocations. 
In addition, and in a modification from the Proposing Release, the headings on the 
relationship summary will be machine readable, which will facilitate third-party data 
aggregators’, as well as the Commission’s, analysis and comparison of certain elements of the 
relationship summary across firms to the benefit of retail investors.  Comparability will lead to 
greater informational efficiency because retail investors will be better able to choose the right 
type of firm or financial professional and the right type of account and services, thereby 
                                                                                                                                                             
1165
  See Regulation Best Interest, Section III.B.3.b. 
1166
     See supra footnote 1027 and accompanying text.  

 
388 
 
increasing the likelihood that they choose what best meets their needs and reduces the likelihood 
of mismatch.  Providers may likewise benefit from higher information acquisition efficiency 
because firms may be more likely to initially attract retail investors who prefer their services, 
thereby potentially reducing customer acquisition costs, such as time and effort spent on initial 
engagement with prospective customers who ultimately do not contract for their services.   
b. Competition 
Beyond increased efficiency for retail investors, the relationship summary may also 
increase competition among broker-dealers and investment advisers.  Provision of the 
relationship summary by firms could enhance the competitiveness of broker-dealers and 
investment advisers by allowing retail investors to better evaluate and compare firms and 
financial professionals through increased transparency, and more generally increase retail 
investors’  understanding of the market for brokerage and investment advisory services.  In 
particular, increased transparency may allow investors to better assess the types of services 
available and the types of fees and costs associated with such services.  Moreover, and as 
discussed above, the relationship summary may facilitate comparisons across firms and lead to 
reduced search costs for retail investors, allowing investors to match their preferences and 
expectations for certain financial services, possibly at lower costs relative to the baseline, and 
may increase competitiveness between firms to lower prices for some services.  We believe the  
changes made to the relationship summary in the final rules have potentially strengthened such 
competitive effects, for example, by using less prescribed general language and instead requiring 
disclosure of firm-specific information about services, fees, costs, and conflicts, and by making 
the headings machine readable, which may encourage the development of search tools by third 
party providers.  An increase in competition may apply only between like firms (i.e ., broker-

 
389 
 
dealers only or investment advisers only) or may have intra-industry effects across broker-
dealers and investment advisers. 
As discussed above, increased competition both among and between broker-dealers and 
investment advisers could reduce the pricing power of firms, benefitting investors through lower 
fees.  Lower fees could draw more retail investors that are not currently seeking investment 
advice to the market, although some retail investors may be willing to pay higher prices for other 
reasons, including enhanced services and firm reputation.  Combined with improved 
informational efficiency, increased competition for retail investors resulting from information 
provided by the relationship summary may drive prices at the margin to competitive levels across 
all types of firms, depending on how price sensitive retail investors are.  Alternatively, and 
similar to what we have today, a separating equilibrium may result where investors’ demand for 
particular services is relatively price insensitive and they cannot be persuaded to move to a 
different level of service simply because of lower prices (e.g., investors seeking ongoing advice 
may be more likely to pay higher prices for advisory services provided by investment advisers, 
even though a potentially lower cost option could be available through broker-dealers). 
Further, lower costs of information acquisition and processing due to the content, format, 
and structure of the relationship summary may lead to more people entering the market for 
brokerage and investment advisory services and may increase overall retail investor participation.  
Such an increase in the number of retail investors in the market for financial services could raise 
demand for brokerage and investments advisory services and mitigate the potential increase in 
competition discussed above.  However, increased levels of retail investor participation could 
also encourage new broker-dealer and investment adviser entrants to meet the needs of the new 
pool of investors, and may increase competition for investor capital through lower fees and costs. 

 
390 
 
How the competitive landscape will shift as a result of the relationship summary is 
difficult to determine and the effect on aggregate level of competition among and between 
broker-dealers and investment advisers could be limited.  For example, the relationship summary 
may not necessarily increase the number of new broker-dealer or investment adviser entrants to 
the market, but could lead to shifts of investors between broker-dealers and investment advisers 
to the extent that some currently engaged retail investors are mismatched, and that search and 
switching costs associated with correcting the mismatch do not justify the costs associated with 
the potential mismatch.  Moreover, the incidence of mismatched relationships with retail 
investors could be likely for both broker-dealers and investment advisers, so competition could 
be relatively unaffected in the aggregate; therefore, any mismatch corrected as a result of the 
relationship summary may not result in a significant net loss of investors for either broker-
dealers or investment advisers.  In addition, to the extent currently mismatched investors are 
customers of dual registrants, any switch in account type (brokerage or investment advisory), as 
a result of the relationship summary, may take place within a dual registrant rather than between 
different firms, further attenuating any competitive impact.  
By reporting legal or disciplinary history, the relationship summary may provide benefits 
to retail investors by prompting them to seek out additional information (e.g., from Investor.gov 
or BrokerCheck) on their current or prospective firms and financial professionals and take that 
information into account when considering whom to engage for financial services.  Competition 
between firms may be enhanced if firms and financial professionals with better disciplinary 
records drive out those with worse records.  We note, however, that legal and disciplinary history 
reported in the relationship summary may bias firms towards hiring financial professionals with 
fewer years of experience (i.e., fewer opportunities for customer complaints) and against hiring 

 
391 
 
experienced financial professional with some (minor) complaints.  Further, investors may also 
bias their choice of firm or financial professional in the same manner.  One commenter stated 
that reporting of legal and disciplinary history “imposes an inappropriate competitive imbalance 
and inaccurate picture concerning the relative number of disciplinary actions in sales 
organizations with large number of financial professionals.”
1167
  The expected economic impact 
of disciplinary reporting on competition across large and small firms, however, is generally 
unclear because small firms may suffer disproportional reputational penalties from more salient 
disciplinary history disclosure.   In general, reportable disciplinary history is less common for 
smaller firms than for larger firms.
1168
  Thus, small firms may appear to have better disciplinary 
history reputation than large firms solely because of their size of operations, rather than their 
actual legal and regulatory compliance or the professional ethics or integrity of their employees.  
At the same time, investors may over-react to generally more frequent disciplinary history 
disclosure by larger firms and forego potentially well-matched relationship with the larger firms 
as a result.  
Disclosing reportable legal and disciplinary history in the relationship summary may 
confer a small competitive advantage for investment advisers over broker-dealers because 
broker-dealers are more likely to have to report that they have a disciplinary history due to 
                                                                                                                                                             
1167
  See ACLI Letter.  
1168
  For example, while only 36% of registered investment advisers with less than $1 million of AUM disclose 
at least one disciplinary action as of January 1, 2019, 71% of registered investment advisers with more than 
$50 billion of AUM disclosed at least one disciplinary action that year.  Form ADV.  Similarly, while 42% 
of broker-dealers with less than $1 million in total assets disclose at least one disciplinary action as of 
January 1, 2019, 100% of broker-dealers with more than $50 billion total assets disclosed at least one 
disciplinary action that year. Form BD. 

 
392 
 
broader broker-dealer disclosure obligations.  Reporting from Form BD with respect to broker-
dealer disclosures of disciplinary actions taken by any regulatory agency or SRO show than 308 
(86%) out of 318 retail-facing dual-registered broker-dealers disclosed a disciplinary action. In 
contrast, 1,330 (54%) out of 2,448 retail-facing standalone broker-dealers disclosed a 
disciplinary action.  For investment advisers, Form ADV requires disclosure of any disciplinary 
actions taken in the past 10 years, and 284 (79%) of 318 retail-facing dual-registered investment 
advisers disclosed a disciplinary action.  However, for standalone investment advisers, only 
1,176 (15%) of 7,917 retail-facing investment advisers disclosed a disciplinary action.
1169
  As 
broker-dealers have relatively more reportable legal and disciplinary history than investment 
advisers, retail investors may engage investment advisers with greater frequency than broker-
dealers as a result of the disciplinary history reporting on the relationship summary, potentially 
creating a competitive advantage for some investment advisers. 
Although the relationship summary applies to SEC-registered broker-dealers and SEC-
registered investment advisers, it could exhibit some spillover effects for other categories of 
firms not affected by the rule changes such as investment advisers not registered with the SEC 
(e.g., state registered investment advisers), bank trust departments, insurance companies, and 
others.  In particular, the relationship summary could change the size of the broker-dealer and 
                                                                                                                                                             
1169
  Source: Items 11C, 11D, and 11E of Form BD and Items 11.C., 11.D. and 11.E. of Form ADV.  Form BD 
asks if the SEC, CFTC, other federal, state, or foreign regulatory agency, or a self-regulatory organization 
have ever found the applicant broker-dealer or control affiliate to have 1) made a false statement or 
omission, 2) been involved in a violation of its regulations or statues, 3) been a cause of an investment 
related business having its authorization to do business denied, suspended, revoked, or restricted, or 4) have 
imposed upon it a civil money penalty or cease and desist order against the applicant or control affiliate. 
Likewise, Form ADV asks similar questions of registered investment advisers and advisory affiliates. 

 
393 
 
investment adviser markets—relative to each other, as well as relative to other markets.  To the 
extent the relationship summary reduces retail investors’ confusion and makes it easier for them 
to choose a relationship in line with their preferences and expectations, this could attract new 
retail investors to the broker-dealer and investment adviser markets from firms in other markets.  
At the same time, it is possible that, as a result of conflicts of interest and the existence of 
disciplinary history being saliently disclosed in the relationship summary, some investors may be 
deterred from seeking services of registered investment advisers or broker-dealers and instead 
seek the services provided by a state registered advisor or another professional not regulated by 
the Commission, or forego seeking financial services altogether.  
Firms’ current retail investors also may consider switching to a different type of firm if 
the relationship summary makes the different services provided and the types of fees and costs of 
investment advisory and brokerage services more prominent.  Such a switch could be within the 
market for investment advisory and brokerage services, or to a financial services provider outside 
this market (such as a bank or insurance company).  The information disclosed in the relationship 
summary may also lead some investors to realize a relationship with any financial services 
provider may not be in their best interest, and therefore withdraw altogether from the market.  
The exact extent and direction of substitution among different types of providers’ services is hard 
to predict and depends on the nature of the current mismatch between retail investor preferences 
and expectations and the type of services for which they have contracted, and the extent to which 
investors will digest and use the provided information in firms’ relationship summaries.  
To the extent the relationship summary increases competition between broker-dealers and 
investment advisers, and   between these firms and other financial services providers, it may result 
in development of new products and services, and general innovation by the industry at large.  

 
394 
 
Competition among firms could provide incentives for firms to seek alternative ways to attract 
retail investors and generate profits.  In the process, firms could develop new and better ways of 
providing services to retail investors, for example, by utilizing information technology to deliver 
information to retail investors at lower costs.  In this way, innovation could improve retail 
investors’ welfare as well as the profitability of financial service providers.   
Another possible long-term effect of the relationship summary is that it could decrease 
the prevalence of third-party selling concessions in the market by requiring broker-dealers and 
dual registrants to include disclosure about indirect fees associated with investments that 
compensate the broker-dealer, including mutual fund loads.  Currently, selling concessions 
constitute a significant part of the compensation of broker-dealers selling mutual fund 
products.
1170
  For example, a mutual fund may provide a selling concession, in the form of a 
sales charge, some portion of which could be remitted to the broker-dealer that recommended the 
product.  To the extent the relationship summary increases the transparency and salience of such 
selling concessions and related conflicts of interest, investors may start to avoid investing in 
products that provide selling concessions, encouraging broker-dealers to avoid such 
arrangements.  To compensate for the potential loss of concession-based revenue, dually 
registered firms could try to switch customers from their brokerage account to their advisory 
accounts.  As noted above, however, if the relationship summary also increases the 
competitiveness in the broker-dealer and investment adviser markets, the increased 
competitiveness would create some general downward price pressure in the market which may 
                                                                                                                                                             
1170
  See supra Table 2, Section IV.B.1.a.   

 
395 
 
spillover to selling concessions.  
c. Capital Formation 
As discussed above, the relationship summary may improve retail investors’ 
understanding about, and confidence in, the market for brokerage and investment advisory 
services, which may increase participation in this market by investors that previously avoided it. 
Such additional entry by new investors could increase the level of total capital across markets 
and increase the demand for new investment products and securities, which could precipitate 
capital formation in aggregate across the economy.  Depending on the magnitude of these effects, 
the increased availability of funds could result in lower cost of capital for companies, which 
could facilitate economic growth. 
However, to the extent the disclosure of certain information such as conflicts of interest 
or disciplinary history decreases some retail investors’ level of confidence in market for 
brokerage and investment advisory services, or the information provided makes some investors 
believe that they do not benefit from a relationship with a firm or financial professional, such 
investors could exit this market, which could attenuate any effects on capital formation.  In 
addition, to the extent that the market for financial services is already saturated, there may only 
be a redistribution between broker-dealers, investment advisers, and other financial service 
providers ( such as state-registered investment advisers, banks, and insurance companies) as a 
result of retail investors becoming more informed, and any effects on capital formation would be 
attenuated.  
4. Alternatives to the Relationship Summary 
To reduce retail investor search costs and costs of potential mismatch between retail 
investors and professionals in brokerage and investment advisory services, we considered 

 
396 
 
various alternative approaches to the relationship summary, including whether to adopt 
additional disclosure requirements.  We have previously learned through public comments, 
investor testing, and a staff financial literacy study that industry commenters and survey 
participants generally supported a short disclosure document to retail investors that would 
address firms’ nature and scope of services, fees, and material conflicts of interest.
1171
  
Accordingly, we proposed rules and rule amendments to require firms to provide retail investors 
with disclosures designed for those purposes.  In our proposal, we solicited comment on 
alternatives to various elements of the relationship summary.  As discussed in Section I above, 
we also conducted extensive public outreach, including investor roundtables, specific solicitation 
of investor comments through the Feedback Forms, and investor testing.
1172
  We considered the 
suggestions and recommendations received through these processes as alternative approaches in 
our rulemaking, many of which we discussed in greater detail in Sections I and II above.  In 
determining the required scope and level of detail of information in the relationship summary, 
we balanced the need for robust disclosures with the risk of investor information overload and 
failure to properly process these disclosures, a recurring theme in both comment letters and 
investor feedback received through surveys and studies, roundtables and on Feedback Forms. 
                                                                                                                                                             
1171
  See Proposing Release, supra footnote 5, at nn.13–21 and accompanying text. 
1172
  See supra footnotes 11–21 and accompanying text. 

 
397 
 
a. Amending Existing Disclosures 
 
The relationship summary will be a new, separate disclosure, in addition to other 
disclosures that firms already must provide.
1173
  As noted in Section I above, some commenters 
argued that the relationship summary is duplicative of other disclosures, for example in Form 
ADV or in Form BD,  and is thus unnecessary.
1174
  The Commission considered amending Part 
2A of Form ADV to require a brief summary at the beginning of the brochure in addition to the 
existing narrative elements, or changing certain existing Part 2A requirements to reduce or 
eliminate redundancy with parts of the relationship summary.  Similarly, the Commission 
considered whether to amend and require delivery to retail investors of a revised Form BD to 
include the same information as in the relationship summary, and make that information publicly 
available.
1175
   
After careful consideration and for the reasons discussed in Section I above, we believe 
that a separate summary disclosure will be more effective to help retail investors to choose from 
among firms and investment services than modifying existing disclosures.
1176
  We believe that a 
short, standalone relationship summary that facilitates comparisons across different providers 
                                                                                                                                                             
1173
  Broker-dealers and investment advisers have disclosure and reporting obligations under state and federal 
laws, including, but not limited to, obligations under the Exchange Act, the Advisers Act, and the 
respective rules thereunder.  Broker-dealers are also subject to disclosure obligations under the rules of 
SROs.  
1174
  See supra footnote 33 and accompanying text. 
1175
  For example, the instructions to Form BD contain a section on the explanation of terms which could be 
extended to include basic (registrant-specific) information on the business practices of the registrant. 
1176
  See supra footnotes 42–44 and accompanying text. 

 
398 
 
and types of services is necessary to highlight information that is relevant to a retail investor 
before or at the time she is deciding to select a firm, financial professional, account type, or 
services.  To that end, the short and succinct relationship summary includes topics that retail 
investors indicated would be important to them in selecting a provider.  Specifically, because the 
relationship summary is a shorter document and designed to be more of an overview than the 
existing investor-facing disclosures, such as Form ADV, and is specifically targeted to help retail 
investors obtain certain information before deciding to enter into a relationship with a financial 
professional, retail investors facing that decision can process its information content more 
efficiently.  The relationship summary facilitates layered disclosures and highlights where 
investors can access more detailed information, including existing documents that investors 
receive, which could facilitate review of those documents, such as Form ADV Part 2.  The 
relationship summary also promotes the investor receiving more detailed information about the 
provider and its services, as necessary, through conversation starters.   Furthermore, when 
compared to other disclosures that financial professionals may make on, for example, Form 
ADV and Form BD, the relationship summary seeks to enhance comparability across both 
adviser and broker-dealer provider types for retail investors.  
Thus, despite some content duplication with other existing disclosure requirements and 
firms having to bear the cost of creating additional disclosures, we believe that retail investors 
will benefit from having information relevant to deciding on a firm, financial professional, 
and/or accounts and services in one place in a more succinct, salient and standardized fashion.  
Overall, we believe that the relationship summary will enable better-informed decision-making, 
reduce risk of mismatch, and reduced search costs by retail investors. 

 
399 
 
b. Form and Format of the Relationship Summary 
Under the final instructions, firms will be required to describe, largely in their own 
wording, different topics related to their offerings in a question-and-answer format.  In 
comparison, we proposed instructions providing for standardized, declarative headings for each 
section of the relationship summary and a mix of prescribed and firm-specific language within 
each section.  As discussed in Section I above, nearly all commenters and investors providing 
feedback at roundtables and on Feedback Forms suggested modifications to the sample 
relationship summary and proposed instructions, and numerous commenters submitted 
alternative sample relationship summaries.
1177
   
Delivery of SEC-authored form.  Commenters suggested that the SEC author a standard 
industry-wide disclosure to deliver to retail investors, which could then be supplemented by 
firm-specific documents.
1178
  For example, one commenter suggested using as a potential 
framework the Buyers Guides developed by the National Association of Insurance 
Commissioners that insurance companies must deliver under certain circumstances.
1179
  
Commenters supporting an SEC-authored educational layer believed that the SEC was better 
placed than firms to discuss areas viewed to be educational in nature, such as comparisons, 
standard of conduct, and key questions to ask. 
                                                                                                                                                             
1177
  See supra footnotes 36–40 and accompanying text. 
1178
  Primerica Letter. 
1179
  ACLI Letter 

 
400 
 
We have incorporated an element of these commenters’ suggestion by removing the 
comparisons section, which many commenters viewed as educational, and adding a link at the 
beginning of the relationship summary to Investor.gov/CRS where investors can obtain 
educational materials. However, we believe that investors are better served by keeping certain 
disclosures that may be viewed as more educational in nature, such as the standard of conduct 
and some of the “conversation starters” (replacing the “Key Questions to Ask”),  in the 
relationship summary.  We believe investors are more likely to understand how such content will 
affect them when presented in the context of the particular firm.  
Level of Flexibility in the Disclosure.   
As discussed in more detail above, we considered the appropriate level of prescribed 
wording and topics in the disclosure.  Several commenters suggested that, as an alternative to the 
prescriptive wording in the proposed relationship summary, we provide firms with more 
flexibility to craft their responses to items, with or without an SEC standardized disclosure to 
accompany the relationship summary or available on Investor.gov.  We considered the relative 
merits of prescribed wording and formatting versus allowing firms to use their own, as well as a 
mix of prescribed requirements and discretionary choices.  We considered this for different 
topics and sub-topics in the relationship summary, as well as for the relationship summary 
overall.   In some instances, we determined that prescribed wording would provide targeted 
benefits that discretionary wording could not, for example, through the use of standardized 
headings and a prescribed order of topics in order to maintain the benefits of comparability and 

 
401 
 
utility for retail investors.
1180
  For the reasons discussed in Section II, above, we also determined 
to prescribe wording for conversation starters, the standard of conduct, and a factual statement 
regarding the effect of fees over time.  In the event that prescribed wording is inapplicable to a 
firm’s business or inaccurate, the firm may omit or modify that wording.  We believe that this 
approach will allow firms greater flexibility to tailor their relationship summary disclosures to 
reflect their offerings more closely and accurately. H owever, greater flexibility in terms of 
wording could also allow firms to present disclosures in a more advantageous manner to them, 
rather than in a manner that would maximize the benefit  s to investors from the disclosures. 
Nonetheless, we believe retail investors will benefit under this adopted approach by receiving 
disclosures that may be more understandable, and also more informative about a particular firms’ 
offerings that they are considering.   
c. Summary of Fees, Costs, Conflicts, and Standard of Conduct   
In response to comments and investor feedback through surveys and studies, roundtable 
and the Feedback Forms, we are adopting changes from the proposal to the relationship 
summary’s required discussion of fees, costs, conflicts of interest, and standard of conduct, as 
described above.
1181
   
In connection with fee disclosure, the Commission considered many alternative 
approaches relating to the scope and types of fees firms must include in their relationship 
                                                                                                                                                             
1180
  See supra Section II.A.1. 
1181
   See supra Section II.B.3.   

 
402 
 
summaries, as well as the presentation of the fee disclosure.
1182
  As discussed in Section II.A.4 
above, commenters’ views varied on the scope and types of fees that should be disclosed and 
their level of detail.
1183
  In addition to what we had proposed and what we have adopted, the 
Commission considered other alternatives, such as whether to require firms to list all fees that 
retail investors may incur, to allow firms the flexibility to determine what fees to highlight, and 
variations or combinations of these approaches.  The final approach is designed to balance the 
need to provide a comprehensive view of what fees retail investors will pay with the need to 
produce relevant, succinct and understandable disclosures.  The final instructions do not require 
firms to disclose every single fee and instead permit firms to highlight examples of the categories 
of the most common fees that their retail investors will pay directly or indirectly.
1184
  We believe 
this approach benefits retail investors because they will be able to compare fee information that 
is more closely tailored to firms’ particular business practices, but also reflective of common fees 
that retail investors are likely to incur. 
The Commission also considered alternative ways in which firms should present their 
fees, such as whether to require firms to link to or include a fee schedule directly in the 
relationship summary,
1185
 or to require firms to include a hypothetical fee example.
1186
  Under 
                                                                                                                                                             
1182
  See supra Section II.A.4.  In addition, the Commission considered alternative approaches with respect to 
the disclosure regarding a firm’s conflicts of interest and standard of conduct.  A discussion of the 
Commission’s consideration may be found in Section II.A.4. 
1183
  See supra footnotes 420–423 and accompanying text. 
1184
  See Item 3.A. of Form CRS. 
1185
   See supra footnotes 426–435 and accompanying text. 
1186
  See supra footnotes 438–435 and accompanying text. 

 
403 
 
the final instructions, firms must summarize their principal fees and costs and other fees and also 
include specific cross-references to more detailed information about their fees available in other 
sources.
1187
  The Proposing Release discussed the option of including an example of the impact 
of fees in the relationship summary.
1188
 While some commenters supported the inclusion of 
various forms of additional examples of fees calculations,
1189
 a fter careful consideration of the 
comment file and investor feedback received through studies and surveys, roundtables and 
Feedback Forms, we are declining to include a hypothetical fee example in the relationship 
summary.  We do so in light of commenters who suggested that such an example could be 
operationally difficult to implement, and that it could be perceived as confusing.
1190
  
Specifically, we believe the assumptions required to make a fee example relevant for investors 
vary for individual investors to the extent that a standardized example risks increasing investor 
confusion.   
 Instead, to help stimulate this discussion, a firm must include in the relationship summary 
the following conversation starter: “Help me understand how these fees and costs might affect 
my investments.  If I give you $10,000 to invest, how much will go to fees and costs, and how 
                                                                                                                                                             
1187
  See Item 3.A.(ii) of Form CRS. 
1188
  Proposing Release, supra footnote 5. 
1189
        See, e.g., Wahl Letter; AARP Letter; Betterment Letter I.  
1190
  NSCP Letter; Edward Jones Letter (noting that given the range of services available, it would be very 
difficult for financial professionals to fully address this question at the outset of the relationship, 
particularly for investors selecting transaction-based services); TIAA Letter; LPL Financial Letter; 
Primerica Letter; ICI Letter; SIFMA Letter (noting most firms do not currently have systems in place to 
allow financial professionals to answer customer-specific questions). 

 
404 
 
much will be invested for me?”
1191
  As discussed above,
1192
 t his represents a different wording 
from the corresponding “Do the Math for Me” Key Question in the proposal, but we expect it to 
similarly encourage the retail investor to ask about the amount they would typically pay per year 
for the account and what is included in those fees, while being easier and less costly to answer 
for firms at the outset of the relationship.  
d. Filing and Delivery 
In connection with filing and delivery, Commission considered alternatives relating to 
filing formats, filing systems, and timeframes for firms’ initial relationship summary and 
subsequent updates.  As discussed in Section II.C. above, firms will file copies of their 
relationship summaries with the Commission. The proposed instructions provided that firms 
must file their relationship summaries in a text-searchable format but did not specify one. We 
solicited comment on whether the relationship summary should be filed as a text-searchable PDF, 
similar to how Form ADV is currently filed, or other enumerated formats.  We also asked about 
what type of format would facilitate greater comparability across forms. Two commenters 
advocated that the relationship summary should be filed not only in a text-searchable, but also 
machine-readable format, in order to facilitate development of data aggregation tools allowing 
for comparability of forms across providers.
1193
  The Commission believes that although a PDF 
                                                                                                                                                             
1191
  Item 3.A.(iv) of Form CRS. 
1192
  See supra Sections II.A.4 and II.B.3.a. 
1193
  CFA Letter I (“past experience regarding investors’ limited use of existing databases, such as IARD and 
BrokerCheck, cautions against placing too much reliance on investors’ accessing the documents directly.  
We therefore urge the Commission to require that the documents be filed, not just in a text-searchable 
format, but in a machine-readable format.”); Schnase Letter (“the data contained in the Relationship 
 

 
405 
 
submission format would not be the most ideal for comparing or aggregating data across 
relationship summary filings, it would likely be the easiest and least costly. A fillable form 
allowing the firm to enter text, similar to Form ADV Part 1, also would not be costly, but would 
not easily accept formatted tables or other graphical information. The final instructions, as with 
the proposed instructions, do not specify a particular format, but the current filing systems 
default firms to PDF format.  In a change from the proposal, we are requiring firms to implement 
machine-readable headings for their filings. We agree with the commenters that suggested this 
change that this approach facilitates some degree of data aggregation, while imposing limited 
costs on registrants.  
Furthermore, we requested comments on alternative filing systems for the relationship 
summary.  In response to comment and upon further consideration, as discussed in Section II.C.2 
above,
1194
 we are requiring broker-dealers to file their relationship summaries through Web 
CRD
®
, instead of EDGAR, as proposed. 
As discussed in Section II.C.3.a above, we also considered whether to allow more 
permissive use of electronic delivery. As proposed, we are affirming that the relationship 
summary must be delivered in accordance with the Commission’s electronic delivery guidance.  
We are adopting an additional instruction, however, that a firm may deliver the relationship 
summary to new or prospective clients or customers in a manner that is consistent with how the 
retail investor requested information about the firm or financial professional, and that this 
                                                                                                                                                             
Summary should be required to be filed in a structured data format, so the document can be utilized as a 
stand-alone human-readable document and serve as the source for a machine-readable data set”). 
1194
  See supra footnotes 666 – 669 and accompanying text. 

 
406 
 
method of initial delivery for the relationship summary would be consistent with the 
Commission’s electronic delivery guidance.
1195
  Commenters suggested different approaches to 
electronic delivery, such as the “notice plus access” model, and a more comprehensive updating 
of the Commission’s electronic delivery guidance, which we considered as alternative 
approaches in this rulemaking.  While we recognize the potential cost savings to firms of 
allowing greater use of electronic delivery, we place great importance on how investors prefer to 
receive information.  Some commenters said that investors prefer to receive electronic 
disclosures because they are delivered faster and can be in more engaging formats, including 
video and audio.  On the other hand, investor surveys and investor testing show that some 
investors still prefer to receive paper disclosures, including in a hybrid approach of electronic 
disclosure with the option for paper.
1196
  As discussed in greater detail in Section II.C.3.a, the 
adopted approach of encouraging electronic presentations that are engaging to retail investors, 
while preserving the option for paper, within the framework of the Commission’s electronic 
delivery guidance and in accordance with retail investors’ preferences, is appropriate for the 
relationship summary. 
e. Transition Provisions  
As discussed above, we are adopting an initial date of June 30, 2020 for all firms that are 
registered, or investment advisers who have an application for registration pending with, the 
                                                                                                                                                             
1195
  See Proposing Release, supra footnote 5, at nn.344–45 and accompanying text; see also 2000 Guidance, 
supra footnote 678, at 65 FR 25845–46; 96 Guidance, supra footnote 678, at 61 FR 24647; and 95 
Guidance, supra footnote 678, at 60 FR 53461.  
1196
  See supra footnotes 682-689and accompanying text. 

 
407 
 
Commission prior to June 30, 2020, to file their initial relationship summaries with the 
Commission.   We considered tiered compliance dates for firms of different sizes.  We believe 
that the compliance dates, as adopted, balance the time and resources needed by different firms, 
as well as the assets under management and the number of firms that would be covered within 
the different compliance periods.   
V. PAPERWORK REDUCTION ACT ANALYSIS  
The amendments that we are adopting here contain “collection of information” 
requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).
1197
  In the 
Proposing Release, we solicited comment on the proposed collection of information 
requirements.  We also submitted the proposed collection of information to the Office of 
Management and Budget (“OMB”) for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 
1320.11.  The titles for the collections of information we are amending are (i) “Form ADV” 
(OMB control number 3235-0049); (ii) “Rule 204-2 under the Investment Advisers Act of 1940” 
(OMB control number 3235-0278); (iii) “Rule 17a-3; Records to be Made by Certain Exchange 
Members, Brokers and Dealers” (OMB control number 3235-0033) and (iv) “Rule 17a-4; 
Records to be Preserved by Certain Exchange Members, Brokers and Dealers” (OMB control 
number 3235-0279).  The new collections of information we are adopting
1198
 relate to (i) “Rule 
                                                                                                                                                             
1197
  44 U.S.C. 3501 et seq. 
1198
  The Commission is not adopting two other rules in the Proposing Release that would have contained 
collections of information.  Proposed rule 211h-1 under the Advisers Act and proposed rule 15l-3 under the 
Exchange Act relate to the disclosure of Commission registration status and financial professional 
association.  As discussed in Section I above, we have concluded that the combination of the disclosure 
requirements in Form CRS and Regulation Best Interest should adequately address the objectives of the 
proposed Affirmative Disclosures.   
 

 
408 
 
204-5 under the Investment Advisers Act of 1940” (OMB control number 3235-0767); and (ii) 
“Form CRS and rule 17a-14 under the Exchange Act” (OMB control number 3235-0766).  We 
are also amending 17 CFR 200.800 to display the control number assigned to information 
collection requirements for “Form CRS and rule 17a-14 under the Exchange Act” by OMB 
pursuant to the PRA.  An agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a currently valid control OMB number.  
A. Form ADV 
Form ADV (OMB Control No. 3235-0049) is currently a two-part investment adviser 
registration form.  Part 1 of Form ADV contains information used primarily by Commission staff, 
and Part 2A is the client brochure.  We use the information to determine eligibility for 
registration with us and to manage our regulatory and examination programs.  Clients use certain 
of the information to determine whether to hire or retain an investment adviser.  The collection 
of information is necessary to provide advisory clients, prospective clients, and the Commission 
with information about the investment adviser and its business, conflicts of interest and 
personnel.  Rule 203-1 under the Advisers Act requires every person applying for investment 
adviser registration with the Commission to file Form ADV.  Rule 204-4 under the Advisers Act 
requires certain investment advisers exempt from registration with the Commission (“exempt 
reporting advisers”) to file reports with the Commission by completing a limited number of items 
on Form ADV.  Rule 204-1 under the Advisers Act requires each registered and exempt 
reporting adviser to file amendments to Form ADV at least annually, and requires advisers to 
                                                                                                                                                             
 

 
409 
 
submit electronic filings through IARD.  The paperwork burdens associated with rules 203-1, 
204-1, and 204-4 are included in the approved annual burden associated with Form ADV and 
thus do not entail separate collections of information.  These collections of information are found 
at 17 CFR 275.203-1, 275.204-1, 275.204-4 and 279.1 (Form ADV itself) and are mandatory.  
Responses are not kept confidential.   
We are adopting amendments to Form ADV to add a new Part 3, requiring registered 
investment advisers that offer services to retail investors to prepare and file with the Commission, 
post to the adviser’s website (if it has one), and deliver to retail investors a relationship summary, 
as discussed in greater detail in Section II above.  Advisers will deliver the relationship summary 
to both existing clients and new or prospective clients who are retail investors.  As with Form 
ADV Parts 1 and 2, we will use the information to determine eligibility for registration with us 
and to manage our regulatory and examination programs.  Similarly, clients can use the 
information required in Part 3 to determine whether to hire or retain an investment adviser as 
well as what types of accounts and services are appropriate for their needs.   
The collection of information is necessary to provide advisory clients, prospective clients, 
and the Commission with information about the relationships and services the firm offers to 
retail investors, fees and costs that the retail investor will pay, specific conflicts of interest and 
standards of conduct, legal or disciplinary history, and how to obtain additional information 
about the firm.  The amendment requiring investment advisers to deliver the relationship 
summary is contained in a new collection of information under new rule 204-5 under the 

 
410 
 
Advisers Act, for which estimates are discussed below.  We did not propose amendments to Part 
1 or 2 of Form ADV.
1199
  
As discussed in Sections I and II of this release, we received comments that addressed 
whether the relationship summary is duplicative of other disclosures and necessary for 
investment advisers, and whether we could further minimize the burden of the proposed 
collections of information.  One commenter specifically addressed the accuracy of our burden 
estimates for the proposed collection of information, suggesting that our estimates were too low 
because compliance professionals estimated it would take 80-500 hours to prepare, deliver, and 
file the relationship summary, depending on the firm’s size and business model.
1200
  Another 
commenter said the current Form ADV requirements are a burden to smaller firms and that the 
currently approved burdens of 23.77 hours and $6,051 are too low.
1201
  Others commented more 
broadly that certain costs to prepare and file the relationship summary would be higher than we 
estimated in the proposal.
1202
  We have considered these comments and are increasing our PRA 
burden estimates from 5 hours to 20 hours for investment advisers to prepare and file the 
relationship summary.    We also modified several substantive requirements to mitigate some of 
these estimated increased costs relative to the proposal. 
                                                                                                                                                             
1199
  We are adopting technical amendments to the General Instructions of Form ADV to add references to the 
Part 3, but these amendments would not affect the burden of Part 1 or Part 2.  See amended General 
Instructions to Form ADV.   
1200
  See NSCP Letter.     
1201
  See Marotta Letter.     
1202
  See, e.g., MarketCounsel Letter.  Others argued that the cost of Form CRS and Regulation Best Interest 
would be high.  See, e.g., Raymond James Letter; CCMC Letter (investor polling results); SIFMA Letter. 

 
411 
 
1. Respondents:  Investment Advisers and Exempt Reporting Advisers 
The respondents to current Form ADV are investment advisers registered with the 
Commission or applying for registration with the Commission and exempt reporting advisers.
1203
  
Based on the IARD system data as of December 31, 2018, approximately 13,299 investment 
advisers were registered with the Commission, and 4,280 exempt reporting advisers file reports 
with the Commission.  
As discussed above, we are adopting amendments to Form ADV that w ill add a new Part 
3, requiring certain registered investment advisers to prepare and file a short and accessible 
relationship summary for retail investors.  Based on IARD system data as of December 31, 2018, 
the Commission estimates that 8,235 investment advisers have some portion of their business 
dedicated to retail investors, including either individual high net worth clients or individual non-
high net worth clients,
1204
 which is higher relative to the estimate in the Proposing Release.
1205 
   
                                                                                                                                                             
1203
  An exempt reporting adviser is an investment adviser that relies on the exemption from investment adviser 
registration provided in either section 203(l) of the Advisers Act because it is an adviser solely to one or 
more venture capital funds or 203(m) of the Advisers Act because it is an adviser solely to private funds 
and has assets under management in the United States of less than $150 million.  An exempt reporting 
adviser is not a registered investment adviser and therefore would not be subject to the relationship 
summary requirements. 
1204
  Proposing Release, supra footnote 5, at Section V.A.1. Based on responses to Item 5.D. of Form ADV, 
these advisers indicated that they advise either high net worth individuals or individuals (other than high 
net worth individuals), which includes trusts, estates, and 401(k) plans and IRAs of individuals and their 
family members, but does not include businesses organized as sole proprietorships in Item 5.D.(a)(1) of 
Form ADV or have regulatory assets attributable to either high net worth individuals or individuals other 
than high net worth individuals in Item 5.D.(a)(3) of Form ADV.  The definition of retail investor will 
include the legal representatives of natural persons who seek to receive or receive services primarily for 
personal, family, or household purposes.  As discussed in Section II.C.1 above, a legal representative of a 
natural person will cover only non-professional legal representatives (e.g., a non-professional trustee that 
represents the assets of a natural person and similar representatives such as executors, conservators, and 
persons holding a power of attorney for a natural person).  We are not able to determine, based on 
responses to Form ADV, exactly how many advisers provide investment advice to these types of legal 
representatives or trustees; however, we believe that these advisers most likely also advise individuals and 
are therefore included in our estimate. 

 
412 
 
This will leave 5,064 registered investment advisers that do not provide advice to retail 
investors
1206
 and 4,280 exempt reporting advisers that will not be subject to Form ADV Part 3 
requirements, but are included in the PRA analysis for purposes of updating the overall Form 
ADV information collection.
1207
  We also note that these figures include the burdens for 318 
registered broker-dealers that are dually registered as investment advisers as of December 31, 
2018.
1208
  We did not receive comments related to the methodology used for estimating the 
number of investment advisers that will be subject to Form ADV Part 3 requirements.  We are 
maintaining the methodology we used in the Proposing Release and are updating our estimates to 
reflect the increased number of investment advisers and exempt reporting advisers since the last 
burden estimate.  
2. Changes in Average Burden Estimates and New Burden Estimates 
Based on the prior revision of Form ADV,
1209
 the currently approved total aggregate 
annual hour burden estimate for all advisers of completing, amending, and filing Form ADV 
(Part 1 and Part 2) with the Commission is 363,082 hours, or a blended average of 23.77 hours 
                                                                                                                                                             
1205
  We estimated in the Proposing Release that approximately 7,625 registered investment advisers of the 
12,721 registered investment advisers would be subject to the relationship summary requirements, based on 
IARD system data as of December 31, 2017.  See Proposing Release, supra footnote 5 at Section V.A.  
1206
  13,299 registered investment advisers – 8,235 = 5,064 registered investment advisers not providing advice 
to retail investors. 
1207
  Based on IARD system data. 
1208
  See supra footnote 863. 
1209
  See Form ADV and Investment Advisers Act Rules, Final Rule, Investment Advisers Act Release No. 4509 
(Aug. 25, 2016) [81 FR 60418 (Sept. 1, 2016)] (“2016 Form ADV Paperwork Reduction Analysis”). 

 
413 
 
per adviser,
1210
 with a monetized total of $92,404,369, or $6,051 per adviser.
1211
  The currently 
approved annual cost burden is $13,683,500.  This burden estimate is based on: (i) the total 
annual collection of information burden for SEC-registered advisers to file and complete Form 
ADV (Part 1 and Part 2); and (ii) the total annual collection of information burden for exempt 
reporting advisers to file and complete the required items of Part 1A of Form ADV.  Broken 
down by adviser type, the current approved total annual hour burden is 29.22 hours per SEC-
registered adviser and 3.60 hours per exempt reporting adviser.
1212
  The amendments will 
increase the current burden estimate due in part to the amendments to Form ADV to add Form 
ADV Part 3:  Form CRS (the relationship summary) and the increased number of investment 
advisers and exempt reporting advisers since the last burden estimate.  We did not propose 
amendments to Part 1 or Part 2 of Form ADV.   
The amendments to Form ADV to add Part 3 will increase the information collection 
burden for registered investment advisers with retail investors.  As discussed above in Sections I 
and II of this release, registered investment advisers providing services to retail investors will be 
required to prepare and file a relationship summary with the Commission electronically through 
IARD in the same manner as they currently file Form ADV Parts 1 and 2.  We are also requiring 
that all relationship summaries be filed in a text-searchable format with machine-readable 
                                                                                                                                                             
1210
  363,082 hours / (12,024 registered advisers + 3,248 exempt reporting advisers) = 23.77 hours.  
1211
  $92,404,369 hours / (12,024 registered advisers + 3,248 exempt reporting advisers) = $6,051.  
1212
  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR 60454. 

 
414 
 
headings.  These investment advisers also will be required to amend and file an updated 
relationship summary within 30 days whenever any information becomes materially inaccurate.   
As noted above, not all investment advisers will be required to prepare and file the 
relationship summary.  For those investment advisers, the per adviser annual hour burden for 
meeting their Form ADV requirements will remain the same, in particular, 29.22 hours per 
registered investment adviser without relationship summary obligations.  Similarly, because 
exempt reporting advisers also will not have relationship summary obligations, the annual hour 
burden for exempt reporting advisers to meet their Form ADV obligations will remain the same, 
at 3.60 hours per exempt reporting adviser.  However, although we did not propose amendments 
to Form ADV Part 1 and Part 2, and the per adviser information collection burden will not 
increase for those without the obligation to prepare and file the relationship summary, the 
information collection burden attributable to Parts 1 and 2 of Form ADV will increase due to an 
increase in the number of registered investment advisers and exempt reporting advisers since the 
last information collection burden estimate.  We discuss below the increase in burden for Form 
ADV overall attributable to the adopted amendments, i.e., new Form ADV Part 3: Form CRS, 
and the increase due to the updated number of respondents that will not be subject to the adopted 
amendments. 
a. Initial Preparation and Filing of Relationship Summary  
As discussed above in Section II, investment advisers will be required to prepare and 
file a relationship summary summarizing specific aspects of their investment advisory 
services that they offer to retail investors.  Much of the required information overlaps with 
that required by Form ADV Part 2A and therefore should be readily available to registered 
investment advisers because of their existing disclosure obligations.  Investment advisers also 

 
415 
 
already file the Form ADV Part 2A brochure on IARD, and we have considered this factor in 
determining our estimate of the additional burden to prepare and file the relationship 
summary.   
In the Proposing Release, we estimated that the initial first year burden for preparing 
and filing the relationship summary, for investment advisers that provide advice to retail 
investors, would be 5 hours per registered adviser.
1213
  Some commenters said that these 
estimated burdens were too low,
1214
 and one argued that the current burden estimates for 
Form ADV are too low.
1215
  One commenter specifically argued that preparing, delivering, 
and filing the relationship summary would take from 80 to 500 hours, based on input from 
compliance professionals, and noted there would be additional costs that are hard to quantify, 
including human resources and information technology programming.
1216
  Commenters also 
said more broadly that the relationship summary would be burdensome for investment 
advisers
1217
 and would result in additional compliance burdens including training.
1218
       
                                                                                                                                                             
1213
  See Proposing Release, supra footnote 5, at nn.356 –367 and accompanying text.  
1214
  See, e.g., NSCP Letter; see also CCMC Letter (costs to implement the proposal were underestimated and 
greater than 40% of firms surveyed anticipate having to spend a moderate or substantial amount to 
implement Regulation Best Interest and Form CRS); SIFMA Letter (stating that implementation costs of 
Regulation Best Interest and Form CRS would be significant).   
1215
  See Marotta Letter. 
1216
 See NSCP Letter.  
1217
  See MarketCounsel Letter. 
1218
  See NSCP Letter (stating that a minimum of two hours of firm level training or two hours of training per 
independent registered representative will be required prior to implementation and delivery of the 
relationship summary).   

 
416 
 
We are revising our estimate of the time that it would take each adviser to prepare and 
file the relationship summary in the first year from 5 hours in the proposal to 20 hours in light 
of these comments and the changes we are making to the proposed relationship summary.
1219
  
For example, as discussed in the Proposing Release, we estimated that it would take firms a 
shorter amount of time to prepare the relationship summary than to prepare more narrative 
disclosures due to the standardized nature and prescribed language of the relationship 
summary.  As discussed above, the final instructions require less prescribed wording relative 
to the proposal and require firms to draft their own summaries for most of the sections.  In 
addition and in a change from the proposal, we are now requiring that all relationship 
summaries be filed with machine-readable headings, as well as in a text-searchable format as 
proposed.  We acknowledge that these changes will increase cost burdens because advisers 
will have to develop their own wording and design, as well as implement machine-readable 
headings, to comply with these requirements.     
The relationship summary will also require more layered disclosures relative to the 
proposal and will encourage the use of electronic formatting and graphical, text, online 
features to facilitate access to other disclosures that provide additional detail.  Although much 
of the information that will be summarized in the relationship summary is contained in other 
disclosures that firms already provide, firms will bear the cost of preparing a new relationship 
summary and cross-referencing or hyperlinking to additional information.  The higher 
estimated burden estimate also reflects our acknowledgement that it will take firms longer to 
                                                                                                                                                             
1219
  See infra footnote 1221.   

 
417 
 
draft certain disclosures than we estimated in the Proposing Release, such as answers to 
“conversation starters” that advisers providing automated investment advisory without a 
particular individual with whom a retail investor can discuss these questions must include on 
their website.  We believe these factors and the other changes we made to the proposal will 
increase the burden to prepare a relationship summary relative to the proposal.    
We are estimating the same hourly burden for investment advisers and investment 
advisers that are dually registered as broker-dealers because we are counting dually registered 
firms in the burden calculation for Form ADV and the Exchange Act rule that requires the 
relationship summary for broker-dealers.
1220
  We recognize that the burden for some advisers 
will exceed our estimate, and the burden for others will be less due to the nature of their 
business, but we do not believe that the range could be as high as some commenters 
suggested.
1221
  After consideration of comments and changes we made to the requirements 
                                                                                                                                                             
1220
  The burden estimates for dual registrants to prepare and file the relationship summary are accounted for in 
the burden estimates for Form ADV and under Exchange Act rule 17a-14.  For example, a dual registrant 
that prepares an initial relationship summary that covers both its advisory business and broker-dealer 
business has an estimated burden of 60 hours amortized (20 hours to prepare and file relationship summary 
related to the advisory business + 40 hours to prepare and file relationship summary related to the broker-
dealer business).  
1221
  See NSCP Letter (estimating that the time required to prepare, deliver and file the relationship summary 
would be anywhere from 80 to 500 hours).  In estimating the cost for the initial preparation of Form ADV 
Part 2, we estimated that small, medium, and large advisers would require 15, 97.5, and 1989 hours 
respectively to prepare Form ADV Parts 1 and 2, for investment advisers overall, and the per adviser 
annual hour burden for meeting their Form ADV Parts 1 and 2 requirements is 36.24 hours.  See Brochure 
Adopting Release, supra footnote 576, at 75 FR at 49257.  In comparison, as discussed above, the 
relationship summary is limited to two pages in length for standalone investment advisers and four pages in 
length for dual registrants in paper format (or equivalent in electronic format).  While we recognize that 
different firms may require different numbers of hours to prepare and file the relationship summary, we 
believe that a first year average of 20 hours for investment advisers with relationship summary obligations 
is an appropriate estimate for purposes of calculating an aggregate burden for the industry, for purposes of 
the PRA analysis, particularly given our experience with the burdens for Form ADV Parts 1 and 2. 

 
418 
 
relative to the proposal and in light of the current approved burden for Part 2 of Form ADV, 
which requires more disclosures than the relationship summary, we are increasing the 
estimated burden relative to the proposal to 20 hours in the first year.
1222
  We therefore 
estimate that the total burden of preparing and filing the relationship summary will be 164,700 
hours.
1223
   
As with the Commission’s prior Paperwork Reduction Act estimates for Form ADV, 
we believe that most of the paperwork burden will be incurred in advisers’ initial preparation 
and filing of the relationship summary, and that over time this burden will decrease 
substantially because the paperwork burden will be limited to updating information.
1224
  The 
estimated initial burden associated with preparing and filing the relationship summary will be 
amortized over the estimated period that advisers will use the relationship summary, i.e., over a 
three-year period.
1225
  The annual hour burden of preparing and filing the relationship 
summary will therefore be 54,900.
1226
  In addition, based on IARD system data, the 
Commission estimates that 1,227 new investment advisers will file Form ADV with us 
                                                                                                                                                             
1222
  We believe that much of the information required in the relationship summary overlaps with that required 
by Form ADV Part 2 and therefore should be readily available to investment advisers because of their 
existing disclosure obligations.  Accordingly, although these new requirements will cause an increase in the 
information collected, the increased burden should largely be attributable to data entry and not data 
collection.   
1223
  20.0 hours x 8,235 investment advisers = 164,700 total aggregate initial hours. 
1224
  We discuss the burden for advisers making annual updating amendments to Form ADV in Section V.A.2.c 
below.   
1225
  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209.  Amortizing the 20 hour burden 
imposed by the relationship summary over a three-year period will result in an average annual burden of 
6.67 hours per year for each of the 8,235 investment advisers with relationship summary obligations. 
1226
  20.0 hours x 8,235 investment advisers / 3 = 54,900 total annual aggregate hours. 

 
419 
 
annually; of these, 656 will be required to prepare and file the relationship summary.
1227
  
Therefore, the aggregate initial burden for newly registered advisers to prepare and file the 
relationship summary will be 13,120
1228
 and, amortized over three years, 4,373 on an annual 
basis.
1229
  In sum, the annual hour burden for existing and newly registered investment advisers 
to prepare and file a relationship summary will be 59,273 hours,
1230
 or approximately 6.67 
hours per adviser,
1231
 f or an annual monetized cost of $16,181,529, or $1,965 per adviser.
1232
 
b. Estimated External Costs for Investment Advisers Preparing 
the Relationship Summary 
The currently approved total annual collection of information burden estimate for Form 
ADV anticipates that there will be external costs, including (i) a one-time initial cost for outside 
                                                                                                                                                             
1227
  The number of new investment advisers is calculated by looking at the number of new advisers in 2017 and 
2018 and then determining the number each year that serviced retail investors.  (644 for 2017 + 668 for 
2018) / 2 = 656.  
1228
  656 new RIAs required to prepare relationship summary x 20.0 hours = 13,120 hours for new RIAs to 
prepare relationship summary. 
1229
  656 x 20.0 hours / 3 = 4,373. 
1230
  (164,700 + 13,120) / 3 years = 59,273 annual hour burden for existing and new advisers to prepare and file 
relationship summary.  
1231
  59,273 hours / (8,235 existing advisers + 656 new advisers) = 6.67 hours per year.  
1232
  59,273 is the total aggregate initial hour burden for preparing and filing a relationship summary. We 
believe that performance of this function will most likely be equally allocated between a senior compliance 
examiner and a compliance manager. Data from the Securities Industry Financial Markets Association’s 
Management & Professional Earnings in the Securities Industry 2013 (“SIFMA Management and 
Professional Earnings Report”), modified by Commission staff to account for an 1,800-hour work-year and 
inflation, and multiplied by 5.35 (professionals) or 2.93 (office) to account for bonuses, firm size, employee 
benefits, and overhead, suggest that costs for these positions are $237 and $309 per hour, respectively. 
(59,273 hours x 50% x $237) + (59,273 hours x 50% x $309 = $16,181,529). $16,181,529 / 8,235 
investment advisers = $1,965 per investment adviser.  The SIFMA Management and Professional Earnings 
Report was updated in 2019 to reflect inflation.  The numbers in the report are higher than the numbers we 
used in the Proposing Release and, along with the higher hourly burden, result in higher cost estimates in 
this release, relative to the proposal.   

 
420 
 
legal and compliance consulting fees in connection with the initial preparation of Part 2 of Form 
ADV, and (ii) the cost for investment advisers to private funds to report the fair value of their 
private fund assets.
1233
  We do not anticipate that the amendments to add a new Part 3 will affect 
the per adviser cost burden for those existing requirements but anticipate that some advisers may 
incur a one-time initial cost for outside legal and consulting fees in connection with the initial 
preparation of the relationship summary.  We do not anticipate external costs to investment 
advisers in the form of website set-up, maintenance, or licensing fees because they will not be 
required to establish a website for the sole purpose of posting their relationship summary if they 
do not already have a website.  We also do not expect other ongoing external costs for the 
relationship summary.   
In the Proposing Release, we estimated that an external service provider would spend 3 
hours helping an adviser prepare an initial relationship summary.  While we received no specific 
comments on our estimate regarding external costs in the Proposing release, one commenter 
suggested that there would be additional implementation costs such as legal advice, but that these 
costs are difficult to quantify.
1234
  Another argued that that the current burden estimates for Form 
ADV did not take into consideration the time spent on learning about the complexities of what is 
needed to comply with similar requirements.
1235
  Based on the concerns expressed by these 
                                                                                                                                                             
1233
  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR 60452.  The estimated 
external costs of outside legal and consulting services for the relationship summary are in addition to the 
estimated hour burden discussed above.   
1234
  See NSCP Letter.   
1235
  See Marotta Letter.   

 
421 
 
commenters and the changes we are making to the relationship summary, we are increasing the 
estimate relative to the proposal from 3 to 5 hours. While we recognize that different firms may 
require different amounts of external assistance in preparing the relationship summary, we 
believe that this is an appropriate average number for estimating an aggregate amount for the 
industry purposes of the PRA analysis, particularly given our experience with the burdens for 
Form ADV.
1236
   
Although advisers that will be subject to the relationship summary requirement may vary 
widely in terms of the size, complexity,  and nature of their advisory business, we believe that the 
strict page limits will make it unlikely that the amount of time, and thus cost, required for outside 
legal and compliance review will vary substantially among those advisers who elect to obtain 
outside assistance.
 
 
Most of the information required in the relationship summary is readily available to 
investment advisers from Form ADV Part 2A, and the narrative descriptions are concise, brief, 
and at a summary level.  As a result, we continue to anticipate, as discussed in the proposal, that 
only 25% of investment advisers will seek the help of outside legal services and 50% of 
investment advisers will seek the help of compliance consulting services in connection with the 
initial preparation of the relationship summary.
1237
  We estimate that the initial per existing 
                                                                                                                                                             
1236
  In estimating the external cost for the initial preparation of Form ADV Part 2, we estimated that small, 
medium, and large advisers would require 8, 11, and 26 hours of outside assistance, respectively, to prepare 
Form ADV Part 2. See Brochure Adopting Release, supra footnote 576, at 75 FR at 49257.  In comparison, 
as discussed above, the relationship summary is limited to two pages in length for standalone investment 
advisers and four pages in length for dual registrants in paper format (or equivalent in electronic format).   
1237
  See Proposing Release, supra footnote 5 at Section V.A.  We did not receive comments on these estimates.  
While we recognize that the instructions have changed, we continue to believe that only 25% of advisers 
will seek help of outside legal services and 50% of advisers will seek compliance consulting services, and 
 

 
422 
 
adviser cost for legal services related to the preparation of the relationship summary will be 
$2,485.
1238
  We estimate that the initial per existing adviser cost for compliance consulting 
services related to the preparation of the relationship summary will be $3,705.
1239
  Thus, the 
incremental external cost burden for existing investment advisers is estimated to be $20,371,331, 
or $6,790,444 annually when amortized over a three-year period.
1240
  In addition, we estimate 
that 1,227 new advisers will register with us annually, 656 of which will be required to prepare a 
relationship summary.  For these 656 new advisers, we estimate that they will require $1,622,780 
in external costs to prepare the relationship summary, or $540,927 amortized over three 
years.
1241
  In summary, the annual external legal and compliance consulting cost for existing and 
                                                                                                                                                             
that these estimates are appropriate for purposes of the PRA analysis, particularly given our experience 
with the external burdens for Form ADV Parts 1 and 2.  
1238
  External legal fees are in addition to the projected hour per adviser burden discussed above.  Data from the 
SIFMA Management and Professional Earnings Report suggest that outside legal services cost 
approximately $497 per hour.  $497 per hour for legal services x 5 hours per adviser = $2,485.  The hourly 
cost estimate of $497 is based on an inflation-adjusted figure and our consultation with advisers and law 
firms who regularly assist them in compliance matters.  
1239
  External compliance consulting fees are in addition to the projected hour per adviser burden discussed 
above.  Data from the SIFMA Management and Professional Earnings Report, modified to account for an 
1,800-hour work year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and 
overhead, and adjusted for inflation, suggest that outside management consulting services cost 
approximately $741 per hour.  $741 per hour for outside consulting services x 5 hours per adviser = $3,705. 
1240
  25% x 8,235 existing advisers x $2,485 for legal services = $5,115,994 for legal services.  50% x 8,235 
existing advisers x $3,705 for compliance consulting services = $15,255,338.  $5,115,994 + $15,255,338 = 
$20,371,331 in external legal and compliance consulting costs for existing advisers.  $20,371,333 / 3 = 
$6,790,444 annually. 
1241
  25% x 656 new advisers x $2,485 for legal services = $407,540.  50% x 656 new advisers x $3,705 for 
compliance consulting services = $1,215,240.  $407,540 + $1,215,240 = $1,622,780 in external legal and 
compliance consulting costs for new advisers. $1,622,780 / 3 = $540,927.annually in external legal and 
compliance consulting costs for newly registered advisers. 

 
423 
 
new advisers relating to obligations to prepare the relationship summary is estimated to total 
$7,331,370, or $825 per adviser.
1242
     
c. Amendments to the Relationship Summary and Filing of 
Amendments 
The current approved information collection burden for Form ADV also includes the 
hour burden associated with annual and other amendments to Form ADV, among other 
requirements.  In the Proposing Release, we estimated that the relationship summary would 
increase the annual burden associated with Form ADV by 0.5 hours
1243
 due to amendments to 
the relationship summary, for those advisers required to prepare and file a relationship summary.  
We did not receive comments regarding hour burdens associated with preparing and filing 
amendments to the relationship summary.  As discussed in section II. C.4 above, in a change 
from the proposal, we are adding a requirement that firms preparing updated relationship 
summaries to existing clients also highlight the most recent changes by, for example, marking 
the revised text or including a summary of material changes.
1244
  To account for this change, we 
are increasing the annual burden to 1 hour per year to amend and file a relationship summary.
1245
  
                                                                                                                                                             
1242
  $6,790,444 in annual external legal and compliance consulting costs for existing advisers + $540,927 
annually for new advisers = $7,331,370 annually for existing and new advisers.  $7,331,370 / (8,235 
existing advisers + 656 new advisers) = $825 per adviser.     
1243
  We have previously estimated that investment advisers would incur 0.5 hours to prepare an interim (other-
than-annual) amendment to Form ADV.  See 2016 Form ADV Paperwork Reduction Analysis, supra 
footnote 1209, at 81 FR at 60452.   
1244
  Additionally, we are requiring that the additional disclosure showing the revised text or summarizing the 
material changes be attached as an exhibit to the unmarked relationship summary.   
1245
  We believe that the time estimated to prepare and file an amendment to the relationship summary is closer 
to the amount of time to prepare an interim-other-than-annual amendment to Form ADV.  See, e.g., 
Brochure Adopting Release, supra footnote 576, at 75 FR at 49257. 

 
424 
 
 We do not expect amendments to be frequent, but based on the historical frequency of 
amendments made on Form ADV Parts 1 and 2, we estimate that on average, each adviser 
preparing a relationship summary will likely amend and file the disclosure an average of 1.71 
times per year.
1246
  We therefore estimate that for making and filing amendments to their 
relationship summaries, advisers will incur an estimated total paperwork burden of 14,082 hours 
per year,
1247
 or approximately 1.58 hours per adviser,
1248
 for an annual monetized cost of 
$3,844,386, or $467 per adviser.
1249
 
Although advisers will be required to amend the relationship summary within 30 days 
whenever any information becomes materially inaccurate, we expect that amendments will 
require relatively minimal wording changes, given the relationship summary’s page limitation 
and summary nature.  We believe that investment advisers will be more knowledgeable about the 
information to include in the amended relationship summaries than outside legal or compliance 
consultants and will be able to make these revisions in-house.  Therefore, we do not estimate that 
                                                                                                                                                             
1246
  Based on IARD data as of December 31, 2018, 8,235 investment advisers with retail clients filed 14,118 
other-than-annual amendments to Form ADV.  14,118 other-than-annual amendments / 8,235 investment 
advisers = 1.71 amendments per investment adviser.  We estimated in the Proposing Release that advisers 
with relationship summary obligations will amend and file disclosures on average of 1.8 times per year, 
based on IARD system data as of December 31, 2017.  See Proposing Release, supra footnote 5 at Section 
V.A.  
1247
  8,235 investment advisers amending relationship summaries x 1.71 amendments per year x 1 hour = 14,082 
hours. 
1248
  14,082 hours / (8,235 existing advisers + 656 new advisers) = 1.58 hours per year.  
1249
  14,082 is the total aggregate initial hour burden for amending relationship summaries. We believe that 
performance of this function will most likely be equally allocated between a senior compliance examiner 
and a compliance manager. Data from the SIFMA Management and Professional Earnings Report suggest 
that costs for these positions are $237 and $309 per hour, respectively. (14,082 hours x 50% x $237 + 
14,082 hours x 50% x $309 = $3,844,386.  $3,844,386 / 8,235 investment advisers = $467 per investment 
adviser. 

 
425 
 
investment advisers will need to incur ongoing external costs for the preparation and review of 
relationship summary amendments.   
d. Incremental Increase to Form ADV Hourly and External Cost 
Burdens Attributable to Form ADV Part 3 Amendments  
For existing and newly-registered advisers with relationship summary obligations, the 
additional burden attributable to amendments to Form ADV to add Part 3:  Form CRS, 
(including the initial preparation and filing of the relationship summary and amendments thereto) 
totals 73,355 hours,
1250
 or 8.25 hours per adviser,
1251
 and a monetized cost of $20,025,915, or 
$2,252 per adviser.
1252
  The incremental external legal and compliance cost is estimated to be 
$7,331,370.
1253
 
3. Total Revised Burden Estimates for Form ADV 
a. Revised Hourly and Monetized Value of Hourly Burdens 
As discussed above, the currently approved total aggregate annual hour burden for all 
registered advisers completing, amending, and filing Form ADV (Part 1 and Part 2) with the 
Commission is 363,082 hours, or a blended average per adviser burden of 23.77 hours, with a 
                                                                                                                                                             
1250
  59,273 hours for initial preparation and filing of the relationship summary + 14,082 hours for amendments 
to the relationship summary = 73,355 total aggregate annual hour burden attributable to the Form ADV 
amendments to add Part 3: Form CRS. 
1251
  73,355 hours / (8,235 existing advisers + 656 newly registered advisers) = 8.25 hours per adviser. 
1252
  73,355 total aggregate annual hour burden for preparing, filing, and amending a relationship summary.  We 
believe that performance of this function will most likely be equally allocated between a senior compliance 
examiner and a compliance manager.  Data from the SIFMA Management and Professional Earnings 
Report suggest that costs for these positions are $237 and $309 per hour, respectively.  73,355 hours x 50% 
x $237 = $8,692,568.  73,355 hours x 50% x $309 = $11,333,348.  $8,692,568 + $11,333,348 = 
$20,025,915.  $20,025,915 / (8,235 existing registered advisers + 656 newly registered advisers) = $2,252 
per adviser. 
1253
  See supra footnote 1242.  

 
426 
 
monetized cost of $92,404,369, or $6,051 per adviser.  This includes the total annual hour burden 
for registered advisers of 351,386 hours, or 29.22 hours per registered adviser, and 11,696 hours 
for exempt reporting advisers, or 3.60 hours per exempt reporting adviser.  For purposes of 
updating the total information collection based on the amendments to Form ADV, we consider 
three categories of respondents, as noted above:  (i) existing and newly-registered advisers 
preparing and filing a relationship summary, (ii) registered advisers with no obligation to prepare 
and file a relationship summary, and (iii) exempt reporting advisers.  One commenter said that 
the current Form ADV requirements are a burden to smaller firms and that the currently 
approved burdens for Form ADV Parts 1 and 2 are too low.
1254
  We disagree.  We recognize that 
the burden for some advisers will exceed our estimate and the burden for others will be less due 
to the nature of their business, but we continue to believe that on average our estimates are 
appropriate for purposes of the PRA analysis.  For example, the current burden estimates for 
Form ADV Parts 1 and 2 range from 15 hours for smaller advisers to 1989 hours for larger 
advisers.
1255
   
For existing and newly-registered advisers preparing and filing a relationship summary, 
including amendments to the disclosure, the total annual collection of information burden for 
preparing all of Form ADV, updated to reflect the amendments to Form ADV, equals 37.47 
hours per adviser, with 8.25 hours attributable to the adopted amendments.
1256
  On an aggregate 
                                                                                                                                                             
1254
  See Marotta Letter.    
1255
  See supra footnote 1221.  
1256
  29.22 hours + 8.25 hours for increase in burden attributable to initial preparation and filing of, and 
amendments to, relationship summary = 37.47 hours total. 

 
427 
 
basis, this totals 333,146 hours for existing and newly registered advisers, with a monetized 
value of $90,978,858.
1257
 
As noted above, we estimate 5,064 of existing registered advisers will not have retail 
investors; therefore, they will not be obligated to prepare and file relationship summaries, so 
their annual per adviser hour burden will remain unchanged.
1258
  To that end, using the currently 
approved total annual hour estimate of 29.22 hours per registered investment adviser to prepare 
and amend Form ADV, we estimate that the updated annual hourly burden for all existing and 
newly-registered investment advisers not required to prepare a relationship summary will be 
164,655,
1259
 with a monetized value of $44,950,816.
1260
  The revised total annual collection of 
information burden for exempt reporting advisers, using the currently approved estimate of 3.60 
                                                                                                                                                             
1257
  37.47 hours x (8,235 existing RIAs required to prepare a relationship summary + 656 newly registered 
RIAs required to prepare a relationship summary) = 333,146 total aggregate annual hour burden for 
preparing, filing and amending a relationship summary.  We believe that performance of this function will 
most likely be equally allocated between a senior compliance examiner and a compliance manager.  Data 
from the SIFMA Management and Professional Earnings Report suggest that costs for these positions are 
$237 and $309 per hour, respectively. 333,146 hours x 0.5 x $237 = $39,477,801.  333,146 hours x 0.5 x 
$309 = $51,471,057.  $39,477,801 + $51,471,057 = $90,948,858. 
1258
  13,299 registered investment advisers – 8,235 registered investment advisers with retail investors = 5,064 
registered investment advisers without retail investors. 
1259
  29.22 hours x (5,064 existing and 571 newly-registered investment advisers without retail investors) = 
approximately 164,655 total annual hour burden for RIAs not preparing a relationship summary.    
1260
  We believe that performance of this function for registered advisers will most likely be equally allocated 
between a senior compliance examiner and a compliance manager. Data from the SIFMA Management and 
Professional Earnings Report suggest that costs for these positions are $237 and $309 per hour, 
respectively. 164,655 hours x 50% x $237 = $19,511,618.  164,655 hours x 50% x $309 = $25,439,198. 
$19,511,618 + $25,439,198 = $44,950,816. 

 
428 
 
hours per exempt reporting adviser, will be 16,996 hours,
1261
 for a monetized cost of $4,639,908, 
or $983 per exempt reporting adviser.
1262
   
In summary, factoring in the amendments to Form ADV to add Part 3, the revised annual 
aggregate burden for Form ADV for all registered advisers and exempt reporting advisers will be 
514,797,
1263
 for a monetized cost of 
 
$140,569,582.
1264
  This results in an annual blended average 
per adviser burden for Form ADV of 29.28 hours
1265
 and $7,996 per adviser.
1266
  This is an 
increase of 151,715 hours,
 1267
 or $48,165,213
 1268
 in the monetized value of the hour burden, 
from the currently approved annual aggregate burden estimates, increases which are attributable 
                                                                                                                                                             
1261
  3.60 hours x 4,280 exempt reporting advisers currently + 441 new exempt reporting advisers = 16,996 
hours.   
1262
  As with preparation of the Form ADV for registered advisers, we believe that performance of this function 
for exempt reporting advisers will most likely be equally allocated between a senior compliance examiner 
and a compliance manager. Data from the SIFMA Management and Professional Earnings Report suggest 
that costs for these positions are $237 and $309 per hour, respectively. 16,996 hours x 0.5 x $237 = 
$2,014,026.  16,996 hours x 0.5 x $309 = $2,625,882.  $2,014,026 + $2,625,882 = $4,639,908.  $4,639,908 
/ (4,280 exempt reporting advisers currently + 441 new exempt reporting advisers) = $983 per exempt 
reporting adviser. 
1263
   333,146 annual hour burden for RIAs preparing relationship summary + 164,655 annual hour burden for 
RIAs not preparing relationship summary + 16,996 annual hour burden for exempt reporting advisers = 
514,797 total updated Form ADV annual hour burden.   
1264
  $90,948,858 for RIAs preparing relationship summary + $44,950,816 for RIAs not preparing relationship 
summary + $4,639,908 for exempt reporting advisers = $140,539,582 total updated Form ADV annual 
monetized hourly burden. 
1265
  514,797 / (13,299 registered investment advisers + 4,280 exempt reporting advisers) = 29.28 hours per 
adviser. 
1266
  $140,569,582 / 13,299 registered investment advisers + 4,280 exempt reporting advisers) = $7,995 per 
adviser. 
1267
  514,797 hours estimated – 363,082 hours currently approved = 151,715 hour increase in aggregate annual 
hourly burden. 
1268
  $140,569,582 monetized hourly burden – $92,404,369 = $48,135,213 increase in aggregate annual 
monetized hourly burden. 

 
429 
 
primarily to the larger registered investment adviser and exempt reporting adviser population 
since the most recent approval, adjustments for inflation, and the amendments to Form ADV to 
add Part 3. 
b. Revised Estimated External Costs for Form ADV 
The currently approved total annual collection of information burden estimate for Form 
ADV anticipates that there will be external costs, including (i) a one-time initial cost for outside 
legal and compliance consulting fees in connection with the initial preparation of Part 2 of Form 
ADV, and (ii) the cost for investment advisers to private funds to report the fair value of their 
private fund assets.
1269
  The currently approved annual cost burden for Form ADV is 
$13,683,500, $3,600,000 of which is attributable to external costs incurred by new advisers to 
prepare Form ADV Part 2, and $10,083,500 of which is attributable to obtaining the fair value of 
certain private fund assets.
1270
  We do not expect any change in the annual external costs relating 
to new advisers preparing Form ADV Part 2.  Due to the slightly higher number of registered 
advisers with private funds, however, the aggregate cost of obtaining the fair value of private 
fund assets is likely to be higher.  We estimate that 6% of registered advisers have at least one 
private fund client that may not be audited.  Based on IARD system data as of December 31, 
2018, 4,806 registered advisers advise private funds.  We therefore estimate that approximately 
                                                                                                                                                             
1269
  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR 60452.  We do not 
anticipate that the amendments we are adopting to add Form ADV Part 3 will affect those per adviser cost 
burden estimates for outside legal and compliance consulting fees.  The estimated external costs of outside 
legal and compliance consulting services for the relationship summary are in addition to the estimated hour 
burden discussed above.   
1270
  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR at 60452-53.  The 
$10,083,500 is based on 4,469 registered advisers reporting private fund activity as of May 16, 2016.   

 
430 
 
288 registered advisers may incur costs of $37,625 each on an annual basis, for an aggregate 
annual total cost of $10,836,000.
1271
   
In summary, taking into account (i) a one-time initial cost for outside legal and 
compliance consulting fees in connection with the initial preparation of Part 2 of Form ADV, (ii) 
the cost for investment advisers to private funds to report the fair value of their private fund 
assets, and (iii) the incremental external legal or compliance costs for the preparation of the  
relationship summary, we estimate the annual aggregate external cost burden of the Form ADV 
information collection will be $21,767,370, or $1,637 per registered adviser.
1272
  This represents 
an $8,083,870 increase from the current external costs estimate for the information collection.
1273
 
B. Rule 204-2 under the Advisers Act  
Under section 204 of the Advisers Act, investment advisers registered or required to 
register with the Commission under section 203 of the Advisers Act must make and keep for 
prescribed periods such records (as defined in section 3(a)(37) of the Exchange Act), furnish 
copies thereof, and make and disseminate such reports as the Commission, by rule, may 
prescribe as necessary or appropriate in the public interest or for the protection of investors.  
Rule 204-2 sets forth the requirements for maintaining and preserving specified books and 
records.   
                                                                                                                                                             
1271
  6% x 4,806 = 288 advisers needing to obtain the fair value of certain private fund assets.  288 advisers x 
$37,625 = $10,836,000.   
1272
  $3,600,000 for preparation of Form ADV Part 2 + $10,836,000 for registered investment advisers to fair 
value their private fund assets + $7,331,370 (see supra footnote 1242) to prepare relationship summary = 
$21,767,370 in total external costs for Form ADV.  $21,767,370 / 13,299 total registered advisers as of 
December 31, 2018 = $1,637 per registered adviser. 
1273
  $21,767,370 - $13,683,500 = $8,083,870. 

 
431 
 
The amendments to rule 204-2 will require registered advisers to retain copies of each 
relationship summary.  Investment advisers will also be required to maintain each amendment to 
the relationship summary as well as to make and preserve a record of dates that each relationship 
summary and each amendment was delivered to any client or to any prospective client who 
subsequently becomes a client.  These records will be required to be maintained in the same 
manner, and for the same period of time, as other books and records required to be maintained 
for the Form ADV Part 2A brochure under the Advisers Act rule 204-2(a)(14)(i), to allow 
regulators to access the relationship summary during an examination.
1274
 
As discussed above in Section II. E several commenters suggested that our estimated 
burdens for the relationship summary recordkeeping obligations were too low.
1275
  Some 
commenters argued that keeping records of when a relationship summary was given to 
prospective retail clients would be unnecessarily burdensome or not feasible, and was not 
adequately considered in the Commission’s burden estimates.
1276
  One of these commenters said 
                                                                                                                                                             
1274
  Specifically, investment advisers will be required to maintain and preserve records of the relationship 
summary in an easily accessible place for not less than five years from the end of the fiscal year during 
which the last entry was made on such record, the first two years in an appropriate office of the investment 
adviser.  See Advisers Act rule 204-2(e)(1). 
1275
  See, e.g., CCMC Letter; SIFMA Letter.  See also NSCP Letter (estimating 80–500 hours to prepare, 
deliver, and file the relationship summary, including recordkeeping policies and procedures). 
1276
  See, e.g., CCMC Letter; SIFMA Letter; Committee of Annuity Insurers Letter; Edward Jones Letter.  A 
few others stated that creating recordkeeping policies and procedures relating to how professionals respond 
to “key questions” would be burdensome and extremely difficult. 
 
See, e.g., LPL Financial Letter.  
Although the final instructions require “conversation starter” questions that are similar to the proposed “key 
questions,” we are not increasing the burden as urged by commenters.  As discussed in Section V.A.2.a. 
above, we increased the burden estimates for the initial preparation of the relationship summary, 
acknowledging, among other things, that certain advisers that provide automated investment advisory 
services will incur additional burdens to develop written answers to the conversation starters and make 
those available on their websites with a hyperlink to the appropriate page in the relationship summary for 
these documents (i.e., robo-advisers).  However, we do not expect these advisers to incur additional 
 

 
432 
 
that it would be difficult for firms to integrate pre-relationship delivery dates into their 
operational systems and procedures, and that there is no way to track when a disclosure is 
accessed on a website.
1277
   
Based on our experience with similar requirements for Form ADV Part 2A brochures, we 
disagree with commenters that retaining records of when a relationship summary was given to 
prospective retail clients would be significantly more burdensome for   investment advisers than 
our proposed estimate of 0.2 hours.  While we recognize that this recordkeeping requirement will 
impose some additional burden on investment advisers that must prepare and deliver relationship 
summaries, advisers are already required to keep similar records for the delivery of the Form 
ADV Part 2A brochures and the currently approved burden for that requirement is 1.5 hours.  
Accordingly, based on our experience, advisers already maintain this information with respect to 
their brochures and should be able to update their systems to also include the relationship 
summary.  We also do not expect that investment advisers will incur additional external costs to 
make and keep these records because we believe that advisers will create and retain them in a 
manner similar to their current recordkeeping practices for the Form ADV Part 2A brochure.   
This collection of information is found at 17 CFR 275.204-2 and is mandatory.  The 
Commission staff uses the collection of information in its examination and oversight program.  
Requiring maintenance of these disclosures as part of the firm’s books and records will facilitate 
                                                                                                                                                             
recordkeeping burdens under amendments to rule 204-2 because we are not establishing new or separate 
recordkeeping obligations related to the conversation starters or the answers provided by firms in response 
to the conversation starters.  See supra footnotes 814 - 816.    
1277
  See SIFMA Letter.  

 
433 
 
the Commission’s ability to inspect for and enforce compliance with firms’ obligations with 
respect to the relationship summary. The information generally is kept confidential.
1278
 
The likely respondents to this collection of information are all of the approximately 
13,299 advisers currently registered with the Commission.  We estimate that based on updated 
IARD data as of December 31, 2018, 8,235 existing advisers will be subject to the amended 
provisions of rule 204-2 to preserve the relationship summary as a result of the adopted 
amendments.   
1. Changes in Burden Estimates and New Burden Estimates 
The currently approved annual aggregate burden for rule 204-2 is 2,199,791 hours, with a 
total annual aggregate monetized cost burden of approximately $130,316,112, based on an 
estimate of 12,024 registered advisers, or 183 hours per registered adviser.
1279
  We estimate that 
the requirements to make and keep copies of each relationship summary under the amendments 
to rule 204-2 will result in an increase in the collection of information burden estimate by 0.2 
hours
1280
 for each of the estimated 8,235 registered advisers with relationship summary 
obligations, resulting in a total of 183.2 hours per adviser.  This will yield an annual estimated 
aggregate burden of 1,508,652 hours under amended rule 204-2 for all registered advisers with 
                                                                                                                                                             
1278
  See section 210(b) of the Advisers Act. 
1279
  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR at 60454–55. 
1280
  In the Paperwork Reduction Act analysis for amendments to Form ADV adopted in 2016, we estimated that 
1.5 hours would be required for each adviser to make and keep records relating to (i) the calculation of 
performance the adviser distributes to any person and (ii) all written communications received or sent 
relating to the adviser’s performance.  Because the burden of preparing the relationship summary is already 
included in the collection of information estimates for Form ADV, we estimate that recordkeeping burden 
for the relationship summary will be considerably less than 1.5 hours and estimate that 0.2 hours is 
appropriate.  

 
434 
 
relationship summary obligations,
1281
 for a monetized cost of $95,588,191, or $11,607 per 
adviser.
1282
   In addition, the 5,064 advisers not subject to the amendments will continue to be 
subject to an unchanged burden of 183 hours under rule 204-2, or a total aggregate annual hour 
burden of 926,712,
1283
 for a monetized cost of $58,716,472, or $11,595 per adviser.
1284
  The 
increase in the collection of information burden estimate by 0.2 hours as a result of the 
amendments to rule 204-2 will therefore result in an annual monetized cost of $12 per 
adviser.
1285
   In summary, taking into account the estimated annual burden of registered advisers 
that will be required to maintain records of the relationship summary,  as well as the estimated 
annual burden of registered advisers that do not have relationship summary obligations and 
whose information collection burden is unchanged, the revised annual aggregate burden for all 
                                                                                                                                                             
1281
  8,235 registered investment advisers required to prepare relationship summary x 183.2 hours = 1,508,652 
hours.  
1282
  As with our estimates relating to the previous amendments to Advisers Act rule 204-2 (see 2016 Form 
ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR at 60454-55), we expect that 
performance of this function will most likely be allocated between compliance clerks and general clerks, 
with compliance clerks performing 17% of the function and general clerks performing 83% of the function.  
Data from the SIFMA Office Salaries in the Securities Industry Report, modified to account for an 1,800-
hour work year and multiplied by 2.93 to account for bonuses, firm size, employee benefits, and overhead, 
suggest that costs for these position are $70 and $62, respectively. (17% x 1,508,652 hours x $70) + (83% x 
1,508,652 hours x $62) = $95,588,191.  $95,588,191 / 8,235 advisers = $11,607 per adviser.  
1283
  5,064 registered investment advisers not required to prepare the relationship summary x 183 hours = 
926,712.   
1284
  As with our estimates relating to the previous amendments to Advisers Act rule 204-2 (see 2016 Form 
ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR at 60454–55, we expect that 
performance of this function will most likely be allocated between compliance clerks and general clerks, 
with compliance clerks performing 17% of the function and general clerks performing 83% of the function.  
Data from the SIFMA Office Salaries Report suggest that costs for these positions are $70 and $62, 
respectively. (17% x 926,712 hours x $70) + (83% x 926,712 hours x $62) = $58,716,473.  $58,716,473 / 
5,064 = $11,595 per adviser.  
1285
  $11607 aggregate burden per adviser subject to relationship summary - $11,595 aggregate burden per 
adviser not subject to the relationship summary = $12.  

 
435 
 
respondents to rule 204-2, under the amendments, is estimated to be 2,435,364 total hours,
1286
 
for a monetized cost of $154,304,663.
1287
  
2. Revised Annual Burden Estimates 
As noted above, the approved annual aggregate burden for rule 204-2 is currently 
2,199,791 hours based on an estimate of 12,024 registered advisers, or 183 hours per registered 
adviser.
1288
  The revised annual aggregate hourly burden for rule 204-2 will be 2,435,364
1289
 
hours, represented by a monetized cost of $154,304,664,
1290
 based on an estimate of 8,235 
registered advisers with the relationship summary obligation and 5,064 registered advisers 
without, as noted above.  This represents an increase of 235,573
1291
 annual aggregate hours in 
the hour burden and
 an annual increase of $23,988,552 from the currently approved total aggregate 
monetized cost 
for rule 204-2.
1292
  
These increases are attributable to a larger registered investment 
adviser population since the most recent approval and adjustments for inflation, as well as the rule 
204-2 amendments relating to the relationship summary as discussed in this release.
 
                                                                                                                                                             
1286
  8,235 registered investment advisers required to prepare relationship summary x 183.2 hours = 1,508,652 
hours.  5,064 registered investment advisers not required to prepare the relationship summary x 183 hours = 
926,712 hours. 1,508,652 hours + 26,712 hours = 2,435,364 hours. 
1287
  $95,588,191 + $58,716,473 = $154,304,664. 
1288
  2,199,791 hours / 12,024 registered advisers = 183 hours per adviser. 
1289
  See supra footnote 1286. 
1290
  See supra footnote 1287. 
1291
  2,435,364 hours – 2,199,791 hours = 235,573 hours. 
1292
  $154,304,664 – $130,316,112 = $23,988,552. 

 
436 
 
C. Rule 204-5 under the Advisers Act 
New rule 204-5 will require an investment adviser to deliver an electronic or paper 
version of the relationship summary to each retail investor before or at the time the adviser enters 
into an investment advisory contract with the retail investor.  The adviser also will make a one-
time initial delivery of the relationship summary to all existing clients within a specified time 
period after the effective date of the rule.  Also with respect to existing clients, the adviser will 
deliver the most recent relationship summary before or at the time of (i) opening any new 
account that is different from the retail investor’s existing account(s); (ii) recommending that the 
retail investor roll over assets from a retirement account into a new or existing account or 
investment; or (iii) recommending or providing a new brokerage or investment advisory service 
or investment that does not necessarily involve the opening of a new account and would not be 
held in the existing account.
1293
  The adviser will be required to post a current version of its 
relationship summary prominently on its public website (if it has one), and will be required to 
communicate any changes in an amended relationship summary to retail investors who are 
existing clients within 60 days, instead of 30 days as proposed, after the amendments are 
required to be made and without charge.
1294
  The investment adviser also must deliver a current 
relationship summary to each retail investor within 30 days upon request.  In a change from the 
                                                                                                                                                             
1293
  We are adopting these requirements instead of the proposed requirements that advisers deliver the 
relationship summary to existing retail investor clients before or at the time of opening a new account that 
is different from the retail investor’s existing account or changes are made to the retail investor’s existing 
account(s) that would “materially change” the nature or scope of the firm’s relationship with the retail 
investor.  See Proposing Release, supra footnote 5 at Section II.C.2.  
1294
  The communication can be made by delivering the relationship summary or by communicating the 
information through another disclosure that is delivered to the retail investor.   

 
437 
 
proposal, an adviser must make a copy of the relationship summary available upon request 
without charge, and where a relationship summary is delivered in paper format, the adviser may 
link to additional information by including URL addresses, QR codes, or other means of 
facilitating access to such information.
1295
  The adviser must also include a telephone number 
where retail investors can request up-to-date information and a copy of the relationship 
summary.
1296
   
As discussed further below, we received comments that our estimated burdens for 
delivery of the relationship summary were too low.  Some of these comments focused on the 
administrative and operational burdens related to monitoring for changes that would “materially 
change” the nature and scope of the relationship and thereby require delivery to existing clients 
and customers.
1297
  One commenter also argued that imposing different delivery requirements for 
the Form ADV, Part 2 brochure and the relationship summary would create substantial 
administrative burdens specifically for investment advisers.
1298
  Other comments focused on the 
recordkeeping burdens related to the requirement to deliver the relationship summary to a new or 
prospective retail investor.
1299
  As discussed further below, we made changes to the proposal to 
require more specific triggers for initial delivery and additional delivery to existing customers in 
                                                                                                                                                             
1295
  Additionally, we are adopting the instruction that if a relationship summary is delivered in paper format as 
part of a package of documents, the firm must ensure that the relationship summary is the first among any 
documents that are delivered at that time, substantially as proposed. See supra footnote 701.   
1296
  This differs from the proposal, which required only firms that do not have a public website to include a toll-
free number that retail investors may call to request documents.  See supra footnote 609.   
1297
  See, e.g., Cambridge Letter; SIFMA Letter; LPL Financial Letter. 
1298
  Pickard Djinis and Pisarri Letter. 
1299
  See supra footnotes 803 - 808.   

 
438 
 
order to replace the requirements in response to comments.  We discuss below the specific 
separate delivery requirements and modifications.  
New rule 204-5 contains a collection of information requirement.  The collection of 
information is necessary to provide advisory clients, prospective clients and the Commission 
with information about the investment adviser and its business, conflicts of interest, and 
personnel.  Clients will use the information contained in the relationship summary to determine 
whether to hire or retain an investment adviser and what type of accounts and services are 
appropriate for their needs.  The Commission will use the information to determine eligibility for 
registration with us and to manage our regulatory and examination programs.  This collection of 
information will be found at 17 CFR 275.204-5 and will be mandatory.  Responses will not be 
kept confidential.   
1. Respondents:  Investment Advisers 
The likely respondents to this information collection will be the approximately 8,235 
investment advisers registered with the Commission that will be required to deliver a relationship 
summary per new rule 204-5.  We also note that these figures include the 318 registered broker-
dealers that are dually registered as investment advisers.
1300
 
2. Initial and Annual Burdens 
a. Posting of the Relationship Summary to Website 
Under new rule 204-5, advisers will be required to post a current version of their 
relationship summary prominently on their public website (if they have one).  In the Proposing 
                                                                                                                                                             
1300
  See supra footnote 863 and accompanying text. 

 
439 
 
Release, we estimated that each adviser will incur 0.5 hours to prepare the posted relationship 
summary, such as to ensure proper electronic formatting and to post the disclosure to the 
adviser’s website, if the adviser has one.
1301
  Although we did not receive any comments 
regarding burdens associated with posting of the relationship summary to a public website, we 
are increasing our estimate of the time from 0.5 to 1.5 hours based on the staff’s experience.
1302
  
We do not anticipate that investment advisers will incur additional external costs to post the 
relationship summary to the adviser’s website because advisers without a public website will not 
be required to establish or maintain one, and advisers with a public website have already incurred 
external costs to create and maintain their websites.  Additionally, external costs for the 
preparation of the relationship summary are already included for the collection of information 
estimates for Form ADV, in Section A.2.b, above.   
Based on IARD system data, 91.6% of investment advisers with individual clients report 
having at least one public website.
1303
  Therefore, we estimate that 91.6% of the 8,235 existing 
and 656 newly registered investment advisers with relationship summary obligations will incur a 
                                                                                                                                                             
1301
  Proposing Release, supra footnote, 5 at section V.C.2.a.  
1302
  See e.g., Optional Internet Availability of Investment Company Shareholder Reports, Investment Company 
Act Release No. 33115 (June 5, 2018) [83 FR 29158 (Jun. 22, 2018)] (estimating that funds that already 
post shareholder reports on their websites will require a half hour burden per fund to comply with the 
annual compliance and posting requirements of rule 30e-3, and funds that do not already post shareholder 
reports to their websites will require one and half hours to post the required documents online). Posting of 
the relationship summary under rule 204-5 pertains to one document, which is similar to the shareholder 
report posting to which rule 30e-3 applies. 
1303
  We estimated in the Proposing Release that 91.1 of investment advisers with individual clients report at 
least one public website, based on IARD system data as of December 31, 2017.  See Proposing Release, 
supra footnote 5 at Section V.C.1.   

 
440 
 
total of 12,216 aggregate burden hours to post relationship summaries to their websites,
1304
 with 
a monetized cost of $757,407.
1305
  As with the initial preparation of the relationship summary, 
we amortize the estimated initial burden associated with posting the relationship summary over a 
three-year period.
1306
  Therefore, the total annual aggregate hourly burden related to the initial 
posting of the relationship summary is estimated to be 4,072 hours, with a monetized cost of 
$252,469.
1307
  We did not receive comments regarding burdens associated with posting of the 
relationship summary to a public website.   
b. Delivery to Existing Clients 
(1) One-Time Initial Delivery to Existing Clients 
The burden for this new rule is based on each adviser with retail investors having, on 
average, an estimated 3,985 clients who are retail investors.
1308
  Although advisers may either 
deliver the relationship summary separately, in a “bulk delivery” to clients, or as part of the 
delivery of information that advisers already provide, such as the annual Form ADV update, 
account statements or other periodic reports, we base our estimates here on a “bulk delivery” to 
                                                                                                                                                             
1304
  1.5 hours to prepare and post the relationship summary x 91.6% x (8,235 existing advisers + 656 newly-
registered advisers with relationship summary obligations) = 12,216 hours. 
1305
  Based on data from the SIFMA Office Salaries Report, we expect that requirement for investment advisers 
to post their relationship summaries to their websites will most likely be performed by a general clerk at an 
estimated cost of $62 per hour.  1.5 hours per adviser x $62 = $93 in monetized costs per adviser.  $93 per 
adviser x 91.6% x (8,235 existing advisers + 656 newly registered advisers) = $757,407 total aggregate 
monetized cost. 
1306
  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209. 
1307
  12,216 hours / 3 years = 4,072 hours annually.  $757,407/ 3 years = $252,469 in annualized monetized 
costs. 
1308
  This estimate is based on IARD system data as of December 31, 2018.   

 
441 
 
existing clients.  This is similar to the approach we took in estimating the delivery costs for 
amendments to rule 204-3 under the Advisers Act, which requires investment advisers to deliver 
their Form ADV Part 2A brochures and brochure supplements to their clients.
1309
  As with the 
estimates for rule 204-3, we estimate that advisers will require approximately 0.02 hours to 
deliver the relationship summary to each client.
1310
  We did not receive comments on the burdens 
specific to delivering the relationship summary to existing clients under new Rule 204-5.  We 
estimate the total burden hours for 8,235 advisers for initial delivery of the relationship summary 
to existing clients to be 79.7 hours per adviser, or 708,613 total aggregate hours, for the first year 
after the rule is in effect,
1311
 with a monetized cost of $4,941
1312
 per adviser or $43,930,431 in 
aggregate.
1313
  Amortized over three years, the total annual hourly burden is estimated to be 
26.57 hours per adviser, or 236,204 annual hours in aggregate,
1314
 with annual monetized costs 
                                                                                                                                                             
1309
  See Brochure Adopting Release, supra footnote 576, at 75 FR at 49259. 
1310
  This is the same estimate we made in the Form ADV Part 2 proposal and for which we received no 
comment.  Brochure Adopting Release, supra footnote 576, at 75 FR at 49259  The burden for preparing 
relationship summaries is already incorporated into the burden estimate for Form ADV discussed above. 
1311
  (0.02 hours per client x 3,985 retail clients per adviser) = 79.7 hours per adviser.  79.7 hours per adviser x 
(8,235 existing advisers + 656 newly registered advisers) = 708,613 total aggregate hours.   
1312
  Based on data from the SIFMA Office Salaries Report, we expect that initial delivery requirement to 
existing clients of rule 204-5 will most likely be performed by a general clerk at an estimated cost of $62 
per hour.  79.7 hours per adviser x $62 = $4,941 in monetized costs per adviser.  We estimate that advisers 
will not incur any incremental postage costs because we estimate that they will make such deliveries with 
another mailing the adviser was already delivering to clients, such as interim or annual updates to the Form 
ADV, or will deliver the relationship summary electronically. 
1313
  $4,941 in monetized costs per adviser x (8,235 existing advisers + 656 newly registered advisers) = 
$43,930,431 in total aggregate costs. 
1314
  79.7 initial hours per adviser / 3 = 26.57 total annual hours per adviser.  708,613 initial aggregate hours / 3 
= 236,204 total annual aggregate hours. 

 
442 
 
of $1,647 per adviser, or $14,643,477 in aggregate.
1315
  We do not expect that investment 
advisers will incur external costs for the initial delivery of the relationship summary to existing 
clients because we estimate that advisers will make such deliveries along with another required 
delivery, such as an interim or annual update to the Form ADV Part 2A.   
(2) Additional Delivery to Existing Clients  
As discussed in Section II. C.3.c above, the proposed instructions would have required 
investment advisers to deliver the relationship summary to existing retail investor clients before 
or at the time firms open a new account that is different from the retail investor’s existing 
account or changes are made to the retail investor’s existing account(s) that would “materially 
change” the nature or scope of the firm’s relationship with the retail investor.  In response to 
comments seeking additional clarity on when the “materially change” requirement would apply, 
and expressing concerns that there will be additional supervisory, administrative, and operational 
processes required, and burdens imposed, we replaced the “materially change” requirement with 
more concrete delivery triggers that firms could more easily implement based on their existing 
systems and processes.
1316
 
Investment advisers will be required to deliver the relationship summary to existing 
clients before or at the time they open a new account that is different from the retail investor’s 
existing account(s), as proposed.  In addition, in a change from the proposal, delivery will be 
required before or at the time the adviser (i) recommends that the retail investor roll over assets 
                                                                                                                                                             
1315
  $4,941 in monetized costs per adviser / 3 = $1,647 annualized monetized cost per adviser.  $43,930,431 
initial aggregate monetized cost / 3 = $14,643,477 in total annual aggregate monetized cost. 
1316
  See supra footnotes 758 – 763 and accompanying text. 

 
443 
 
from a retirement account into a new or existing account or investment, or (ii) recommends or 
provides a  new brokerage or investment advisory service or investment that does not necessarily 
involve the opening of a new account and would not be held in the existing account.  We are 
adopting these two triggers instead of the proposed requirement to deliver the relationship 
summary before or at the time changes are made to the existing account that would “materially 
change” the nature and scope of the relationship to address c ommenters’ requests for additional 
guidance or examples of what would constitute a “material change.”
1317
  Commenters also 
described administrative and operational burdens arising from this requirement and argued that 
our estimated burdens were too low.
1318
  One commenter asserted that firms would be required to 
build entirely new operational and supervisory processes to identify asset movements that could 
trigger a delivery requirement.
1319
  Another commenter noted the challenges of designing a 
system that distinguishes non-ordinary course events from routine account changes.
1320
   
As discussed above, we replaced the “materially change” requirement with more specific 
triggers to be clearer about when a relationship summary must be delivered.
1321
  While these 
specific triggers will still impose operational and supervisory burdens on firms, we believe that 
they are more easily identified and monitored, such that firms will not incur significant burdens 
                                                                                                                                                             
1317
  See Prudential Letter; TIAA Letter; Cambridge Letter; SIFMA Letter; LPL Financial Letter; Institute for 
Portfolio Alternatives Letter.  
1318
  See, e.g., SIFMA Letter; LPL Financial Letter.  
1319
  See SIFMA Letter. 
1320
  See LPL Letter.  
1321
  These more specific triggers are intended to address circumstances that the proposed “materially change” 
sought to address.  See supra footnote 761 and accompanying text.   

 
444 
 
as described by commenters to implement entirely new supervisory, administrative, and 
operational processes needed to monitor events that cause a material change.  However, 
recognizing that some additional processes will be necessary to implement these delivery triggers, 
we are increasing our burden estimate from 0.02 to 0.04 hours.  We now estimate that each 
adviser will incur 16 hours per year to deliver the relationship summary in these types of 
situations, and that delivery under these circumstances will take place among 10% of an 
adviser’s retail investors annually.
1322
  We will therefore estimate a total annual aggregate hours 
of 142,256,
1323
 with a monetized cost of $992 per adviser
1324
 and $8,818,872 in aggregate.
1325
  
(3) Posting of Amended Relationship Summaries to Websites 
and Communicating Changes to Amended Relationship 
Summaries, Including by Delivery 
Investment advisers will be required to amend their relationship summaries within 30 
days when any of the information becomes materially inaccurate.  Investment advisers also will 
be required to communicate any changes in an amended relationship summary to existing clients 
who are retail investors within 60 days, instead of 30 days as proposed, after the updates are 
required to be made and without charge.  We do not expect this change to increase the PRA 
                                                                                                                                                             
1322
  10% of 3,985 retail clients per adviser x .04 hours to deliver the relationship summary = 16 hours per 
adviser. 
1323
  16 hours x (8,235 existing advisers + 656 new advisers) = 142,256 total aggregate hours. 
1324
  Based on data from the SIFMA Office Salaries Report, we expect that delivery requirements of rule 204-5 
will most likely be performed by a general clerk at an estimated cost of $62 per hour.  16 hours per adviser 
x $62 = $992 per adviser.  We estimate that advisers will not incur any incremental postage costs in the 
delivery of the relationship summary to existing clients for changes in accounts, because we estimate that 
advisers will make such deliveries with another mailing the adviser was already delivering to clients, such 
as new account agreements and other documentation normally required in such circumstances.   
1325
  $992 in monetized costs per adviser x (8,235 existing advisers + 656 newly registered advisers) = 
$8,819,872 in total aggregate costs. 

 
445 
 
estimates.
1326
  The communication can be made by delivering the relationship summary or 
through another disclosure that is delivered to the retail investor.  This requirement is a change 
from the proposed requirement but is substantively similar.
1327
 C ommenters did not comment on 
the estimated burden.  We have determined not to change the burden relative to the proposal.   
Based on the historical frequency of amendments made on Form ADV Parts 1 and 2, we 
estimate that on average, each adviser preparing a relationship summary will likely amend the 
disclosure an average of 1.71 times per year.
1328
  We are not changing the 0.5 hours estimates to 
post the amendments to a public website, consistent with our estimates at proposal.  Using the 
same percentage of investment advisers reporting public websites, 91.6% of 8,235 advisers will 
incur a total annual burden of 0.86 hours per adviser, or 6,487 hours in aggregate,
1329
 to post the 
amended relationship summaries to their website.  This translates into an annual monetized cost 
                                                                                                                                                             
1326
  As discussed in Section V.A.2.c., we have increased the burden estimates for preparing amendments to the 
relationship summary, acknowledging, among other things, that firms will incur additional burdens to 
prepare and file amendments as a result of the instructions that firms preparing amendments highlight the 
most recent changes, and that additional disclosure showing the revised text be attached as an exhibit to the 
unmarked relationship summary.    
1327
  The proposed instructions would have required firms to communicate updated information by delivering 
the amended relationship summary or by communicating the information another way.  The revised 
instruction will eliminate the wording “another way” and will clarify that the communication can be made 
through another disclosure that is delivered to the retail investor.  See supra footnote 767.  
1328
  We estimated in the Proposing Release that each adviser preparing a relationship summary will likely 
amend the disclosure an average 1.81 times based on IARD system data as of December 31, 2017.  See 
Proposing Release, supra footnote 5 at section V.C.2.b.iii.  We are updating the average number to 1.71 
times per year based on IARD system data as of December 31, 2018.  
1329
  0.5 hours to post the amendment x 1.71 amendments annually = 0.86 hours per adviser annually to post 
amendments to the website.  0.86 x 8,235 existing advisers amending the relationship summary x 91.6% of 
advisers with public websites = 6,487 aggregate annual hours to post amendments of the relationship 
summary. 

 
446 
 
of $53.32 per adviser, or $402,207 in the aggregate for existing registered advisers with 
relationship summary obligations.
1330
   
For this requirement, we estimate that 50% of advisers will choose to deliver the 
relationship summary to communicate the updated information, and that the delivery will be 
made along with other disclosures already required to be delivered.  We did not receive 
comments on this estimate.  We believe that it is likely that the other 50% of advisers will 
incorporate all of the updated information in their Form ADV Part 2, like the summary of 
material changes or other disclosures, which they are already obligated to deliver in order to 
avoid having to deliver two documents.  We estimate a burden of 561,162 hours,
1331
 or 136.29 
hours per adviser,
1332
 at a monetized cost of $34,792,044 in aggregate,
1333
 or $8,450 per 
                                                                                                                                                             
1330
  Based on data from the SIFMA Office Salaries Report, we expect that the posting requirements of rule 204-
5 will most likely be performed by a general clerk at an estimated cost of $62 per hour.  0.86 hours per 
adviser x $62 = $53.32 per adviser.  $53.32 per adviser x 91.6% x 8,235 existing advisers = $402,207 in 
annual monetized costs.     
1331
  8,235 advisers amending the relationship summary x 3,985 retail clients per adviser x 50% delivering the 
amended relationship summary to communicate updated information x 0.02 hours per delivery x 1.71 
amendments annually = 561,162 hours to deliver amended relationship summaries. 
1332
  3,985 retail clients per adviser x 0.02 hours per delivery x 1.71 amendments annually = 136.29 hours per 
adviser. 
1333
  Based on data from the SIFMA Office Salaries Report, we expect that delivery requirements of rule 204-5 
will most likely be performed by a general clerk at an estimated cost of $62 per hour.  561,162 hours x $62 
= $34,792,044.  We estimate that advisers will not incur any incremental postage costs to deliver the 
relationship summary for communicating updated information by delivering the relationship summary, 
because we estimate that advisers will make the delivery along with other documents already required to be 
delivered, such as an interim or annual update to Form ADV, or will deliver the relationship summary 
electronically.   

 
447 
 
adviser,
1334
 for the 50% of advisers that choose to deliver amended relationship summaries in 
order to communicate updated information.
1335
   
In a change from the proposal,
1336
 we are also adopting two requirements not included in 
the proposal.  First, all firms will be required to make available a copy of the relationship 
summary upon request without charge.  Second, in a relationship summary that is delivered in 
paper format, firms may link to additional information by including URL addresses, QR codes, 
or other means of facilitating access to such information.
1337
  We believe that these new 
requirements will increase the burden relative to the proposal for some firms that do not 
currently fulfill these types of disclosure requests, including, for example, additional costs 
associated with tracking delivery preferences related to making copies of the relationship 
summary available upon request, and printing and mailing costs for copies that are delivered i n 
paper. We estimate that the 8,235 advisers with relationship summary obligations, on average, 
will require 0.5 hours each annually to comply with this requirement.  Therefore, we estimate 
that the 8,235 advisers will incur a total of 4,118 aggregate burden hours to make copies of the 
                                                                                                                                                             
1334
  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
delivery requirements of rule 204-5 will most likely be performed by a general clerk at an estimated cost of 
$62 per hour.  136.29 hours per adviser x $62 per hour = $8,450 per adviser. 
1335
  For the other 50% of advisers that may choose to communicate updated information in another disclosure, 
we estimate no added burden because these advisers will be communicating the information in other 
disclosures they are already delivering like the Form ADV Part 2 brochure or summary of material 
changes. 
1336
  See supra footnotes 699 - 701 and accompanying text.   
1337
  We are adopting the instruction that if a relationship summary is delivered in paper format as part of a 
package of documents, it should be the first among any documents that are delivered at the same time, as 
proposed.  See supra footnote 701.  

 
448 
 
relationship summary available upon request,
1338
 with a monetized cost per adviser of $31, or 
$255,285 in aggregate monetized cost.
1339
  We acknowledge that the burden may be more or less 
than 0.5 hours for some advisers, but w e believe that, on average, 0.5 hours is an appropriate 
estimate for calculating an aggregate burden for the industry for this collection of information.   
We do not expect investment advisers to incur external costs in delivering amended 
relationship summaries or communicating the information in another way because we estimate 
that they will make this delivery with, or as part of, other disclosures required to be delivered, 
such as an interim or annual update to Form ADV.  We did not receive comments on this 
assumption in the proposal. 
c.  Delivery to New Clients or Prospective New Clients 
Data from the IARD system indicate that of the 13,299 advisers registered with the 
Commission, 8,235 have retail investors, and on average, each has 3,985 clients who are retail 
investors.
1340
  As proposed, we estimate that the client base for investment advisers will grow by 
approximately 4.5% annually.
1341
  Based on our experience with Form ADV Part 2, we estimate 
the annual hour burden for initial delivery of a relationship summary will be the same by paper 
                                                                                                                                                             
1338
  0.5 hours to make paper copies of the relationship summary available upon request x 8,235 advisers with 
relationship summary obligations = 4,118 hours.  
1339
  Based on data from the SIFMA Office Salaries Report, we expect that the requirement for advisers to make 
paper copies of the relationship summary available upon request will most likely be performed by a general 
clerk at an estimated cost of $62 per hour.  0.5 hours per adviser x $62 = $31 in monetized costs per 
adviser.  $31 per adviser x 8,235 advisers with relationship summary obligations = $255,285 total 
aggregate monetized cost.   
1340
  This average is based on advisers’ responses to Item 5 of Part 1A of Form ADV as of December 31, 2018. 
1341
  In the Proposing Release, we determined this estimate based on IARD system data.  See Proposing Release, 
supra footnote 5 at section V.C.c.  The number of retail clients reported by RIAs changed by 6.7% between 
December 2015 and 2016, and by 2.3% between December 2016 and 2017.  (6.7% + 2.3%) / 2 = 4.5% 
average annual rate of change over the past two years.  We did not receive comments on this estimate.   

 
449 
 
or electronic format, at 0.02 hours for each relationship summary,
1342
 or 3.6 annual hours per 
adviser.
1343
  Therefore, we estimate that the aggregate annual hour burden for initial delivery of 
the relationship summary to new clients will be 29,646 hours,
1344
 at a monetized cost of 
$1,838,052, or $223 per adviser.
1345
   
As in the Proposing Release, we continue to estimate that investment advisers will not 
incur external costs to deliver the relationship summary to new or prospective clients because 
they will make the delivery along with other documentation normally provided in such 
circumstances, such as Form ADV Part 2, or will deliver the relationship summary electronically.  
We did not receive comments regarding the burdens for delivering the relationship summary to 
prospective clients that eventually become clients. 
                                                                                                                                                             
1342
  This is the same as the estimate for the burden to deliver the brochure required by Form ADV Part 2. See 
Brochure Adopting Release, supra footnote 576.   
1343
  3,985 clients per adviser with retail clients x 4.5% = 179 new clients per adviser.  179 new clients per 
adviser x 0.02 hours per delivery = 3.6 hours per adviser for delivery of a relationship summary to new or 
prospective new clients. 
1344
  3.6 hours per adviser for delivery obligation to new or prospective clients x 8,235 advisers = 29,646 hours. 
1345
  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
delivery requirements of rule 204-5 will most likely be performed by a general clerk at an estimated cost of 
$62 per hour.  29,646 hours x $62 = $1,838,052.  We estimate that advisers will not incur any incremental 
postage costs to deliver the relationship summary to new or prospective clients because we estimate that 
advisers will make the delivery along with other documentation normally provided in such circumstances, 
such as Form ADV Part 2.  $1,838,052 / 8,235 investment advisers = $223 per adviser. 

 
450 
 
d. Total New Initial and Annual Burdens 
All together, we estimate the total collection of information burden for new rule 204-5 to 
be 983,945 annual aggregate hours per year,
1346
 or 120 hours per respondent,
1347
 for a total 
annual aggregate monetized cost of $61,003,406,
1348
 or $7,408
1349
 per adviser.   
D. Form CRS and Rule 17a-14 under the Exchange Act 
New rule 17a-14 under the Exchange Act [17 CFR 240.17a-14] and Form CRS  [17 CFR 
249.640] will require a broker-dealer that offers services to retail investors to prepare and file 
with the Commission, post to the broker-dealer’s website (if it has one), and deliver to retail 
investors a relationship summary, as discussed in greater detail in Section II above.  Broker-
dealers will deliver the relationship summary to both existing customers and new or prospective 
customers who are retail investors.  In a change from the proposal, broker-dealers will file the 
relationship summary through Web CRD
®
 instead of EDGAR.  We are also requiring that all 
                                                                                                                                                             
1346
  4,072 annual hours for posting initial relationship summaries to adviser websites + 236,204 annual hours 
for initial delivery to existing clients + 142,256 hours for delivery to existing clients based on material 
changes to accounts or scope of relationship + 6,487 annual hours to post amended relationship summary to 
website + 561,162 hours for delivery to existing clients to communicate updated information in amended 
relationship summaries + 29,646 hours for delivery to new or prospective clients + 4,118 hours to make 
paper copies of the relationship summary available upon demand = 983,945 annual total hours for 
investment advisers to post and deliver the relationship summary under proposed rule 204-5. 
1347
  983,945 hours (initial and other deliveries) / 8,235 advisers = 120 hours per adviser. 
1348
  $252,469 for posting initial relationship summaries to adviser websites + $14,643,477 for initial delivery to 
existing clients + $8,819,872 for delivery to existing clients based on material changes to accounts or scope 
of relationship + $402,207 to post amended relationship summary to website + $34,792,044 for delivery to 
existing clients to communicate updated information in amended relationship summaries + $1,838,052 for 
delivery to new or prospective clients + $255,285 for making paper copies of the relationship summary 
available upon demand = $61,003,406 in total annual aggregate monetized cost for investment advisers to 
post and deliver the relationship summary under proposed rule 204-5. 
1349
  $61,003,406 / 8,235 advisers = $7,408 per adviser. 

 
451 
 
relationship summaries be filed with machine-readable headings, in a change from the proposal, 
as well as in a text-searchable format as proposed.   
New rule 17a-14 under the Exchange Act [17 CFR 240.17a-14] and Form CRS [17 
CFR 249.640] contain a collection of information requirement.  We will use the information 
to manage our regulatory and examination programs.  Clients can use the information required 
in the relationship summary to determine whether to hire or retain a broker-dealer, as well as 
what types of accounts and services are appropriate for their needs.  The collection of 
information is necessary to provide broker-dealer customers, prospective customers, and the 
Commission with information about the broker-dealer and its business, conflicts of interest 
and personnel.  This collection of information will be found at 17 CFR 249.640 and will be 
mandatory.  Responses will not be kept confidential.     
As discussed in Sections I and II of this release, we received comments that addressed 
whether the relationship summary is necessary for broker-dealers, and whether we could further 
minimize the burden of the proposed collections of information.  One commenter specifically 
addressed the accuracy of our burden estimates for the proposed collections of information, 
suggesting that our estimates were too low because compliance professionals estimated it would 
take 80-500 hours to prepare, deliver, and file the relationship summary, depending on the firm’s 
size and business model.
1350
  Others commented more broadly that the implementation costs of 
                                                                                                                                                             
1350
  See NSCP Letter.     

 
452 
 
the relationship summary would be higher than we estimated in the Proposing Release.
1351
  We 
have considered these comments and are increasing our PRA burden estimates from 15 hours to 
40 hours for broker-dealers to prepare and file the relationship summary.  We also modified 
several substantive requirements to mitigate some of these estimated increased costs relative to 
the proposal.   
1. Respondents:  Broker-Dealers  
The respondents to this information collection will be the broker-dealers registered with 
the Commission that will be required to prepare, file, and deliver a relationship summary in 
accordance with new rule 17a-14 under the Exchange Act [17 CFR 240.17a-14].  As of 
December 31, 2018, there were 2,766 broker-dealers registered with the Commission that 
reported sales to retail customer investors,
1352
 and therefore likely will be required to prepare and 
deliver the relationship summary.
1353
  We also note that these include 318 broker-dealers that are 
dually registered as investment advisers.
1354
  We did not receive comments related to the 
methodology used for estimating the number of broker-dealers that will be subject to these 
                                                                                                                                                             
1351
  Some commenters argued that the cost to implement Form CRS and Regulation Best Interest would be 
high.  See, e.g., Raymond James Letter; CCMC Letter (investor polling results); SIFMA Letter.  
1352
  See supra footnote 867 and accompanying text.  Retail sales activity is identified from Form BR (see supra 
footnote 861, which categorizes retail activity broadly (by marking the “sales” box) or narrowly (by 
marking the “retail” or “institutional” boxes as types of sales activity).  We use the broad definition of sales 
as we believe that many firms will just mark “sales” if they have both retail and institutional activity.  
However, this may capture some broker-dealers that do not have retail activity, although we are unable to 
estimate that frequency. 
1353
  For purposes of Form CRS, a “retail investor” will be defined as: a natural person, or the legal 
representative of such natural person, who seeks to receive or receives services primarily for personal, 
family or household purposes.     
1354
  See supra footnote 863 and accompanying text. 

 
453 
 
requirements.  We are maintaining the methodology we used in the Proposing Release and are 
updating our estimates to reflect the number of broker-dealers since the last burden estimate.   
Some of the burden for dual registrants to prepare and deliver the relationship summary 
and post it to a website is already accounted for in the estimated burdens for investment advisers 
under the amendments to Form ADV and new rule 204-5, discussed in Sections V.A.2.a and V. 
C.2 above.  However, dually registered broker-dealers will incur burdens related to their business 
as an investment adviser that standalone broker-dealers will not incur, such as the requirement to 
file the relationship summary using both IARD and Web CRD
®
, and to deliver to both 
investment advisory clients and brokerage customers, to the extent those groups of retail 
investors do not overlap.  In addition, dual registrants may provide different services, charge 
different fees,  and have different conflicts on the advisory and broker-dealer sides such that the 
burden of preparing the relationship summary on the broker-dealer side may not be substantially 
reflected in the burden for preparing the relationship summary on the advisory side.  Therefore, 
although treating dually registered broker-dealers in this way may be over-inclusive, we base our 
burden estimates for rule 17a-14 and the relationship summary on 2,766 broker-dealers with 
relationship summary obligations, including those dually registered as broker-dealers.
  1355
     
                                                                                                                                                             
1355
  The burden estimates for dual registrants to prepare and file the relationship summary is accounted for in 
the burden estimates for Form ADV and under Exchange Act rule 17a-14.  For example, a dual registrant 
that prepares an initial relationship summary that covers both its advisory business and broker-dealer 
business has an estimated burden of 60 hours amortized (20 hours to prepare and file relationship summary 
related to the advisory business + 40 hours to prepare and file relationship summary related to the broker-
dealer business). 

 
454 
 
2. Initial and Annual Burdens  
a. Initial Preparation,  Filing, and Posting of Relationship 
Summary    
As discussed above in Section II, firms will be required to prepare and file a relationship 
summary summarizing specific aspects of their brokerage services that they offer to retail 
investors.  Unlike investment advisers, which already prepare Form ADV Part 2A brochures and 
have information readily available to prepare the relationship summary, broker-dealers will be 
required for the first time to prepare a disclosure that contains all the information required by the 
relationship summary.     
In the Proposing Release, we estimated that the initial first year burden for preparing and 
filing the relationship summary for broker-dealers would be 15 hours per registered broker-
dealer and an additional 0.5 hours to prepare the relationship summary for posting on its website, 
if it has one.  Several commenters said that our estimated burdens were too low.
1356
  One 
commenter specifically argued that preparing, delivering, and filing the relationship summary 
would take from 80 to 500 hours, based on input from compliance professionals, and noted there 
would be additional costs that are hard to quantify, including human relations and information 
                                                                                                                                                             
1356
  See, e.g., NSCP Letter; see also CCMC Letter (costs to implement the proposal were underestimated and 
greater than 40% of firms surveyed anticipate having to spend a moderate or substantial amount to 
implement Regulation Best Interest and Form CRS); Raymond James Letter (noting the significant 
implementation costs of Regulation Best Interest and Form CRS for the industry); SIFMA Letter (stating 
that implementation costs of Regulation Best Interest and Form CRS would be significant).   

 
455 
 
technology programming.
1357
  Commenters also said the relationship summary would result in 
additional compliance burdens, including training.
1358
 
We are revising our estimate of the time that it would take each broker-dealer to prepare 
and file the relationship summary in the first year from 15 to 40 hours in light of these comments 
and the changes we are making to the proposed relationship summary.   For example, in the 
Proposing Release, we estimated that it would take firms a shorter amount of time to prepare the 
relationship summary than a more narrative disclosure due to the standardized nature and 
prescribed language of the relationship summary.  As discussed above, the final instructions 
require less prescribed wording relative to the proposal and require broker-dealers to draft their 
own summaries for most of the sections.  In addition and in a change from the proposal, we now 
are requiring that all relationship summaries be filed with machine-readable headings, as well as 
text-searchable format as proposed.  We acknowledge that these changes will increase cost 
burdens relative to the proposal because broker-dealers have to develop their own wording and 
design, as well as implement machine-readable headings to comply with these requirements.   
The relationship summary will also require more layered disclosures relative to the 
proposal and will encourage the use of electronic formatting and graphical, text, online features 
to facilitate access to other disclosures that provide additional detail.  Although broker-dealers 
are currently required to disclose certain information about their services and accounts to their 
                                                                                                                                                             
1357
 See NSCP Letter.  
1358
  See NSCP Letter (stating that a minimum of two hours of firm level training or two hours of training per 
independent registered representative or adviser will be required prior to Form CRS implementation).  

 
456 
 
retail investors,
1359
 broker-dealers are not currently required to disclose in one place all of the 
information required by the relationship summary or to file a narrative disclosure document with 
the Commission comparable to investment advisers’ Form ADV Part 2A.  Broker-dealers will 
bear the cost of drafting a new relationship summary and cross-referencing or hyperlinking to 
additional information.  The higher estimated burden estimate also reflects our acknowledgement 
that it will take firms longer to draft certain disclosures than we estimated in the Proposing 
Release, such as answers to “conversation starters” that broker-dealers providing services only 
online without a particular individual with whom a retail investor can discuss these questions 
must include on their website.  We believe these factors and the changes we made to the proposal 
will increase the burden to prepare a relationship summary relative to the proposal. 
We are also changing the filing system for broker-dealers as compared to the proposal. 
Broker-dealers will file Form CRS through Web CRD
®
 instead of EDGAR as proposed, but we 
believe that this change will reduce the estimated burden for filing with the Commission, relative 
to the proposal.  Broker-dealers already submit registration filings on Web CRD
®
 so they will 
not incur additional costs to access the system.
1360
      
We are estimating the same hourly burden for standalone broker-dealers and broker-
dealers that are dually registered as investment advisers because we are counting dually 
registered firms in the burden calculation for the Advisers Act rule that requires the relationship 
                                                                                                                                                             
1359
  See, e.g., Exchange Act rule 10b-10 (requiring a broker-dealer effecting transactions in securities to provide 
written notice to the customer of certain information specific to the transaction at or before completion of 
the transaction, including the capacity in which the broker-dealer is acting (i.e., agent or principal) and any 
third-party remuneration it has received or will receive).   
1360
  This reduction in the filing burden is offset by the increased burden to prepare the relationship summary, 
resulting in a higher total burden.   

 
457 
 
summary for investment advisers.
1361
  We recognize that the burden for some broker-dealers will 
exceed our estimate and the burden for others will be less because broker-dealers vary in the size 
and complexity of their business models, but we do not believe that the range could be as high as 
suggested by some commenters.
1362
  Unlike investment advisers, which already prepare Form 
ADV Part 2A brochures and have information readily available to prepare the relationship 
summary, broker-dealers will be required for the first time to prepare disclosure that contains all 
the information required by the relationship summary. 
  We recognize that the burden on some broker-dealers might be significant, especially in 
the initial preparation and filing of the relationship summary and thus will require additional 
burdens than what we estimated in the Proposing Release.  Accordingly, we are increasing the 
estimate from 15 to 40 hours in the first year for a broker-dealer’s initial preparation and filing of 
the relationship summary, which is higher than the estimated burden for investment advisers.
1363
  
We estimate that the total burden for broker-dealers to prepare and file the relationship summary 
will be 110,640 hours,
1364
 for a monetized value of $30,204,720.
1365
  The initial burden will be 
                                                                                                                                                             
1361
  See supra footnote 1220.   
1362
  See NSCP Letter (estimating that the time required to prepare, deliver, and file Form CRS would be 
anywhere from 80 to 500 hours).  
1363
  See infra footnote 1366.  Amortizing the 40 hour burden imposed by the relationship summary over a 
three-year period will result in an average annual burden of 13.33 hours per year for each of the 2,766 
broker-dealers with relationship summary obligations.     
1364
  2,766 x 40.0 hours / 3 = 36,880 total hours.  
1365
  We expect that performance of this function will most likely be equally allocated between a senior 
compliance examiner and a compliance manager. Data from the SIFMA Management and Professional 
Earnings Report suggest that costs for these positions are $237 and $309 per hour, respectively.  (0.5 x 
110,640 hours x $237) + (0.5 x 110,640 hours x $309) = $30,204,720. 

 
458 
 
amortized over three years to arrive at an annual burden for broker-dealers to prepare and file the 
relationship summary.  Therefore, the total annual aggregate hour burden for registered broker-
dealers to prepare and file the relationship summary will be 36,880 hours, or 13.33 hours per 
broker-dealer,
1366
 for an annual monetized cost of $10,068,240, or $3,640 per broker-dealer.
1367
  
As proposed, broker-dealers will be required to post a current version of their relationship 
summary prominently on their public website (if they have one).  In the Proposing Release, we 
estimated that each broker-dealer will incur 0.5 hours to prepare the posted relationship summary, 
such as to ensure proper electronic formatting and to post a current version of the relationship 
summary on the broker-dealer’s website, if it has one.  Although we did not receive any 
comments regarding burdens associated with posting of the relationship summary to a public 
website, we are increasing our estimate of the time from 0.5 to 1.5 hours based upon the staff’s 
experience.
1368
  We believe that the amount of time needed to prepare the relationship summary 
for posting, including ensuring proper formatting and posting it on the website, will not vary 
significantly from the time needed by investment advisers.  We do not anticipate that broker-
dealers will incur additional external costs to post the relationship summary to the broker-
dealer’s website because broker-dealers without a public website will not be required to establish 
or maintain one, and broker-dealers with a public website have already incurred external costs to 
                                                                                                                                                             
1366
  110,640 hours for preparing and filing / 3 years = 36,880 total aggregate annual hour burden to prepare and 
file relationship summary.  36,880 hours / 2,766 broker-dealers with retail accounts = 13.33 hours annually 
per broker-dealer. 
1367
  $30,204,720 total initial aggregate monetized cost for preparation and filing / 3 = $10,068,240 total annual 
monetized cost for preparation and filing the relationship summary.  $10,068,240 / 2,766 broker-dealers 
subject to relationship summary obligations = $3,640 per broker-dealer. 
1368
  See supra footnote 1302. 

 
459 
 
create and maintain their websites.  As with investment advisers, we estimate that each broker-
dealer will incur 1.5 hours to prepare the relationship summary for posting to its website.  We 
estimate that the initial burden of posting the relationship summary to their websites, if they have 
one, will be 4,149 hours,
1369
 for a monetized value of $257,238.
1370
  The initial burden will be 
amortized over three years to arrive at an annual burden for broker-dealers to post the 
relationship summary to a public website.  Therefore, the total annual aggregate hour burden for 
broker-dealers to post the relationship summary will be 1,383 hours, or 0.5 hours per broker-
dealer,
1371
 for an annual monetized cost of $87,746, or $31 per broker-dealer.
1372
 
To arrive at an annual burden for preparing, filing, and posting the relationship summary, 
as for investment advisers, the initial burden will be amortized over a three-year period for 
broker-dealers.  Therefore, the total annual aggregate hour burden for registered broker-dealers 
to prepare, file, and post a relationship summary to their website, if they have one, will be 38,263 
                                                                                                                                                             
1369
  1.5 hours x 2,766 broker-dealers = 4,149 hours to prepare and post relationship summary to the website. 
1370
  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
performance of this function will most likely be performed by a general clerk at an estimated cost of $62 
per hour.  4,149 hours x $62 = $257,238 total aggregate monetized cost. 
1371
  4,149 hours for posting to website / 3 years = 1,383 total aggregate annual burden to prepare and file 
relationship summary.  1,383 hours / 2,766 broker-dealers with retail account = 0.5 hours annually per 
broker-dealer. 
1372
  $257,238 total initial aggregate monetized cost for posting to website / 3 = $85,746 total annual monetized 
cost for posting the relationship summary.  $87,746 / 2,766 broker-dealers with retail accounts = $31 per 
broker-dealer.  

 
460 
 
hours, or 13.83 hours per broker-dealer,
1373
 for an annual monetized cost of $10,153,986, or 
$3,671 per broker-dealer.
1374
  
b. Estimated External Costs for Initial Preparation of 
Relationship Summary  
Under new rule 17a-14, broker-dealers will be required to prepare and file a relationship 
summary, as well as post it to their website if they have one.  We do not anticipate external costs 
to broker-dealers in the form of website set-up, maintenance, or licensing fees because they will 
not be required to establish a website for the sole purpose of posting their relationship summary 
if they do not already have a website.  We do anticipate that most broker-dealers will incur a 
one-time initial cost for outside legal and consulting fees in connection with the initial 
preparation of the relationship summary.   
We estimated in the Proposing Release that an external service provider would spend 3 
hours helping a broker-dealer prepare an initial relationship summary.  While we received no 
specific comments on our estimate regarding external costs in the Proposing Release, one 
commenter suggested that there would be additional implementation costs such as legal advice, 
but that these costs are difficult to quantify.
1375
  Based on the concerns expressed by this 
commenter and the changes we are making to the relationship summary, for example, requiring 
                                                                                                                                                             
1373
  110,640 hours for preparing and filing + 4,149 hours for posting = 114,789 hours. 114,789 / 3 years = 
38,263 total aggregate annual hour burden to prepare and file relationship summary.  38,263 hours / 2,766 
broker-dealers with retail accounts = 13.83 hours annually per broker-dealer. 
1374
  $30,204,720 total initial aggregate monetized cost for preparation and filing + $257,238 for posting to the 
website / 3 = $10,153,986 total annual monetized cost for preparation, filing and posting the relationship 
summary.  $10,153,968 / 2,766 broker-dealers subject to relationship summary obligations = $3,671 per 
broker-dealer. 
1375
  See NSCP Letter.   

 
461 
 
less prescribed wording, we are increasing the estimate relative to the proposal from 3 to 5 hours.  
While we recognize that different firms may require different amounts of external assistance in 
preparing the relationship summary, we believe that this is an appropriate average number for 
estimating an aggregate amount for the industry purposes of the PRA analysis, particularly given 
our experience with the burdens for Form ADV.
1376
    
Although broker-dealers that will be subject to the relationship summary requirement 
may vary widely in terms of the size, complexity, and nature of their business, we believe that 
the strict page limits will make it unlikely that the amount of time, and thus cost, required for 
outside legal and compliance review will vary substantially among those broker-dealers who 
elect to obtain outside assistance.
 
 
Most of the information required in the relationship summary is readily available to 
broker-dealers because the information required pertains largely to the broker-dealer’s own 
business practices, and thus the information is likely more readily available to the broker-dealer 
than to an external legal or compliance consultant.  However, because broker-dealers are drafting 
a narrative disclosure for the first time, we anticipate that 50% of broker-dealers w ill seek the 
help of outside legal services and 50% of broker-dealers will seek the help of compliance 
consulting services in connection with the initial preparation of the relationship summary.  We 
estimate that the initial per broker-dealer cost for legal services related to the preparation of the 
relationship summary will be $2,485.
1377
  We estimate that the initial per broker-dealer cost for 
                                                                                                                                                             
1376
  See supra footnote 1221.  
1377
  External legal fees are in addition to the projected hour per broker-dealer burden discussed above.  Data 
from the SIFMA Management and Professional Earnings Report suggest that outside legal services cost 
 

 
462 
 
compliance consulting services related to the preparation of the relationship summary will be 
$3,705.
1378
  Accordingly, we estimate that 1,383 broker-dealers will use outside legal services, 
for a total initial aggregate cost burden of $3,436,755,
1379
 and 1,383 broker-dealers w ill use 
outside compliance consulting services, for a total initial aggregate cost burden of 
$5,124,015,
1380
 resulting in a total initial aggregate cost burden among all respondents of 
$8,560,770, or $3,095 per broker-dealer, for outside legal and compliance consulting fees related 
to preparation of the relationship summary.
1381
  Annually, this represents $2,853,590, or $1,032 
per broker-dealer, when amortized over a three-year period.
1382
  
c. Amendments to the Relationship Summary and Filing and 
Posting of Amendments 
As with our estimates above for investment advisers, we do not expect broker-dealers to 
amend their relationship summaries frequently.  In the Proposing Release, we estimated that 
broker-dealers required to prepare and file a relationship summary would require 0.5 hours to 
                                                                                                                                                             
approximately $497 per hour.  $497 per hour for legal services x 5 hours per broker-dealer = $2,485.  The 
hourly cost estimate of $497 is adjusted for inflation and based on our consultation with broker-dealers and 
law firms who regularly assist them in compliance matters. 
1378
  External compliance consulting fees are in addition to the projected hour per broker-dealer burden 
discussed above.  Data from the SIFMA Management and Professional Earnings Report suggest that 
outside management consulting services cost approximately $741 per hour.  $741 per hour for outside 
consulting services x 5 hours per broker-dealer = $3,705. 
1379
  50% x 2,766 SEC registered broker-dealers = 1,383 broker-dealers.  $2,485 for legal services x 1,383 
broker-dealers = $3,436,755.   
1380
  50% x 2,766 SEC registered broker-dealers = 1,383 broker-dealers.  $3,705 for compliance consulting 
services x 1,383 broker-dealers = $5,124,015. 
1381
  $3,436,755 + $5,124,015 = $8,560,770.  $8,560,770 / 2,766 broker-dealers = $3,095 per broker-dealer. 
1382
  $8,560,770 initial aggregate monetized cost / 3 years = $2,853,590 annually.  $3,095 initial monetized cost 
per broker-dealer / 3 years = $1,032. 

 
463 
 
amend and file the updated relationship summary, and 0.5 hours to post it to their website.  We 
did not receive comments regarding hour burdens associated with preparing and filing 
amendments to the relationship summary.  As discussed in section II. C.4 above, in a change 
from the proposal, we are adding a requirement that broker-dealers delivering updated 
relationship summaries to customers also highlight the most recent changes by, for example, 
marking the revised text or including a summary of material changes.  To account for this change, 
we are increasing the annual burden to 1 hour per year for preparing and filing amendments to 
the relationship summary.  We are not changing the proposed 0.5 hours estimate to post the 
amendments to a public website.  
Based on staff experience, we believe that many broker-dealers will update their 
relationship summary at a minimum once a year, after conducting an annual supervisory review, 
for example.
1383
  We also estimate that on average, each broker-dealer preparing a relationship 
summary may amend the disclosure once more during the year, due to emerging issues.  
Therefore, we estimate that broker-dealers will update their relationship summary, on average, 
twice a year.  Thus, we estimate that broker-dealers will incur a total annual aggregate hourly 
burden of 5,532 hours per year to prepare and file amendments per year, and 2,766 hours per 
                                                                                                                                                             
1383
  FINRA rules set an annual supervisory review as a minimum threshold for broker-dealers, for example in 
FINRA Rules 3110 (requiring an annual review of the businesses in which the broker-dealer engages), 
3120 (requiring an annual report detailing a broker-dealer’s system of supervisory controls, including 
compliance efforts in the areas of antifraud and sales practices); and 3130 (requiring each broker-dealer’s 
CEO or equivalent officer to certify annually to the reasonable design of the policies and procedures for  
compliance with relevant regulatory requirements).   

 
464 
 
year to post to their websites an estimated total of 5,532 amendments per year.
1384
  We therefore 
estimate that for making and filing amendments to their relationship summaries, broker-dealers 
will incur an annual aggregate monetized cost of $1,510,236, or approximately $546 per broker-
dealer to prepare and file amendments,
1385
 and an annual aggregate monetized cost of $171,492, 
or approximately $62 per broker-dealer to post the amendments.
1386
    In total, the aggregate 
annual monetized cost for broker-dealers to make, file, and post amendments will be $1,681,728, 
or approximately $608 per broker dealer.
1387
 
We do not expect ongoing external legal or compliance consulting costs for the 
relationship summary.
1388
  Although broker-dealers will be required to amend the relationship 
summary within 30 days whenever any information becomes materially inaccurate, we expect 
that the amendments will require relatively minimal wording changes, given the relationship 
summary’s page limitation and summary nature.  We believe that broker-dealers will be more 
knowledgeable about the information to include in the amendments than outside legal or 
                                                                                                                                                             
1384
  2,766 broker-dealers amending relationship summaries x 2 amendments per year = 5,532 amendments per 
year. 5,532 amendments x 1 hour to amend and file = 5,532 hours.  2,766 broker-dealers x (0.5 hours to 
post amendments to website x 2 amendments a year) = 2,766 hours.  
1385
  5,532 total aggregate initial hour burden for amending relationship summaries. We believe that 
performance of this function will most likely be equally allocated between a senior compliance examiner 
and a compliance manager. Data from the SIFMA Management and Professional Earnings Report suggest 
that costs for these positions are $237 and $309 per hour, respectively. (5,532 hours x 50% x $237 + 5,532 
hours x 50% x $309 = $1,510,236.  $1,510,236 / 2,677 investment advisers = $546 per investment broker-
dealer. 
1386
  Based on data from the SIFMA Office Salaries Report, we expect that the posting will most likely be 
performed by a general clerk at an estimated cost of $62 per hour.  2,766 aggregate hours to post 
amendment x $62 = $171,492.  $171,492 / 2,766 broker-dealers = $62 in annual monetized costs.     
1387
  $1,510,236 to prepare and file amendment + $171,492 to post the amendments = $1,681,728. $1,681,728 / 
2,766 = $608.  
1388
  But see NNCP Letter.  

 
465 
 
compliance consultants and will be able to make these revisions in-house.  Therefore, we do not 
expect that broker-dealers will need to incur ongoing external costs for the preparation and 
review of relationship summary amendments. 
d. Delivery of the Relationship Summary 
Rule 17a-14 under the Exchange Act will require a broker-dealer to deliver the 
relationship summary, with respect to a retail investor that is a new or prospective customer, 
before or at the at the earliest of:  (i) a recommendation of an account type,  a securities 
transaction or an investment strategy involving securities; (ii) placing an order for the retail 
investor; or (iii) the opening of a brokerage account for the retail investor.   Broker-dealers also 
will make a one-time, initial delivery of the relationship summary to all existing customers 
within a specified time period after the effective date of the rule.  Also with respect to existing 
customers, broker-dealers will deliver the most recent relationship summary before or at the time 
of (i) opening a new account that is different from the retail investor’s existing account(s); or (ii) 
recommending that the retail investor roll over assets from a retirement account into a new or 
existing account or investment; or (iii) recommending or providing a new brokerage or 
investment advisory service or investment that does not necessarily involve the opening of a new 
account and would not be held in the existing account.   
As discussed above in Section II. C.3.a, broker-dealers will be required to post a current 
version of the relationship summary prominently on their public websites (if they have one), and 
will be required to communicate any changes in an amended relationship summary to retail 
investors who are existing clients or customers within 60 days, instead of 30 days as proposed, 

 
466 
 
after the amendments are required to be made and without charge.
1389
  Broker-dealers also must 
deliver a current relationship summary to each retail investor within 30 days upon request.  In a 
change from the proposal, a broker-dealer must make available a copy of the relationship 
summary upon request without charge, and where a relationship summary is delivered in paper 
format, the broker-dealer may link to additional information by including URL addresses, QR 
codes, or other means of facilitating access to such information.
1390
  The broker-dealer must also 
include a telephone number where retail investors can request up-to-date information and request 
a copy of the relationship summary.
1391
   
As discussed further below, we received comments that our estimated burdens for 
delivery of the relationship summary were too low.
1392
  Some of these comments were focused 
on the delivery burdens related to the requirement to deliver a relationship summary to existing 
retail investors when changes are made to the existing account that would “materially change” 
the nature and scope of the relationship.
1393
  Other comments focused on the recordkeeping 
burdens related to the requirement to deliver the relationship summary to a new or prospective 
                                                                                                                                                             
1389
  The communication can be made by delivering the relationship summary or by communicating the 
information through another disclosure that is delivered to the retail investor.   
1390
  Additionally, we are adopting the instruction that if a relationship summary is delivered in paper format as 
part of a package of documents, the firm must ensure that the relationship summary is the first among any 
documents that are delivered at that time, substantially as proposed.  See supra footnotes 678 -679.   
1391
  This differs from the proposal, which required only firms that do not have a public website to include a toll-
free number that retail investors may call to request documents.  See supra footnote 609.   
1392
  See, e.g., SIFMA Letter.  
1393
  See, e.g., Cambridge Letter; SIFMA Letter; LPL Financial Letter. 

 
467 
 
retail investor.
1394
  As discussed further below, we made changes to the proposal to require more 
specific triggers for initial delivery and additional delivery to existing customers in order to 
replace the requirements in response to comments.  We discuss below the specific separate 
delivery requirements and modifications.  
(1) One-Time Initial Delivery to Existing Customers 
We estimate the burden for broker-dealers to make a one-time initial delivery of the 
relationship summary to existing customers based on an estimate of the number of accounts held 
by these broker-dealers.  Based on FOCUS data, we estimate that the 2,766 broker-dealers that 
report retail activity have approximately 139 million customer accounts, and that approximately 
73.5%, or 102.165 million, of those accounts belong to retail customers.
1395
  We estimate that, 
under the adopted rule, broker-dealers will send their relationship summary along with other 
required disclosures, such as periodic account statements, in order to comply with initial delivery 
requirements for the relationship summary.   
As with investment advisers, we estimate that a broker-dealer will require no more than 
0.02 hours to deliver the relationship summary to each existing retail investor under rule 17a-14.  
We did not receive comments on the burdens specific to delivering the relationship summary to 
existing clients.  We will therefore estimate broker-dealers to incur an aggregate initial burden of 
                                                                                                                                                             
1394
  See infra footnote 1427. 
1395
  See supra footnotes 857 - 865 and accompanying text.  2,766 broker-dealers (including dually registered 
firms) report 139 million customer accounts.  Approximately 73.5% of registered broker-dealers report 
retail customer activity; see supra footnote 861. Therefore, 73.5% x 139 million accounts = 102.165 
million accounts.  This number likely overstates the number of deliveries to be made due to the double-
counting of deliveries to be made by dual registrants to a certain extent, and the fact that one customer may 
own more than one account. 

 
468 
 
2,043,300 hours, or approximately 739 hours per broker-dealer for the first year after the rule is 
in effect.
1396
  We expect the aggregate monetized cost for broker-dealers to make a one-time 
initial delivery of relationship summaries to existing customers to be $126,684,600.
1397
  
Amortized over three years, the total annual hourly burden is estimated to be 681,100 hours, or 
approximately 246 hours per broker-dealer,
1398
 w ith annual monetized costs of $42,228,200 and 
$15,267, respectively.
1399
  We do not expect that broker-dealers will incur external costs for the 
initial delivery of the relationship summary to existing clients because we estimate that they will 
make such deliveries along with another required delivery, such as periodic account statements. 
(2) Additional Delivery to Existing Customers 
 As discussed in Section II.C.3.c above, broker-dealers will be required to deliver the 
relationship summary to existing customers when opening a new account that is different from 
the retail investor’s existing account(s), as proposed.  In addition, in a change from the proposal, 
delivery will be required before or at the time the broker-dealer (i) recommends that the retail 
investor roll over assets from a retirement account into a new or existing account or investment, 
                                                                                                                                                             
1396
  (0.02 hours per customer account x 102.165 million customer accounts) = 2,043,300 hours.  The burden for 
preparing updated relationship summaries is already incorporated into the burden estimate for Form CRS 
discussed above.  2,043,300 hours / 2,766 broker-dealers = approximately 739 hours per broker-dealer.   
1397
 Based on data from SIFMA’s Office Salaries Report, we expect that initial delivery requirement to existing 
clients of rule 17a-14 will most likely be performed by a general clerk at an estimated cost of $62 per hour.  
2,043,300 hours x $62 = $126,684,600.  We estimate that broker-dealers will not incur any incremental 
postage costs because we estimate that they will make such deliveries with another mailing the broker-
dealer was already delivering to clients, such as periodic account statements. 
1398
  2,043,300 initial aggregate hours / 3 = 681,100 total annual aggregate hours.  739 initial hours per broker-
dealer / 3 = 246 total annual hours per broker-dealer. 
1399
  $126,684,600 initial aggregate monetized cost / 3 = $42,228,200 annual aggregate monetized cost.  
$42,228,200 / 2,766 broker-dealers = $15,267 annual monetized cost per broker-dealer. 

 
469 
 
or (ii) recommends or provides a new brokerage or investment advisory service or investment 
that does not necessarily involve the opening of a new account and would not be held in the 
existing account.  We are adopting these two triggers instead of the proposed requirement to 
deliver the relationship summary before or at the time changes are made to the existing account 
that would “materially change” the nature and scope of the relationship to address commenters’ 
requests for additional guidance or examples of what would constitute a “material change.”
1400
  
Commenters also described administrative and operational burdens arising from this requirement 
and argued that our estimated burdens were too low.
1401
  One commenter asserted that firms 
would be required to build entirely new operational and supervisory processes to identify asset 
movements that could trigger a delivery requirement.
1402
  Another noted the challenges of 
designing a system that distinguishes non-ordinary course events from routine account 
changes.
1403
   
As discussed above, we replaced the “materially change” requirement with more specific 
triggers to be clearer about when a relationship summary must be delivered.
1404
  While these 
specific triggers will still impose operational and supervisory burdens on broker-dealers, we 
believe that they are more easily identified and monitored, such that firms will not incur 
                                                                                                                                                             
1400
 See supra footnotes 758–763 and accompanying text. 
1401
  See, e.g., LPL Financial Letter (stating that proposed re-delivery triggering events would not be easily 
identifiable and would present operational challenges and compliance costs).   
1402
  See SIFMA Letter. 
1403
  See LPL Financial Letter. 
1404
  See supra footnote 761 and accompanying text.  

 
470 
 
significant burdens as described by commenters to implement entirely new supervisory, 
administrative, and operational processes needed to monitor events that cause a material change.  
However, recognizing that some additional processes will be necessary to implement these 
delivery triggers, we are increasing our burden estimate from 0.02 to 0.04 hours.  We now 
estimate that each broker-dealer will incur 149 hours per year to deliver the relationship 
summary in these types of situations, and that delivery under these circumstances will take place 
among 10% of broker-dealer’s retail investors annually.  We will therefore estimate broker-
dealers to incur a total annual aggregate burden of 408,660 hours, or 148 hours per broker-
dealer,
1405
 at an annual aggregate monetized cost of $25,336,920, or approximately $9,160 per 
broker-dealer.
1406
   
(3) Communicating Changes to Amended Relationship 
Summaries, Including by Delivery 
As discussed above, broker-dealers will be required to amend their relationship 
summaries within 30 days when any of the information becomes materially inaccurate.  They 
must also communicate any changes in any new version of the relationship summary to retail 
investors who are existing customers within 60 days, instead of 30 days as proposed, after the 
                                                                                                                                                             
1405
  10% of 102.165 million customers x 0.04 hours = 408,660 hours.  408,660 hours / 2,766 broker-dealers = 
148 hours per broker-dealer.   
1406
  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
delivery requirements of rule 17a-14 will most likely be performed by a general clerk at an estimated cost 
of $62 per hour.  408,660 hours x $62 = $25,336,920.  $25,336,920 / 2,766 broker-dealers = $9,160 per 
broker-dealer.  We estimate that broker-dealers will not incur any incremental postage costs in these 
deliveries of the relationship summary to existing customers, because we estimate that broker-dealers will 
make such deliveries with another mailing the broker-dealer was already delivering to clients, such as 
periodic account statements, or new account agreements and other similar documentation. 

 
471 
 
updates are required to be made and without charge.  We do not expect this change to increase 
the PRA estimates.
1407
  The communication can be made by delivering the relationship summary 
or by communicating the information through another disclosure to the retail investor.  This 
requirement is a change from the proposed requirement but is substantively similar, and 
commenters did not comment on the estimated burden.
1408
  We have determined not to change 
the burden relative to the proposal. 
Consistent with our discussion on broker-dealers’ amendments to the relationship 
summary we are assuming that the broker-dealers with relationship summaries will amend them 
twice each year.  We also estimate that 50% will choose to deliver the relationship summary to 
communicate the updated information.  We did not receive comments on this estimate.  As with 
investment advisers, we believe that it is likely that the other 50% of broker-dealers will 
incorporate all of the updated information in other disclosures, which they are already obligated 
to deliver in order to avoid having to deliver two documents.  We estimate that broker-dealers 
will require 0.02 hours to make a delivery to each customer.
1409
  Therefore, the estimated burden 
                                                                                                                                                             
1407
  As discussed in Section V.D.2.c., we have increased the burden estimates for preparing amendments to the 
relationship summary, acknowledging, among other things, that firms will incur additional burdens to 
prepare and file amendments as a result of the instructions that firms preparing amendments highlight the 
most recent changes, and that additional disclosure showing the revised text be attached as an exhibit to the 
unmarked relationship summary.    
1408
  The proposed instructions would have required firms to communicate updated information by delivering 
the amended relationship summary or by communicating the information another way.  The revised 
instruction will eliminate the wording “another way” and will clarify that the communication can be made 
through another disclosure that is delivered to the retail investor.  See supra footnotes 775 - 778 and 
accompanying text. 
1409
  For the other 50% of broker-dealers that may choose to communicate updated information in another 
disclosure, we estimate no added burden because these broker-dealers are communicating the information 
in other disclosures they are already delivering. 

 
472 
 
for those broker-dealers choosing to deliver an amended relationship summary to meet this 
communication requirement will be approximately 2,043,300 hours, or 739 hours per broker-
dealer,
1410
 translating into a monetized cost of $126,684,600 in aggregate, or $45,801 per broker-
dealer.
1411
   
In a change from the proposal, we are also adopting two requirements not included in the 
proposal.  First, all firms will be required to make available a copy of the relationship summary 
upon request without charge.  Second, in a relationship summary that is delivered in paper 
format, firms may link to additional information by including URL addresses, QR codes, or other 
means of facilitating access to such information.  We believe that these new requirements will 
increase the burden relative to the proposal for some broker-dealers that do not currently fulfill 
these types of disclosure requests, including, for example, additional costs associated with 
tracking customer delivery preferences related to making copies of the relationship summary 
available upon request, and printing and mailing costs for copies delivered in paper.  We 
estimate that the 2,766 broker-dealers with relationship summary obligations, on average, will 
require 0.5 hours each annually to comply with this requirement.  Therefore, we estimate that the 
2,766 broker-dealers with relationship summary obligations will incur a total of 1,383 aggregate 
                                                                                                                                                             
1410
  2 amendments per year x 102.165 million customer accounts x 50% delivering the amended relationship 
summary to communicate updated information x 0.02 hours per delivery = 2,043,300 hours to deliver 
amended relationship summaries.  2,043,300 hours / 2,766 broker-dealers = 739 hours per broker-dealer. 
1411
  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
delivery requirements of rule 17a-14 will most likely be performed by a general clerk at an estimated cost 
of $62 per hour.  2,043,300 hours x $62 = $126,684,600.  $126,684,600 / 2,766 broker-dealers = $45,801 
per broker-dealer.  We estimate that broker-dealers will not incur any incremental postage costs to deliver 
these relationship summaries, because we estimate that advisers will make the delivery along with other 
documentation they normally would provide, such as account opening documents.   

 
473 
 
burden hours to make copies of the relationship summary available upon request,
1412
 with a 
monetized cost per adviser of $31, or $85,746 in aggregate monetized cost.
1413
  We acknowledge 
that the burden may be more or less than 0.5 hours for some broker-dealers, but w e believe that, 
on average, 0.5 hours is an appropriate estimate for calculating an aggregate burden for the 
industry for this collection of information.     
We do not expect broker-dealers to incur external costs in delivering amended 
relationship summaries or communicating the information in another way because we estimate 
that they will make these deliveries with, or as part of other disclosures required to be delivered.  
We did not receive comments on this assumption in the proposal.   
e. Delivery to New Customers or Prospective New Customers 
To estimate the delivery burden for broker-dealers’ new or prospective new customers, as 
discussed above, we estimate that the 2,766 standalone broker-dealers with retail activity have 
approximately 102.165 million retail customer accounts.
1414
  We did not receive comments on 
the burdens specific to delivering the relationship summary to new and prospective retail 
investors under rule 17a-14.  Based on FOCUS data over the past five years, we estimate that 
broker-dealers grow their customer base and enter into new agreements with, on average, 11% 
                                                                                                                                                             
1412
  0.5 hours to make paper copies of the relationship summary available upon request x 2,677 broker-dealers 
with relationship summary obligations = 1,383 hours.  
1413
  Based on data from the SIFMA Office Salaries Report, we expect that the requirement for broker-dealers to 
make paper copies of the relationship summary available upon request will most likely be performed by a 
general clerk at an estimated cost of $62 per hour.  0.5 hours per broker-dealer x $62 = $31 in monetized 
costs per broker-dealer.  $31 per broker-dealer x 2,766 broker-dealers with relationship summary 
obligations = $85,746 total aggregate monetized cost.   
1414
  See supra footnotes 857-865 and accompanying text.   

 
474 
 
more new retail investors each year.
1415
  We estimate the hour burden for initial delivery of a 
relationship summary will be the same by paper or electronic format, at 0.02 hours for each 
relationship summary, as we have estimated above.  Therefore, the aggregate annual hour burden 
for initial delivery of the relationship summary by broker-dealers to new or prospective new 
customers will be 224,763 hours, or 81.3 hours per broker-dealer,
1416
 at a monetized cost of 
$13,935,306 at an aggregate level, or $5,038 per broker-dealer.
1417
 
f. Total New Initial and Annual Burdens 
As discussed above, we estimate the total annual collection of information burden for  
new rule 17a-14 in connection with obligations relating to the relationship summary, including 
(i) initial preparation, filing, and posting to a website; (ii) amendments to the relationship 
summary for material updates and related filing and website posting burdens; (iii) one-time 
initial delivery to existing customers; (iv) additional delivery to existing customers; (v) delivery 
of amended relationship summaries; (vi) delivery to new and prospective customers; and (vii) 
making copies available upon request.  Given these requirements, we estimate the total annual 
aggregate hourly burden to be approximately 3,408,533 hours per year, or 1,232 hours on a per 
                                                                                                                                                             
1415
  This represents the average annual rate of growth from 2014-2018 in the number of accounts for all broker-
dealers reporting retail activity.   
1416
  102.165 million customer accounts x 11% increase = 11,238,150 new customers.  11,238,150 new 
customers x 0.02 hours per delivery = 224,763 total annual aggregate hours.  224,763 / 2,766 broker-
dealers = 81.3 hours per broker-dealer for delivery to new customers.  
1417
  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
these functions will most likely be performed by a general clerk at an estimated cost of $62 per hour.  
224,763 hours x $62 = $13,935,306.  $13,935,306 / 2,766 broker-dealers = $5,038 per broker-dealer for 
delivery to new customers.  We estimate that broker-dealers will not incur any incremental postage costs to 
deliver the relationship summary to new or prospective clients because we estimate that broker-dealers will 
make the delivery along with other documentation, such as periodic account statements. 

 
475 
 
broker-dealer basis.
1418
  This translates into an aggregate annual monetized cost of $219,110,726, 
or $79,216 per broker-dealer per year.
1419
  In addition, we estimate that broker-dealers will incur 
external legal and compliance costs in the initial preparation of the relationship summary of 
approximately $8,560,770 in aggregate, or $3,095 per broker-dealer, translating into $2,853,590 
annually, or $1,032 per broker-dealer, when amortized over a three year period.
1420
 
E. Recordkeeping Obligations under Exchange Act Rule 17a-3
1421
 
The final requirement to make a record indicating the date that a relationship summary 
was provided to each retail investor, including any relationship summary provided before such 
retail investor opens an account, will contain a collection of information that will be found at 17 
CFR 240.17a-3(a)(24) and will be mandatory.  The Commission staff will use this collection of 
information in its examination and oversight program, and the information generally is kept 
                                                                                                                                                             
1418
  36,880 hours per year for initial preparation and filing of relationship summary + 4,149 hours for posting to 
website + 8,298 hours per year for amendments, filing, and posting of amendments + 681,100 hours for 
one-time initial delivery to existing customers + 408,660 hours for delivery to existing customers making 
material changes to their accounts + 2,043,300 hours for delivery of amendments + 224,763 hours for 
delivery to new customers + 1,383 hours to make paper copies available upon demand = 3,408,533 total 
annual aggregate hours. 3,408,533 hours / 2,766 broker-dealers = 1,232 hours per broker-dealer. 
1419
  $10,068,240 per year for initial preparation, filing, and posting of relationship summary + $257,238 per 
year for posting to website + $514,476 per year for amendments, filing, and posting of amendments + 
$42,228,200 for one-time initial delivery to existing customers (amortized over three years) + $25,336,920 
for delivery to existing customers making material changes to their accounts + $126,684,600 for delivery of 
amendments + $13,935,306 for delivery to new customers + $85,746 per year to make paper copies of the 
relationship summary available upon demand = $219,110,726 in total annual aggregate monetized cost. 
$219,110,726 / 2,766 broker-dealers = $79,216 per broker-dealer. 
1420
  $3,436,755 total external legal costs + $5,124,015 total external compliance cost = $8,560,770 total 
external legal and compliance costs. $8,560,770 total external legal and compliance costs / 2,766 broker-
dealers = $3,095 per broker-dealer. $8,560,770 total external legal and compliance costs / 3 = $2,853,590 
annually. $3,095 / 3 = $1,032 per year. 
1421
  In a concurrent release, we are adopting additional burden adjustments to Exchange Act rules 17a-3 and 
17a-4.  See Regulation Best Interest Release, supra footnote 47. 

 
476 
 
confidential.
1422
  The likely respondents to this collection of information requirement are the 
approximately 2,766 broker-dealers currently registered with the Commission that offer services 
to retail investors, as defined above.
1423
  
Exchange Act section 17(a)(1) requires registered broker-dealers to make and keep for 
prescribed periods such records as the Commission deems “necessary or appropriate in the 
public interest, for the protection of investors or otherwise in furtherance of the purposes of” the 
Exchange Act.”
1424
  Exchange Act rules 17a-3 and 17a-4 specify minimum requirements with 
respect to the records that broker-dealers must make, and how long those records and other 
documents must be maintained, respectively.      
The amendments to Exchange Act rule 17a-3   will require SEC-registered broker-dealers 
to make a record indicating the date that a relationship summary was provided to each retail 
investor and to each prospective retail investor who subsequently becomes a retail investor.  We 
are adopting these amendments as proposed.  In the Proposing Release, we estimated that the 
adoption of new paragraph (a)(24) of rule 17a-3   would result in an incremental burden increase 
of 0.1 hours annually for each of the estimated 2,766 SEC-registered broker-dealers that will be 
                                                                                                                                                             
1422
  See section 24(b) of the Exchange Act. 
1423
  See supra footnotes 857-865 and accompanying text.   
1424
  See section 17(a) of the Exchange Act. 

 
477 
 
required to record the dates that the initial relationship summary and each new version thereof, is 
provided to an existing or prospective retail investor.
1425
   
As discussed above in Section II. E, several commenters suggested that our estimated 
burdens for the relationship summary recordkeeping obligations were too low.
1426
  Some 
commenters argued that keeping records of when a relationship summary was given to 
prospective retail clients would be unnecessarily burdensome or not feasible, and was not 
adequately considered in the Commission’s burden estimates.
1427
  One of these commenters said 
that it would be difficult for firms to integrate pre-relationship delivery dates into their 
operational systems and procedures, and that there is no way to track when a disclosure is 
accessed on a website.
1428
   
                                                                                                                                                             
1425
  We applied the same 0.2 hour estimate as with investment advisers, but divided equally between creating a 
record of the relationship summary and its deliveries and the maintenance of those records.  As discussed 
above, we are increasing our estimates.  
1426
  See, e.g., CCMC Letter; SIFMA Letter; see also NSCP Letter (estimating 80-500 hours to prepare, deliver, 
and file Form CRS, including recordkeeping policies and procedures).   
1427
  See, e.g., CCMC Letter; SIFMA Letter; Committee of Annuity Insurers Letter; Edward Jones Letter.  A 
few others stated that creating recordkeeping policies and procedures relating to how professionals respond 
to “key questions” would be burdensome and extremely difficult.  See, e.g., LPL Financial Letter.  
Although the final instructions require “conversation starter” questions that are similar to the proposed “key 
questions,” we are not increasing the burden as urged by commenters.  As discussed in Section V.D.2.a. 
above, we increased the burden estimates for the initial preparation of the relationship summary, 
acknowledging, among other things, that certain broker-dealers that provide services only online will incur 
additional burdens to develop written answers to the conversation starters and make those available on their 
websites with a hyperlink to the appropriate page in the relationship summary for these documents.   
However, we do not expect these broker-dealers to incur additional recordkeeping burdens under 
amendments to Exchange Act rule 17a-3 because we are not establishing new or separate recordkeeping 
obligations related to the conversation starters or the answers provided by firms in response to the 
conversation starters.  See supra footnotes 814 - 816. 
1428
  See SIFMA Letter.  

 
478 
 
After consideration of comments, and because broker-dealers do not currently maintain 
similar records like the relationship summary, we are revising our estimate of the time that it 
would take each broker-dealer to create the records required by new paragraph (a)(24) of rule 
17a-3 as adopted from 0.1 hours to 0.5 hours.  The incremental hour burden for broker-dealers to 
create the records required by new paragraph (a)(24) of rule 17a-3 as adopted will therefore be 
1,383 hours,
1429
 for a monetized cost of $87,627 in aggregate, or $32 per broker-dealer.
1430
  We 
also do not expect that broker-dealers will incur external costs for the requirement to make 
records b ecause we believe that broker-dealers will make such records in a manner similar to 
their current recordkeeping practices, including those that apply to communications and 
correspondence with retail investors.     
F. Record Retention Obligations under Exchange Act Rule 17a-4  
Exchange Act section 17(a)(1) requires registered broker-dealers to make and keep for 
prescribed periods such records as the Commission deems “necessary or appropriate in the 
public interest, for the protection of investors or otherwise in furtherance of the purposes of” the 
Exchange Act.”
1431
  Exchange Act rule 17a-4 specifies minimum requirements with respect to 
how long records created under Exchange Act rule 17a-3 and other documents must be kept.  We 
                                                                                                                                                             
1429
  2,766 broker-dealers x 0.5 hours annually = 1,383 annual hours for recordkeeping.  
1430
  As with our estimates relating to the proposed amendments to Advisers Act rule 204-2 (see, e.g., supra 
footnote 1284 and accompanying text), we expect that performance of this function will most likely be 
allocated between compliance clerks and general clerks, with compliance clerks performing 17% of the 
function and general clerks performing 83% of the function.  Data from the SIFMA Office Salaries Report 
suggest that costs for these positions are $70 and $62, respectively. (17% x 1,383 hours x $70) + (83% x 
1,383 hours x $62) = $87,627.  $87,627/ 2,766 broker-dealers = $32 per broker-dealer.     
1431
  See section 17(a) of the Exchange Act. 

 
479 
 
are adopting amendments to rule 17a-4 as proposed that will require broker-dealers to retain 
copies of each version of the relationship summary provided to current or prospective retail 
investors, and to preserve the record of dates that each version of the relationship summary was 
delivered to any existing retail investor or to any new or prospective retail investor customer, 
pursuant to the new requirements under new paragraph (a)(24) under rule 17a-3, as adopted, 
discussed above.  These records as well as a copy of each version of a firm’s relationship 
summary will be required to be maintained in an easily accessible place for at least six years 
after such record or relationship summary is created.  This collection of information will be 
found at 17 CFR 240.17a-4 and will be mandatory.  The Commission staff will use the collection 
of information in its examination and oversight program.  Requiring maintenance of these 
disclosures as part of the broker-dealer’s books and records will facilitate the Commission’s 
ability to inspect for and enforce compliance with firms’ obligations with respect to the 
relationship summary.  The information generally is kept confidential.
1432
 
The likely respondents to this collection of information requirement are the 
approximately 2,766 broker-dealers that report retail activity, as described above.  We did not 
receive comments related to burdens associated with record retention obligations for broker-
dealers.  We do not expect that broker-dealers will incur external costs for the requirement to 
maintain and preserve a copy of each version of the relationship summary as well as the records 
required to be made pursuant to new paragraph (a)(24) of Exchange Act rule 17a-3 because 
                                                                                                                                                             
1432
  See section 24(b) of the Exchange Act. 

 
480 
 
broker-dealers are already required to maintain and retain similar records related to 
communication with retail investors.      
1. Changes in Burden Estimates and New Burden Estimates 
The approved annual aggregate burden for rule 17a-4 is currently 1,042,866 hours, with a 
total annual aggregate monetized cost burden of approximately $67.8 million, based on an 
estimate of 4,104 broker-dealers and 150 broker-dealers maintaining an internal broker-dealer 
system.
1433
  The currently approved annual reporting and recordkeeping cost estimate to 
respondents is $20,520,000.
1434
  We estimate that the adopted amendments will result in an 
increase in the collection of information burden estimate by 0.10 hour
1435
 for each of the 
estimated 2,766 currently registered broker-dealers that report retail sales activity and will have 
relationship summary obligations.
1436
  The incremental hour burden for broker-dealers will 
                                                                                                                                                             
1433
  (4,104 broker-dealers x 254 hours per broker-dealer) + (150 broker-dealers maintaining internal broker-
dealer systems x 3 hours) = (1,042,416 hours + 450 hours) = 1,042,866 hours each year.  The monetized 
cost was based on these functions being performed by a compliance clerk earning an average of $65 per 
hour, resulting in a total internal cost of compliance of (1,042,416 x $65) + (450 x $65) = $67,786.  See 
Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rule 17a-4 
(Oct. 19, 2016), available at https://www.reginfo.gov/public/do/DownloadDocument?objectID=68823501 
(defining an internal broker-dealer system as “any facility that provides a mechanism for collecting, 
receiving, disseminating, or displaying system orders and facilitating agreement to the basic terms of a 
purchase or sale of a security between a customer and the sponsor, but excludes a national securities 
exchange, an exchange exempt from registration based on limited volume, and an alternative trading 
system.”).  
1434
  4,104 broker-dealers x $5,000 annual recordkeeping cost per broker-dealer = $20,520,000.   
1435
  In the Proposing Release, we applied the same 0.2 hour estimate as with investment advisers, but divided 
that burden equally between the rule 17a-3 requirement to create a record of the dates the relationship 
summary was delivered to current or prospective customers and the rule 17a-4 requirement to maintain 
those records as well as copies of each version of the relationship summary.  As discussed above, we are 
increasing the burden estimates for the recordkeeping requirement from 0.1 hours to 0.5 hours in light of 
certain comments, however, we believe, on balance, that 0.1 hour estimate for the record retention 
requirement is a reasonable estimate for purposes of the PRA analysis. 
1436
  See supra footnotes 857-865.  

 
481 
 
therefore be 277 hours,
1437
 for a monetized cost of $19,390 in aggregate, or $7 per broker-
dealer.
1438
  This will yield an annual estimated aggregate burden of 702,841 hours for all broker-
dealers with relationship summary obligations to comply with paragraph (e)(10) of Exchange 
Act rule 17a-4, as amended,
1439
 for a monetized cost of approximately $49,198,870.
1440
  In 
addition, the 998 broker-dealers not subject to the amendments
1441
 w ill continue to be subject to 
an unchanged burden of 254 hours per broker-dealer, or 253,492 hours for these broker-
dealers.
1442
  In addition, those maintaining an internal broker-dealer system will continue to be 
subject to an unchanged burden of 450 hours annually, under paragraph (e)(10) of Exchange Act 
rule 17a-4, as amended.  In summary, taking into account the estimated annual burden of broker-
dealers that will be required to maintain records of the relationship summary, as well the 
estimated annual burden of broker-dealers that do not have relationship summary obligations and 
whose information collection burden is unchanged, the revised annual aggregate burden for all 
broker-dealer respondents to the recordkeeping requirements under rule 17a-4 is estimated to be 
                                                                                                                                                             
1437
  2,766 broker-dealers x 0.1 hours annually = 277 annual hours for record retention.  
1438
  Consistent with our prior paperwork reduction analyses for rule 17a-4, we expect that performance of this 
function will most likely be performed by compliance clerks.  Data from the SIFMA Office Salaries Report 
suggest that costs for these positions are $70 per hour. 277 hours x $70 = $19,390.  $19,390/ 2,766 broker-
dealers = $7 per broker-dealer.     
1439
  2,766 broker-dealers required to prepare relationship summary x (254 hours + 0.1 hour) = 702,841 hours.  
1440
  Consistent with our prior paperwork reduction analyses for rule 17a-4, we expect that performance of this 
function will most likely be performed by compliance clerks.  Data from the SIFMA Office Salaries Report 
suggest that costs for these positions are $70 per hour.  702,841 hours x $70 = $49,198,870. 
1441
  See supra footnotes 858-863 and accompanying text. 
1442
  998 broker-dealers x 254 hours = 253,492 hours for broker-dealers not preparing a relationship summary. 

 
482 
 
956,783 total annual aggregate hours,
1443
 for a monetized cost of approximately $66,974,810 
million.
1444
  
2. Revised Annual Burden Estimates 
As noted above, the approved annual aggregate burden for rule 17a-4 is currently 
1,042,866 hours, with a total annual aggregate monetized cost burden of approximately $67.8 
million, based on an estimate of 4,104 broker-dealers and 150 broker-dealers maintaining an 
internal broker-dealer system.  The revised annual aggregate hourly burden for rule 17a-4 will be 
956,783
1445
 hours, represented by a monetized cost of approximately $66,974,810 million,
1446
 
based on an estimate of 2,766 broker-dealers with the relationship summary obligation and 998 
broker-dealers without, as noted above.  This represents a decrease of 85,633
1447
 annual 
aggregate hours in the hour burden and an annual decrease of approximately $811,480 from the 
currently approved total aggregate monetized cost for rule 17a-4.
1448
  These changes are 
attributable to the amendments to rule 17a-4 relating to the relationship summary as discussed in 
this release and the decline in the number of registered broker-dealer respondents.  The revised 
annual reporting and recordkeeping cost to respondents is estimated at approximately 
                                                                                                                                                             
1443
  702,841 + 253,492 + 450 = 956,783 total aggregate hours. 
1444
  Consistent with our prior paperwork reduction analyses for rule 17a-4, we expect that performance of this 
function will most likely be performed by compliance clerks.  Data from the SIFMA Office Salaries Report 
suggest that costs for these positions are $70 per hour.  956,783 hours x $70 = $66,974,810. 
1445
  See supra footnote 1443.  
1446
  See supra footnote 1444.  
1447
  1,042,416 hours – 956,783 hours = 85,633 hours. 
1448
  $67,786,290 – $66,974,810 = $811,480. 

 
483 
 
$18,820,000, or a reduction of $1,700,000 million from the currently approved annual reporting 
and recordkeeping cost burden of $20,520,000.
1449
   
VI. FINAL REGULATORY FLEXIBILITY ANALYSIS 
The Commission has prepared the following Final Regulatory Flexibility Analysis 
(“FRFA”) in accordance with section 4(a) of the Regulatory Flexibility Act.
1450
  It relates to: (i) 
new rule 204-5 under the Advisers Act and amendment to Form ADV (17 CFR 279.1), to add a 
new Part 3: Form CRS (relationship summary); (ii) amendments to rule 203-1 under the Advisers 
Act; (iii) amendments to rule 204-1 under the Advisers Act; (iv) amendments to rule 204-2 under 
the Advisers Act; (v) new rule 17a-14 under the Exchange Act and new Form CRS (17 CFR 
249.640) (relationship summary); and (vi) amendments to rules 17a-3 and 17a-4 under the 
Exchange Act.
1451
  We prepared an Initial Regulatory Flexibility Analysis (“IRFA”) in the 
Proposing Release.
1452
 
A. Need for and Objectives of the Amendments 
Broker-dealers, investment advisers, and dually registered firms all provide important 
services for retail investors.  As discussed above in Sections I and IV, research continues to show 
                                                                                                                                                             
1449
  3,764 registered broker-dealers as of December 31, 2018 x $5,000 per broker-dealer in record maintenance 
costs = $18,820,000.  $20,520,000 – $18,820,000 = $1,700,000. 
1450
  5 U.S.C. 604(a). 
1451
  The Commission is also amending 17 CFR 200.800 to display the control number assigned to information 
collection requirements for “Form CRS and rule 17a-14 under the Exchange Act” by OMB pursuant to the 
PRA.  Because the Commission is not publishing the amendments to 17 CFR 200.800 in a notice of 
proposed rulemaking, no analysis is required under the Regulatory Flexibility Act.  (See 5 U.S.C. 601(2) 
(for purposes of  the Regulatory Flexibility Act, the term “rule” means any rule for which the agency 
publishes a general notice of proposed rulemaking).)   
1452
  See Proposing Release, supra footnote 5. 

 
484 
 
that retail investors are confused about services, fees, conflicts of interest, and the required 
standard of conduct for particular firms as well as the differences between broker-dealers and 
investment advisers.  Lack of knowledge about important aspects of the market for financial 
advice, such as the services, fees, conflicts of interest, and the required standard of conduct for 
particular firms may harm retail investors by deterring them from seeking brokerage or 
investment advisory services even if they could potentially benefit from them, or by increasing 
the risk of a mismatch between the investors’ preferences and expectations and the actual 
brokerage or advisory services they receive.  Therefore, it is important to reduce retail investor 
confusion in the marketplace for brokerage and investment advisory services and to assist retail 
investors with the process of deciding whether to (i) establish an investment advisory or 
brokerage relationship, (ii) engage a particular firm or financial professional, or (iii) terminate or 
switch a relationship or specific service.  Moreover, it is important to ensure that retail investors 
receive the information they need to clearly understand the relationships and services a firm 
offers, as well as the fees, costs, conflicts, standard of conduct, and disciplinary history of firms 
and financial professionals they are considering, and where to find additional information, to 
ameliorate this potential harm.   
As discussed above in Section I above, the Commission considered ways to address retail 
investor confusion and engaged in broad outreach to investors and other market participants to 
solicit feedback on the proposal, including comment letters, a “feedback form,” investor 
roundtables, and RAND investor testing.   
After carefully considering the comments we received, we are adopting disclosure 
requirements that are designed to ameliorate the potential harm of retail investor confusion and 
to assist retail investors with the process of deciding whether to (i) establish an investment 

 
485 
 
advisory or brokerage relationship, (ii) engage a particular firm or financial professional, or (iii) 
terminate or switch a relationship or specific service. 
As discussed in Section II above, we are adopting new rules and rule amendments to 
require broker-dealers and investment advisers to deliver a relationship summary to retail 
investors.  The relationship summary will be short with narrative information presented in a 
prescribed order with the following sections: (i) introduction; (ii) relationships and services; (iii) 
fees, costs, conflicts, and standard of conduct; (iv) disciplinary history; and (v) where to find 
additional information.  As discussed in Section II. C.3.c above, the relationship summary will be 
in addition to, and not in lieu of, current disclosure and reporting requirements for broker-dealers 
and investment advisers.
 
 
To promote effective communication, firms will be required to write their relationship 
summary in plain English and they are encouraged to use charts, graphs, tables, and other 
graphics or text features to respond to the required disclosures.  We are limiting the length of the 
relationship summary to keep the disclosures focused.
1453
  The purpose of the relationship 
summary is to summarize information about a particular broker-dealer or investment adviser in a 
format that allows for comparability among firms, encourages retail investors to ask questions, 
and highlights additional sources of information.   
                                                                                                                                                             
1453
  Specifically, the relationship summary for standalone broker-dealers and standalone investment advisers 
must not exceed two pages in paper format (or equivalent in electronic format).  Dual registrants will have 
the flexibility to decide whether to prepare separate or combined relationship summaries.  For dual 
registrants that prepare combined relationship summaries, they must not exceed four pages in paper format 
(or equivalent in electronic format).   

 
486 
 
As discussed in Section II above, we are adopting filing, delivery, and updating 
requirements for the relationship summary.  We also are adopting amendments to the 
recordkeeping requirements under the Advisers Act rule 204-2 and Exchange Act rules 17a-3 
and 17a-4 to address the new relationship summary.
1454
 
All of these requirements are discussed in detail in Section II above.  The costs and 
burdens of these requirements on small advisers and small broker-dealers are discussed below as 
well as above in our Economic Analysis and Paperwork Reduction Act Analysis, which discuss 
the costs and burdens on all investment advisers and broker-dealers.
1455
    
B. Significant Issues Raised by Public Comments  
The Commission is sensitive to the burdens that the new rules and rule amendments may 
have on small entities.  In the Proposing Release, we requested comment on matters discussed in 
the IRFA.  In particular, we sought comments on the number of small entities subject to the new 
relationship summary, and the new rules and rule amendments as well as the potential impacts on 
small entities.  We sought comments on whether the proposal could have an effect on small 
entities that had not been considered.  We also requested that commenters describe the nature of 
any impact on small entities and provide empirical data to support the extent of such impact.   
The Commission did not receive comments specifically addressing the IRFA.  However, 
as discussed in the Economic Analysis and Paperwork Reduction Act Analysis above, we 
                                                                                                                                                             
1454
  17 CFR 275.204-2; 17 CFR 240.17a-3; 17 CFR 240.17a-4. 
1455
  See supra Sections IV and V.    

 
487 
 
received comments regarding the potential costs and burdens of the proposal on investment 
advisers and broker-dealers, including those that are small entities.
1456
   
With regard to comment letters addressing small firms in particular, the Commission 
received comment letters concerning the impact of ongoing delivery requirements on small 
firms.
1457
  As discussed in Sections II.C.3.c and II.C.4, firms must comply with ongoing delivery 
requirements to (i) particular retail investors under certain circumstances
1458
 and (ii) all retail 
investors who are existing clients or customers when a relationship summary is updated.  The 
commenters appeared to be discussing both types of ongoing delivery requirements.  Specifically, 
a commenter stated that to comply with ongoing delivery requirements, firms would need to 
implement a process that would include additional costs for delivery, especially for small firms 
who are more likely to conduct such delivery in hard copy.
1459
  Another commenter stated that 
the existing Form ADV brochure delivery requirements and the ongoing delivery requirements 
of the relationship summary would impose unjustifiable administrative burdens on advisers, the 
majority of whom the commenter considers to be small businesses.
1460
  The commenter defined 
the term “small business” as an investment adviser who has ten or fewer non-clerical 
                                                                                                                                                             
1456
  See supra Sections IV.D.2 and V. 
1457
  See NSCP Letter; Pickard Djinis and Pisarri Letter. 
1458
  As discussed in Section II.C.3.c, firms must deliver the most recent relationship summary to a retail 
investor who is an existing client or customer upon certain triggers.  Also, firms must deliver the 
relationship summary to a retail investor within 30 days upon the retail investor’s request.   
1459
  See NSCP Letter. 
1460
  See Pickard Djinis and Pisarri Letter. 

 
488 
 
employees.
1461
  As discussed in Section VI.C.1 below, the definition of small entities for 
purposes of the Advisers Act and the Regulatory Flexibility Act concerns assets under 
management and total assets, not the number of employees.
1462
  Therefore, we are unable to 
assess whether the businesses the commenter is discussing fall under the definition of small 
entity for purposes of the Advisers Act and the Regulatory Flexibility Act.
1463
  As discussed in 
Section VI.C.1 below, the new requirements will not affect most investment advisers that are 
small entities because they are generally registered with one or more state securities authorities 
and not with the Commission.     
We agree that the ongoing delivery requirements will impose added costs, as discussed 
above in the Economic Analysis and Paperwork Reduction Act Analysis,
1464
 but the costs may 
not necessarily be higher for small firms.  To the extent that small firms are more likely to have 
fewer retail investors than larger firms, the ongoing delivery requirements should impose lower 
variable costs on small firms than on larger firms.  Therefore, the ongoing delivery requirements 
should impose lower variable costs on small firms, who have fewer retail investors, than on 
larger firms who have more retail investors.  Also, firms have the flexibility to communicate any 
changes in the relationship summary by either delivering the relationship summary or by 
communicating the information through another disclosure that is delivered to the retail investor, 
                                                                                                                                                             
1461
  Id. 
1462
  See 17 CFR 275.0-7. 
1463
  Id. 
1464
  See supra Sections IV and V. 

 
489 
 
which should mitigate the costs to all firms, including small firms.
1465
  The additional hours per 
investment adviser and broker-dealer, the monetized cost per investment adviser and broker-
dealer, and the incremental external legal and compliance cost for investment advisers and 
broker-dealers, attributable to ongoing delivery requirements are estimated above in the 
Paperwork Reduction Analysis.
1466
  To the extent that the ongoing delivery requirements impose 
added costs to small investment advisers, we disagree that existing Form ADV brochure delivery 
requirements and the ongoing delivery requirements of the relationship summary would impose 
administrative burdens on small investment advisers that are unjustifiable.  As discussed in 
Section II. C.3.c above, the relationship summary and the existing Form ADV brochure serve 
different purposes.  The relationship summary is designed to provide a high-level overview to 
retail investors while the Form ADV brochure is designed to present more detailed disclosures.     
The Commission is not adopting different ongoing delivery requirements for small 
entities.  For the reasons discussed in Section VI.E below, establishing different compliance or 
reporting requirements for small investment advisers and small broker-dealers will be 
inappropriate under these circumstances.  Moreover, retail investors considering and receiving 
services should receive current information from all firms, not just larger firms, to help them 
make a decision about continuing to receive services and to let them know when there have been 
changes to this information.  They should also understand their available options during certain 
                                                                                                                                                             
1465
  See supra Sections II.C.4 and IV.D.2. 
1466
  See supra Sections V.C.2 and V.D.2. 

 
490 
 
decision points when firms are required to deliver another relationship summary.
1467
  
Additionally, it is important and beneficial for retail investors to receive a relationship summary 
within 30 days upon request to ensure that retail investors receive the relationship summary as 
needed.  As a result, we believe that the benefits to retail investors justify the potential cost of 
ongoing delivery.  
C. Small Entities Subject to the Rule and Rule Amendments 
The amendments will affect many, but not all, broker-dealers and investment advisers 
registered with the Commission, including some small entities.   
1. Investment Advisers 
Under Commission rules, for the purposes of the Advisers Act and the Regulatory 
Flexibility Act, an investment adviser generally is a small entity if it:  (i) has assets under 
management having a total value of less than $25 million; (ii) did not have total assets of $5 
million or more on the last day of the most recent fiscal year; and (iii) does not control, is not 
controlled by, and is not under common control with another investment adviser that has assets 
under management of $25 million or more, or any person (other than a natural person) that had 
total assets of $5 million or more on the last day of its most recent fiscal year.
1468
  As discussed 
in Section V.A.1 above, the Commission estimates that based on IARD data as of December 31, 
                                                                                                                                                             
1467
  As discussed in Section II.C.3.c, firms must deliver the most recent relationship summary to a retail 
investor who is an existing client or customer before or at the time the firm: (i) opens a new account that is 
different from the retail investor’s existing account(s); (ii) recommends that the retail investor roll over 
assets from a retirement account into a new or existing account or investment; or (iii) recommends or 
provides a new brokerage or investment advisory service or investment that does not necessarily involve 
the opening of a new account and would not be held in an existing account. 
1468
  See 17 CFR 275.0-7.    

 
491 
 
2018, approximately 8,235 investment advisers will be subject to new rule 204-5 under the 
Advisers Act, Form CRS (required by new Part 3 of Form ADV) (the relationship summary), the 
amendments to rules 203-1, 204-1, and rule 204-2 under the Advisers Act.
1469
  Our new rules and 
amendments will not affect most investment advisers that are small entities (“small advisers”) 
because they are generally registered with one or more state securities authorities and not with 
the Commission.  Under section 203A of the Advisers Act, most small advisers are prohibited 
from registering with the Commission and are regulated by state regulators.
1470
  Based on IARD 
data, we estimate that as of December 31, 2018, approximately 561 SEC-registered advisers are 
small entities under the Regulatory Flexibility Act.
1471
  Of these, 183 have individual high net 
worth and individual non-high net worth clients, and will therefore be subject to the new 
requirements under the Advisers Act.
1472
  
                                                                                                                                                             
1469
  See supra footnote 1204 and accompanying text. 
1470
  15 U.S.C. 80b-3a. 
1471
  Based on SEC-registered investment adviser responses to Items 5.F. and 12 of Form ADV.  
1472
  Based on SEC-registered investment adviser responses to Items 5.D.(a)(1), 5.D.(a)(3), 5.D.(b)(1), 
5.D.(b)(2), 5.F. and 12 of Form ADV. These responses indicate that the investment adviser has clients that 
are high net worth individuals and/or individuals (other than high net worth individuals), or that the 
investment adviser has regulatory assets under management attributable to clients that are high net worth 
individuals and/or individuals (other than high net worth individuals), and that the investment adviser is a 
small entity.  Of these small advisers, two are dually registered as a broker-dealer and an investment 
adviser and may offer services to retail investors as both a broker-dealer and an investment adviser (e.g., 
“dual registrants” for purposes of the relationship summary).  See supra footnote 63.  As discussed in 
Section II.C.2, dual registrants must file the relationship summary using both IARD and Web CRD
®
.  In 
this FRFA, dual registrants are counted in both the total number of small advisers and small broker-dealers 
that would be subject to the new requirements.  We believe that counting these firms twice is appropriate 
because of their additional burdens of complying with the rules with respect to both their advisory and 
brokerage businesses.    

 
492 
 
2. Broker-Dealers 
For purposes of Commission rulemaking in connection with the Regulatory Flexibility 
Act, a broker-dealer will be deemed a small entity if it: (i) had total capital (net worth plus 
subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its 
audited financial statements were prepared pursuant to rule 17a-5(d) under the Exchange Act,
1473
 
or, if not required to file such statements, had total capital (net worth plus subordinated 
liabilities) of less than $500,000 on the last business day of the preceding fiscal year (or in the 
time that it has been in business, if shorter); and (ii) is not affiliated with any person (other than a 
natural person) that is not a small business or small organization.
1474
    
As discussed in Section V.D.1 above, the Commission estimates that as of December 31, 
2018, approximately 2,766 broker-dealers will be subject to the new Form CRS (relationship 
summary) requirements and new Exchange Act rule 17a-14, as well as amendments to Exchange 
Act rules 17a-3 and 17a-4.
1475
  Further, based on FOCUS Report data, the Commission estimates 
that as of December 31, 2018, approximately 985 broker-dealers may be deemed small entities 
under the Regulatory Flexibility Act.  Of these, approximately 756 have retail business, and will 
be subject to the new requirements.
1476
       
                                                                                                                                                             
1473
  17 CFR 240.17a-5(d). 
1474
  See 17 CFR 240.0-10(c). 
1475
  See supra footnote 1352 and accompanying text. 
1476
  See supra footnote 1352 (discussing how we identify retail sales activity from Form BR). 

 
493 
 
D. Projected Reporting, Recordkeeping, and Other Compliance Requirements 
The new requirements impose certain reporting and compliance requirements on certain 
investment advisers and broker-dealers, including those that are small entities, requiring them to 
create and update relationship summaries, and comply with certain filing, delivery, and 
recordkeeping requirements.  The new requirements are summarized in this FRFA (Section VI.A 
above).  All of these requirements are also discussed in detail, in Section II above, and these 
requirements as well as the costs and burdens on investment advisers and broker-dealers, 
including those that are small entities, are discussed above in Sections IV and V (the Economic 
Analysis and Paperwork Reduction Act Analysis) and below.   
1. Initial Preparation and Filing of the Relationship Summary 
Requiring each firm that offers services to retail investors to prepare and file a 
relationship summary will impose additional costs on may firms, including some small advisers 
and small broker-dealers.  Investment advisers must file their relationship summary as Form 
ADV Part 3 (Form CRS) electronically through IARD.  Broker-dealers must file their 
relationship summary as Form CRS electronically through Web CRD
®
.  All relationship 
summaries must be filed using text-searchable format with machine-readable headings. 
Investment Advisers.  Our Paperwork Reduction Analysis and Economic Analysis discuss 
the costs and burdens of preparing and filing the relationship summary for investment advisers, 
including small advisers.
1477
  In addition, as discussed in our Paperwork Reduction Analysis, 
above, we anticipate that some advisers may incur a one-time initial cost for external legal and 
                                                                                                                                                             
1477
  See supra Sections V.A and IV.D.2. 

 
494 
 
compliance consulting fees in connection with the initial preparation of the relationship 
summary.
1478
  Generally, all advisers, including small advisers that advise retail investors are 
currently required to prepare and distribute Part 2A of Form ADV (the firm brochure).  Because 
advisers already provide disclosures about their services, fees, costs, conflicts, and disciplinary 
history in their firm brochures,
1479
 they will be able to use some of this information to respond to 
the disclosure requirements of the relationship summary.  They will, however, have to draft a 
completely new disclosure to comply with the new format of the relationship summary.  As 
discussed above, approximately 183 small advisers currently registered with us will be subject to 
the new requirements.
1480
  As discussed above in our Paperwork Reduction Act Analysis, the 
new initial preparation and filing requirements will impose an annual burden of approximately 
6.67 annual hours per adviser, or 1,221 annual hours in aggregate for small advisers.
1481
  We 
therefore expect the annual monetized costs to small advisers associated with these amendments 
to be $1,965 per adviser, or $359,595 in aggregate for small advisers.
1482
  We expect the 
                                                                                                                                                             
1478
  See supra Section V.A.     
1479
  See supra footnote 904.  
1480
  See supra Section VI.C.1.  
1481
  See supra Section V.A.2.  As discussed in the Paperwork Reduction Act Analysis, we expect each 
investment adviser to spend approximately 20 hours preparing and filing the relationship summary, which 
as amortized over three years is approximately 6.67 hours.  6.67 hours per adviser for preparing and filing 
the relationship summary x 183 small advisers = approximately 1,221 hours in aggregate for small advisers.   
1482
  See supra Sections V.A.2.  Monetized cost of $1,965 per adviser for the initial preparation and filing of the 
relationship summary x 183 small advisers = $359,595 monetized cost in aggregate for small advisers.  As 
discussed in the Paperwork Reduction Act Analysis, we believe that performance of this function will most 
likely be equally allocated between a senior compliance examiner and a compliance manager. 

 
495 
 
incremental external legal and compliance cost for small advisers to be estimated at $825 per 
adviser, or $150,975 in aggregate for small advisers.
1483
   
Broker-Dealers.  Our Paperwork Reduction Analysis and Economic Analysis discuss the 
costs and burdens of preparing and filing the relationship summary for broker-dealers, including 
small broker-dealers.
1484
  In addition, as discussed in our Paperwork Reduction Analysis, above, 
we anticipate that some broker-dealers may incur a one-time initial cost for external legal and 
compliance consulting fees in connection with the initial preparation of the relationship 
summary.
1485
  As discussed in Sections IV.D.2 and V.D.2, broker-dealers are not currently 
required to deliver to their retail investors a comprehensive written document comparable to 
investment advisers’ Form ADV Part 2A.  Therefore, broker-dealers may incur comparatively 
greater compliance costs than investment advisers.  As discussed above, approximately 756 
small broker-dealers will be subject to the new requirements.
1486
  As discussed above in our 
Paperwork Reduction Act Analysis, the new initial preparation and filing requirements will 
impose an annual burden of approximately 13.33 annual hours per broker-dealer, or 10,077 
annual hours in aggregate for small broker-dealers.
1487
  We therefore expect the annual 
                                                                                                                                                             
1483
  See supra Section V.A.2.b.  $825 in external legal and compliance costs per adviser x 183 small advisers = 
$150,975 in aggregate for small advisers. 
1484
  See supra Sections V.D and IV.D.2. 
1485
  See supra Section V.D.   
1486
  See supra Section VI.C.2.   
1487
  See supra Section V.D.2.  As discussed in the Paperwork Reduction Act Analysis, we expect each broker-
dealer to spend approximately 40 hours preparing and filing the relationship summary, which as amortized 
over three years is approximately 13.33 hours.  13.33 hours per broker-dealer for preparing and filing the 
 

 
496 
 
monetized costs to small broker-dealers associated with these amendments to be $3,640 per 
broker-dealer, or $2,751,840 in aggregate for small broker-dealers.
1488
  We expect the 
incremental external legal and compliance cost for small broker-dealers to be estimated at $1,032 
per broker-dealer, or $780,192 in aggregate for small broker-dealers.
1489
      
Costs Generally.  The costs associated with preparing the new relationship summaries 
will be limited for investment advisers and broker-dealers, including small entities, for several 
reasons.  First, the disclosure document is concise, no more than two pages for a standalone 
investment adviser and standalone broker-dealer and four pages for a dual registrant in length or 
equivalent limit if in electronic format.  Second, although the relationship summary will require 
more narrative responses, the disclosure will still involve some degree of standardization across 
firms, requiring firms to use standardized headings in a prescribed order.  Third, firms will be 
prohibited from including disclosures in the relationship summary other than the disclosure that 
is required or permitted by the Instructions and applicable items.   
The compliance costs could, however, be different across firms with relatively smaller or 
larger numbers of retail investors as customers or clients.  For example, as discussed in Section 
IV.D.2 above, to the extent that developing the relationship summary entails a fixed cost, firms 
                                                                                                                                                             
relationship summary x 756 small broker-dealers = approximately 10,077 hours in aggregate for small 
broker-dealers.   
1488
  See supra Section V.D.2.  Monetized cost of $3,640 per broker-dealer for the initial preparation and filing 
of the relationship summary x 756 small broker-dealers = $2,751,840 monetized cost in aggregate for small 
broker-dealers.  As discussed in the Paperwork Reduction Act Analysis, we believe that the performance of 
this function will most likely be equally allocated between a senior compliance examiner and a compliance 
manager. 
1489
  See supra Section V.D.2.b.  756 small broker-dealers x $1,032 in external legal and compliance costs on 
average per broker-dealer = $780,192. 

 
497 
 
with fewer retail investors as customers or clients may be at disadvantage relative to firms with 
more retail investors as customers or clients because the former would amortize these costs over 
a smaller retail investor base.  Therefore, to the extent that small firms are more likely to have 
fewer retail investors than larger firms, small firms may be at a disadvantage relative to larger 
firms.  On the other hand, smaller firms are likely to have fewer types of fees, costs, and conflicts 
to report compared to larger firms, potentially making it less burdensome for them to summarize 
the required information.   
As discussed in Section IV.D.2 above, small advisers and small broker-dealers may 
disproportionately incur costs associated with electronic and graphical formatting, particularly if 
they do not have an existing web presence.  However, because the final instructions encourage, 
but do not require electronic and graphical formatting, firms would only bear these costs if they 
expected these features to provide benefits that justify these costs.  Similarly, small advisers and 
small broker dealers may disproportionally incur costs associated with the requirement to file 
their relationship summaries with machine-readable headings and text-searchable format.  
However, costs for firms, including small entities, could be minimal to the extent they implement 
structured headings in PDF formatted documents by creating a bookmark for each of the 
headings.
1490
 
                                                                                                                                                             
1490
  See supra Section II.C.2. 

 
498 
 
2. Delivery and Updating Requirements Related to the Relationship 
Summary 
As discussed in Section II. C above, firms must follow certain delivery and updating 
requirements.  Investment advisers must deliver a relationship summary to each retail investor 
before or at the time the firm enters into an investment advisory contract with the retail investor, 
even if the agreement is oral.  Broker-dealers must deliver a relationship summary to each retail 
investor, before or at the earliest of: (i) a recommendation of an account type, a securities 
transaction, or an investment strategy involving securities; (ii) placing an order for the retail 
investor; or (iii) the opening of a brokerage account for the retail investor.  Dual registrants must 
deliver the relationship summary at the earlier of the delivery requirements for the investment 
adviser or broker-dealer.  
As discussed in Section II. C above, firms must update, file amendments to, and re-deliver 
the relationship summary under certain circumstances.  Specifically, firms must update the 
relationship summary and file it within 30 days whenever any information in the relationship 
summary becomes materially inaccurate.  The filing must include an exhibit highlighting 
changes.  Firms must communicate any changes in the updated relationship summary to retail 
investors who are existing clients or customers within 60 days after the updates are required to be 
made and without charge.
1491
  Additionally, firms must deliver the relationship summary to a 
                                                                                                                                                             
1491
  Firms can make the communication by delivering the amended relationship summary or by communicating 
the information through another disclosure that is delivered to the retail investor. 

 
499 
 
retail investor within 30 days upon the retail investor’s request and re-deliver the relationship 
summary to existing clients and customers under certain circumstances.
1492
     
As discussed in Sections II.C above, we are adopting requirements concerning electronic 
posting and manner of delivery.  Firms must post the current version of the relationship summary 
prominently on their public website, if they have one.  Firms must include a telephone number 
where retail investors can request up-to-date information and request a copy of the relationship 
summary.  Firms must make a copy of the relationship summary available upon request without 
charge.  If the relationship summary is delivered electronically, it must be presented prominently 
in the electronic medium.  If the relationship summary is delivered in paper format as part of a 
package of documents, firms must ensure that the relationship summary is the first among any 
documents that are delivered at that time.  The additional hours per adviser and broker-dealer, 
the monetized cost per adviser and broker-dealer, and the incremental external legal and 
compliance cost for small entity investment advisers and broker-dealers, attributable to these 
requirements are estimated above in the Paperwork Reduction Analysis.
1493
    
3. Recordkeeping Requirements Related to the Relationship Summary 
As discussed in Section II. E above, we are adopting amendments to the recordkeeping 
requirements under Advisers Act rule 204-2 and Exchange Act rules 17a-3 and 17a-4 to address 
                                                                                                                                                             
1492
  Specifically, firms must deliver the most recent relationship summary to a retail investor who is an existing 
client or customer before or at the time the firm: (i) opens a new account that is different from the retail 
investor’s existing account(s); (ii) recommends that the retail investor roll over assets from a retirement 
account into a new or existing account or investment; or (iii) recommends or provides a new brokerage or 
investment advisory service or investment that does not necessarily involve the opening of a new account 
and would not be held in an existing account. 
1493
  See supra Section V. 

 
500 
 
the new relationship summary.
1494
  The amendments to Advisers Act rule 204-2 will require 
investment advisers who are registered or required to be registered to make and keep true, 
accurate and current, a copy of each relationship summary and each amendment or revision to 
the relationship summary, as well as a record of the dates that each relationship summary, and 
each amendment or revision thereto, was given to any client or to any prospective client who 
subsequently becomes a client.  Investment advisers must maintain and preserve their respective 
records in an easily accessible place for a period of not less than five years from the end of the 
fiscal year during which the last entry was made on such record, the first two years in an 
appropriate office of the investment adviser.
1495
  The amendments to Exchange Act rule 17a-3 
will require broker-dealers to make and keep current a record of the date that each relationship 
summary was provided to each retail investor, including any relationship summary that was 
provided before such retail investor opens an account.  The amendments to Exchange Act rule 
17a-4 will require broker-dealers to maintain and preserve in an easily accessible place all record 
dates described above as well as a copy of each relationship summary until at least six years after 
such record or relationship summary is created.   
These amendments are designed to update recordkeeping rules in light of the new 
relationship summary, and, for investment advisers, they mirror the current recordkeeping 
requirements for the Form ADV brochure and brochure supplement.
1496
  As discussed in Section 
                                                                                                                                                             
1494
  17 CFR 275.204-2; 17 CFR 240.17a-3; 17 CFR 240.17a-4. 
1495
  See 17 CFR 275.204-2(e)(1). 
1496
  See 17 CFR 275.204-2(a)(14)(i) and 17 CFR 275.204-2(e)(1). 

 
501 
 
II. E above, the recordkeeping requirements will facilitate the Commission’s ability to inspect for 
and enforce compliance with the relationship summary requirements and also may facilitate 
firms’ ability to monitor for compliance with delivery requirements.     
As discussed in the Paperwork Reduction Act Analysis in Section V.B above, the 
amendments to Advisers Act rule 204-2 will impose an annual burden of approximately 0.2 
annual hours per adviser, or 37 annual hours in aggregate for small advisers.
1497
  We therefore 
expect the annual monetized costs to small advisers associated with these amendments to be $12 
per adviser,
1498
 or $2,196 in aggregate for small advisers.
1499
  We do not expect investment 
advisers to incur any external costs with respect to the amendments to Advisers Act rule 204-
2.
1500
  
As discussed in the Paperwork Reduction Act Analysis in Sections V.E and V.F, the 
amendments to Exchange Act rules 17a-3 and 17a-4 will impose an annual burden of 
approximately 0.6 annual hours per broker-dealer, or 454 annual hours in the aggregate for small 
broker-dealers.
1501
  We therefore expect the annual monetized cost to small broker-dealers 
                                                                                                                                                             
1497
  0.2 hours x 183 small advisers = 37 hours, when rounded up to the nearest hour.   
1498
  As discussed in, the Paperwork Reduction Analysis, we believe the performance of this function will most 
likely be allocated between compliance clerks and general clerks, with compliance clerks performing 17% 
of the function and general clerks performing 83% of the function.  See supra Section V.B. 
1499
  $12 per adviser x 183 small advisers = approximately $2,196 in aggregate for small advisers. 
1500
  See supra Section V.B. 
1501
  As discussed in Section V.E, amendments to Exchange Act rule 17a-3 will impose a burden of 
approximately 0.5 annual hours per broker-dealer.  As discussed in Section V.F, amendments to Exchange 
Act rule 17a-4 will impose a burden of approximately 0.1 annual hours per broker-dealer.  Therefore, 
together, amendments to Exchange Act rules 17a-3 and 17a-4 will impose a burden of approximately 0.6 
hours annually.  0.6 hours x 756 small broker-dealers = approximately 454 annual hours in aggregate for 
small broker-dealers.   

 
502 
 
associated with these amendments to be $39 per broker-dealer,
1502
 or $29,484 in aggregate for 
small broker-dealers.
1503
  We do not expect broker-dealers to incur any external costs with 
respect to the amendments to Exchange Act rules 17a-3 and 17a-4.
1504
  
E. Agency Action to Minimize Effect on Small Entities 
The Regulatory Flexibility Act directs the Commission to consider significant 
alternatives that would accomplish the stated objective, while minimizing any significant adverse 
impact on small entities.  We considered the following alternatives for small entities in relation 
to the new requirements: (i) the establishment of differing compliance or reporting requirements 
or timetables that take into account the resources available to small entities; (ii) the clarification, 
consolidation, or simplification of compliance and reporting requirements for s mall entities; (iii) 
the use of performance rather than design standards; and (iv) an exemption from coverage of the 
new requirements, or any part thereof, for such small entities.
1505
   
                                                                                                                                                             
1502
  $32 per broker dealer for amendments to Exchange Act rule 17a-3 + $7 per broker-dealer for amendments 
to Exchange Act rule 17a-4 = $39 per broker-dealer.  As discussed in the Paperwork Reduction Act 
Analysis, we believe that the performance of the functions associated with the amendments to Exchange 
Act rule 17a-3 will most likely be allocated between compliance clerks and general clerks.  Also as 
discussed in the Paperwork Reduction Act Analysis, we believe that the performance of the functions 
associated with the amendments to Exchange Act rule 17a-4 will be performed by compliance clerks.  See 
supra Sections V.E and V.F.   
1503
  $32 per broker dealer for amendments to Exchange Act rule 17a-3 + $7 per broker-dealer for amendments 
to Exchange Act rule 17a-4 = $39 per broker-dealer.  $39 x 756 small broker-dealers = $29,484.  See supra 
Sections V.E and V.F. 
1504
  See supra Sections V.E and V.F. 
1505
  As discussed in the Economic Analysis in Section IV.D.4, the Commission considered the following 
alternatives as they affect all firms, including small entities: (i) requiring a new, separate disclosure versus 
amending existing disclosure requirements; (ii) alternatives concerning the form and format of the 
relationship summary; (iii) alternatives concerning the disclosures concerning the summary of fees, costs, 
conflicts, and standard of conduct; (iv) alternatives concerning filing and delivery; and (v) alternatives to 
compliance deadlines, including transition provisions.     

 
503 
 
Regarding the first alternative, the Commission believes that establishing different 
compliance or reporting requirements for small advisers and small broker-dealers will be 
inappropriate under these circumstances.  We considered adopting tiered compliance dates so 
that smaller investment advisers and smaller broker-dealers would have had more time to comply.  
This would have been an alternative to the proposal, which did not include such tiered 
compliance.  However, as adopted, instead of providing more time to smaller investment 
advisers and smaller broker-dealers only, we are extending the compliance dates for all firms.  
As discussed in Section II. D above, we believe the final compliance dates provide adequate 
notice and opportunity for all firms to comply with the new requirements. 
Because the protections of the Advisers Act and Exchange Act are intended to apply 
equally to retail investor clients and customers of both large and small firms, it will be 
inconsistent with the purposes of the Advisers Act and the Exchange Act to specify differences 
for small entities under the new requirements.  As discussed above, we believe that the new 
requirements will result in multiple benefits to all retail investors, including alerting retail 
investors to certain information to consider when deciding whether to (i) establish an investment 
advisory or brokerage relationship, (ii) engage a particular firm or financial professional, or (iii) 
terminate or switch a relationship or specific service.
1506
  In addition, the content of the 
relationship summary will facilitate comparisons across firms.
1507
  We believe that these benefits 
should apply to retail investors that engage smaller firms as well as retail investors that engage 
                                                                                                                                                             
1506
  See supra Sections IV and VI.A. 
1507
  See supra Sections I and IV.  

 
504 
 
larger firms.  To establish different disclosure requirements for small entities will diminish this 
investor protection for clients and customers of small entities.   
As discussed above in Section II. C above, we are requiring that investment advisers and 
broker-dealers file their relationship summaries with the Commission.
1508
  As discussed in 
Section II. C.2, there are several reasons we are requiring the relationship summaries to be filed 
with the Commission.  First, the public will benefit by being able to use a central location to find 
any firm’s relationship summary,
1509
 which may facilitate simpler comparisons across firms.  
Second, some firms may not maintain a website, and therefore their relationship summaries will 
not otherwise be accessible to the public.  Third, by having firms file the relationship summaries 
with the Commission, Commission staff can more easily monitor the filings for compliance.  
These benefits of filing are important for retail investors who are clients and customers of both 
large and small firms.  Furthermore, almost all advisers, including small advisers, have Internet 
access and use the Internet for various purposes so using the Internet to file electronically should 
not increase costs for those advisers.
1510
  All relationship summaries must be filed using a text-
searchable format with machine-readable headings.  There are several reasons we are requiring 
                                                                                                                                                             
1508
  Investment advisers must file their relationship summaries with the Commission electronically through 
IARD in the same manner as they currently file Form ADV Parts 1 and 2.  Broker-dealers must file their 
relationship summaries with the Commission electronically through Web CRD
®
.  Dual registrants must file 
the relationship summary using both IARD and Web CRD
®
. 
1509
  The filed relationship summaries will be accessible through the Commission’s investor education website 
Investor.gov.  See supra footnote 661 and accompanying text. 
1510
  Electronic Filing by Investment Advisers; Proposed Amendments to Form ADV, Investment Advisers Act 
Release No. 1862 (Apr. 5, 2000) [65 FR 20524 (Apr. 17, 2000)], at n.304 and accompanying text.  
However, an adviser that is a small business may be eligible for a continuing hardship exemption for Form 
ADV filings, which includes the relationship summary, if it can demonstrate that filing electronically 
would impose an undue hardship.  See General Instruction 17 to Form ADV. 

 
505 
 
firms to file their relationship summaries with machine-readable headings and text-searchable 
format, including that this formatting will facilitate the aggregation and comparison of responses 
to specific items across different relationship summaries and is consistent with the Commission’s 
ongoing efforts to modernize our forms by taking advantage of technological advances, both in 
the manner in which information is reported to the Commission and how it is provided to 
investors and other users, as discussed above.
1511
  These benefits are important for filings by all 
firms and would be significantly reduced by allowing different requirements for small entities.  
Costs for firms, including small entities, could be minimal to the extent they implement 
structured headings in PDF formatted documents by creating a bookmark for each of the 
headings.
1512
   
The requirement for investment advisers and broker-dealers to post their relationship 
summary on their public websites, if they have a public website, in a location and format that is 
easily accessible for retail investors, already incorporates the flexibility to permit different 
compliance and reporting requirements for small entities, if applicable.  To the extent that 
broker-dealers and investment advisers that are small entities are less likely to have public 
websites and do not have them, they will not be required to post the relationship summary on 
their websites.
1513
  In other ways, as well, the requirements incorporate flexibility for small 
broker-dealers and small advisers to comply with the requirements.  For instance, we are 
                                                                                                                                                             
1511
  See supra Section II.C.2. 
1512
  See supra Section II.C.2. 
1513
  Firms must provide a telephone number in their relationship summary that retail investors can call to obtain 
up-to-date information and request a copy of the relationship summary.  See supra Section II.B.5.  

 
506 
 
requiring firms to communicate the information in an updated relationship summary to retail 
investors who are existing clients or customers within 60 days after the updates are required to be 
made and without charge.
1514
  Firms c an communicate this information by delivering the 
amended relationship summary or by communicating the information through another disclosure 
that is delivered to the retail investor.  This requirement provides firms the ability to disclose 
changes without requiring them to duplicate disclosures and incur additional costs.   
We believe it will be inappropriate to establish different recordkeeping requirements for 
small entities, because the recordkeeping requirements will facilitate the Commission’s ability to 
inspect for and enforce compliance with firms’ obligations with respect to the relationship 
summary, which is important for retail investor clients and customers of both large and small 
firms.  Also, the Commission is not adopting different ongoing delivery requirements for small 
entities for the reasons discussed in Section VI.B above.    
Regarding the second alternative, we clarified and simplified certain requirements for all 
entities, as an alternative to the proposal.
1515
  However, we believe the final requirements are 
clear and that further clarification, consolidation, or simplification of the compliance and 
                                                                                                                                                             
1514
  See supra Section II.C.4.  
1515
  See supra Sections I and II.  For example, we have clarified re-delivery requirements by replacing the 
proposed standard of “materially change the nature and scope of the relationship” with two more specific 
and easily identifiable triggers that we believe would not implicate the same operational or supervisory 
burdens described by commenters to meet the proposed requirement. As another example, in a change from 
the proposal, we eliminated the proposed requirement that standalone broker-dealers and standalone 
investment advisers include a separate section using prescribed wording that generally describes how the 
services of investment advisers and broker-dealers, respectively, differ from the firm’s services.  Instead, 
we adopted a simpler approach so firms will be required to simply state that free and simple tools are 
available to research firms and financial professionals at Investor.gov/CRS, which also provides 
educational materials about broker-dealers, investment advisers, and investing. 

 
507 
 
reporting requirements separately for small entities is not necessary.  For the same reasons 
discussed above in this section concerning the first alternative, we believe that further clarifying, 
consolidating, or simplifying the requirements only for small entities will be inappropriate under 
these circumstances. 
Regarding the third alternative, we considered using performance rather than design 
standards.  Performance standards would allow for increased flexibility in the methods firms can 
use to achieve the objectives of the requirements.  Design standards would specify the behavior 
or manner of compliance that regulated entities must adopt.  We revised the combination of 
performance and design standards of the requirements, as an alternative to the proposal.
1516
  The 
Commission believes that the final relationship summary and the related new rules and 
amendments appropriately use a combination of performance and design standards for all firms, 
including those that are small entities.   
The Commission is adopting certain performance standards as an alternative to design 
standards so firms will have some flexibility in how they complete the relationship summary.  
Instead of requiring extensive prescribed language, as proposed, prescribed wording will be 
limited and, instead, firms will complete most of the relationship summary using their own 
words.
1517
  Although this increases costs to firms, including small firms, as discussed above,
1518
 
                                                                                                                                                             
1516
  See supra Sections I and II.  For example, in the final requirements we require less prescribed wording, and 
provide more flexibility in certain formatting and filing requirements.  See supra Sections II.A.1 
(discussing limited prescribed wording) and II.A.5 (discussing more flexible formatting and filing 
requirements for dual registrants).   
1517
  See supra Section II.A.1. 
1518
  See supra Sections V.A and V.D. 

 
508 
 
firms will now have the flexibility to create disclosures that are more accurately tailored to their 
business, and therefore more understandable and relevant to retail investors.
1519
  In addition, we 
are encouraging, but not requiring, firms to use charts, graphs, tables, and other graphics or text 
features to respond to the required disclosures.
1520
  In an alternative to the proposal, which 
required dual registrants to file a single relationship summary, dual registrants will have the 
flexibility to decide whether to prepare separate or combined relationship summaries.
1521
   In 
another alternative to the proposal, which required firms to provide a toll-free telephone number 
under certain circumstances, we are not requiring the telephone number to be toll-free.
1522
  As 
discussed in Section II.B.5 above, firms must include a telephone number where retail investors 
can request up-to-date information and request a copy of the relationship summary.  Although 
we are adopting a requirement to provide a telephone number, we are not requiring the telephone 
number to be toll-free.  If firms, including small firms, do not already have a toll-free telephone 
number, they will not be required to obtain one to comply with the requirements of the 
relationship summary.  Firms will have the flexibility to decide whether the telephone number 
they provide in their relationship summary will be toll-free.  
In conjunction with the performance standards, the Commission is adopting certain 
design standards.  For example, with respect to delivery requirements, as discussed in Section 
II. C.3.c above, in an alternative to the proposal, we replaced a performance standard with a 
                                                                                                                                                             
1519
  See supra Section II.A.1. 
1520
  See supra Section II.A.3. 
1521
  See supra Section II.A.5. 
1522
  See supra Section II.B.5. 

 
509 
 
design standard to clarify requirements and reduce operational and supervisory burdens.  
Specifically, we proposed a performance standard that would have required a firm to deliver a 
relationship summary to an existing client or customer when changes are made to the existing 
account that would “materially change the nature and scope of the relationship.”  This 
requirement would have required analysis about facts and circumstances and commenters 
expressed concern that it would impose operational and supervisory burdens.  In response, we 
replaced the standard of “materially change the nature and scope of the relationship” with two, 
more specific and easily identifiable, triggers that we believe would not implicate the same 
operational or supervisory burdens described by commenters to meet the proposed requirement.  
Therefore, the final requirements set forth specific triggers that require re-delivery of the 
relationship summary in situations that the proposed “material changes” language sought to 
address, but are presented as a design standard rather than a performance standard and, as a result, 
are designed to ease burdens for all firms, including small entities.     
The relationship summary includes design standards to more easily allow for 
comparability among firms.  These requirements specify the headings and sequence of the topics; 
prohibit disclosure other than the disclosure that is required or permitted; limit the length of the 
relationship summary; and require limited prescribed language in certain sections.  The 
Commission considered alternative performance standards such as unlimited page numbers and 
not prohibiting disclosure other than the disclosure that is required or permitted.  However, as 
discussed in Section II. A.1 above, we believe that retail investors will benefit from receiving a 
relationship summary that contains high-level information, with the ability to access more 
detailed information.  We also believe that the relationship summary should present information 
that is responsive and relevant to the topics covered by the final instructions.  We believe that 

 
510 
 
allowing only the mandatory or permissible information will promote consistency of information 
presented to investors, and allow investors to focus on relevant information that is helpful in 
deciding among firms.  We believe that the design standards that we are adopting will provide 
comparative information in a user-friendly format that helps retail investors with informed 
decision making.   
We believe that this approach of using both performance and design standards balances 
the need to provide firms flexibility in making the presentation of information consistent with 
their particular business model while ensuring that all retail investors receive certain information 
in a manner that promotes comparability.  
Regarding the fourth alternative, we believe that, similar to the first alternative, it would 
be inconsistent with the purposes of the Advisers Act and the Exchange Act to exempt small 
advisers and broker-dealers from the new requirements, or any part thereof.  Because the 
protections of the Advisers Act and Exchange Act are intended to apply equally to retail 
investors that are clients and customers of both large and small firms, it would be inconsistent 
with the purposes of the Advisers Act and Exchange Act to specify differences for small entities 
under the final requirements.  As discussed above, we believe that the new requirements will 
result in multiple benefits to all retail investors, including alerting retail investors to certain 
information to consider when deciding whether to (i) establish an investment advisory or 
brokerage relationship, (ii) engage a particular firm or financial professional, or (iii) terminate or 
switch a relationship or specific service.
1523
  In addition, the content of the relationship summary 
                                                                                                                                                             
1523
  See supra Sections IV and VI.A. 

 
511 
 
will facilitate comparisons across firms.
1524
  We believe that providing this information at the 
prescribed timeframes is appropriate and in the public interest and will improve investor 
protection by helping retail investors to make a more informed choice among the types of firms 
and services available to them.  Because we view investor confusion about brokerage and 
advisory services as an issue for many retail investors who are clients and customers of advisers 
and broker-dealers, it will be inconsistent with the purpose of the relationship summary to 
specify different requirements for small entities.
1525
 
VII. STATUTORY AUTHORITY 
The Commission is adopting amendments to rule 203-1 under the Advisers Act pursuant 
to authority set forth in sections 203(c)(1), 204, and 211(a) of the Investment Advisers Act of 
1940 [15 U.S.C. 80b-3(c)(1), 80b-4, and 80b-11(a)]. 
The Commission is adopting amendments to rule 204-1 under the Advisers Act pursuant 
to authority set forth in sections 203(c)(1) and 204 of the Investment Advisers Act of 1940 [15 
U.S.C. 80b-3(c)(1) and 80b-4]. 
The Commission is adopting new rule 204-5 under the Advisers Act pursuant to authority 
set forth in sections 204, 206A, 206(4), 211(a), and 211(h) of the Investment Advisers Act of 
1940 [15 U.S.C. 80b-4, 80b-6a, 80b-6(4), 80b-11(a), 80b-11(h)], and section 913(f) of Title IX 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank 
Act”).   
                                                                                                                                                             
1524
  See supra Sections I and IV.  
1525
  See supra Sections I and IV (discussing investor confusion). 

 
512 
 
The Commission is adopting amendments to rule 279.1, Form ADV, under section 19(a) 
of the Securities Act of 1933 [15 U.S.C. 77s(a)], sections 23(a) and 28(e)(2) of the Securities 
Exchange Act of 1934 [15 U.S.C. 78w(a) and 78bb(e)(2)], section 319(a) of the Trust Indenture 
Act of 1939 [15 U.S.C. 7sss(a)], section 38(a) of the Investment Company Act of 1940 [15 
U.S.C. 80a-37(a)], and sections 203(c)(1), 204, 206A, 211(a) and 211(h), and of the Investment 
Advisers Act of 1940 [15 U.S.C. 80b-3(c)(1), 80b-4, 80b-6a, 80b-11(a) and 80b-11(h)], and 
section 913(f) of Title IX of the Dodd-Frank Act.   
The Commission is adopting amendments to rule 204-2 under the Advisers Act pursuant 
to authority set forth in sections 204 and 211 of the Advisers Act [15 U.S.C. 80b-4 and 80b-11].  
The Commission is adopting new rule 17a-14 under the Exchange Act, Form CRS, and 
amendments to rules 17a-3 and 17a-4 under the Exchange Act pursuant to the authority set forth 
in the Exchange Act sections 3, 10, 15, 15(c)(6), 15(l), 17, 23 and 36 thereof 15 U.S.C. 78c, 78j, 
78o, 78o(c)(6), 78o(l), 78q, 78w and 78mm, and section 913(f) of Title IX of the Dodd-Frank 
Act. 
The Commission is adopting amendments to rule 800 under the Organization; Conduct 
and Ethics; and Information and Requests pursuant to the authority set forth in PRA sections 
3506 and 3507 [44 U.S.C. 3506, 3507]. 
TEXT OF THE RULE AND FORM 
List of Subjects in 17 CFR Part 200 
 Administrative practice and procedure, Organization and functions (Government 
agencies). 

 
513 
 
List of Subjects  
17 CFR Parts 240 and 249 
Brokers, Reporting and recordkeeping requirements, Sales practice and disclosure 
requirements, Securities.  
17 CFR Parts 275 and 279  
Investment advisers, Reporting and recordkeeping requirements, Securities. 
For the reasons set out in the preamble, title 17, chapter II of the Code of Federal 
Regulations is amended as follows: 
PART 200 – ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS  
 
Subpart N – Commission Information Collection Requirements Under the Paperwork 
Reduction Act: OMB Control Numbers  
 
1.  The authority citation for part 200 subpart N continues to read as follows:  
Authority: 44 U.S.C. 3506; 44 U.S.C. 3507.  
2.  In § 200.800, the table in paragraph (b) is amended by adding an entry in numerical order 
by part and section number for “Form CRS” to read as follows:  
 
§200.800 OMB control numbers assigned pursuant to the Paperwork Reduction Act.  
* * * * *  
(b)  *  *  * 
 
 

 
514 
 
Information collection 
requirement 
17 CFR part or section 
where identified and 
described 
Current OMB control No.  
*            * 
 
 
        *         *         * 
 
*            * 
Form CRS 
 
249.640 
 
3235-0766 
*            * 
 
      *         *         * 
 
*            * 
 
PART 240 – GENERAL RULES AND REGULATIONS, SECURITIES 
EXCHANGE ACT OF 1934 
3. The general authority citation for part 240 continues to read as follows and sectional 
authority for 240.17a-14 is added to read as follows: 
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 
77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 
78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 
80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq.; and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 
18 U.S.C. 1350; and Pub. L. 111-203, 939A, 124 Stat. 1887 (2010); and secs. 503 and 602, Pub. 
L. 112-106, 126 Stat. 326 (2012), unless otherwise noted.  
* * * * * 
Section 240.17a-14 is also issued under Pub. L. 111-203, sec. 913, 124 Stat. 1376 (2010). 
* * * * * 
 4. Section 240.17a-3 is amended by adding paragraph (a)(24) to read as follows: 
§240.17a-3  Records to be made by certain exchange members, brokers and dealers. 
(a) * * * 

 
515 
 
(24) A record of the date that each Form CRS was provided to each retail investor, 
including any Form CRS provided before such retail investor opens an account. 
* * * * * 
 3. Section 240.17a-4 is amended by adding paragraph (e)(10) to read as follows: 
§240.17a-4  Records to be preserved by certain exchange members, brokers and dealers. 
* * * * * 
(e) * * * 
(10) All records required pursuant to §240.17a-3(a)(24), as well as a copy of each Form 
CRS, until at least six years after such record or Form CRS is created. 
* * * * * 
4. Section 240.17a-14 is added to read as follows: 
§240.17a-14   Form CRS, for preparation, filing and delivery of Form CRS. 
(a) Scope of section.  This section shall apply to every broker or dealer registered with the 
Commission pursuant to section 15 of the Act that offers services to a retail investor.   
(b) Form CRS.  You must: 
(1)  Prepare Form CRS 17 CFR 249.640, by following the instructions in the form. 
(2) File your current Form CRS electronically with the Commission through the Central 
Registration Depository (“Web CRD
®
”) operated by the Financial Industry Regulatory 
Authority, Inc., and thereafter, file an amended Form CRS in accordance with the instructions in 
Form CRS. 
(3) Amend your Form CRS as required by the instructions in the form. 
(c) Delivery of Form CRS.  You must: 
(1) Deliver to each retail investor your current Form CRS before or at the earliest of:   

 
516 
 
(i) A recommendation of an account type, a securities transaction; or an investment 
strategy involving securities;  
(ii) Placing an order for the retail investor; or  
(iii) The opening of a brokerage account for the retail investor.    
(2) Deliver to each retail investor who is an existing customer your current Form CRS 
before or at the time you:  
(i) Open a new account that is different from the retail investor’s existing account(s);  
(ii) Recommend that the retail investor roll over assets from a retirement account into a 
new or existing account or investment; or  
(iii) Recommend or provide a new brokerage service or investment that does not 
necessarily involve the opening of a new account and would not be held in an existing account.   
(3) Post the current Form CRS prominently on your public Website, if you have one, in a 
location and format that is easily accessible for retail investors. 
(4) Communicate any changes made to Form CRS to each retail investor who is an 
existing customer within 60 days after the amendments are required to be made and without 
charge.  The communication can be made by delivering the amended Form CRS or by 
communicating the information through another disclosure that is delivered to the retail investor. 
(5) Deliver a current Form CRS to each retail investor within 30 days upon request. 
(d) Other disclosure obligations. Delivering a Form CRS in compliance with this section 
does not relieve you of any other disclosure obligations arising under the federal securities laws 
and regulations or other laws or regulations (including the rules of a self-regulatory 
organization). 
(e) Definitions.  For purposes of this section: 

 
517 
 
(1) Current Form CRS means the most recent version of the Form CRS. 
(2) Retail investor means a natural person, or the legal representative of such natural 
person, who seeks to receive or receives services primarily for personal, family or household 
purposes. 
(f) Transition rule. (1) If you are registered with the Commission prior to June 30, 2020, 
pursuant to Section 15 of the Act, you must file your initial Form CRS with the Commission in 
accordance with section (b)(2) of this section, beginning on May 1, 2020, and by no later than 
June 30, 2020. 
(2) On or after June 30, 2020, if you file an application for registration with the 
Commission or have an application for registration pending with the Commission as a broker or 
dealer
 pursuant to Section 15 of the Act, you must begin to comply with this section by the date 
on which your registration application becomes effective pursuant to Section 15 of the Act, 
including by filing your Form CRS in accordance with paragraph (b)(2) of this section. 
(3) Within 30 days after the date by which you are first required by paragraph (f) of this 
section to electronically file your initial Form CRS with the Commission, you must deliver to 
each of your existing customers who is a retail investor your current Form CRS. 
(4) As of the date by which you are first required to electronically file your Form CRS 
with the Commission pursuant to this section, you must begin using your Form CRS as required 
to comply with paragraph (c) of this rule. 
PART 249 – FORMS, SECURITIES EXCHANGE ACT OF 1934 
 5. The authority citation for part 249 is amended by revising the general authority 
and adding sectional authority for 249.640 to read as follows: 

 
518 
 
Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 
1350; Sec. 953(b), Pub. L. 111-203, 124 Stat. 1904; Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 
309 (2012); Sec. 107, Pub. L. 112-106, 126 Stat. 313, (2012), and Sec. 72001, Pub. L. 114-94, 
129 Stat. 1312 (2015), unless otherwise noted.  
* * * * * 
 Section 249.640 is also issued under Pub. L. 111-203, sec. 913, 124 Stat. 1376 (2010). 
* * * * * 
6.  Section 249.641 is added to subpart G read as follows: 
§249.641   Form CRS, Relationship Summary for Brokers and Dealers Providing Services 
to Retail Investors, pursuant to §240.17a-14 of this chapter. 
This form shall be prepared and filed by brokers and dealers registered with the Securities 
and Exchange Commission pursuant to Section 15 of the Act that offer services to a retail 
investor pursuant to §240.17a-14 of this chapter. 
PART 275 – RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 
1940 
7. The general authority citation for part 275 continues to read as follows and 
sectional authorities for 275.204-5 and 275.211h-1 are added to read as follows: 
Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-2(a)(17), 80b-3, 80b-4, 
80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless otherwise noted. 
* * * * * 
Section 275.204-5 is also issued under sec. 913, Pub. L. 111-203, sec. 124 Stat. 1827-28 (2010). 
Section 275.211h-1 is also issued under sec. 913, Pub. L. 111-203, sec. 124 Stat. 1827-28 (2010). 
* * * * * 

 
519 
 
8. Amend §275.203-1 by revising paragraph (a) to read as follows: 
§275.203-1   Application for investment adviser registration. 
(a) Form ADV. (1) To apply for registration with the Commission as an investment 
adviser, you must complete Form ADV (17 CFR 279.1) by following the instructions in the form 
and you must file Part 1A of Form ADV, the firm brochure(s) required by Part 2A of Form ADV 
and Form CRS required by Part 3 of Form ADV electronically with the Investment Adviser 
Registration Depository (IARD) unless you have received a hardship exemption under §275.203-
3. You are not required to file with the Commission the brochure supplements required by Part 
2B of Form ADV. 
N
OTE 1 TO PARAGRAPH (a)(1): Information on how to file with the IARD is available on 
the Commission's website at http://www.sec.gov/iard. If you are not required to deliver a 
brochure or Form CRS to any clients, you are not required to prepare or file a brochure or Form 
CRS, as applicable, with the Commission. If you are not required to deliver a brochure 
supplement to any clients for any particular supervised person, you are not required to prepare a 
brochure supplement for that supervised person. 
(2)(i) On or after June 30, 2020, the Commission will not accept any initial application 
for registration as an investment adviser that does not include a Form CRS that satisfies the 
requirements of Part 3 of Form ADV. 
(ii) Beginning on May 1, 2020, any initial application for registration
 as an investment 
adviser filed prior to June 30, 2020, must include a Form CRS that satisfies the requirements of 
Part 3 of Form ADV by no later than June 30, 2020. 
* * * * * 

 
520 
 
 9. Amend  §275.204-1 by revising paragraphs (a) and (b) and adding paragraph (e) 
to read as follows: 
§275.204-1   Amendments to Form ADV. 
(a) When amendment is required. You must amend your Form ADV (17 CFR 279.1):  
(1) Parts 1 and 2: 
(i) At least annually, within 90 days of the end of your fiscal year; and  
(ii) More frequently, if required by the instructions to Form ADV. 
(2) Part 3 at the frequency required by the instructions to Form ADV. 
(b) Electronic filing of amendments. (1) Subject to paragraph (c) of this section, you must 
file all amendments to Part 1A, Part 2A, and Part 3 of Form ADV electronically with the IARD, 
unless you have received a continuing hardship exemption under §275.203-3. You are not 
required to file with the Commission amendments to brochure supplements required by Part 2B 
of Form ADV. 
(2) If you have received a continuing hardship exemption under §275.203-3, you must, 
when you are required to amend your Form ADV, file a completed Part 1A, Part 2A and Part 3 
of Form ADV on paper with the SEC by mailing it to FINRA. 
* * * * * 
(e) Transition to Filing Form CRS. If you are registered with the Commission or have an 
application for registration pending with the Commission prior to June 30, 2020, you must 
amend your Form ADV by electronically filing with IARD your initial Form CRS that satisfies 
the requirements of Part 3 of Form ADV (as amended effective September 30, 2019) beginning 
on May 1, 2020 and by no later than June 30, 2020. 

 
521 
 
Note 1 to paragraphs (e): This note applies to paragraphs (a), (b), and (e) of this section. 
Information on how to file with the IARD is available on our Web site at 
http://www.sec.gov/iard. For the annual updating amendment: Summaries of material changes 
that are not included in the adviser's brochure must be filed with the Commission as an exhibit to 
Part 2A in the same electronic file; and if you are not required to prepare a brochure, a summary 
of material changes, an annual updating amendment to your brochure, or Form CRS you are not 
required to file them with the Commission. See the instructions for Part 2A and Part 3 of Form 
ADV. 
* * * * * 
10. Section 275.204-2 is amended by revising paragraph (a)(14)(i) as follows: 
§275.204-2 Books and records to be maintained by investment advisers. 
(a) * * * 
(14)(i) A copy of each brochure, brochure supplement and Form CRS, and each 
amendment or revision to the brochure, brochure supplement and Form CRS, that satisfies the 
requirements of Part 2 or Part 3 of Form ADV, as applicable [17 CFR 279.1]; any summary 
of material changes that satisfies the requirements of Part 2 of Form ADV but is not contained in 
the brochure; and a record of the dates that each brochure, brochure supplement and Form CRS, 
each amendment or revision thereto, and each summary of material changes not contained in a 
brochure given to any client or to any prospective client who subsequently becomes a client. 
* * * * * 
11. Section 275.204-5 is added to read as follows: 

 
522 
 
§275.204-5   Delivery of Form CRS. 
(a) General requirements. If you are registered under the Act as an investment adviser, 
you must deliver Form CRS, required by Part 3 of Form ADV [17 CFR 279.1], to each retail 
investor. 
(b) Delivery requirements. You (or a supervised person acting on your behalf) must: 
(1) Deliver to each retail investor your current Form CRS before or at the time you enter 
into an investment advisory contract with that retail investor.   
(2) Deliver to each retail investor who is an existing client your current Form CRS before 
or at the time you:  
(i) Open a new account that is different from the retail investor’s existing account(s);  
(ii) Recommend that the retail investor roll over assets from a retirement account into a 
new or existing account or investment; or  
(iii) Recommend or provide a new investment advisory service or investment that does 
not necessarily involve the opening of a new account and would not be held in an existing 
account.    
(3) Post the current Form CRS prominently on your website, if you have one, in a 
location and format that is easily accessible for retail investors. 
(4) Communicate any changes made to Form CRS to each retail investor who is an 
existing client within 60 days after the amendments are required to be made and without charge.  
The communication can be made by delivering the amended Form CRS or by communicating the 
information through another disclosure that is delivered to the retail investor. 
(5) Deliver a current Form CRS to each retail investor within 30 days upon request. 

 
523 
 
(c) Other disclosure obligations. Delivering Form CRS in compliance with this section 
does not relieve you of any other disclosure obligations you have to your retail investors under 
any Federal or State laws or regulations. 
(d) Definitions. For purposes of this section: 
(1) Current Form CRS means the most recent version of the Form CRS. 
(2) Retail investor means a natural person, or the legal representative of such natural 
person, who seeks to receive or receives services primarily for personal, family or household 
purposes. 
(3) Supervised person means any of your officers, partners or directors (or other persons 
occupying a similar status or performing similar functions) or employees, or any other person 
who provides investment advice on your behalf. 
(e) Transition rule. (1) Within 30 days after the date by which you are first required by 
§275.204-1(b)(3) to electronically file your Form CRS with the Commission, you must deliver to 
each of your existing clients who is a retail investor your current Form CRS as required by Part 3 
of Form ADV.  
(2) As of the date by which you are first required to electronically file your Form CRS 
with the Commission, you must begin using your Form CRS as required by Part 3 of Form ADV 
to comply with the requirements of paragraph (b) of this section.  
PART 279 – FORMS PRESCRIBED UNDER THE INVESTMENT ADVISERS 
ACT OF 1940  
12. The authority citation for part 279 is revised to read as follows:  
Authority: The Investment Advisers Act of 1940, 15 U.S.C. 80b-1, et seq., Pub. L. 111-
203, 124 Stat. 1376.   

 
524 
 
Note: The following amendment does not appear in the Code of Federal Regulations. 
13. Form ADV [referenced in §279.1] is amended by:  
a. In the instructions to the form, revising the section entitled “Form ADV: General 
Instructions.” The revised version of Form ADV: General Instructions is attached as Appendix 
A;  
b. In the instructions to the form, adding the section entitled “Form ADV, Part 3: 
Instructions to Form CRS.” The new version of Form ADV, Part 3: Instructions to Form CRS is 
attached as Appendix B. 
Dated:  June 5, 2019 
By the Commission. 
 
Vanessa A. Countryman 
Acting Secretary 
 
 Note: The appendices will not appear in the Code of Federal Regulations. 
 
APPENDICES 
 
 

SEC 1707 ([06]-19)  File 1 of 5  
 
OMB APPROVAL 
 
OMB Number:   3235-0049 
Expires:                             [Date]     
Estimated average burden  
hours per response [xx.xx] 
 
 
APPENDIX A 
 
FORM ADV (Paper Version) 
• UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION 
     AND 
• REPORT FORM BY EXEMPT REPORTING ADVISERS 
  
Form ADV:  General Instructions 
 
Read these instructions carefully before filing Form ADV.  Failure to follow these instructions, 
properly complete the form, or pay all required fees may result in your application or report 
being delayed or rejected. 
 
In these instructions and in Form ADV, “you” means the investment adviser (i.e., the advisory 
firm).   
 
If you are a “separately identifiable department or division” (SID) of a bank, “you” means the 
SID, rather than your bank, unless the instructions or the form provide otherwise.   
 
If you are a private fund adviser filing an umbrella registration, “you” means the filing adviser 
and each relying adviser, unless the instructions or the form provide otherwise.  The information 
in Items 1, 2, 3 and 10 (including corresponding schedules) should be provided for the filing 
adviser only.   
 
Terms that appear in italics are defined in the Glossary of Terms to Form ADV. 
 
1. Where can I get more information on Form ADV, electronic filing, and the IARD? 
 
The SEC provides information about its rules and the Advisers Act on its website:  
<http://www.sec.gov/iard>. 
 
NASAA provides information about state investment adviser laws and state rules, and how to 
contact a state securities authority, on its website:  <http://www.nasaa.org>. 
 
FINRA provides information about the IARD and electronic filing on the IARD website:  
<http://www.iard.com>. 
 
2. What is Form ADV used for? 
 
Investment advisers use Form ADV to: 
 
• Register with the Securities and Exchange Commission 
• Register with one or more state securities authorities 

 
2 
 
• Amend those registrations; 
 
• Report to the SEC as an exempt reporting adviser 
• Report to one or more state securities authorities as an exempt reporting adviser 
• Amend those reports; and 
• Submit a final report as an exempt reporting adviser 
 
3. How is Form ADV organized? 
 
Form ADV contains five parts: 
 
• Part 1A asks a number of questions about you, your business practices, the persons who 
own and control you, and the persons who provide investment advice on your behalf. 
o All advisers registering with the SEC or any of the state securities authorities must 
complete Part 1A. 
o Exempt reporting advisers (that are not also registering with any state securities 
authority) must complete only the following Items of Part 1A:  1, 2, 3, 6, 7, 10, and 
11, as well as corresponding schedules.  Exempt reporting advisers that are 
registering with any state securities authority must complete all of Form ADV. 
 Part 1A also contains several supplemental schedules.  The items of Part 1A let you know 
 which schedules you must complete. 
o Schedule A asks for information about your direct owners and executive officers. 
o Schedule B asks for information about your indirect owners. 
o Schedule C is used by paper filers to update the information required by Schedules A 
and B (see Instruction 18). 
o Schedule D asks for additional information for certain items in Part 1A. 
o Schedule R asks for additional information about relying advisers. 
o Disclosure Reporting Pages (or DRPs) are schedules that ask for details about 
disciplinary events involving you or your advisory affiliates. 
 
• Part 1B asks additional questions required by state securities authorities.  Part 1B 
contains three additional DRPs.  If you are applying for SEC registration or are registered 
only with the SEC, you do not have to complete Part 1B.  (If you are filing electronically 
and you do not have to complete Part 1B, you will not see Part 1B). 
 
• Part 2A requires advisers to create narrative brochures containing information about the 
advisory firm.  The requirements in Part 2A apply to all investment advisers registered 
with or applying for registration with the SEC, but do not apply to exempt reporting 
advisers.  Every application for registration must include a narrative brochure prepared in 
accordance with the requirements of Part 2A of Form ADV.  See Advisers Act Rule 203-
1.
   
 
• Part 2B requires advisers to create brochure supplements containing information about 
certain supervised persons.  The requirements in Part 2B apply to all investment advisers 

 
3 
 
registered with or applying for registration with the SEC, but do not apply to exempt 
reporting advisers. 
 
• Part 3 requires advisers to create relationship summary (Form CRS) containing 
information for retail investors.  The requirements in Part 3 apply to all investment 
advisers registered or applying for registration with the SEC, but do not apply to exempt 
reporting advisers.  Every adviser that has retail investors to whom it must deliver a 
relationship summary must include in the application for registration a relationship 
summary prepared in accordance with the requirements of Part 3 of Form ADV.  See 
Advisers Act Rule 203-1. 
 
4. When am I required to update my Form ADV? 
 
• SEC- and State-Registered Advisers: 
 
o Annual updating amendments:  You must amend your Form ADV each year by filing 
an annual updating amendment within 90 days after the end of your fiscal year.  
When you submit your annual updating amendment, you must update your responses 
to all items in Part 1A, 1B, 2A and 2B (as applicable), including corresponding 
sections of Schedules A, B, C, and D and all sections of Schedule R for each relying 
adviser.  You must submit your summary of material changes required by Item 2 of 
Part 2A either in the brochure (cover page or the page immediately thereafter) or as 
an exhibit to your brochure.  You may, but are not required, to submit amended 
versions of the relationship summary required by Part 3 as part of your annual 
updating amendment. 
           
o Other-than-annual amendments:  In addition to your annual updating amendment, 
 
 If you are registered with the SEC or a state securities authority, you must 
amend Part 1A, 1B, 2A and 2B (as applicable) of your Form ADV, including 
corresponding sections of Schedules A, B, C, D, and R, by filing additional 
amendments (other-than-annual amendments) promptly, if: 
 
o you are adding or removing a relying adviser as part of your umbrella 
registration; 
 
o information you provided in response to Items 1 (except 1.O. and Section 
1.F. of Schedule D), 3, 9 (except 9.A.(2), 9.B.(2), 9.E., and 9.F.), or 11 of 
Part 1A or Items 1, 2.A. through 2.F., or 2.I. of Part 1B or Sections 1 or 3 
of Schedule R becomes inaccurate in any way; 
 
o information you provided in response to Items 4, 8, or 10 of Part 1A, or 
Item 2.G. of Part 1B, or Section 10 of Schedule R becomes materially 
inaccurate; or 
 

 
4 
 
o information you provided in your brochure becomes materially inaccurate 
(see note below for exceptions). 
 
Notes:  Part 1:  If you are submitting an other-than-annual amendment, you are not 
required to update your responses to Items 2, 5, 6, 7, 9.A.(2), 9.B.(2), 9.E., 
9.F., or 12 of Part 1A, Items 2.H. or 2.J. of Part 1B, Section 1.F. of Schedule 
D or Section 2 of Schedule R even if your responses to those items have 
become inaccurate. 
 
Part 2:  You must amend your brochure supplements (see Form ADV, Part 
2B) promptly if any information in them becomes materially inaccurate.  If 
you are submitting an other-than-annual amendment to your brochure, you are 
not required to update your summary of material changes as required by Item 
2.  You are not required to update your brochure between annual amendments 
solely because the amount of client assets you manage has changed or because 
your fee schedule has changed.  However, if you are updating your brochure 
for a separate reason in between annual amendments, and the amount of client 
assets you manage listed in response to Item 4.E. or your fee schedule listed in 
response to Item 5.A. has  become materially inaccurate, you should update 
that item(s) as part of the interim amendment.     
 
• If    you are an SEC-registered adviser, you are required to file your 
brochure amendments electronically through IARD.  You are not 
required to file amendments to your brochure supplements with the 
SEC, but you must maintain a copy of them in your files. 
 
• If    you are a state-registered adviser, you are required to file your 
brochure amendments and brochure supplement amendments with the 
appropriate state securities authorities through IARD. 
 
Part 3:  If you are registered with the SEC, you must amend Part 3 of your 
Form ADV within 30 days whenever any information in your relationship 
summary becomes materially inaccurate by filing with the SEC an additional 
other-than-annual amendment or by including the relationship summary as 
part of an annual updating amendment.  You must include an exhibit 
highlighting the most recent changes required by Form ADV, Part 3 (Form 
CRS), General Instruction 8.C. 
 
• Exempt reporting advisers: 
 
o Annual Updating Amendments:  You must amend your Form ADV each year by 
filing an annual updating amendment within 90 days after the end of your fiscal year.  
When you submit your annual updating amendment, you must update your responses 
to all required items, including corresponding sections of Schedules A, B, C, and D. 
 

 
5 
 
o Other-than-Annual Amendments:  In addition to your annual updating amendment, 
you must amend your Form ADV, including corresponding sections of Schedules A, 
B, C, and D, by filing additional amendments (other-than-annual amendments) 
promptly if: 
 
 information you provided in response to Items 1 (except Item 1.O. and Section 
1.F. of Schedule D), 3, or 11 becomes inaccurate in any way; or 
 
 information you provided in response to Item 10 becomes materially 
inaccurate. 
 
Failure to update your Form ADV, as required by this instruction, is a violation of SEC 
rules or similar state rules and could lead to your registration being revoked. 
 
5. What is SEC umbrella registration and how can I satisfy the requirements of filing 
 an umbrella registration?  
 
An umbrella registration is a single registration by a filing adviser and one or more relying 
advisers who advise only private funds and certain separately managed account clients that 
are qualified clients and collectively conduct a single advisory business.  Absent other facts 
suggesting that the filing adviser and relying adviser(s) conduct different businesses, 
umbrella registration is available under the following circumstances: 
 
i.    The filing adviser and each relying adviser advise only private funds and clients in 
 separately managed accounts that are qualified clients and are otherwise eligible to invest 
 in the private funds advised by the filing adviser or a relying adviser and whose accounts 
 pursue investment objectives and strategies that are substantially similar or otherwise 
 related to those private funds. 
 
ii.   The filing adviser has its principal office and place of business in the United States and, 
 therefore, all of the substantive provisions of the Advisers Act and the rules thereunder 
 apply to the filing adviser's and each relying adviser's dealings with each of its clients, 
 regardless of whether any client of the filing adviser or relying adviser providing the 
 advice is a United States person. 
 
iii.  Each relying adviser, its employees and the persons acting on its behalf are subject to the 
 filing adviser’s supervision and control and, therefore, each relying adviser, its employees 
 and the persons acting on its behalf are “persons associated with” the filing adviser (as 
 defined in section 202(a)(17) of the Advisers Act). 
 
iv. The advisory activities of each relying adviser are subject to the Advisers Act and the 
 rules thereunder, and each relying adviser is subject to examination by the SEC. 
 
v. The filing adviser and each relying adviser operate under a single code of ethics adopted 
 in accordance with SEC rule 204A-1 and a single set of written policies and procedures 

 
6 
 
 adopted and implemented in accordance with SEC rule 206(4)-7 and administered by a 
 single chief compliance officer in accordance with that rule. 
 
To satisfy the requirements of Form ADV while using umbrella registration the filing 
adviser must sign, file, and update as required, a single Form ADV (Parts 1 and 2) that 
relates to, and includes all information concerning, the filing adviser and each relying adviser 
(e.g., disciplinary information and ownership information), and must include this same 
information in any other reports or filings it must make under the Advisers Act or the rules 
thereunder (e.g., Form PF).  The filing adviser and each relying adviser must not be 
prohibited from registering with the SEC by section 203A of the Advisers Act (i.e., the filing 
adviser and each relying adviser must individually qualify for SEC registration). 
 
Unless otherwise specified, references to “you” in Form ADV refer to both the filing adviser 
and each relying adviser.  The information in Items 1, 2, 3 and 10 (including corresponding 
schedules) should be provided for the filing adviser only.  A separate Schedule R should be 
completed for each relying adviser.  References to “you” in Schedule R refer to the relying 
adviser only. 
 
A filing adviser applying for registration with the SEC should complete a Schedule R for 
each relying adviser.  If you are a filing adviser registered with the SEC and would like to 
add or delete relying advisers from an umbrella registration, you should file an other-than-
annual amendment and add or delete Schedule Rs as needed. 
 
Note:  Umbrella registration is not available to exempt reporting advisers. 
 
6. Where do I sign my Form ADV application or amendment? 
 
You must sign the appropriate Execution Page.  There are three Execution Pages at the end 
of the form.  Your initial application, your initial report (in the case of an exempt reporting 
adviser), and all amendments to Form ADV must include at least one Execution Page. 
 
• If you are applying for or are amending your SEC registration, or if you are reporting as 
an exempt reporting adviser or amending your report, you must sign and submit either a: 
 
o Domestic Investment Adviser Execution Page, if you (the advisory firm) are a 
resident of the United States; or 
o Non-Resident Investment Adviser Execution Page, if you (the advisory firm) are not a 
resident of the United States. 
 
• If you are applying for or are amending your registration with a state securities authority, 
you must sign and submit the State-Registered Investment Adviser Execution Page. 
 
7. Who must sign my Form ADV or amendment? 
 
The individual who signs the form depends upon your form of organization: 
 

 
7 
 
• For a sole proprietorship, the sole proprietor. 
• For a partnership, a general partner. 
• For a corporation, an authorized principal officer. 
• For a “separately identifiable department or division” (SID) of a bank, a principal officer 
of your bank who is directly engaged in the management, direction, or supervision of 
your investment advisory activities. 
• For all others, an authorized individual who participates in managing or directing your 
affairs. 
 
The signature does not have to be notarized, and in the case of an electronic filing, should be 
a typed name.  
 
8. How do I file my Form ADV? 
 
Complete Form ADV electronically using the Investment Adviser Registration Depository 
(IARD) if: 
 
• You are filing with the SEC (and submitting notice filings to any of the state securities 
authorities), or 
 
• You are filing with a state securities authority that requires or permits advisers to submit 
Form ADV through the IARD. 
 
 Note:  SEC rules require advisers that are registered or applying for registration with the 
 SEC, or that are reporting to the SEC as an exempt reporting adviser, to file 
 electronically through the IARD system.  See SEC rules 203-1 and 204-4.  
 
To file electronically, go to the IARD website (<www.iard.com>), which contains detailed 
instructions for advisers to follow when filing through the IARD. 
 
Complete Form ADV (Paper Version) on paper if: 
 
• You are filing with the SEC or a state securities authority that requires electronic filing, 
but you have been granted a continuing hardship exemption.  Hardship exemptions are 
described in Instruction 17. 
 
• You are filing with a state securities authority that permits (but does not require) 
electronic filing and you do not file electronically. 
 
9. How do I get started filing electronically? 
 
First, obtain a copy of the IARD Entitlement Package from the following website:  
<http://www.iard.com/GetStarted.asp>.  Second, request access to the IARD system for your 
firm by completing and submitting the IARD Entitlement Package.  The IARD Entitlement 
Package explains how the form may be submitted.  Mail the forms to:  FINRA Entitlement 
Group, 9509 Key West Avenue, Rockville, MD 20850. 

 
8 
 
 
When FINRA receives your Entitlement Package, they will assign a CRD number 
(identification number for your firm) and a user I.D. code and password (identification 
number and system password for the individual(s) who will submit Form ADV filings for 
your firm).  Your firm may request an I.D. code and password for more than one individual.  
FINRA also will create a financial account for you from which the IARD will deduct filing 
fees and any state fees you are required to pay.  If you already have a CRD account with 
FINRA, it will also serve as your IARD account; a separate account will not be established. 
 
Once you receive your CRD number, user I.D. code and password, and you have funded your 
account, you are ready to file electronically. 
 
Questions regarding the Entitlement Process should be addressed to FINRA at 240.386.4848. 
 
10. If I am applying for registration with the SEC, or amending my SEC registration, 
 how do I make notice filings with the state securities authorities? 
 
If you are applying for registration with the SEC or are amending your SEC registration, one 
or more state securities authorities may require you to provide them with copies of your SEC 
filings.  We call these filings “notice filings.”  Your notice filings will be sent electronically 
to the states that you check on Item 2.C. of Part 1A.  The state securities authorities to which 
you send notice filings may charge fees, which will be deducted from the account you 
establish with FINRA.  To determine which state securities authorities require SEC-
registered advisers to submit notice filings and to pay fees, consult the relevant state 
investment adviser law or state securities authority.  See General Instruction 1. 
 
If you are granted a continuing hardship exemption to file Form ADV on paper, FINRA will 
enter your filing into the IARD and your notice filings will be sent electronically to the state 
securities authorities that you check on Item 2.C. of Part 1A. 
 
11. I am registered with a state.  When must I switch to SEC registration? 
 
If at the time of your annual updating amendment you meet at least one of the requirements 
for SEC registration in Item 2.A.(1) to (12) of Part 1A, you must apply for registration with 
the SEC within 90 days after you file the annual updating amendment.  Once you register 
with the SEC, you are subject to SEC regulation, regardless of whether you remain registered 
with one or more states.  See SEC rule 203A-1(b)(2).  Each of your investment adviser 
representatives, however, may be subject to registration in those states in which the 
representative has a place of business.  See Advisers Act section 203A(b)(1); SEC rule 
203A-3(a).  For additional information, consult the investment adviser laws or the state 
securities authority for the particular state in which you are “doing business.”  See General 
Instruction 1. 
 
12. I am registered with the SEC.  When must I switch to registration with a state 
 securities authority? 
 

 
9 
 
If you check box 13 in Item 2.A. of Part 1A to report on your annual updating amendment 
that you are no longer eligible to register with the SEC, you must withdraw from SEC 
registration within 180 days after the end of your fiscal year by filing Form ADV-W.  See 
SEC rule 203A-1(b)(2).  You should consult state law or the state securities authority for the 
states in which you are “doing business” to determine if you are required to register in these 
states.  See General Instruction 1.  Until you file your Form ADV-W with the SEC, you will 
remain subject to SEC regulation, and you also will be subject to regulation in any states 
where you register.  See SEC rule 203A-1(b)(2). 
 
13. I am an exempt reporting adviser.  When must I submit my first report on Form 
 ADV? 
 
• All exempt reporting advisers: 
You must submit your initial Form ADV filing within 60 days of relying on the 
exemption from registration under either section 203(l) of the Advisers Act as an adviser 
solely to one or more venture capital funds or section 203(m) of the Advisers Act because 
you act solely as an adviser to private funds and have assets under management in the 
United States of less than $150 million. 
 
• Additional instruction for advisers switching from being registered to being exempt 
reporting advisers: 
If you are currently registered as an investment adviser (or have an application for 
registration pending) with the SEC or with a state securities authority, you must file a 
Form ADV-W to withdraw from registration in the jurisdictions where you are switching.  
You must submit the Form ADV-W before submitting your first report as an exempt 
reporting adviser.  
 
14. I am an exempt reporting adviser.  Is it possible that I might be required to also 
 register with or submit a report to a state securities authority? 
 
Yes, you may be required to register with or submit a report to one or more state securities 
authorities.  If you are required to register with one or more state securities authorities, you 
must complete all of Form ADV.  See General Instruction 3.  If you are required to submit a 
report to one or more state securities authorities, check the box(es) in Item 2.C. of Part 1A 
next to the state(s) you would like to receive the report.  Each of your investment adviser 
representatives may also be subject to registration requirements.  For additional information 
about the requirements that may apply to you, consult the investment adviser laws or the 
state securities authority for the particular state in which you are “doing business.”  See 
General Instruction 1.  
 
15. What do I do if I no longer meet the definition of “exempt reporting adviser”? 
 
• Advisers Switching to SEC Registration: 
 
o You may no longer be an exempt reporting adviser and may be required to register 
with the SEC if you wish to continue doing business as an investment adviser.  For 

 
10 
 
example, you may be relying on section 203(l) and wish to accept a client that is not a 
venture capital fund as defined in SEC rule 203(l)-1, or you may have been relying on 
SEC rule 203(m)-1 and reported in Section 2.B. of Schedule D to your annual 
updating amendment that you have private fund assets of $150 million or more. 
 
 If you are relying on section 203(l), unless you qualify for another exemption, 
you would violate the Advisers Act’s registration requirement if you accept a 
client that is not a venture capital fund as defined in SEC rule 203(l)-1 before 
the SEC approves your application for registration.  You must submit your 
final report as an exempt reporting adviser and apply for SEC registration in 
the same filing. 
 
 If you were relying on SEC rule 203(m)-1 and you reported in Section 2.B. of 
Schedule D to your annual updating amendment that you have private fund 
assets of $150 million or more, you must register with the SEC unless you 
qualify for another exemption.  If you have complied with all SEC reporting 
requirements applicable to an exempt reporting adviser as such, you have up 
to 90 days after filing your annual updating amendment to apply for SEC 
registration, and you may continue doing business as a private fund adviser 
during this time.  You must submit your final report as an exempt reporting 
adviser and apply for SEC registration in the same filing.  Unless you qualify 
for another exemption, you would violate the Advisers Act’s registration 
requirement if you accept a client that is not a private fund during this 
transition period before the SEC approves your application for registration, 
and you must comply with all SEC reporting requirements applicable to an 
exempt reporting adviser as such during this 90-day transition period.  If you 
have not complied with all SEC reporting requirements applicable to an 
exempt reporting adviser as such, this 90-day transition period is not available 
to you.  Therefore, if the transition period is not available to you, and you do 
not qualify for another exemption, your application for registration must be 
approved by the SEC before you meet or exceed SEC rule 203(m)-1’s $150 
million asset threshold. 
 
o You will be deemed in compliance with the Form ADV filing and reporting 
requirements until the SEC approves or denies your application.  If your application is 
approved, you will be able to continue business as a registered adviser. 
 
o If you register with the SEC, you may be subject to state notice filing requirements.  
To determine these requirements, consult the investment adviser laws or the state 
securities authority for the particular state in which you are “doing business.”  See 
General Instruction 1. 
 
Note:  If you are relying on SEC rule 203(m)-1 and you accept a client that is not a 
private fund, you will lose the exemption provided by SEC rule 203(m)-1 immediately.  
To avoid this result, you should apply for SEC registration in advance so that the SEC 
has approved your registration before you accept a client that is not a private fund. 

 
11 
 
 
The 90-day transition period described above also applies to investment advisers with 
their principal offices and places of business outside of the United States with respect to 
their clients who are United States persons (e.g., the adviser would not be eligible for the 
90-day transition period if it accepted a client that is a United States person and is not a 
private fund). 
 
• Advisers Not Switching to SEC Registration: 
 
o You may no longer be an exempt reporting adviser but may not be required to 
register with the SEC or may be prohibited from doing so.  For example, you may 
cease to do business as an investment adviser, become eligible for an exemption that 
does not require reporting, or be ineligible for SEC registration.  In this case, you 
must submit a final report as an exempt reporting adviser to update only Item 1 of 
Part 1A of Form ADV. 
 
o You may be subject to state registration requirements.  To determine these 
requirements, consult the investment adviser laws or the state securities authority for 
the particular state in which you are “doing business.”  See General Instruction 1.  
 
16. Are there filing fees? 
 
Yes.  These fees go to support and maintain the IARD.  The IARD filing fees are in addition 
to any registration or other fee that may be required by state law.  You must pay an IARD 
filing fee for your initial application, your initial report, and each annual updating 
amendment.  There is no filing fee for an other-than-annual amendment, a final report as an 
exempt reporting adviser, or Form ADV-W.  The IARD filing fee schedule is published at 
<http://www.sec.gov/iard>; <http://www.nasaa.org>; and <http://www.iard.com>. 
 
If you are submitting a paper filing under a continuing hardship exemption (see Instruction 
17), you are required to pay an additional fee.  The amount of the additional fee depends on 
whether you are filing Form ADV or Form ADV-W.  (There is no additional fee for filings 
made on Form ADV-W.)  The hardship filing fee schedule is available by contacting FINRA 
at 240.386.4848. 
 
17.  What if I am not able to file electronically? 
 
If you are required to file electronically but cannot do so, you may be eligible for one of two 
types of hardship exemptions from the electronic filing requirements. 
 
• A temporary hardship exemption is available if you file electronically, but you 
encounter unexpected difficulties that prevent you from making a timely filing with 
the IARD, such as a computer malfunction or electrical outage.  This exemption does 
not permit you to file on paper; instead it extends the deadline for an electronic filing 
for seven business days.  See SEC rules 203-3(a) and 204-4(e). 
 

 
12 
 
• A continuing hardship exemption may be granted if you are a small business and 
you can demonstrate that filing electronically would impose an undue hardship.  You 
are a small business, and may be eligible for a continuing hardship exemption, if you 
are required to answer Item 12 of Part 1A (because you have assets under 
management of less than $25 million) and you are able to respond “no” to each 
question in Item 12.  See SEC rule 0-7. 
 
If you have been granted a continuing hardship exemption, you must complete and 
submit the paper version of Form ADV to FINRA.  FINRA will enter your responses 
into the IARD.  As discussed in General Instruction 16, FINRA will charge you a fee 
to reimburse it for the expense of data entry. 
 
18. I am eligible to file on paper.  How do I make a paper filing? 
 
When filing on paper, you must: 
 
• Type all of your responses. 
• Include your name (the same name you provide in response to Item 1.A. of Part 1A) and 
the date on every page. 
• If you are amending your Form ADV: 
o complete page 1 and circle the number of any item for which you are changing your 
response. 
o include your SEC 801-number (if you have one), or your 802-number (if you have 
one), and your CRD number (if you have one) on every page. 
o complete the amended item in full and circle the number of the item for which you 
are changing your response. 
o to amend Schedule A or Schedule B, complete and submit Schedule C. 
 
Where you submit your paper filing depends on why you are eligible to file on paper: 
 
• If you are filing on paper because you have been granted a continuing hardship 
exemption, submit one manually signed Form ADV and one copy to:  IARD Document 
Processing, FINRA, P.O. Box 9495, Gaithersburg, MD 20898-9495. 
 
If you complete Form ADV on paper and submit it to FINRA but you do not have a 
continuing hardship exemption, the submission will be returned to you. 
 
• If you are filing on paper because a state in which you are registered or in which you are 
applying for registration allows you to submit paper instead of electronic filings, submit 
one manually signed Form ADV and one copy to the appropriate state securities 
authorities. 
 
19. Who is required to file Form ADV-NR? 
 
Every non-resident general partner and managing agent of all SEC-registered advisers and 
exempt reporting advisers, whether or not the adviser is resident in the United States, must 

 
13 
 
file Form ADV-NR in connection with the adviser’s initial application or report.  A general 
partner or managing agent of an SEC-registered adviser or exempt reporting adviser who 
becomes a non-resident after the adviser’s initial application or report has been submitted 
must file Form ADV-NR within 30 days.  Form ADV-NR must be filed on paper (it cannot 
be filed electronically). 
 
Submit Form ADV-NR to the SEC at the following address: 
 
 Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549;  
 Attn:  OCIE Registrations Branch. 
 
Failure to file Form ADV-NR promptly may delay SEC consideration of your initial 
application. 
 
 
Federal Information Law and Requirements 
 
Sections 203 and 204 of the Advisers Act [15 U.S.C. 80b-3 and 80b-4] authorize the SEC to 
collect the information required by Form ADV.  The SEC collects the information for regulatory 
purposes, such as deciding whether to grant registration.  Filing Form ADV is mandatory for 
advisers who are required to register with the SEC and for exempt reporting advisers.  The SEC 
maintains the information submitted on this form and makes it publicly available.  The SEC may 
return forms that do not include required information.  Intentional misstatements or omissions 
constitute federal criminal violations under 18 U.S.C. 1001 and 15 U.S.C. 80b-17. 
 
SEC’s Collection of Information 
 
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid control number.  The Advisers Act authorizes the 
SEC to collect the information on Form ADV from investment advisers.  See 15 U.S.C. 80b-3 
and 80b-4.  Filing the form is mandatory. 
 
The form enables the SEC to register investment advisers and to obtain information from and 
about exempt reporting advisers.  Every applicant for registration with the SEC as an adviser, 
and every exempt reporting adviser, must file the form.  See 17 CFR 275.203-1 and 204-4.  By 
accepting a form, however, the SEC does not make a finding that it has been completed or 
submitted correctly.  The form is filed annually by every adviser, no later than 90 days after the 
end of its fiscal year, to amend its registration or its report.  It is also filed during the year to 
reflect material changes.  See 17 CFR 275.204-1.  The SEC maintains the information on the 
form and makes it publicly available through the IARD. 
 
Anyone may send the SEC comments on the accuracy of the burden estimate on page 1 of the 
form, as well as suggestions for reducing the burden.  The Office of Management and Budget has 
reviewed this collection of information under 44 U.S.C. 3507. 
  

 
14 
 
The information contained in the form is part of a system of records subject to the Privacy Act of 
1974, as amended.  The SEC has published in the Federal Register the Privacy Act System of 
Records Notice for these records. 
 

 
APPENDIX B 
UNITED STATES
1
 
SECURITIES AND EXCHANGE COMMISSION 
 
FORM CRS 
Sections 3, 10, 15, 15(c)(6), 15(l),  17, 23, and 36 of the Securities Exchange Act of 1934 (“Exchange Act”) and 
section 913(f) of Title IX of the Dodd-Frank Act authorize the Commission to require the collection of the 
information on Form CRS from brokers and dealers.  See 15 U.S.C. 78c, 78j, 78o, 78o(c)(6), 78o(l), 78q, 78w and 
78mm.  Filing Form CRS is mandatory for every broker or dealer registered with the Commission pursuant to 
section 15 of the Exchange Act that offers services to a retail investor.  See 17 CFR 240.17a-14.  Intentional 
misstatements or omissions constitute federal criminal violations (see 18 U.S.C. 1001 and 15 U.S.C. 78ff(a)).  The 
Commission may use the information provided in Form CRS to manage its regulatory and examination programs.  
Form CRS is made publically available.   
 
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless 
it displays a currently valid control number.  Any member of the public may direct to the Commission any 
comments concerning the accuracy of this burden estimate and any suggestions for reducing this burden.  This 
collection of information has been reviewed by the Office of Management and Budget in accordance with the 
requirements of 44 U.S.C. 3507.  
 
The information contained in the form is part of a system of records subject to the Privacy Act of 1974, as amended.  
The information may be disclosed as outlined above and in the routine uses listed in the applicable system of records 
notice, SEC-70, SEC’s Division of Trading and Markets Records, published in the Federal Register at 83 FR 6892 
(February 15, 2018). 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SEC 2942 (06-19)
  
                                                                                                                                                             
1
  This cover page will be included for Form CRS (17 CFR 249.640) only. 
OMB APPROVAL 
 
OMB Number:      3235-0766  
Expires:                           [Date]  
Estimated average burden  
hours per response:     [xx.xx] 
 
 

 
2 
 
 [Form ADV, Part 3:  Instructions to Form CRS]
2
 
General Instructions 
Under rule 17a-14 under the Securities Exchange Act of 1934 and rule 204-5 under the 
Investment Advisers Act of 1940, broker-dealers registered under section 15 of the Exchange 
Act and investment advisers registered under section 203 of the Advisers Act are required to 
deliver to retail investors a relationship summary disclosing certain information about the firm.
3
  
Read all the General Instructions as well as the particular item requirements before preparing or 
updating the relationship summary. 
If you do not have any retail investors to whom you must deliver a relationship summary, you 
are not required to prepare or file one.  See also Advisers Act rule 204-5; Exchange Act rule 17a-
14(a). 
1. Format.  
A. The relationship summary must include the required items enumerated below.  
The items require you to provide specific information. 
B. You must respond to each item and must provide responses in the same order as 
the items appear in these instructions.  You may not include disclosure in the 
relationship summary other than disclosure that is required or permitted by these 
Instructions and the applicable item.   
C. You must make a copy of the relationship summary available upon request 
without charge.  In paper format, the relationship summary for broker-dealers and 
investment advisers must not exceed two pages.  For dual registrants that include 
their brokerage services and investment advisory services in one relationship 
summary, it must not exceed four pages in paper format.  Dual registrants and 
affiliates that prepare separate relationship summaries are limited to two pages for 
each relationship summary.  See General Instruction 5.  You must use reasonable 
paper size, font size, and margins.  If delivered electronically, the relationship 
summary must not exceed the equivalent of two pages or four pages in paper 
format, as applicable. 
2. Plain English; Fair Disclosure.   
A. The items of the relationship summary are designed to promote effective 
communication between you and retail investors.  Write your relationship 
summary in plain English, taking into consideration retail investors’ level of 
                                                                                                                                                             
2
  The bracketed text will be included for Form ADV, Part 3 (17 CFR 279.1) only. 
3
  Terms that are italicized in these instructions are defined in General Instruction 11. 

 
3 
 
financial experience.  You should include white space and implement other design 
features to make the relationship summary easy to read.  The relationship 
summary should be concise and direct.  Specifically: (i) use short sentences and 
paragraphs; (ii) use definite, concrete, everyday words; (iii) use active voice; (iv) 
avoid legal jargon or highly technical business terms unless you clearly explain 
them; and (v) avoid multiple negatives.  You must write your response to each 
item as if you are speaking to the retail investor, using “you,” “us,” “our firm,” 
etc. 
Note: The SEC’s Office of Investor Education and Advocacy has published A 
Plain English Handbook.  You may find the handbook helpful in writing your 
relationship summary.  For a copy of this handbook, visit the SEC’s website at 
www.sec.gov/news/extra/handbook.htm. 
B. All information in your relationship summary must be true and may not omit any 
material facts necessary in order to make the disclosures required by these 
Instructions and the applicable Item, in light of the circumstances under which 
they were made, not misleading.  If a required disclosure or conversation starter is 
inapplicable to your business or specific wording required by these Instructions is 
inaccurate, you may omit or modify that disclosure or conversation starter.  
C. Responses must be factual and provide balanced descriptions to help retail 
investors evaluate your services.  For example, you may not include exaggerated 
or unsubstantiated claims, vague and imprecise “boilerplate” explanations, or 
disproportionate emphasis on possible investments or activities that are not 
offered to retail investors.   
D. Broker-dealers and investment advisers have disclosure and reporting obligations 
under state and federal laws, including, but not limited to, obligations under the 
Exchange Act, the Advisers Act, and the respective rules thereunder.  Broker-
dealers are also subject to disclosure obligations under the rules of self-regulatory 
organizations.  Delivery of the relationship summary will not necessarily satisfy 
the additional requirements that you have under the federal securities laws and 
regulations or other laws or regulations.  
3. Electronic And Graphical Formats.  
A. You are encouraged to use charts, graphs, tables, and other graphics or text 
features in order to respond to the required disclosures.  You are also encouraged 
to use text features, text colors, and graphical cues, such as dual-column charts, to 
compare services, account characteristics, investments, fees, and conflicts of 
interest.  For a relationship summary that is posted on your website or otherwise 
provided electronically, we encourage online tools that populate information in 
comparison boxes based on investor selections.  You also may include: (i) a 
means of facilitating access to video or audio messages, or other forms of 
information (whether by hyperlink, website address, Quick Response Code (“QR 
code”), or other equivalent methods or technologies); (ii) mouse-over windows; 

 
4 
 
(iii) pop-up boxes; (iv) chat functionality; (v) fee calculators; or (vi) other forms 
of electronic media, communications, or tools designed to enhance a retail 
investor’s understanding of the material in the relationship summary.   
B. In a relationship summary that is posted on your website or otherwise provided 
electronically, you must provide a means of facilitating access to any information 
that is referenced in the relationship summary if the information is available 
online, including, for example, hyperlinks to fee schedules, conflicts disclosures, 
the firm’s narrative brochure required by Part 2A of Form ADV, or other 
regulatory disclosures.  In a relationship summary that is delivered in paper 
format, you may include URL addresses, QR codes, or other means of facilitating 
access to such information. 
C. Explanatory or supplemental information included in the relationship summary 
pursuant to General Instructions 3.A. or 3.B.: (i) must be responsive to and meet 
the requirements in these instructions for the particular Item in which the 
information is placed; and (ii) may not, because of the nature, quantity, or manner 
of presentation, obscure or impede understanding of the information that must be 
included.  When using interactive graphics or tools, you may include instructions 
on their use and interpretation.  
4. Formatting For Conversation Starters, Additional Information, and Standard of 
Conduct. 
A. For the “conversation starters” required by Items 2, 3, 4, and 5 below, you must 
use text features to make the conversation starters more noticeable and prominent 
in relation to other discussion text, for example, by: using larger or different font, 
a text box around the heading or questions; bolded, italicized or underlined text; 
or lines to offset the questions from the other sections.   
B. Investment advisers that provide only automated investment advisory services or 
broker-dealers that provide services only online without a particular individual 
with whom a retail investor can discuss these conversation starters must include a 
section or page on their website that answers each of the questions and must 
provide in the relationship summary a means of facilitating access to that section 
or page.  If you provide automated investment advisory or brokerage services but 
also make a financial professional available to discuss your services with a retail 
investor, a financial professional must be available to discuss these conversation 
starters with the retail investor. 
C. For references to additional information regarding services, fees, and conflicts of 
interest required by Items 2.C., 3.A.(iii), and 3.B.(iv) below, you must use text 
features to make this information more noticeable and prominent in relation to 
other discussion text, for example, by: using larger or different font, a text box 
around the heading or questions, bolded, italicized or underlined text, or lines to 
offset the information from the other sections.  A relationship summary provided 

 
5 
 
electronically must include a hyperlink, QR code, or other means of facilitating 
access that leads directly to the relevant additional information.   
5. Dual Registrants, Affiliates, and Additional Services. 
A. If you are a dual registrant, you are encouraged to prepare a single relationship 
summary discussing both your brokerage and investment advisory services. 
Alternatively, you may prepare two separate relationship summaries for 
brokerage services and investment advisory services. Whether you prepare a 
single relationship summary or two, you must present the brokerage and 
investment advisory information with equal prominence and in a manner that 
clearly distinguishes and facilitates comparison of the two types of services.  If 
you prepare two separate relationship summaries, you must reference and provide 
a means of facilitating access to the other, and you must deliver to each retail 
investor both relationship summaries with equal prominence and at the same 
time, without regard to whether the particular retail investor qualifies for those 
retail services or accounts.     
B. If you are a broker-dealer or investment adviser and your affiliate also provides 
brokerage or investment advisory services to retail investors, you may prepare a 
single relationship summary discussing the services you and your affiliate 
provide. Alternatively, you may prepare separate relationship summaries for your 
services and your affiliate’s services.   
(i) Whether you prepare a single relationship summary or separate 
relationship summaries, you must design them in a manner that presents 
the brokerage and investment advisory information with equal prominence 
and clearly distinguishes and facilitates comparison of the two types of 
services.   
(ii) If you prepare separate relationship summaries: 
a. If a dually licensed financial professional provides brokerage and 
investment advisory services on behalf of you and your affiliate, 
you must deliver to each retail investor both your and your 
affiliate’s relationship summaries with equal prominence and at 
the same time, without regard to whether the particular retail 
investor qualifies for those retail services or accounts.  Each of the 
relationship summaries must reference and provide a means of 
facilitating access to the other.  
b. If General Instruction 5.B.(ii)(a) does not apply, you may choose 
whether or not to reference and provide a means of facilitating 
access to your affiliate’s relationship summary and whether or not 
to deliver your and your affiliate’s relationship summaries to each 
retail investor with equal prominence and at the same time. 

 
6 
 
C. You may acknowledge other financial services that you provide in addition to 
your services as a broker-dealer or investment adviser registered with the SEC, 
such as insurance, banking, or retirement services, or investment advice pursuant 
to state registration or licensing.  You may include references and means of 
facilitating access to additional information about those services.  Information not 
pertaining to brokerage or investment advisory services may not, because of the 
nature, quantity, or manner of presentation, obscure or impede understanding of 
the information that must be included.  See also General Instruction 3.C. 
6. Preserving Records. 
A. You must maintain records in accordance with Advisers Act rule 204-2(a)(14)(i) 
and/or Exchange Act rule 17a-4(e)(10), as applicable.   
7. Initial Filing and Delivery; Transition Provisions.  
A. Initial filing.  
(i) If you are an investment adviser and are required to deliver a relationship 
summary to a retail investor, you must file Form ADV, Part 3 (Form CRS) 
electronically with the Investment Adviser Registration Depository 
(IARD).  If you are a registered broker-dealer and are required to deliver a 
relationship summary to a retail investor, you must file Form CRS 
electronically through the Central Registration Depository (“Web 
CRD®”) operated by the Financial Industry Regulatory Authority, Inc. 
(FINRA).  If you are a dual registrant and are required to deliver a 
relationship summary to one or more retail investor clients or customers 
of both your investment advisory and brokerage businesses, you must file 
using IARD and Web CRD®.  You must file Form CRS using a text-
searchable format with machine-readable headings.  
(ii) Information for investment advisers on how to file with IARD is available 
on the SEC’s website at www.sec.gov/iard.  Information for broker-
dealers on how to file through Web CRD
®
 is available on FINRA’s 
website at http://www.finra.org/industry/web-crd/web-crd-system-links.   
B. Initial delivery.   
(i) Investment Advisers:  If you are an investment adviser, you must deliver a 
relationship summary to each retail investor before or at the time you 
enter into an investment advisory contract with the retail investor.  You 
must deliver the relationship summary even if your agreement with the 
retail investor is oral.  See Advisers Act rule 204-5(b)(1).  
(ii) Broker-Dealers:  If    you are a broker-dealer, you must deliver a 
relationship summary to each retail investor, before or at the earliest of:  
(i) a recommendation of an account type, a securities transaction, or an 
investment strategy involving securities; (ii) placing an order for the retail 

 
7 
 
investor; or (iii) the opening of a brokerage account for the retail investor.  
See Exchange Act rule 17a-14(c)(1).   
(iii) Dual Registrants:  A dual registrant must deliver the relationship 
summary at the earlier of the timing requirements in General Instruction 
7.B.(i) or (ii). 
C. Transition provisions for initial filing and delivery after the effective date of 
the new Form CRS requirements.   
(i) Filings for Investment Advisers  
a. If you are already registered or have an application for registration 
pending with the SEC as an investment adviser before June 30, 
2020 you must electronically file, in accordance with Instruction 
7.A. above, your initial relationship summary beginning on May 1, 
2020 and by no later than June 30, 2020 either as: (1) an other-
than-annual amendment or (2) part of your initial application or 
annual updating amendment.  See Advisers Act rules 203-1 and 
204-1.   
b. If you file an application for registration with the SEC as an 
investment adviser on or after June 30, 2020, the Commission will 
not accept any initial application that does not include a 
relationship summary.  See Advisers Act rule 203-1. 
(ii) Filings for Broker-Dealers 
a. If you are already registered with the SEC as a broker-dealer 
before June 30, 2020, you must electronically file, in accordance 
with Instruction 7.A. above, your initial relationship summary 
beginning on May 1, 2020 and by no later than June 30, 2020. See 
Exchange Act rule 17a-14.   
b. If you file an application for registration or have an application 
pending with the SEC as a broker-dealer on or after June 30, 2020, 
you must file your relationship summary by no later than the date 
that your registration becomes effective. See Exchange Act rule 
17a-14. 
(iii) Delivery to New and Prospective Clients and Customers: As of the date by 
which you are first required to electronically file your relationship 
summary with the SEC, you must begin to deliver your relationship 
summary to new and prospective clients and customers who are retail 
investors as required by Instruction 7.B. See Advisers Act rule 204-5 and 
Exchange Act rule 17a-14. 
(iv) Delivery to Existing Clients and Customers: Within 30 days after the date 
by which you are first required to electronically file your relationship 

 
8 
 
summary with the SEC, you must deliver your relationship summary to 
each of your existing clients and customers who are retail investors. See 
Advisers Act rule 204-5 and Exchange Act rule 17a-14. 
8. Updating the Relationship Summary and Filing Amendments. 
A. You must update your relationship summary and file it in accordance with 
Instruction 7.A. above within 30 days whenever any information in the 
relationship summary becomes materially inaccurate. The filing must include an 
exhibit highlighting changes required by Instruction 8.C. below.  
B. You must communicate any changes in the updated relationship summary to 
retail investors who are existing clients or customers within 60 days after the 
updates are required to be made and without charge.  You can make the 
communication by delivering the amended relationship summary or by 
communicating the information through another disclosure that is delivered to the 
retail investor.   
C. Each amended relationship summary that is delivered to a retail investor who is 
an existing client or customer must highlight the most recent changes by, for 
example, marking the revised text or including a summary of material changes.  
The additional disclosure showing revised text or summarizing the material 
changes must be attached as an exhibit to the unmarked amended relationship 
summary. 
9. Additional Delivery Requirements to Existing Clients and Customers.   
A. You must deliver the most recent relationship summary to a retail investor who is 
an existing client or customer before or at the time you: (i) open a new account 
that is different from the retail investor’s existing account(s); (ii) recommend that 
the retail investor roll over assets from a retirement account into a new or existing 
account or investment; or (iii) recommend or provide a new brokerage or 
investment advisory service or investment that does not necessarily involve the 
opening of a new account and would not be held in an existing account, for 
example, the first-time purchase of a direct-sold mutual fund or insurance product 
that is a security through a “check and application” process, i.e., not held directly 
within an account.  
B. You also must deliver the relationship summary to a retail investor within 30 
days upon the retail investor’s request.   
10. Electronic Posting and Manner of Delivery.   
A. You must post the current version of the relationship summary prominently on 
your public website, if you have one, in a location and format that is easily 
accessible for retail investors.   

 
9 
 
B. You may deliver the relationship summary electronically, including updates, 
consistent with SEC guidance regarding electronic delivery, in particular Use of 
Electronic Media by Broker-Dealers, Transfer Agents, and Investment Advisers 
for Delivery of Information, which you can find at 
www.sec.gov/rules/concept/33-7288.txt.  You may deliver the relationship 
summary to new or prospective clients or customers in a manner that is consistent 
with how the retail investor requested information about you or your financial 
professional consistent with SEC guidance, in particular Form CRS Relationship 
Summary; Amendments to Form ADV, which you can find at 
https://www.sec.gov/rules/final/2019/34-86032.pdf. 
C. If the relationship summary is delivered electronically, it must be presented 
prominently in the electronic medium, for example, as a direct link or in the body 
of an email or message, and must be easily accessible for retail investors. 
D. If the relationship summary is delivered in paper format as part of a package of 
documents, you must ensure that the relationship summary is  the first among any 
documents that are delivered at that time.  
11. Definitions. 
For purposes of Form CRS and these Instructions, the following terms have the meanings 
ascribed to them below:  
A. Affiliate:  Any persons directly or indirectly controlling or controlled by you or 
under common control with you.   
B. Dually licensed financial professional:  A natural person who is both an 
associated person of a broker-dealer registered under section 15 of the Exchange 
Act, as defined in section 3(a)(18) of the Exchange Act, and a supervised person 
of an investment adviser registered under section 203 of the Advisers Act, as 
defined in section 202(a)(25) of the Advisers Act. 
C. Dual registrant:  A firm that is dually registered as a broker-dealer under section 
15 of the Exchange Act and an investment adviser under section 203 of the 
Advisers Act and offers services to retail investors as both a broker-dealer and an 
investment adviser.  For example, if you are dually registered and offer 
investment advisory services to retail investors, but offer brokerage services only 
to institutional investors, you are not a dual registrant for purposes of Form CRS 
and these Instructions. 
D. Relationship summary:  A written disclosure statement prepared in accordance 
with these Instructions that you must provide to retail investors.  See Advisers 
Act rule 204-5; Exchange Act rule 17a-14; Form CRS. 
E. Retail investor:  A natural person, or the legal representative of such natural 
person, who seeks to receive or receives services primarily for personal, family or 
household purposes.  

10 
Item Instructions 
 
Item 1. Introduction 
Include the date prominently at the beginning of the relationship summary (e.g., in the header or 
footer of the first page or in a similar location for a relationship summary provided 
electronically).  Briefly discuss the following information in an introduction: 
A. State your name and whether you are registered with the Securities and Exchange 
Commission as a broker-dealer, investment adviser, or both.  Also indicate that 
brokerage and investment advisory services and fees differ and that it is important 
for the retail investor to understand the differences.  You may also include a 
reference to FINRA or Securities Investor Protection Corporation membership in 
a manner consistent with other rules or regulations (e.g., FINRA rule 2210).  
B. State that free and simple tools are available to research firms and financial 
professionals at Investor.gov/CRS, which also provides educational materials 
about broker-dealers, investment advisers, and investing.   
Item 2. Relationships and Services 
A. Use the heading: “What investment services and advice can you provide me?”   
B. Description of Services: State that you offer brokerage services, investment 
advisory services, or both, to retail investors, and summarize the principal 
services, accounts, or investments you make available to retail investors, and any 
material limitations on such services.  For broker-dealers, state the particular 
types of principal brokerage services you offer to retail investors, including 
buying and selling securities, and whether or not you offer recommendations to 
retail investors.  For investment advisers, state the particular types of principal 
investment advisory services you offer to retail investors, including, for example, 
financial planning and wrap fee programs. 
In your description you must address the following:  
(i) Monitoring:  Explain whether or not you monitor retail investors’ 
investments, including the frequency and any material limitations.  If so, 
indicate whether or not the services described in response to this Item 
2.B.(i) are offered as part of your standard services. 
(ii) Investment Authority:  For investment advisers that accept discretionary 
authority, describe those services and any material limitations on that 
authority.  Any such summary must include the specific circumstances 
that would trigger this authority and any material limitations on that 
authority (e.g., length of time).  For investment advisers that offer non-
discretionary services and broker-dealers, explain that the retail investor 
makes the ultimate decision regarding the purchase or sale of investments.  

 
11 
 
Broker-dealers may, but are not required to state whether you accept 
limited discretionary authority.         
Note:  If you are a broker-dealer offering recommendations, you should consider 
the applicability of the Investment Advisers Act of 1940, consistent with SEC 
guidance. 
(iii) Limited Investment Offerings:  Explain whether or not you make available 
or offer advice only with respect to proprietary products, or a limited 
menu of products or types of investments, and if so, describe these 
limitations. 
(iv) Account Minimums and Other Requirements:  Explain whether or not you 
have any requirements for retail investors to open or maintain an account 
or establish a relationship, such as minimum account size or investment 
amount.   
C. Additional Information:  Include specific references to more detailed 
information about your services that, at a minimum, include the same or 
equivalent information to that required by the Form ADV, Part 2A brochure 
(Items 4 and 7 of Part 2A or Items 4.A. and 5 of Part 2A Appendix 1) and 
Regulation Best Interest, as applicable. If you are a broker-dealer that does not 
provide recommendations subject to Regulation Best Interest, to the extent you 
prepare more detailed information about your services, you must include specific 
references to such information. You may include hyperlinks, mouse-over 
windows, or other means of facilitating access to this additional information and 
to any additional examples or explanations of such services. 
D. Conversation Starters:  Include the following additional questions for a retail 
investor to ask a financial professional and start a conversation about relationships 
and services: 
(i) If you are a broker-dealer and not a dual registrant, include: “Given my 
financial situation, should I choose a brokerage service?  Why or why 
not?” 
(ii) If you are an investment adviser and not a dual registrant, include: “Given 
my financial situation, should I choose an investment advisory service?  
Why or why not?” 
(iii) If you are a dual registrant, include: “Given my financial situation, should 
I choose an investment advisory service?  Should I choose a brokerage 
service?  Should I choose both types of services?  Why or why not?”   
(iv) “How will you choose investments to recommend to me?” 
(v) “What is your relevant experience, including your licenses, education and 
other qualifications?  What do these qualifications mean?” 

 
12 
 
Item 3. Fees, Costs, Conflicts, and Standard of Conduct  
A. Use the heading: “What fees will I pay?”  
(i) Description of Principal Fees and Costs:  Summarize the principal fees 
and costs that retail investors will incur for your brokerage or investment 
advisory services, including how frequently they are assessed and the 
conflicts of interest they create.   
a. Broker-dealers must describe their transaction-based fees.  With 
respect to addressing conflicts of interest, a broker-dealer could, 
for example, include a statement that a retail investor would be 
charged more when there are more trades in his or her account, and 
that the firm may therefore have an incentive to encourage a retail 
investor to trade often. 
b. Investment advisers must describe their ongoing asset-based fees, 
fixed fees, wrap fee program fees, or other direct fee arrangement.  
The principal fees for investment advisory services should align 
with the type of fee(s) that you report in response to Form ADV 
Part 1A, Item 5.E.   
(1)  Include information about each type of fee you report in Form 
ADV that is responsive to this Item 3.A.  Investment advisers 
with wrap fee program fees are encouraged to explain that 
asset-based fees associated with the wrap fee program will 
include most transaction costs and fees to a broker-dealer or 
bank that has custody of these assets, and therefore are higher 
than a typical asset-based advisory fee.   
(2)  With respect to addressing conflicts of interest, an investment 
adviser that charges an asset-based fee could, for example, 
include a statement that the more assets there are in a retail 
investor’s advisory account, the more a retail investor will pay 
in fees, and the firm may therefore have an incentive to 
encourage the retail investor to increase the assets in his or her 
account. 
Note: If you receive compensation in connection with the purchase 
or sale of securities, you should carefully consider the applicability 
of the broker-dealer registration requirements of the Securities 
Exchange Act of 1934 and any applicable state securities statutes. 
(ii) Description of Other Fees and Costs:  Describe other fees and costs 
related to your brokerage or investment advisory services and investments 
in addition to the firm’s principal fees and costs disclosed in Item 3.A.(i) 
that the retail investor will pay directly or indirectly.  List examples of the 

 
13 
 
categories of the most common fees and costs applicable to your retail 
investors (e.g., custodian fees, account maintenance fees, fees related to 
mutual funds and variable annuities, and other transactional fees and 
product-level fees).   
(iii) Additional Information:   State “You will pay fees and costs whether you 
make or lose money on your investments.  Fees and costs will reduce any 
amount of money you make on your investments over time.  Please make 
sure you understand what fees and costs you are paying.”  You must 
include specific references to more detailed information about your fees 
and costs that, at a minimum, include the same or equivalent information 
to that required by the Form ADV, Part 2A brochure (specifically Items 
5.A., B., C., and D.) and Regulation Best Interest, as applicable.  If you are 
a broker-dealer that does not provide recommendations subject to 
Regulation Best Interest, to the extent you prepare more detailed 
information about your fees and costs, you must include specific 
references to such information. You may include hyperlinks, mouse-over 
windows, or other means of facilitating access to this additional 
information and to any additional examples or explanations of such fees 
and costs included in response to Item 3.A.(i) or (ii). 
(iv) Conversation Starter:  Include the following question for a retail investor 
to ask a financial professional and start a conversation about the impact of 
fees and costs on investments: “Help me understand how these fees and 
costs might affect my investments.  If I give you $10,000 to invest, how 
much will go to fees and costs, and how much will be invested for me?” 
B. If you are a broker-dealer, use the heading: “What are your legal obligations to 
me when providing recommendations?  How else does your firm make money 
and what conflicts of interest do you have?”  If you are an investment adviser, use 
the heading: “What are your legal obligations to me when acting as my 
investment adviser?  How else does your firm make money and what conflicts of 
interest do you have?”  If you are a dual registrant that prepares a single 
relationship summary, use the heading: “What are your legal obligations to me 
when providing recommendations as my broker-dealer or when acting as my 
investment adviser?  How else does your firm make money and what conflicts of 
interest do you have?” 
(i) Standard of Conduct. 
a. If you are a broker-dealer that provides recommendations subject 
to Regulation Best Interest, include (emphasis required): “When we 
provide you with a recommendation, we have to act in your best 
interest and not put our interest ahead of yours.  At the same time, 
the way we make money creates some conflicts with your interests.  
You should understand and ask us about these conflicts because 

 
14 
 
they can affect the recommendations we provide you.  Here are 
some examples to help you understand what this means.”  If you 
are a broker-dealer that does not provide recommendations subject 
to Regulation Best Interest, include (emphasis required):  “We do 
not provide recommendations.  The way we make money creates 
some conflicts with your interests.  You should understand and ask 
us about these conflicts because they can affect the services we 
provide you.  Here are some examples to help you understand what 
this means.” 
b. If you are an investment adviser, include (emphasis required): 
“When we act as your investment adviser, we have to act in your 
best interest and not put our interest ahead of yours.  At the same 
time, the way we make money creates some conflicts with your 
interests.  You should understand and ask us about these conflicts 
because they can affect the investment advice we provide you.  
Here are some examples to help you understand what this means.” 
c. If you are a dual registrant that prepares a single relationship 
summary and you provide recommendations subject to Regulation 
Best Interest as a broker-dealer, include (emphasis required): 
“When we provide you with a recommendation as your broker-
dealer or act as your investment adviser, we have to act in your 
best interest and not put our interest ahead of yours.  At the same 
time, the way we make money creates some conflicts with your 
interests.  You should understand and ask us about these conflicts 
because they can affect the recommendations and investment 
advice we provide you.  Here are some examples to help you 
understand what this means.”  If you are a dual registrant that 
prepares a single relationship summary and you do not provide 
recommendations subject to Regulation Best Interest as a broker-
dealer, include (emphasis required):  “We do not provide 
recommendations as your broker-dealer.  When we act as your 
investment adviser, we have to act in your best interest and not put 
our interests ahead of yours.  At the same time, the way we make 
money creates some conflicts with your interest.  You should 
understand and ask us about these conflicts because they can affect 
the services and investment advice we provide you.  Here are some 
examples to help you understand what this means.”  If you are a 
dual registrant that prepares two separate relationship summaries, 
follow the instructions for broker-dealers and investment advisers 
in Items 3.B., 3.B.(i).a., and 3.B.(i).b. 
(ii) Examples of Ways You Make Money and Conflicts of Interest:  If 
applicable to you, summarize the following other ways in which you and 
your affiliates make money from brokerage or investment advisory 

 
15 
 
services and investments you provide to retail investors.  If none of these 
conflicts applies to you, summarize at least one other material conflict of 
interest that affects retail investors.  Explain the incentives created by each 
of these examples. 
a. Proprietary Products:  Investments that are issued, sponsored, or 
managed by you or your affiliates. 
b. Third-Party Payments:  Compensation you receive from third 
parties when you recommend or sell certain investments.   
c. Revenue Sharing:  Investments where the manager or sponsor of 
those investments or another third party (such as an intermediary) 
shares with you revenue it earns on those investments.   
d. Principal Trading:  Investments you buy from a retail investor, 
and/or investments you sell to a retail investor, for or from your 
own accounts, respectively.   
(iii) Conversation Starter:   Include the following question for a retail investor 
to ask a financial professional and start a conversation about conflicts of 
interest: “How might your conflicts of interest affect me, and how will you 
address them?” 
(iv) Additional Information:  You must include specific references to more 
detailed information about your conflicts of interest that, at a minimum, 
include the same or equivalent information to that required by the Form 
ADV, Part 2A brochure and Regulation Best Interest, as applicable.  If 
you are a broker-dealer that does not provide recommendations subject to 
Regulation Best Interest, to the extent you prepare more detailed 
information about your conflicts, you must include specific references to 
such information.  You may include hyperlinks, mouse-over windows, or 
other means of facilitating access to this additional information and to any 
additional examples or explanations of such conflicts of interest. 
C. Use the heading: “How do your financial professionals make money?” 
(i) Description of How Financial Professionals Make Money:  Summarize 
how your financial professionals are compensated, including cash and 
non-cash compensation, and the conflicts of interest those payments 
create.   
(ii) Required Topics in the Description:  Include, to the extent applicable, 
whether your financial professionals are compensated based on factors 
such as: the amount of client assets they service; the time and complexity 
required to meet a client’s needs; the product sold (i.e., differential 
compensation); product sales commissions; or revenue the firm earns from 
the financial professional’s advisory services or recommendations.  

 
16 
 
Item 4. Disciplinary History 
A. Use the heading: “Do you or your financial professionals have legal or 
disciplinary history?” 
B. State “Yes” if you or any of your financial professionals currently disclose, or are 
required to disclose, the following information: 
(i) Disciplinary information in your Form ADV (Item 11 of Part 1A or Item 9 
of Part 2A).  
(ii) Legal or disciplinary history in your Form BD (Items 11 A–K) (except to 
the extent such information is not released to BrokerCheck, pursuant to 
FINRA Rule 8312).  
(iii) Disclosures for any of your financial professionals in Items 14 A–M on 
Form U4 (Uniform Application for Securities Industry Registration or 
Transfer), or in Items 7A or 7C–F of Form U5 (Uniform Termination 
Notice for Securities Industry Registration), or on Form U6 (Uniform 
Disciplinary Action Reporting Form) (except to the extent such 
information is not released to BrokerCheck, pursuant to FINRA Rule 
8312). 
C. State “No” if neither you nor any of your financial professionals currently 
discloses, or is required to disclose, the information listed in Item 4.B. 
D. Regardless of your response to Item 4.B, you must: 
(i) Search Tool:  Direct the retail investor to visit Investor.gov/CRS for a free 
and simple search tool to research you and your financial professionals.   
(ii) Conversation Starter:  Include the following questions for a retail investor 
to ask a financial professional and start a conversation about the financial 
professional’s disciplinary history: “As a financial professional, do you 
have any disciplinary history?  For what type of conduct?” 
Item 5. Additional Information 
A. State where the retail investor can find additional information about your 
brokerage or investment advisory services and request a copy of the relationship 
summary.  This information should be disclosed prominently at the end of the 
relationship summary.   
B. Include a telephone number where retail investors can request up-to-date 
information and request a copy of the relationship summary. 

 
17 
 
C. Conversation Starter:  Include the following questions for a retail investor to 
ask a financial professional and start a conversation about the contacts and 
complaints: “Who is my primary contact person?  Is he or she a representative of 
an investment adviser or a broker-dealer?  Who can I talk to if I have concerns 
about how this person is treating me?” 
 
 

 
APPENDIX C 
 
Feedback Forms Comment Summary 
 
The Proposing Release, at Appendix F, provided investors seeking to comment on the 
relationship summary a form with standardized questions for providing their feedback.  The 
Appendix F form could be completed electronically on our website.  As of June 4, 2019, 93 
individuals provided a relevant response or comment answering at least one question on this 
form (a “responsive” answer.).
1
  About 50% (47) were completed electronically using the on-line 
version of the form on our website.
2
  Other commenters (46) submitted a downloaded and 
completed copy of the form to the comment file in a .pdf file or submitted a completed a copy of 
the form at one of our investor roundtables.
3
   
 
This Appendix reports the staff’s summary of the 93 comments provided using the Appendix F 
form with a responsive answer to one or more questions (the “Feedback Forms”).  Some 
questions called for a “structured” response (e.g., Question 2 asks commenters to indicate 
whether specific sections of the relationship summary are: “very useful," “useful," “not useful" 
or “unsure").  For these questions, the Feedback Forms are summarized from the structured 
question options. Other questions requested a narrative response and, for these questions, the 
Feedback Forms are summarized from the sentiment of these narrative answers.   
 
Question 1: Overall do you find the Relationship Summary useful? If not, how would you 
change it? If so, what topics and how can they be improved? 
 
Question 1 requested a narrative answer. 70 (over 70%) of individuals who submitted the 
Feedback Forms indicated in narrative answers in Question 1 or to other questions that they 
found the relationship summary to be useful.   
 
Among those who indicated that they found the document overall to be useful, many suggested 
ways to improve the document. For example, 41 noted that some topics are too technical or 
otherwise need improvement in response to Question 4 or in other comments, 48 suggested 
additional information in response to Question 5 or in other comments; and 27 indicated that the 
document should be shorter in response to Question 6 or in other comments.  Also, many 
indicated that they did not find the relationship summary entirely easy to read and follow (33 
commenters (35%) answered “Somewhat” or “No” in either of Question 3(a) (Do you find the 
format of the Relationship Summary easy to follow?) or Question 3(c) (Is the Relationship 
Summary easy to read?).      
                                                                                                                                                             
1
 A few individuals used the on-line version of the Appendix F form to provide comments on other topics and did 
not provide any responses or comments relevant to any of the form’s questions. These non-responsive comment 
documents are not included in this summary.  
2
 Feedback forms completed on line and included in this summary are at listed at Endnote 1. 
3
 Feedback forms submitted to the comment file on a downloaded and completed copy of the Feedback form or at 
one of our investor roundtables that are included in this summary are listed at Endnote 2. 

 
2 
 
 
9 (about 10%) indicated that they did not find the relationship summary to be useful. The 
remaining responses to this question did not express a clear sentiment.   
 
Question Q2(a): How useful is the Type of Relationship and Service section of the 
Relationship Summary?
4
 
 
Very 
Useful Useful 
Not 
Useful Unsure 
No 
Response 
41 
(44%) 
41 
(44%) 
5 
(5%) 
4 
(4%) 
2 
(2%) 
 
Question Q2(b): How useful is the Our Obligations to You section of the Relationship 
Summary? 
 
Very 
Useful Useful 
Not 
Useful Unsure 
No 
Response 
36 
(39%) 
42 
(45%) 
7 
(8%) 
4 
(4%) 
4 
(4%) 
 
 
Question Q2(c): How useful is the Fees and Costs section of the Relationship Summary? 
 
Very 
Useful Useful 
Not 
Useful Unsure 
No 
Response 
33 
(35%) 
43 
(46%) 
8 
(9%) 
6 
 (6%) 
3  
(3%) 
 
Question Q2(d): How useful is the Comparison to different account types section of the 
Relationship Summary? 
 
Very 
Useful Useful 
Not 
Useful Unsure 
No 
Response 
29 
(31%) 
39 
(42%) 
6 
(6%) 
11 
(12%) 
8 
(9%) 
 
                                                                                                                                                             
4
 Percentages reported in tables summarized responses to Questions 2 and 3 are based on the total number of 
Feedback Forms. 

 
3 
 
Question Q2(e): How useful is the Conflict of Interests section of the Relationship Summary? 
 
Very 
Useful Useful 
Not 
Useful Unsure 
No 
Response 
39 
(42%) 
30 
(32%) 
10 
(11%) 
10 
(11%) 
4 
(4%) 
 
Question Q2(f): How useful is the Additional Information section of the Relationship 
Summary? 
 
Very 
Useful Useful 
Not 
Useful Unsure 
No 
Response 
30 
(32%) 
35 
(38%) 
10 
(11%) 
10 
(11%) 
8 
(9%) 
 
Question Q2(g): How useful is the Key Questions to Ask section of the Relationship 
Summary? 
 
Very 
Useful Useful 
Not 
Useful Unsure 
No 
Response 
51 
(55%) 
28 
(30%) 
7 
(8%) 
3 
(3%) 
4 
(4%) 
 
Question Q3(a): Do you find the format of the Relationship Summary easy to follow? 
 
Yes Somewhat No 
No 
Response 
58 
(62%) 
24 
(26%) 
7 
(8%) 
4 
(4%) 
 
Question Q3(b): Is the information in the appropriate order? 
 
Yes Somewhat No 
No 
Response 
57 
(61%) 
26 
(28%) 
7 
(8%) 
3 
(3%) 
 
Question Q3(c): Is the Relationship Summary easy to read? 
 
Yes Somewhat No 
No 
Response 
55 
(59%) 
23 
(25%) 
10 
(11%) 
5 
(5%) 
 

 
4 
 
Question Q3(d): Should the Relationship Summary include additional information about 
different account types? 
Yes Somewhat No 
No 
Response 
49 
(53%) 
9 
(10%) 
29 
(31%) 
6 
(6%) 
 
Question Q3(e): Would you seek out additional information about a firm's disciplinary history 
as suggested in the Relationship Summary? 
 
Yes Somewhat No 
No 
Response 
65 
(70%) 
14 
(15%) 
10 
(11%) 
4 
(4%) 
 
Question 4: Are there topics in the Relationship Summary that are too technical or that could 
be improved? 
 
Question 4 requested a narrative answer.  Narrative answers offered by 25 (more than 25% of 
Feedback Forms) specifically stated that the relationship summary was not too technical.   
 
On 27 Feedback Forms (about 30%), commenters did not respond to Question 4 or offered an 
answer that did not address this question.  Among these 27, 13 appeared to fully agree that 
relationship summary format was easy to follow and the relationship summary was easy to read 
by checking “yes” in response to Question 3(a) (Do you find the format of the Relationship 
Summary easy to follow?) and Question 3(c) (Is the Relationship Summary easy to read?).  
Overall, 45 commenters (48%) on Feedback Forms fully agreed that the relation summary is 
easy to read and follow by checking “yes” in response to Question 3(a) (“Do you find the format 
of the Relationship Summary easy to follow”) and Question 3(c) (“Is the Relationship Summary 
easy to read?).  
 
On 41 of the Feedback Forms (44% of 93 Feedback Forms), the narrative response to Question 4 
or other comments on the Feedback Form indicated that the relationship summary was too 
technical or suggested one or more topics that could be improved.  Across all Feedback Forms 
(including those with comments indicating that the relationship summary was not too technical): 
• 20 Feedback Forms included comment indicating that the relationship summary language 
was generally too technical, wordy or confusing, or should be made simpler; 
• 23 Feedback Forms included narrative comments indicating that information about fees 
and costs was too technical or needed to be more clear, including seven (7) that asked for 
definitions of terms such as transaction-based fee, asset-based fee or wrap fee; 
• 23 Feedback Forms included narrative comments suggesting that information in sections 
covering relationships and services and the obligations of financial professionals needed 
clarification, including ten (10) Feedback Forms that asked for a definition or better 
explanation of the term  “fiduciary”; and  

 
5 
 
• 14 Feedback Forms included narrative comments suggesting clarification or more 
information about conflicts of interest. 
 
Question 5: Is there additional information that we should require in the Relationship 
Summary, such as more specific information about the form or additional information about 
fees? Is that because you do not receive the information now, or because you would also like 
to see it presented in this summary document, or both? Is there any information that should be 
made more prominent? 
 
Question 5 requested a narrative answer.  48 of the Feedback Forms (more than 50%) included 
comments suggesting additional information that could be required in response to Question 5 or 
another question on the Feedback Form.  Many (29) indicated that additional information about 
fees and costs would be helpful.  
 
On 13 of the Feedback Forms (about 14%) narrative comments responding to Question 5 
indicated that no additional information was needed.  On the remainder of Feedback Forms (32, 
over 30% of Feedback Forms), there was no answer given or the answer given was not relevant 
to Question 5.   
 
Question 6: Is the Relationship Summary an appropriate length? If not, should it be longer or 
shorter? 
 
Question 6 requested a narrative answer.  37 narrative answers responding to Question 6 or 
another question (about 40% of 93 Feedback Forms) specifically indicated that the relationship 
summary’s length is appropriate.  27 of the Feedback Forms (about 30%) included comments 
suggesting that the relationship summary should be shorter.  Two commenters suggested that the 
form should be longer.  On the remainder of Feedback Forms (27, or almost 30%), there was no 
answer given or the answer given was not relevant to Question 6.  
 
Question 7: Do you find the ‘Key Questions to Ask’ useful?  Would the questions improve the 
quality of your discussion with your financial professional?  If not, why not? 
 
Question 7 requested a narrative answer. Responses on 77 (over 75%) of Feedback Forms 
indicated that the Key Questions were useful (“useful” and “very  useful” answers to Question 
2(g) are included, if there was no answer provided to Question 7).   
 
11 Feedback Forms (about 12%) included specific comments agreeing that the Key Questions 
would encourage discussions with financial professionals.  Another two (2) included a comment 
agreeing that, in general, the relationship summary could encourage dialogue between financial 
professionals and clients.   
 
Several commenters (8) suggested moving the Key Questions to the beginning or closer to the 
beginning of the relationship summary, or including the Key Questions within individual 
sections, rather than placing the key questions at the end of the document. 
 

 
6 
 
Endnotes: 
[1] Feedback forms completed on-line and included in this summary:  Fors Anderson, 3/17/2019, 
https://www.sec.gov/comments/s7-08-18/s70818-5134364-183356.htm (“Anderson Feedback 
Form”), Sylva Baker, 8/6/2018, https://www.sec.gov/comments/s7-08-18/s70818-4170945-
172084.pdf (“Baker Feedback Form”); Linda Baumbusch, 7/29/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4133141-171850.htm (“Baumbusch Feedback 
Form”); Mahesh Bhupalam, 7/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4069296-169437.htm (“Bhupalam Feedback Form”);  Hugh Caddess, 7/23/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4097528-170159.htm(“Caddess Feedback 
Form”);  Paul Calderon, 7/30/2018, https://www.sec.gov/comments/s7-08-18/s70818-4140254-
171938.htm(“Calderon Feedback Form”);  Robert Carr, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4024224-167344.htm (“Carr Feedback Form”); 
Rod Carroll, 7/10/2018m, https://www.sec.gov/comments/s7-08-18/s70818-4029201-
167352.htm (“Carroll Feedback Form”); Charles Christine, 6/22/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3910620-166661.htm(“Christine Feedback 
Form”); Lloyd Coleman, 7/17/2018, https://www.sec.gov/comments/s7-08-18/s70818-4063665-
169130.htm (“Coleman Feedback Form”); Janice Daunheimer, 8/7/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4185205-172598.htm (“Daunheimer Feedback 
Form”); Juanita Fontaine, 7/21/2018, https://www.sec.gov/comments/s7-08-18/s70818-4096751-
170113.htm (“Fontaine Feedback Form”); Frederick Greene, 7/13/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4044546-168910.htm (“Greene Feedback 
Form”);  Chester Hawkins, 8/1/2018, https://www.sec.gov/comments/s7-08-18/s70818-4171653-
172230.htm (“Hawkins Feedback Form”); Anthony Hicks, 7/20/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4096231-170102.htm (“Hicks Feedback 
Form”); Jeffrey T., 7/10/2018, https://www.sec.gov/comments/s7-08-18/s70818-4024265-
167345.htm (“Jeffrey Feedback Form”); Mike Keeler, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4024769-167348.htm (“Keeler Feedback 
Form”); Duane Lee, 12/3/2018, https://www.sec.gov/comments/s7-08-18/s70818-4719639-
176708.htm (“Lee2 Feedback Form”); George Macke, 6/2/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3768103-162690.htm (“Macke Feedback 
Form”); Mary Malone, 7/15/2018, https://www.sec.gov/comments/s7-08-18/s70818-4048232-
168957.htm (“Malone Feedback Form”); Mary Margolis, MBR Financial, 6/28/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3974252-167135.htm (“Margolis Feedback 
Form”); Darren Markle, 7/6/2018, https://www.sec.gov/comments/s7-08-18/s70818-4008397-
167254.htm (“Markle Feedback Form”); Chelsea Matvey, 7/19/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4078676-169821.htm (“Matvey Feedback 
Form”); Kevin McGuire, 7/17/2018, https://www.sec.gov/comments/s7-08-18/s70818-4063664-
169164.htm (“McGuire Feedback Form”); Jennifer Mellgren, 7/22/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4097514-170157.htm (“Mellgren Feedback 
Form”); Robert Mennella, 8/22/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4251004-173033.htm (“Mennella Feedback Form”); Steven Miller, 7/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4065013-169285.htm (“Miller Feedback 
Form”); Bob Murphy, 7/25/2018, https://www.sec.gov/comments/s7-08-18/s70818-4111730-
170372.htm (“Murphy Feedback Form”); Mary Newton, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4024770-167347.htm (“Newton Feedback 

 
7 
 
Form”); Jon Panitzke, 7/23/2018, https://www.sec.gov/comments/s7-08-18/s70818-4105327-
170265.htm (“Panitzke Feedback Form”); Marcus Paredes, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4024691-167346.htm (“Panitzke Feedback 
Form”); Huelien Pham, 7/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-4069312-
169440.htm (“Pham Feedback Form”); Loizos Prodromou, 7/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4064613-169273.htm (“Prodromou Feedback 
Form”); Richard Rohr, 6/22/2018, https://www.sec.gov/comments/s7-08-18/s70818-3910614-
166660.htm (“Rohr Feedback Form”); Kathy Sachs, 7/23/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4105119-170257.htm (“Sachs Feedback 
Form”); Richard Salkowitz, 7/19/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4078450-169772.htm (“Salkowitz Feedback Form”); Dwight Sanders, 6/8/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3816823-162750.htm (“Sanders1Feedback 
Form”); Dr. Dwight Sanders, 6/30/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3985541-167075.htm (“Sanders2 Feedback Form”); Daniel Schuman, 7/20/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4096425-170103.htm (“Schuman Feedback 
Form”); Ron Shepherd, 6/20/2018, https://www.sec.gov/comments/s7-08-18/s70818-3900517-
162957.htm (“Shepherd Feedback Form”); Pat Smith, 7/24/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4110731-170363.htm (“Smith1 Feedback 
Form”); Joe Smith, 8/6/2018, https://www.sec.gov/comments/s7-08-18/s70818-4173957-
172348.htm (“Smith2 Feedback Form”); Star Identifier, 11/5/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4611472-176365.htm (“Star Feedback Form”); 
Cyril Anouar Streit, 9/10/2018, https://www.sec.gov/comments/s7-08-18/s70818-4445712-
173232.htm (“Streit Feedback Form”); Jay Thompson, 7/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4069295-169419.htm (“Thompson Feedback 
Form”); Brenda Winslow, 6/6/2018, https://www.sec.gov/comments/s7-08-18/s70818-3784415-
162708.htm (“Winslow Feedback Form”); Mark Winsor, 7/21/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4096783-170118.htm (“Winsor Feedback 
Form”). 
[2]  Feedback Forms filed in the comment file in .pdf format:  Anonymous, 6/15/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3857882-162788.pdf (“Anonymous01 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3898398-162931.pdf (“Anonymous02 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3898681-162940.pdf (“Anonymous03 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3897774-162930.pdf (“Anonymous04 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3898814-162941.pdf (“Anonymous05 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3897701-162929.pdf (“Anonymous06 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899032-162942.pdf (“Anonymous07 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3897489-162926.pdf (“Anonymous08 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3898137-162934.pdf (“Anonymous09 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3898482-162937.pdf (“Anonymous10 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3897632-162927.pdf (“Anonymous11 

 
8 
 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3898148-162936.pdf (“Anonymous12 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3898590-162939.pdfv (“Anonymous13 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3898570-162938.pdf, (“Anonymous14 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3897651-162928.pdf (“Anonymous15 
Feedback Form”); Anonymous, 7/10/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4030385-167421.pdf (“Anonymous16 Feedback Form”); Anonymous, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4030375-167399.pdf (“Anonymous17 
Feedback Form”); Anonymous, 7/10/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4030330-167397.pdf (“Anonymous18 Feedback Form”); Anonymous, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4030369-167398.pdf (“Anonymous19 
Feedback Form”); Anonymous, 7/10/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4030378-167420.pdf (“Anonymous20 Feedback Form”); Anonymous, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4030325-167411.pdf (“Anonymous21 
Feedback Form”); Anonymous, 7/17/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4345352-173277.pdf (“Anonymous22 Feedback Form”); Anonymous, 7/17/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4345314-173293.pdf (“Anonymous23 
Feedback Form”); Anonymous, 7/17/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4345453-173280.pdf (“Anonymous24 Feedback Form”);  Anonymous, 7/17/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4345356-173278.pdf (“Anonymous25 
Feedback Form”); Anonymous, 7/17/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4345378-173279.pdf (“Anonymous26 Feedback Form”); Anonymous, 7/17/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4345323-173294.pdf (“Anonymous27 
Feedback Form”); Anonymous, 8/6/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4287928-173164.pdf (“Anonymous28 Feedback Form”); Anonymous, 9/27/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4447388-175712.pdf) (“Anonymous29 
Feedback Form”); Leo Asen, 8/4/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4171811-172312.pdf (“Asen Feedback Form”); Lee Baird, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899545-162952.pdf (“Baird Feedback 
Form”); MT Bowling, 6/1/2018, https://www.sec.gov/comments/s7-  08-18/s70818-3757598-
162619.pdf (“Bowling Feedback Form”); Mike Brantley, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899574-162955.pdf (“Brantley Feedback 
Form”); James Davis, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-3899432-
162948.pdf (“Davis Feedback Form”); George Durgin, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899422-162947.pdf (“Durgin Feedback 
Form”); Brain Hobbes, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-3899428-
162945.pdf (“Hobbes Feedback Form”); Karean Hoggan, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899522-162951.pdf (“Hoggan Feedback 
Form”); Joker Jenkins, 6/18/2018,  
https://www.sec.gov/comments/s7-08-18/s70818-3899511-162950.pdf (“Jenkins Feedback 
Form”); Jennifer Lee 4/28/2018, https://www.sec.gov/comments/s7-08-18/s70818-3551103-
162323.pdf (“Lee1 Feedback Form”); Angela Montellano, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3897484-162925.pdf (“Montellano Feedback 
Form”); Don Parsons, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-3899387-

 
9 
 
162944.pdf (“Parsons Feedback Form”); David Schreiner, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899390-162946.pdf (“Schreiner Feedback 
Form”); Ron Seits, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-3899580-
162956.pdf (“Seits Feedback Form”); Mark Shaffer, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899570-162954.pdf (“Shaffer Feedback 
Form”); Malia Starmer, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-3899562-
162953.pdf (“Starmer1 Feedback Form”); Jason Starmer, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899436-162949.pdf (“Starmer2 Feedback 
Form”). 
 

1 

 

Conformed to Federal Register version 

SECURITIES AND EXCHANGE COMMISSION 

17 CFR Parts 200, 240, 249, 275, and 279 

[Release Nos. 34-86032; IA-5247; File No. S7-08-18] 

RIN 3235-AL27 

Form CRS Relationship Summary; Amendments to Form ADV 

AGENCY:  Securities and Exchange Commission. 

ACTION:  Final rule. 

SUMMARY:  The Securities and Exchange Commission (the “Commission” or the “SEC”) is 

adopting new rules and forms as well as amendments to its rules and forms, under both the 

Investment Advisers Act of 1940 (“Advisers Act”) and the Securities Exchange Act of 1934 

(“Exchange Act”) to require registered investment advisers and registered broker-dealers 

(together, “firms”) to provide a brief relationship summary to retail investors.  The relationship 

summary is intended to inform retail investors about: the types of client and customer 

relationships and services the firm offers; the fees, costs, conflicts of interest, and required 

standard of conduct associated with those relationships and services; whether the firm and its 

financial professionals currently have reportable legal or disciplinary history; and how to obtain 

additional information about the firm.  The relationship summary will also reference 

Investor.gov/CRS, a page on the Commission’s investor education website, Investor.gov, which 

offers educational information to investors about investment advisers, broker-dealers, and 

individual financial professionals and other materials.  Retail investors will receive a relationship 

summary at the beginning of a relationship with a firm, communications of updated information 

following a material change to the relationship summary, and an updated relationship summary 



 

2 

 

upon certain events.  The relationship summary is subject to Commission filing and 

recordkeeping requirements. 

DATES: Effective dates:  The rules and form are effective September 10, 2019. 

Compliance dates: The applicable compliance dates are discussed in section II.D.  

FOR FURTHER INFORMATION CONTACT:  Gena Lai, James McGinnis, Elizabeth 

Miller, Sirimal R. Mukerjee, Olawalé Oriola, Alexis Palascak, Benjamin Tecmire, Roberta 

Ufford, Jennifer Porter (Branch Chief), Investment Adviser Regulation Office at (202) 551-6787 

or [email protected]; Benjamin Kalish and Parisa Haghshenas (Branch Chief), Chief Counsel’s 

Office at (202) 551-6825 or [email protected], Division of Investment Management; Alicia 

Goldin, Emily Westerberg Russell, Lourdes Gonzalez (Assistant Chief Counsel), Office of Chief 

Counsel, Division of Trading and Markets, at (202)-551-5550 or [email protected], 

Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. 

SUPPLEMENTARY INFORMATION:  The Commission is adopting new rule 17 CFR 

275.204-5 [rule 204-5] under the Investment Advisers Act of 1940 [15 U.S.C. 80b]1 and is 

adopting amendments to Form ADV to add a new Part 3: Form CRS [17 CFR 279.1] under the 

Advisers Act.  The Commission is also adopting amendments to rules 17 CFR 275.203-1 [rule 

203-1], 17 CFR 275.204-1 [rule 204-1], and 17 CFR 275.204-2 [rule 204-2] under the Advisers 

Act.  The Commission is adopting new rule 17 CFR 240.17a-14 [rule 17a-14]2 under the 

                                                                                                                                                             

1  15 U.S.C. 80b. Unless otherwise noted, when we refer to the Advisers Act, or any paragraph of the 
Advisers Act, we are referring to 15 U.S.C. 80b, at which the Advisers Act is codified, and when we refer 
to rules under the Advisers Act, or any paragraph of these rules, we are referring to Title 17, Part 275 of the 
Code of Federal Regulations [17 CFR 275], in which these rules are published. 

2  15 U.S.C. 78a. Unless otherwise noted, when we refer to the Exchange Act, or any paragraph of the 
 



 

3 

 

Securities Exchange Act of 1934 and new Form CRS [17 CFR 249.641] under the Exchange 

Act.  The Commission is also adopting amendments to rules 17 CFR 240.17a-3 [rule 17a-3] and 

17 CFR 240.17a-4 [rule 17a-4] under the Exchange Act.  The Commission is also adopting 

amendments to rule 17 CFR 200.800 [rule 800].  

Table of Contents 

I. INTRODUCTION 
II. Form CRS Relationship Summary 

A. Presentation and Format 
1. Limited Prescribed Wording 
2. Standard Question-and-Answer Format and Other Presentation Instructions 
3. Electronic and Graphical Formats, and Layered Disclosure 
4. Conversation Starters 
5. Presentation of Relationship Summaries by Dual Registrants and Affiliated 

Firms 
B. Items 

1. Introduction 
2. Relationships and Services 
3. Summary of Fees, Costs, Conflicts, and Standard of Conduct 
4. Disciplinary History 
5. Additional Information 
6. Proposed Items Omitted in Final Instructions 

C. Filing, Delivery, and Updating Requirements 
1. Definition of Retail Investor 
2. Filing Requirements 
3. Delivery Requirements 
4. Updating Requirements 

D. Transition Provisions 
E. Recordkeeping Amendments 

                                                                                                                                                             

Exchange Act, we are referring to 15 U.S.C. 78a, at which the Exchange Act is codified, and when we refer 
to rules under the Exchange Act, or any paragraph of these rules, we are referring to Title 17, Part 240 of 
the Code of Federal Regulations [17 CFR 240], in which these rules are published. 



 

4 

 

III. Disclosures about a Firm’s Regulatory Status and a Financial 
Professional’s Association 
IV. Economic Analysis 

A. Introduction 
B. Baseline 

1. Providers of Financial Services 
2. Investor Perceptions about the Marketplace for Financial Services and 

Disclosures 
3. Investor Responses to Disclosures about Financial Professionals and Firms 

C. Broad Economic Considerations 
D. Economic Effects of the Relationship Summary 

1. Retail Investors 
2. Broker-Dealers and Investment Advisers (Registrants) 
3. Impact on Efficiency, Competition, and Capital Formation 
4. Alternatives to the Relationship Summary 

V. Paperwork Reduction Act Analysis 
A. Form ADV 

1. Respondents:  Investment Advisers and Exempt Reporting Advisers 
2. Changes in Average Burden Estimates and New Burden Estimates 
3. Total Revised Burden Estimates for Form ADV 

B. Rule 204-2 under the Advisers Act 
1. Changes in Burden Estimates and New Burden Estimates 
2. Revised Annual Burden Estimates 

C. Rule 204-5 under the Advisers Act 
1. Respondents:  Investment Advisers 
2. Initial and Annual Burdens 

D. Form CRS and Rule 17a-14 under the Exchange Act 
1. Respondents:  Broker-Dealers 
2. Initial and Annual Burdens 

E. Recordkeeping Obligations under Exchange Act Rule 17a-3 
F. Record Retention Obligations under Exchange Act Rule 17a-4 

1. Changes in Burden Estimates and New Burden Estimates 
2. Revised Annual Burden Estimates 

VI. Final Regulatory Flexibility Analysis 
A. Need for and Objectives of the Amendments 
B. Significant Issues Raised by Public Comments 
C. Small Entities Subject to the Rule and Rule Amendments 

1. Investment Advisers 
2. Broker-Dealers 

D. Projected Reporting, Recordkeeping, and Other Compliance Requirements 



 

5 

 

1. Initial Preparation and Filing of the Relationship Summary 
2. Delivery and Updating Requirements Related to the Relationship Summary 
3. Recordkeeping Requirements Related to the Relationship Summary 

E. Agency Action to Minimize Effect on Small Entities 
VII. Statutory Authority 
Text of the Rule and Form 
  

I. INTRODUCTION 

Individual investors rely on the services of broker-dealers and investment advisers when 

making and implementing investment decisions.  Research continues to show that retail investors 

are confused about the services, fees, conflicts of interest, and the required standard of conduct 

for particular firms, and the differences between broker-dealers and investment advisers.3  We 

are adopting a new set of disclosure requirements designed to reduce retail investor confusion in 

the marketplace for brokerage and investment advisory services and to assist retail investors with 

the process of deciding whether to engage, or to continue to engage, a particular firm4 or 

financial professional and whether to establish, or to continue to maintain, an investment 

advisory or brokerage relationship.5  Firms will deliver to retail investors a customer or client 

                                                                                                                                                             

3  Brian Scholl, et al., SEC Office of the Investor Advocate and RAND Corporation, The Retail Market for 
Investment Advice (2018), available at https://www.sec.gov/comments/s7-07-18/s70718-4513005-
176009.pdf (“OIAD/RAND”) (finding that participant understanding of types of financial services and 
financial professionals continues to be low).  The SEC’s Office of Investor Advocate and the RAND 
Corporation prepared this research report regarding the retail market of investment advice prior to, and 
separate from, our rulemaking proposal.  This report was included in the comment file at 
https://www.sec.gov/comments/s7-07-18/s70718-4513005-176009.pdf. 

4  For purposes of this release, the term “firm” includes sole proprietorships and other business organizations 
that are registered as (i) an investment adviser under section 203 of the Advisers Act; (ii) a broker-dealer 
under section 15 of the Exchange Act; or (iii) a broker-dealer under section 15 of the Exchange Act and as 
an investment adviser under section 203 of the Advisers Act. 

5  The requirements adopted here, with modifications as discussed in this release, were proposed in Form 
CRS Relationship Summary; Amendments to Form ADV; Required Disclosures in Retail Communications 

 



 

6 

 

relationship summary (“relationship summary” or “Form CRS”) that provides succinct 

information about the relationships and services the firm offers to retail investors, fees and costs 

that retail investors will pay, specified conflicts of interest and standards of conduct, and 

disciplinary history, among other things.6  The relationship summary will also link to 

Investor.gov/CRS on the Commission’s investor education website, Investor.gov, which offers 

educational information to investors about investment advisers, broker-dealers, and individual 

financial professionals and other materials.  

We proposed a version of a relationship summary on April 18, 2018.7  The proposed 

relationship summary would have required information separated into the following sections: (i) 

introduction; (ii) the relationships and services the firm offers to retail investors; (iii) the standard 

of conduct applicable to those services; (iv) the fees and costs that retail investors will pay; (v) 

comparisons of brokerage and investment advisory services (for standalone broker-dealers and 

investment advisers);8 (vi) conflicts of interest; (vii) where to find additional information, 

                                                                                                                                                             

and Restrictions on the use of Certain Names or Titles, Investment Advisers Act Release No. 4888, 
Exchange Act Release No. 83063 (Apr. 18, 2018) [83 FR 23848 (May 23, 2018)] (“Proposing Release”). 

6  For investment advisers registered with the Commission, a new Form ADV Part 3 will describe the 
requirements for the relationship summary and it will be required by amended rule 203-1. For broker-
dealers, Form CRS will be required by new rule 17a-14 under the Exchange Act. When we refer to Form 
CRS in this release, we are referring to Form CRS for both broker-dealers and investment advisers 
registered with the Commission. We are also adopting conforming technical and clarifying amendments to 
the General Instructions of Form ADV.  

7 See Proposing Release, supra footnote 5. 

8  We proposed definitions for “standalone investment adviser” and “standalone broker-dealer”.  See 
Proposed General Instruction 9.(f) to Form CRS.  Given the streamlining and other revisions to the Form 
CRS instructions relative to the proposal, we believe that these proposed definitions are no longer needed 
and therefore are not adopting them.  We use the terms throughout this release, however, for the avoidance 
of doubt, to indicate broker-dealers and investment advisers that are not dual registrants.  We are adopting 
the proposed definition for “dual registrant” substantially as proposed.  We are adding language in the 

 



 

7 

 

including whether the firm and its financial professionals currently have reportable legal or 

disciplinary history and who to contact about complaints; and (viii) key questions for retail 

investors to ask the firm’s financial professional.  The proposed instructions required firms to use 

standardized headings in a prescribed order throughout the disclosure and respond to the required 

items by using a mix of language prescribed in the instructions as well as their own wording in 

describing their services and offerings.  The proposal limited the relationship summary to four 

pages or an equivalent length if in electronic format and also included three examples of how the 

relationship summary might look for a standalone broker-dealer, a standalone investment 

adviser, and a dual registrant. 

To better understand retail investors’ views about the disclosures designed for them, the 

Commission engaged in broad outreach to investors and other market participants.  As described 

further throughout the release, the Commission received substantial feedback on the proposed 

relationship summary in several forms.  We received comment letters in connection with the 

Proposing Release from a variety of commenters including individual investors, consumer 

advocacy groups, financial services firms, investment professionals, industry and trade 

associations, state securities regulators, bar associations, and others.9  Several of those 

commenters provided alternative mock-ups to illustrate their suggestions.  Additionally, some 

                                                                                                                                                             

definition of dual registrant in the final instructions to clarify that a dually registered firm is not considered 
a dual registrant for purposes of Form CRS and the final instructions if the dually registered firm does not 
provide both investment advisory and brokerage services to retail investors.  See General Instruction 11.C 
to Form CRS; see infra footnotes 201- 202 and accompanying text. 

9  The comment letters are available in the comment file at https://www.sec.gov/comments/s7-08-
18/s70818.htm.   



 

8 

 

commenters submitted reports of surveys or studies that they had conducted or engaged third 

parties to conduct in connection with the proposal. The Commission also received input and 

recommendations from its Investor Advisory Committee (“IAC”) on the proposed relationship 

summary to improve its effectiveness.10   

The Commission also solicited comments from individual investors through a number of 

forums in addition to the traditional requests for comment in the Proposing Release.  The 

Commission used a “feedback form” designed specifically to solicit input from retail investors 

with a set of questions requesting both structured and narrative responses, and received more 

than 90 responses from individuals who reviewed and commented on the sample proposed 

relationship summaries published in the proposal.11  Seven investor roundtables were held in 

                                                                                                                                                             

10  See Investor Advisory Committee, Recommendation of the Investor as Purchaser Subcommittee Regarding 
Proposed Regulation Best Interest, Form CRS, and Investment Advisers Act Fiduciary Guidance (Nov. 7, 
2018), available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac110718-investor-
as-purchaser-subcommittee-recommendation.pdf. (“IAC Form CRS Recommendation”).  The majority of 
the IAC recommended that the Commission conduct usability testing of the proposed Form CRS 
disclosures and, if necessary, revise them to ensure that they enable investors to make an informed choice 
among different types of providers and accounts.  In addition, when considering potential Commission 
rulemaking under section 913 of the Dodd-Frank Act, the IAC also recommended that the Commission 
adopt a uniform, plain English disclosure document to be provided to customers and potential customers of 
broker-dealers and investment advisers at the start of the engagement, and periodically thereafter, that 
covers basic information about the nature of services offered, fees and compensation, conflicts of interest, 
and disciplinary record.  See Investor Advisory Committee, Recommendation of the Investor Advisory 
Committee: Broker-Dealer Fiduciary Duty (Nov. 22, 2013), available at 
https://www.sec.gov/spotlight/investor-advisory-committee-2012/fiduciary-duty-recommendation-
2013.pdf, as amended in https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac112213-
minutes.htm (“IAC Broker-Dealer Fiduciary Duty Recommendations”).  We discuss these IAC findings 
and recommendations in several sections below. Under section 39 of the Exchange Act, the Commission is 
required to review, assess, and disclose the action, if any, the Commission intends to take with respect to 
the findings and recommendations of the IAC; however, the Commission is not required to agree or to act 
upon any such findings or recommendations.  See 15 U.S.C. 78pp. 

11  The feedback forms are available in the comment file at https://www.sec.gov/comments/s7-08-
18/s70818.htm (“Feedback Forms”).  When we refer to Feedback Form commenters, we include those who 
completed and submitted a Feedback Form with a relevant response or comment answering at least one of 
the questions on the form.  To simplify discussion of comments received on the Feedback Forms, staff 

 



 

9 

 

different locations across the country to solicit further comment from individual investors on the 

proposed relationship summary, and we received in-person feedback from almost 200 attendees 

in total.12   

Further, the Commission’s Office of the Investor Advocate engaged the RAND 

Corporation (“RAND”) to conduct investor testing of the proposed relationship summary.13  

RAND conducted a survey of over 1,400 individuals through a nationally representative panel to 

collect information on the opinions, preferences, attitudes, and level of self-assessed 

comprehension regarding the sample dual-registrant relationship summary in the proposal.  

RAND also conducted qualitative interviews of a smaller sample of individuals to ascertain 

comprehension of the relationship summary and gain feedback from interview participants, 

which allowed RAND to obtain insights to complement its survey.14  On November 7, 2018, the 

Office of the Investor Advocate made the report on that testing available in the comment file to 
                                                                                                                                                             

aggregated and summarized these comments in an appendix to this release (see Appendix C, the “Feedback 
Forms Comment Summary”), and references to individual Feedback Forms in this release use short-form 
names defined in the Feedback Forms Comment Summary.   

12  The transcripts from the seven investor roundtables, which took place in Atlanta (“Atlanta Roundtable”), 
Baltimore (“Baltimore Roundtable”), Denver (“Denver Roundtable”), Houston (“Houston Roundtable”), 
Miami (“Miami Roundtable”), Philadelphia (“Philadelphia Roundtable”), and Washington, D.C. 
(“Washington, D.C. Roundtable”), are available in the comment file at https://www.sec.gov/comments/s7-
08-18/s70818.htm#transcripts.   

13  Angela A. Hung, et al., RAND Corporation, Investor Testing of Form CRS Relationship Summary (2018), 
available at https://www.sec.gov/about/offices/investorad/investor-testing-form-crs-relationship-
summary.pdf (“RAND 2018”).   

14  RAND conducted a total of 31 in-person interviews with investors recruited using guidelines designed to 
achieve a sample that had a broad range of educational background, racial and ethnic characteristics, 
gender, age and experience working with financial professionals. In describing the design of qualitative 
interviews, RAND explains that interviews included some general questions about comprehension and 
helpfulness of the form, which provided a window into participants’ understanding of concepts introduced 
in the relationship summary, but were not designed to serve as a full assessment of participants’ objective 
understanding of the relationship summary.  See RAND 2018, supra footnote 13. 



 

10 

 

allow the public to consider and comment on the supplemental information.15  The Commission 

received several letters in response to the inclusion of the RAND 2018 report in the comment 

file.16 

As noted, some commenters submitted reports of surveys and studies to the comment file, 

and the design and scope of these varied considerably. Two reports described online surveys of 

larger sample sizes – one based on the sample proposed dual-registrant relationship summary17 

and another based on the proposed sample standalone investment adviser relationship 

summary.18 A group of commenters submitted two reports of usability testing of the sample 

proposed dual-registrant relationship summary based on a small number of long-form 

                                                                                                                                                             

15  See Investor Testing of the Proposed Relationship Summary for Investment Advisers and Broker-Dealers, 
Securities and Exchange Commission Press Release 2018-257 (Nov. 7, 2018), available at 
https://www.sec.gov/news/press-release/2018-257. 

16  See, e.g., Comment Letter of Investment Adviser Association (Dec. 4, 2018); Comment Letter of Ron A. 
Rhodes (Dec. 6, 2018); Comment Letter of AFL-CIO, et al. (Dec. 7, 2018) (“AFL-CIO Letter”); Comment 
Letter of Betterment (Dec. 7, 2018) (“Betterment Letter II”); Comment Letter of Consumer Federation of 
America (Dec. 7, 2018) (“CFA Letter II”); Comment Letter of Financial Services Institute (Dec. 7, 2018) 
(“FSI Letter II”); Comment Letter of Public Investors Arbitration Bar Association (Dec. 7, 2018); 
Comment Letter of Consumer Reports (Feb. 15, 2019) (“Consumer Reports Letter”).   

17  Comment Letter of Cetera Financial Group (Nov. 19, 2018) (“Cetera Letter II”) (attaching report of 
Woelfel Research Inc. (“Woelfel”)). Woelfel, an independent research firm, conducted internet interviews 
in June 2018 with a sample of 800 adults aged 25 and over, including individuals that had a current 
relationship with a financial professional and individuals who did not have a current financial professional 
relationship. Respondents were asked to read the sample dual-registrant relationship summary included in 
the proposal and answer a series of questions about the document overall and for specific sections.  Id.  

18     Comment Letter of Betterment (Aug. 7, 2018) (“Betterment Letter I”) (attaching report of Hotspex, Inc. 
(“Hotspex”)).  Hotspex, an independent research firm, conducted online surveys with 304 current or 
potential U.S. investors ages 18 and over in June 2018.  The survey tested the standalone investment 
adviser relationship summary prepared following the instructions and sample design of the proposal (the 
“SEC Form”) and a redesigned version developed by Betterment.  Id.  Respondents reviewed and answered 
questions about only one version; 154 responded to questions on the SEC Form.  Id. 



 

11 

 

interviews.19  One of the two surveys, and the two interview-based studies, included questions 

designed to ascertain comprehension and tested alternate relationship summary designs with 

changes to some of the proposed prescribed wording and presentation from the proposal.20  

Finally, two different commenters submitted surveys of retail investors’ views about disclosure 

communications provided by firms and their relationships with financial professionals, which did 

not test any version of the proposed relationship summary.21   

The Commission appreciates the time and effort of these commenters who submitted 

surveys and studies.  The Commission has carefully considered this input.  The varying designs 

and scope of these surveys and studies limits us from drawing definitive conclusions, and we do 
                                                                                                                                                             

19  Kleimann Communication Group, Inc., Final Report on Testing of Proposed Customer Relationship 
Summary Disclosures, Submitted to AARP, Consumer Federation of America, and Financial Planning 
Coalition (Sept. 10, 2018), available at https://www.sec.gov/comments/s7-08-18/s70818-4341455-
173259.pdf (“Kleimann I”) (results of 15 90-minute qualitative interviews focusing on how consumers 
interacted with the sample dual-registrant relationship summary as proposed); Kleimann Communication 
Group, Inc., Report on Development and Testing of Model Client Relationship Summary, Presented to 
AARP and Certified Financial Planner Board of Standards, Inc. (Dec. 5, 2018), available at 
https://www.sec.gov/comments/s7-07-18/s70718-4729850-176771.pdf  (“Kleimann II”) (results of testing 
alternate designs of the proposed dual-registrant relationship summary in 18 one-on-one qualitative 
interviews). 

20  See Betterment Letter I (Hotspex), supra footnote 18 (online survey included ten true-false questions 
designed to test investor comprehension of the standalone investment adviser relationship summary as 
proposed relative to a version redesigned by Betterment); Kleimann I, supra footnote 19 (interview 
questions designed to elicit responses that could demonstrate two levels of cognitive skills); Kleimann II, 
supra footnote 19.   

21  Comment Letter of Charles Schwab & Co., Inc. (Aug. 6, 2018) (“Schwab Letter I”) (attaching report of 
Koski Research (“Koski”)).  Koski, an independent research firm, conducted an online survey of a national 
sample of 1000 investors in June 2018 to measure investor understanding of fiduciary duty and best interest 
standards for investment advice and obtain input from retail investors on method, frequency and content of 
disclosure communications.  Id.; Comment Letter of the Center for Capital Markets Competitiveness of the 
U.S. Chamber of Commerce (Sept. 5, 2018) (“CCMC Letter”) (attaching report of investor polling 
(“investor polling”)).  CCMC commissioned online polling of 801 investors in May 2018 to examine 
investors’ perspectives on working with financial professionals and gauge priorities regarding new 
regulatory requirements. Id. 

 



 

12 

 

not view any one of the surveys and studies submitted by commenters, or the RAND 2018 report, 

as dispositive.  However, these surveys and studies submitted by commenters, together with the 

results of the RAND 2018 report, input from individual investors at our roundtables and on 

Feedback Forms, and other information offered by other commenters, have informed our policy 

choices. Throughout this release we discuss observations reported in the RAND 2018 report and 

in surveys and studies submitted by commenters, and how these observations informed our 

policy choices as well as the costs and benefits of such choices. 

Overall, we believe that feedback we have received from or on behalf of retail investors 

through the RAND 2018 report, surveys and studies submitted by commenters, and input 

received at roundtables and on Feedback Forms, demonstrate that the proposed relationship 

summary would be useful for retail investors and provide information, e.g., about services, fees 

and costs, and standard of care, that would help investors to make more informed choices when 

deciding among firms and account options.  For example, among the RAND 2018 survey 

respondents, nearly 90% said that the relationship summary would help them make more 

informed decisions about types of accounts and services and more than 80% said it would help 

them compare accounts offered by different firms.22  RAND 2018 survey participants rated 

information about the firm’s relationship and services and fees and costs to be among the most 

informative.23  In other surveys, large majorities of respondents also reacted positively to the 

                                                                                                                                                             

22  RAND 2018, supra footnote 13. 

23  RAND 2018, supra footnote 13 (a majority of respondents rated both of the relationships and services 
section and fees and costs sections of the relationship summary as one of two sections that are “most 
informative”).   



 

13 

 

relationship summary and the types of information that would be provided.24  In the RAND 2018 

qualitative interviews, it was observed that participants could learn new information from the 

proposed relationship summary.25  Similarly, other surveys and studies that assessed investor 

comprehension observed that investors learned important information by reviewing the 

relationship summary.26  Over 70% of individuals submitting Feedback Forms commented that 

they found the relationship summary to be “useful,” with more than 80% rating the relationship 

summary sections describing relationships and services, obligations, and fees and costs as “very 

useful” or “useful.”27  Investor roundtable participants also reacted positively and indicated that 

                                                                                                                                                             

24  Cetera Letter II (Woelfel), supra footnote 17 (more than 80% of respondents rated all of the nine topics 
covered by the relationship summary as “very” or “somewhat” important; 88% rated fees and costs and the 
firm’s obligations as “very” or “somewhat” important; 61% said the relationship summary had provided the 
necessary information to help decide whether a brokerage relationship or an advisory relationship is best); 
Betterment Letter I (Hotspex), supra footnote 18 (finding that around 90% of survey respondents found the 
proposed relationship summary “very useful” or “somewhat useful”); see also CCMC Letter (investor 
polling), supra footnote 21 (when the concept of the proposed relationship summary was described, 62% of 
participants said they would be interested in reading the document and 72% agreed that the new document 
will “boost transparency and help build stronger relationships between me and my financial professional”). 

25  RAND 2018, supra footnote 13 (concluding from qualitative interviews that “[p]articipants demonstrated 
evidence of learning new information from the relationship summary” even though interview discussions 
revealed areas of confusion). 

26 See Kleimann I, supra footnote19 (although the authors concluded that, overall, participants had difficulty 
with “sorting out similarities and differences,” the study reports that “nearly all participants easily 
identified a key difference between Brokerage Accounts and Advisory accounts as the fee structure” and 
that “most participants understood that both Brokerage Accounts and Advisory Accounts could have 
financial relationships with other companies that could be potential conflicts with clients’ best interests.”); 
see also Betterment Letter I (Hotspex), supra footnote 18 (83% of respondents correctly identified as “true” 
a statement that “some investment firms have a conflict of interest because they benefit financially from 
recommending certain investments” when viewing a version of the standalone adviser relationship 
summary constructed based on the instructions set forth in the proposal”).  

27 See Feedback Forms Comment Summary, supra footnote 11 (summary of answers to Questions 1 and 2).  
In addition, more than 70% of commenters on Feedback Forms rated all of the other sections of the 
proposed relationship summary as “very useful” or “useful.” Id. 



 

14 

 

they found the relationship summary to be useful.28  A significant percentage of RAND 2018 

survey participants agreed that the relationship summary would facilitate conversations between 

retail investors and their financial professionals, and other surveys and studies reported similar 

observations.29  Investor roundtable participants and comments on Feedback Forms also 

indicated that the relationship summary could facilitate conversations between retail investors 

and their financial professionals in a beneficial way.30   

Many other commenters supported the concept of a short disclosure document for retail 

investors that would serve as part of a layered disclosure regime,31 and agreed that that the 

                                                                                                                                                             

28 See e.g., Houston Roundtable, at 19 (“I think your idea of having . . . a short four page . . . is really 
helpful”), at 27 (reacting positively to the idea of the relationship summary but asking that updated versions 
indicate the changed content), and at 35 (agreeing that a disclosure such as the relationship summary is 
needed); Atlanta Roundtable, at 28 (stating that the proposed sample relationship summary is “a very good 
form” and “concise” and “easy to read and clear” but needs to be in a form that can be compared with other 
relationship summaries). 

29  RAND 2018, supra footnote 13 (approximately 76% of participants agreed that they would use the 
relationship summary as the basis for a conversation with an investment professional; in qualitative 
interviews, participants said they liked all of the questions and they would ask questions in meeting with a 
financial service provider); see also Kleimann I, supra footnote 19 (many investors responded that they 
would use key questions when speaking with their brokers); Betterment Letter I (Hotspex), supra footnote 
18 (93% of respondents viewing a version of the proposed standalone relationship summary indicated that 
they were very or somewhat likely to ask the suggested questions.).  

30  Houston Roundtable (several investors responding that key questions would be helpful conversation 
starters, one commenter remarking that the Key Questions were “very, very good”); Feedback Forms 
Comment Summary, supra footnote 11 (summary of responses to Question 7) (over 75% of commenters 
indicated that the Key Questions are useful).  Eleven Feedback Forms included specific comments agreeing 
that the Key Questions would encourage discussions with financial professionals.  See, e.g., Hawkins 
Feedback Form (“Useful information for the investor to have before engaging in a conversation with an 
investment firm. Giving some examples of types of questions to ask would be beneficial.”); Asen Feedback 
Form (“The Relationship Summary (and not the individual BD or RIA account opening forms) is the 
opportunity to have that important conversation and “educate” the customer.”); Baker Feedback Form 
(“key questions are very useful as they give words to an unsophisticated client”). 

31  See, e.g., Comment Letter of AARP (Aug. 7, 2018) (“AARP Letter”); Comment Letter of Consumers 
Union (Oct. 19, 2018) (“Consumers Union Letter”); Comment Letter Type B; Comment Letter of the North 
American Securities Administrators Association, Inc. (Aug. 23, 2018) (“NASAA Letter”); Comment Letter 
of the Securities Industry and Financial Markets Association (Aug. 7, 2018) (“SIFMA Letter”); Comment 

 



 

15 

 

relationship summary would facilitate conversations between retail investors and their financial 

professionals in a beneficial way.32  However, some commenters argued that the relationship 

summary is duplicative of other disclosures and is unnecessary.33  Others cautioned against over-

reliance on disclosure efforts to address all issues related to the different business models and the 

applicable standard of conduct for broker-dealers and investment advisers.34   

                                                                                                                                                             

Letter of Triad Advisors, LLC (Jul. 26, 2018) (“Triad Letter”); Comment Letter of Investacorp, Inc. (Jul. 
26, 2018) (“Investacorp Letter”); Comment Letter of Ladenburg Thalmann Financial Services Inc. (Jul. 26, 
2018) (“Ladenburg Letter”); Comment Letter of KMS Financial Services, Inc. (Jul. 27, 2018) (“KMS 
Financial Letter”); Comment Letter of Securities America, Inc. (Jul. 27, 2018) (“Securities America 
Letter”). 

32  See, e.g., Comment Letter of Commonwealth Financial Network (Aug 7, 2018) (“CFN Letter”) (“Form 
CRS may also drive conversations that help potential clients and advisors determine which type of 
relationship (brokerage or advisory) is most appropriate.”); CCMC Letter (concluding from investor polling 
that “[t]he SEC’s proposed Form CRS could be a good way to start a conversation with investors.”); 
Comment Letter of the Financial Services Institute (Aug. 7, 2018) (“FSI Letter I”) (“The greatest benefit of 
these disclosures will come in the conversations they facilitate between the client and their financial 
professionals”); Comment Letter Wells Fargo & Company (Aug. 7, 2018) (“Wells Fargo Letter”) (“the 
basic premise that a brief overview document designed to provide a high-level understanding of important 
information to clients (with directions to more detailed information) that can be used to prompt more 
detailed conversations with financial professionals is a good one”).  Triad Letter (“The greatest benefit of 
the CRS will come in the conversations it facilitates between the client and their Financial 
Professional….”); Ladenburg Letter (same); KMS Financial Letter (same). 

33  Some commenters stated that Form CRS would be duplicative of the Disclosure Obligation required by 
Regulation Best Interest.  See, e.g., Triad Letter; Investacorp Letter; Ladenburg Letter; KMS Financial 
Letter; Securities America Letter; FSI Letter I; Comment Letter of Securities Service Network, LLC (Aug. 
6, 2018); Comment Letter of Cambridge Investment Research, Inc. (Aug. 7, 2018) (“Cambridge Letter”).  
Others argued that Form CRS is duplicative of other Form ADV disclosures.  See, e.g., Comment Letter of 
MarketCounsel (Aug. 7, 2018) (“MarketCounsel Letter”); Comment Letter of the Investment Adviser 
Association (Aug. 6, 2018) (“IAA Letter I”); Comment Letter of Gerald Lopatin (Jul. 30, 2018).  One 
commenter expressed concern that because the relationship summary would be duplicative of Form ADV 
and Form BD, retail customers would be less likely to read the more comprehensive disclosures.  See 
Comment Letter of Financial Engines (Aug. 6, 2018) (“Financial Engines Letter”). 

34  See Comment Letter of Integrated Financial Planning Solutions (Jul. 20, 2018) (“IFPS Letter”) (“Clients do 
not have the ability to understand the disclosure material that is still written only by and for lawyers.”); 
Comment Letter of Sen. Elizabeth Warren (Aug. 7, 2018) (“Warren Letter”) (arguing that “the 
[Commission] shouldn’t rely on disclosure alone to protect consumers”); Consumers Union Letter 
(“[W]hile we support simple, understandable disclosures, we caution against placing too much reliance on 
disclosure to protect investors.”); Consumer Reports Letter. 



 

16 

 

Nearly all commenters (including commenters on Feedback Forms) and investors 

participating in roundtables, suggested modifications to the proposed relationship summary, as 

did observations reported in the RAND 2018 report and surveys and studies submitted to the 

comment file.  Suggested changes generally pertained to:  appropriate placement of educational 

material; length and format; use of prescribed wording; comprehensibility; additional flexibility 

for firms; and delivery requirements (including electronic delivery).  For example, some 

commenters and observations from the RAND 2018 survey and other surveys and studies 

indicated that the proposed relationship summary could be difficult to understand, particularly 

the proposed disclosures on fees, conflicts of interest, and standards of conduct.35  Many 

commenters preferred a shorter, one-to-two page document relying more heavily on layered 

disclosure, such as by using more hyperlinks and other cross-references to more detailed 

disclosure.36  Many commenters from both industry and investor groups argued that some of the 

                                                                                                                                                             

35  See RAND 2018, supra footnote 13 (among other findings, the percentages of respondents indicating that 
the fees and costs, conflicts of interest, and standards of conduct sections were either “difficult” or “very 
difficult” to understand were 35.5%, 33.5%, and 22.9%, respectively); Kleimann I, supra footnote 19 
(noting that participants had difficulty “sorting out similarities and differences between Broker-Dealer 
Services and Investment Adviser Services. Both the formatting and language contributed to the 
confusion.”); Betterment Letter I (Hotspex), supra footnote 18 (showing that survey participants had 
difficulty understanding differences in standard of care and did not find the section on conflicts in the 
standalone adviser relationship summary to be useful); see also Comment Letter of John Wahh (Apr. 23, 
2018) (“Wahh Letter”) (relationship summary is “impenetrable”); Comment Letter of David John Marotta 
(Apr. 26, 2018) (“Marotta Letter”) (disclosures would be too confusing to clients); Comment Letter of John 
H. Robinson (Aug. 6, 2018) (“Robinson Letter”) (expressing concern that relationship summary is too text-
heavy for consumers to read and will be ineffective in resolving investor confusion); Comment Letter of 
CFA Institute (Aug. 7, 2018) (“CFA Institute Letter I”) (“[A]s proposed, CRS is too wordy and technically 
written for the average investor to understand.”).   

36  See, e.g., AARP Letter; Comment Letter of Better Markets (Aug. 7, 2018) (“Better Markets Letter”); 
Comment Letter of the Bank of America (Aug. 7, 2018) (“Bank of America Letter”); Comment Letter of 
the Committee on Capital Markets Regulation (Jul. 16, 2018) (“CCMR Letter”); Comment Letter of LPL 
Financial LLC (Aug. 7, 2018) (“LPL Financial Letter”); Schwab Letter I.  Cf. RAND 2018, supra footnote 
13 (finding at least a plurality of respondents would keep the length of each section “as is”; however, when 

 



 

17 

 

prescribed wording would not be accurate or applicable in relation to the different services and 

business models of all firms or could lead to confusing or misleading disclosures.37  Various 

commenters advocated for more flexibility for firms to use their own wording to describe their 

services more accurately.38  Many commenters favored the use of a question-and-answer format, 

                                                                                                                                                             

asked “Is the Relationship Summary too long, too short, or about right?”, 56.9% of respondents answered 
“too long” and only 41.2% responded “about right”).  

37  See, e.g., Comment Letter of the Vanguard Group, Inc. (Aug. 7, 2018) (“Vanguard Letter”) (explaining 
instances in which the prescribed wording would be inaccurate or not sufficiently nuanced for some of its 
services); Comment Letter of the American Council of Life Insurers (Aug. 3, 2018) (“ACLI Letter”) 
(“[M]any of the statements mandated in the Proposed Rule are inaccurate from the perspective of a life 
insurer-affiliated broker-dealer); IAA Letter I (expressing concern that the proposed prescribed language 
describing legal standards of conduct would result in less accurate understanding and greater confusion for 
investors); FSI Letter I (“[S]ome of the prescribed disclosure language is highly problematic, will add to 
investor confusion, and would negatively impact [firms’] client relationships.”); AARP Letter (expressing 
concern that some of the prescribed language is too technical and likely to confuse retail investors); 
Comment Letter of the Insured Retirement Institute (Aug. 7, 2018) (“IRI Letter”) (expressing concern that 
the prescribed language would not permit descriptions of services offered outside of brokerage accounts, 
such as recommendations of variable annuities).  One commenter asserted that prescribed wording 
requiring firms to compare themselves adversely with their competitors could raise First Amendment 
concerns.  See Comment Letter of the Consumer Federation of America (Aug. 7, 2018) (“CFA Letter I”) 
(arguing that certain language requiring firms to compare their own services unfavorably to those of their 
competitors may raise First Amendment concerns, and that Proposed Item 5, Comparisons to be provided 
by standalone investment advisers and standalone broker-dealers, should be eliminated entirely); see also 
infra footnotes 77–80 and accompanying text.  Although not explicitly raising First Amendment concerns, 
another commenter also opposed requiring firms to describe services of other types of financial 
professionals.  See IAA Letter I (“In our view, it is not appropriate to require firms to include statements 
about business models other than their own.”). But see Comment Letter of AFL-CIO, Consumer Federation 
of America, et. al.  (Apr. 26, 2019) (“AFL-CIO, CFA Letter”) (arguing that allowing firms more flexibility 
in their disclosure will result in a failure to clearly convey important information, and such information 
would not be comparable from firm to firm). 

38  See, e.g., ACLI Letter (“Firms should have the flexibility in the Form CRS to accurately describe their 
business model and what their clients can expect from the relationship”); NASAA Letter (“[F]irms should 
have some level of flexibility in crafting their own Form CRS so that it is tailored for the different types of 
customers they service.”); Letter from Members of Congress (Aug. 8, 2019) (“The SEC should develop a 
disclosure form that ensures firms have the flexibility to provide information that the average investor will 
understand.”); IAA Letter I (advocating that firms be given flexibility to draft their own descriptions of 
their principal services and conflicts of interest); FSI Letter I (suggesting that the prescribed wording 
regarding the extent and frequency of monitoring be removed or customized using the firm’s own 
wording); IRI Letter (firms need more latitude to describe their relationships and services and fees and 
costs, given their variability; one-size-fits-all disclosures are insufficient); Comment Letter of T. Rowe 
Price (Aug. 10, 2018) (“T. Rowe Letter”) (firms should have the flexibility to tailor their disclosures to 
make it clearer and more readable without potentially confusing investors); Vanguard Letter (suggesting 

 



 

18 

 

suggesting, for example, that focusing a document on investors’ questions helps them to feel that 

the document is relevant to them and encourages them to read it.39  Some commenters viewed 

parts of the relationship summary as educational, such as the sections comparing broker-dealers 

and investment advisers, describing the applicable standard of conduct, and containing key 

questions investors should ask, and advocated that the Commission should develop and provide 

educational material separately from firm-specific disclosures, such as in an additional disclosure 

layer or on the Commission’s website.40  Several individuals submitting Feedback Forms also 

were supportive of links to additional educational information.41 

                                                                                                                                                             

that the Commission clarify that all of the prescribed disclosures may be modified to accurately describe 
the nature of firms’ services and conflicts of interest given their business models); Comment Letter of 
CUNA Mutual Group (Aug. 7, 2018).   

39  See, e.g., CFA Letter I.  Many of the mock-ups submitted by commenters used a question-and-answer 
format.  See Comment Letter of Fidelity Brokerage Services LLC (Aug. 7, 2018) (“Fidelity Letter”); IAA 
Letter I; LPL Financial Letter; Comment Letter of Primerica (Aug. 7, 2018) (“Primerica Letter”); Schwab 
Letter I; SIFMA Letter; Wells Fargo Letter.  For the purposes of this release, we view the substance and 
design of all mock-ups that commenters provided within their comment letters as comments on our 
proposed form, and the mock-ups have informed our approach to the relationship summary, as discussed 
below throughout. 

40  See, e.g., Comment Letter of the American Securities Association (Aug. 7, 2018) (“ASA Letter”); 
Primerica Letter; ACLI Letter; IAA Letter I; Comment Letter of Pickard Djinis and Pisarri LLP (Aug. 14, 
2018) (“Pickard Djinis and Pisarri Letter”); Comment Letter of L.A. Schnase (Jul. 30, 2018) (“Schnase 
Letter”); CFA Letter I; LPL Financial Letter. 

41  See, e.g., Daunheimer Feedback Form (“I would like to see a list of applicable websites for discerning 
disciplinary websites or anything else that would additionally educate a consumer.”); Asen Feedback Form 
(“Might want to consider hyperlinking key words for ease of definition lookup.”); Baker Feedback Form 
(responding to a question on the Additional Information section, commented “Helpful also were the 
website links, i.e., sec.gov, investor.gov, BrokerCheck.Finra.org.”); Smith2 Feedback Form (“would like to 
see a link included a site or sites that contain general investment information.  Types of investments, risks, 
time horizons …”). 



 

19 

 

Although some commenters argued that the relationship summary is duplicative of other 

disclosures and is unnecessary,42 we believe that the relationship summary has a distinct purpose 

and will provide a separate and important benefit relative to other disclosures.  The relationship 

summary is designed to help retail investors select or determine whether to remain with a firm or 

financial professional by providing better transparency and summarizing in one place selected 

information about a particular broker-dealer or investment adviser.  The format of the 

relationship summary also allows for comparability among the two different types of firms in a 

way that is distinct from other required disclosures.  Both broker-dealers and investment advisers 

must provide disclosures on the same topics under standardized headings in a prescribed order to 

retail investors, which should benefit retail investors by allowing them to more easily compare 

services by comparing different firms’ relationship summaries.43  We do not believe that existing 

disclosures provide this level of transparency and comparability across investment advisers, 

broker-dealers, and dual registrants.  The relationship summary also encourages retail investors 

to ask questions and highlights additional sources of information.  All of these features should 

make it easier for investors to get the facts they need when deciding among investment firms or 

financial professionals and the accounts and services available to them.  As noted above, the 

relationship summary will complement additional rules and guidance that the Commission is 

                                                                                                                                                             

42  See supra footnote 33. 

43  Several individuals submitting Feedback Forms said that more firm-specific information that could be 
easily compared would be helpful.  See, e.g., Lee1 Feedback Form (“The information should let me 
compare firms. . . . Make it short, more useful (so I can compare services and firms).”); Anonymous13 
Feedback Form (“Firm specific info would be nice on this document.”);  Bhupalam Feedback Form (“I 
would like to see additional information regarding specific firm rather than a general description.”). 



 

20 

 

adopting concurrently to enhance protections for retail investors and is not designed to address 

all investor protection issues related to different business models and legal obligations of broker-

dealers and investment advisers.44 

Further to this purpose, in response to the comment letters and other feedback, we 

modified the instructions to reorganize and streamline the relationship summary, to enable more 

accurate descriptions tailored to what firms offer, and to help improve investor understanding of 

the disclosures provided.  The instructions we are adopting are consistent with and designed to 

fulfill the original goals of the proposal, including the creation of relationship summaries that 

will highlight certain information in one place for retail investors in order to help them select or 

decide whether to remain with a firm or financial professional, encourage retail investors to 

engage in meaningful and individualized conversations with their financial professionals, and 

empower them to easily find additional information.  Although certain prescribed generalized 

comparisons between brokerage and investment advisory services have been removed from the 

final instructions, we believe the revised instructions will result in more meaningful comparisons 

among firms. 

The key changes of the relationship summary and instructions we are adopting include 

the following:45  

                                                                                                                                                             

44  See supra footnote 34. 

45  If any of the provisions of these rules, or the application thereof to any person or circumstance, is held to be 
invalid, such invalidity shall not affect other provisions or application of such provisions to other persons or 
circumstances that can be given effect without the invalid provision or application.21 

 

• Standardized Question-and-Answer Format and Less Prescribed Wording.  

Instead of declarative headings as proposed, the final instructions for the 

relationship summary will require a question-and-answer format, with 

standardized questions serving as the headings in a prescribed order to promote 

consistency and comparability among different relationship summaries.  The 

headings will be structured and machine-readable, to facilitate data aggregation 

and comparison.  Under the standardized headings, firms will generally use their 

own wording to address the required topics.  Thus, the final instructions contain 

less prescribed language, which creates more flexibility in providing accurate 

information to investors.  Investment advisers and broker-dealers will be limited 

to two pages and dual registrants will be limited to four pages (or an equivalent 

length if in electronic format).46   

• Use of Graphics, Hyperlinks, and Electronic Formats.  To help retail investors 

easily digest the information, the instructions will specifically encourage the use 

of charts, graphs, tables, and other graphics or text features in order to explain or 

compare different aspects of the firm’s offerings.  If the chart, graph, table, or 

other graphical feature is self-explanatory and responsive to the disclosure item, 

additional narrative language that may be duplicative is not required.  For 

electronic relationship summaries, the instructions encourage online tools that 

populate information in comparison boxes based on investor selections.  The 
                                                                                                                                                             

46  For clarification purposes, one page is equivalent to a single-side of text on a sheet of paper, rather than two 
sides of the same paper. 



 

22 

 

instructions permit, and in some instances require, a firm to cross-reference 

additional information (e.g., concerning services, fees, and conflicts), and will 

require embedded hyperlinks in electronic versions to further facilitate layered 

disclosures.  Firms must use text features to make the required cross-references 

more noticeable and prominent in relation to other discussion text.   

• Introduction with Link to Commission Information.  The relationship summary 

will include a more streamlined introductory paragraph that will provide a link to 

Investor.gov/CRS, a page on the Commission’s investor education website, 

Investor.gov, which offers educational information about investment advisers, 

broker-dealers, and individual financial professionals and other materials.  In 

order to highlight the importance of these materials, the introduction also will 

note that brokerage and advisory services and fees differ and that it is important 

for the retail investor to understand the differences. 

• Combined Fees, Costs, Conflicts of Interest, and Standard of Conduct Section.  

We are integrating the proposed fees and costs section with the sections 

discussing the conflicts of interest and standards of conduct.  We are also 

expanding the discussion of fees and making several other changes to help make 

the disclosures clearer for retail investors.  The relationship summary will cover 

the same broad topics as proposed, including a summary of fees and costs, a 

description of ways the firm makes money, certain conflicts of interest, and 

standards of conduct.  In addition, firms will include disclosure about financial 

professionals’ compensation.   



 

23 

 

• Separate Disciplinary History Section.  Firms will be required to indicate under a 

separate heading whether or not they or any of their financial professionals have 

reportable disciplinary history and where investors can conduct further research 

on these events, instead of including this information under the Additional 

Information section as proposed. 

• Conversation Starters.  The proposed Key Questions to Ask have generally been 

integrated into the relationship summary sections either as question-and-answer 

headings or as additional “conversation starters” to provide clearer context for the 

questions.  Retail investors can use these questions to engage in dialogue with 

their financial professionals about their individual circumstances.  The discussion 

topics raised by certain other proposed key questions have been incorporated into 

the relationship summary through otherwise-required disclosure. 

• Elimination of Proposed Comparisons Section.  We are eliminating the proposed 

requirement that broker-dealers and investment advisers include a separate section 

using prescribed wording that in a generalized way described how the services of 

investment advisers and broker-dealers, respectively, differ from the firm’s 

services.  We encourage, but do not require, dual registrants to prepare a single 

relationship summary that discusses both brokerage and investment advisory 

services.  Whether dual registrants prepare a single or two separate relationship 

summaries to describe their brokerage and investment advisory services, they 

must present information on both services with equal prominence and in a manner 

that clearly distinguishes and facilitates comparison between the two.  The 

material provided on Investor.gov offers educational information about 



 

24 

 

investment advisers, broker-dealers, and individual financial professionals and 

other materials. 

• Delivery.  As proposed, investment advisers must deliver a relationship summary 

to each new or prospective client who is a retail investor before or at the time of 

entering into an investment advisory contract with the retail investor.  In a change 

from the proposal, broker-dealers must deliver the relationship summary to each 

new or prospective customer who is a retail investor before or at the earliest of: (i) 

a recommendation of an account type, a securities transaction, or an investment 

strategy involving securities; (ii) placing an order for the retail investor; or (iii) 

the opening of a brokerage account for the retail investor.  We also are revising 

the instructions to provide greater clarity on the use of electronic delivery, while 

generally maintaining the guidelines that were proposed. 

We designed the final disclosure requirements in light of comments, input from 

individual investors through roundtables and on Feedback Forms, and observations reported in 

the RAND 2018 report and other surveys and studies, that suggest retail investors benefit from 

receiving certain information about a firm before the beginning of a relationship with that firm, 

but they prefer condensed disclosure so that they may focus on information that they perceive as 

salient to their needs and circumstances, and prefer having access to other “layers” of additional 

information rather than receiving a significant amount of information at once.  Together, all of 

the required disclosures will assist a retail investor to make an informed choice regarding 

whether a brokerage or investment advisory relationship, as well as whether a particular broker-

dealer or investment adviser, best suits his or her particular needs and circumstances.  The 



 

25 

 

relationship summary will complement additional rules and guidance that the Commission is 

adopting concurrently to enhance protections for retail investors.47   

Some commenters responding to the RAND 2018 report noted that the RAND 2018 

survey and qualitative interviews did not objectively test investor comprehension, and they 

pointed to observations from RAND 2018 interviews that suggested that some interview 

participants failed to understand differences in the legal standards that apply to brokerage and 

advisory accounts and did not understand the meaning of the word “fiduciary” for example.48  

They argued that we should conduct more usability testing before adopting Form CRS and 

Regulation Best Interest.49  

                                                                                                                                                             

47  See Regulation Best Interest, Exchange Act Release No. 86031 (June 5, 2019) (adopting rule 15l-1 under 
the Exchange Act (“Regulation Best Interest”)) (“Regulation Best Interest Release”).  Along with adopting 
Regulation Best Interest, the Commission is clarifying standards of conduct for investment advisers.  See 
Commission Interpretation Regarding Standard of Conduct for Investment Advisers, Advisers Act Release 
No. 5248 (June 5, 2019) (“Fiduciary Release”).  The Commission is also providing guidance about when a 
broker-dealer’s advisory services are solely incidental to the conduct of the business of a broker or dealer.  
See Commission Interpretation Regarding the Solely Incidental Prong of the Broker-Dealer Exclusion to 
the Definition of Investment Adviser, Advisers Act Release No. 5249 (June 5, 2019) (“Solely Incidental 
Release”).   

48  See CFA Letter II (noting that the testing conducted for the RAND 2018 Report is limited and does not 
provide more detailed information, such as transcripts of the in-depth interviews, to present fully the level 
of investor understanding); Comment Letter of CFA Institute (May 16, 2019) (“CFA Institute Letter II”) 
(“The RAND Report is clear that its survey was not designed to measure objective comprehension … Nor 
did it provide respondents with alternatives that could have allowed them to express preferences for certain 
formats or language.”).  See also AFL-CIO Letter; Consumer Reports Letter; Comment Letter of PIABA 
(Dec. 7, 2018).   

49  See, e.g., AFL-CIO Letter (“If the Commission chooses to maintain different standards for brokers and 
advisers, it must clearly delineate what the differences are … This would require rethinking the Form CRS 
and re-testing to ensure that it achieves these goals …”); CFA Letter II (“make the [RAND 2018] report the 
start, not the end, of an iterative process of testing and revision needed to develop disclosure that works  
…”); AFL-CIO, CFA Letter (stating “. . . unless the Commission retests the revised disclosure, it won’t 
have any way to know whether the revised version solves the problems that earlier testing has identified.”); 
Consumer Reports Letter (“SEC must test and retest Form CRS disclosures … and continue to publish the 
results of its testing before the form is made final”); CFA Institute Letter II.  Others commented on the 
results of the RAND 2018 report but did not suggest delaying adoption of Form CRS.  See, e.g., Comment 
Letter of Charles Schwab & Co. Inc. (Dec. 7, 2018) (“Schwab Letter II”) (“The Commission should 

 



 

26 

 

We disagree.  The amount of information available from the various investor surveys and 

investor testing described in this release, including those submitted by commenters, as well as 

the comment letters and other input submitted to the Commission for this rulemaking, is 

extensive.  We considered all of this information thoroughly, leveraging our decades of 

experience with investor disclosures, when evaluating changes to the relationship summary from 

the proposal.  The perceived usefulness of the relationship summary, as shown by observations 

in the RAND 2018 report, surveys and studies submitted by commenters, and input from 

individual investors at our roundtables and in Feedback Forms, demonstrates that, even as 

proposed, the relationship summary would benefit investors by providing information that would 

help investors make more informed choices when deciding among firms and account options.50  

Large majorities of participants in the RAND 2018 survey and in other surveys supported the 

specific topics, such as services, fees, conflicts and standards of conduct, that we require firms to 

address in the relationship summary.51  Even though the RAND 2018 qualitative interviews and 

                                                                                                                                                             

acknowledge and act on consensus findings to improve the Form CRS”); Betterment Letter II (noting that 
the RAND 2018 report “demonstrates that Form CRS serves a valuable function”).  See also FSI Letter II 
(encouraging the Commission to “continue investor testing of Form CRS after the final rule is in place”). 

50  See supra footnotes 22 to 30 and accompanying text.  We note that the Department of Labor did not 
describe or reference usability testing in adopting its now vacated rule broadening the definition of 
fiduciary investment advice under the Employee Retirement Income Security Act of 1974 as amended 
(“ERISA”) and the related Best Interest Contract Exemption (“BIC Exemption”).  The BIC Exemption 
required certain disclosures to be provided to a retirement investor and included on a financial institution’s 
public website.  See DOL, Best Interest Contract Exemption, 81 FR 21002, 21045-52 (Apr. 8, 2016). 

51  See supra footnotes 23 to 24 and accompanying text; see also Schwab Letter (Koski), supra footnote 
21(reporting that retail investors say it is most important for firms to communicate about “costs I will pay 
for investment advice,” a “description of advice services,” the “obligations the firm and its representatives 
owe me” and any “conflicts of interest related to the advice I receive”); CCMC Letter (investor polling), 
supra footnote 21 (reporting as issues that “matter most” to investors, “explaining fees and costs,” 
explaining conflicts of interest” and “explaining own compensation”). 



 

27 

 

another interview-based study observed that interview participants could have some gaps in 

understanding, these studies still observed that interview participants could learn new important 

information from the relationship summary as proposed.52   

In addition, as noted above and discussed in further detail below, we are making a 

number of modifications designed to improve the relationship summary relative to the proposal, 

which are informed by these and other observations reported by RAND 2018 and other surveys 

and studies, as well as by investor feedback at roundtables and in Feedback Forms and the other 

comment letters we have received.  For example, we are substantially revising our approach to 

disclosing standard of conduct and conflicts of interest to make this information clearer to retail 

investors, including (among other changes) eliminating the word “fiduciary” and requiring 

firms—whether broker-dealers, investment advisers, or dual registrants—to use the term “best 

interest” to describe their applicable standard of conduct.53  Further, as compared to the proposal, 

modifications adopted in the final relationship summary instructions require less prescribed 

                                                                                                                                                             

52  See RAND 2018, supra footnote 13 (describing that participants in qualitative interviews had difficulty 
reconciling the information provided in the obligations section and conflicts of interest section and other 
areas of confusion, but concluding that “[p]articipants demonstrated evidence of learning new information 
from the relationship summary”); Kleimann I, supra footnote 19 (although study author concluded that, 
overall, participants had difficulty with “sorting out similarities and differences,” the study reports that 
“nearly all participants easily identified a key difference between Brokerage Accounts and Advisory 
accounts as the fee structure;” “[p]articipants expected to pay for transactions in a Brokerage Account or 
the quarterly fee for an Advisory Account;” “most participants understood that both Brokerage Accounts 
and Advisory Accounts could have financial relationships with other companies that could be potential 
conflicts with clients’ best interests” and “[nearly all participants saw the Key Questions as essential … 
straightforward and raised important questions that they themselves might not have thought to ask.”); see 
also Betterment Letter I (Hotspex) supra footnote 18 (83% of respondents correctly identified as “true” a 
statement that “some investment firms have a conflict of interest because they benefit financially from 
recommending certain investments” when viewing a version of the standalone adviser relationship 
summary constructed based on the instructions set forth in the proposal). 

53  See infra, Section II.B.3. 



 

28 

 

wording, and instead, firms will generally use their own wording to address required topics, 

which creates flexibility in providing accurate information to investors.  We believe that this 

modification substantially limits the practicability and benefit of additional usability testing 

because there is no single version of the relationship summary (or a limited set of form versions) 

that may be used to gauge investor comprehension given firms’ flexibility to tailor their 

relationship summary.54  Therefore, we believe that any anticipated benefit from continued 

rounds of investor usability testing does not justify the cost to investors of delaying a rulemaking 

designed to increase investor protection. 

Accordingly, we believe that the totality of input received through comments (including 

Feedback Forms), outreach at roundtables and through the OIAD/RAND and RAND 2018 

reports, as well as surveys and studies submitted by commenters, fully supports our 

consideration and adoption of the relationship summary, with modifications informed by this 

input as discussed more fully below.  However, to help ensure that the relationship summary 

fulfills its intended purpose, we have directed our staff to review a sample of relationship 

summaries that are filed with the Commission beginning after June 30, 2020, when firms first 

                                                                                                                                                             

54  In this regard, the RAND 2018 report and surveys and studies submitted by commenters generally were 
based on sample versions of the relationship summary that we included in the proposal.  Alternate designs 
tested by commenters generally used the all of the same topics (e.g., a description of service and the 
relationship, fees and costs, standard of care, conflicts, additional information and key questions) as the 
proposed sample versions, with changes using different versions of prescribed wording and formatting 
designed to be more appealing to readers.  See Kleimann II, supra footnote 19 (describing alternative Form 
CRS design assumptions) and Betterment Letter I (Hotspex) supra footnote 18 (describing approach to 
optimizing the Form CRS).  Given modifications that we are adopting to the Form CRS instructions that 
provide firms more flexibility to use their own wording to describe service offerings, fees and costs and 
their conflicts of interest and more flexibility in formatting as compared to the proposal, we are not 
preparing sample or illustrative versions of the relationship summary that could be used to repeat such 
surveys and testing, and we do not believe that we would be able to develop sample versions that would be 
representative given the diversity among firms in their service and product offerings.   



 

29 

 

file their relationship summaries, and to provide the Commission with the results of this review.  

The Commission and its staff are also reviewing educational materials provided on Investor.gov 

and intend to develop additional content in order to continue to improve the information 

available to investors about working with investment advisers, broker-dealers, individual 

financial professionals, and investing. 

 In the Proposing Release, we proposed certain disclosures to be included in all print or 

electronic retail investor communications by broker-dealers, investment advisers, and their 

financial professionals (the “Affirmative Disclosures”).  We have determined not to adopt the 

Affirmative Disclosures, as we discuss further below.  In our view, the combination of the 

disclosure requirements in Form CRS and Regulation Best Interest should adequately address the 

objectives of the proposed Affirmative Disclosures. 

II. FORM CRS RELATIONSHIP SUMMARY 

A. Presentation and Format  

The relationship summary is designed to be a short and accessible disclosure for retail 

investors that helps them to compare information about firms’ brokerage and/or investment 

advisory offerings and promotes effective communication between firms and their retail 

investors.55  The proposed instructions included requirements on length, formatting, and content.  

The proposal also provided three examples of what a relationship summary might look like for a 

                                                                                                                                                             

55  Form CRS defines “relationship summary” as “[a] disclosure  prepared in accordance with these 
Instructions that you must provide to retail investors” and also references Advisers Act rule 204-5 and 
Exchange Act rule 17a-14.  Firms that do not have any retail investors to whom they must deliver a 
relationship summary are not required to prepare or file one.  See General Instructions to Form CRS, 
Advisers Act rule 204-5, Exchange Act rule 17a-14(a).   



 

30 

 

standalone broker-dealer, standalone investment adviser, and dual registrant.  In providing 

feedback on the proposed sample relationship summaries, commenters on Feedback Forms and 

participants in the RAND 2018 survey and other surveys and studies provided by commenters 

indicated that the proposed relationship summary could be too dense and difficult to read.56  

They suggested using simpler terms and more white space, among other changes.57  Commenters 

also encouraged the use of design principles that would result in a more visually appealing and 

                                                                                                                                                             

56  See Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Questions 1 and 4) 
(33 commenters (35%) answered “Somewhat” or “No” in either of Question 3(a) (Do you find the format of 
the Relationship Summary easy to follow?) or Question 3(c) (Is the Relationship Summary easy to read?); 
comments responding to Question 4 (“Are there topics in the relationship summary that are too technical 
or that could be improved?”); 41 Feedback Forms (44%) indicated in response to Question 4 or another 
question that the relationship summary was too technical or suggested one or more  topics that could be 
improved); see also RAND 2018, supra footnote 13 (on average, 24% of respondents described any given 
section as difficult or very difficult, more than 30% described the fees and costs section as difficult or very 
difficult; but qualitative interview discussions revealed that there were areas of confusion for  participants, 
including differences between account types or financial professionals); Betterment Letter I (Hotspex) 
supra footnote 18 (only 22% of respondents reviewing a version of the standalone adviser relationship 
summary said information was easy to understand; only 18% said the format was appealing); Kleimann I, 
supra footnote 19 (finding that participants were confused).  Cf. Cetera Letter II (Woelfel), supra footnote 
17 (more than 75% of respondents strongly or somewhat agreed that individual topics covered by the 
relationship summary were described clearly).  See also comments discussed supra footnote 35. 

57  Comment Letter of Front Street Consulting (Jun. 8, 2018) (stating that disclosure must be readable and 
understandable using plain language); Kleimann II, supra footnote 19 (describing design and content 
principles for a redesigned relationship summary, noting that “[h]eading and white space allow readers to 
have an overview of the content, see the overall structure of the content, and choose which parts most 
interest them…”); IAA Letter I (recommending flexibility for innovative use of design techniques 
including “using more white space, and using visuals like icons and images”); Fidelity Letter (discussing 
designed relationship summary using “key design elements that are informed by our experienced 
employees whose focus is on graphic design and applying design thinking techniques to customer facing 
products”). Schwab Letter I (Koski), supra footnote 21 (reporting that the “majority of retail investors 
surveyed want communications that are relevant to them (91%), short and to the point (85%), and visually 
appealing (79%)”); Schwab Letter II (stating that combined results of RAND 2018 and its own survey 
indicate that the Form CRS should be shorter, organized around questions, focus on “fees/costs” and 
“services/relationships” and contain “hyperlinks”); Betterment Letter I (Hotspex), supra footnote 18   
(providing suggestions for streamlining and focusing the content requirements and improving the visual 
layout and format of the relationship summary to improve its effectiveness). 



 

31 

 

accessible disclosure.58  In addition, the IAC recommended, through a majority vote, uniform, 

simple, and clear summary disclosures to retail investors.59  We have incorporated many of these 

suggestions into the instructions.  

We are changing the instructions to require a question-and-answer format, give additional 

support for electronic formats, provide guidance that firms should include white space, and 

implement other design features to make the relationship summary easier to read.60  We are 

requiring firms to use standardized headings in a prescribed order to preserve comparability, 

while permitting greater flexibility in other aspects of the relationship summary’s wording and 

design to enhance the relationship summary’s accuracy, usability, and effectiveness.61  The final 

instructions will require limited prescribed wording compared to the proposal and will permit 

firms to use their own wording to describe most topics.  We also are not requiring firms to 

discuss the sub-topics required within each section in a prescribed order, as proposed.62  Dual 

                                                                                                                                                             

58  See, e.g., Betterment Letter II (“The form should better implement design principles that have been shown 
to facilitate visual appeal and comprehension.”); Schwab Letter I (citing to a presentation given by 
Kleimann Communication Group, Inc., at an IAC meeting on June 14, 2018); IAA Letter I (arguing that 
more visually dynamic and engaging design would make the relationship summary more effective and 
likely to be read). 

59  See IAC Form CRS Recommendation, supra footnote 10 (reiterating a recommendation from the IAC 
Broker-Dealer Fiduciary Duty Recommendations in 2013 to “adopt a uniform, plain English disclosure 
document to be provided to customers and potential customers of broker-dealers and investment advisers 
that covers basic information about the nature of services offered, fees and compensation, conflicts of 
interest, and disciplinary record” and recommending that the Commission work with a design expert and 
test the relationship summary for effectiveness). 

60  General Instruction 2.A. to Form CRS.  (“You should include white space and implement other design 
features to make the relationship summary easy to read.”). 

61  See, e.g., Items 2.B. and 3.C.(ii) of Form CRS.   

62  See Proposed General Instruction 1.(b) to Form CRS (“Unless otherwise noted, you must also present the 
required information within each item in the order listed.”). 



 

32 

 

registrants63 and affiliated brokerage and investment advisory firms also will have flexibility to 

decide whether to prepare separate or combined relationship summaries.  These changes are 

intended to enhance the relationship summary’s clarity, usability, and design, and to promote 

effective communication and understanding between retail investors and their firms and financial 

professionals.  We describe these changes in more detail below.  

We are also adopting some parts of the instructions that address presentation and 

formatting as proposed.  The instructions state that the relationship summary should be concise 

and direct, and firms must use plain English and take into consideration retail investors’ level of 

financial experience, as proposed.64  Firms also are not permitted to use multiple negatives, or 

legal jargon or highly technical business terms unless firms clearly explain them, as proposed.  In 

a change from the proposal, the instructions will not permit use of legal jargon or technical terms 

without explaining them in plain English, even if the firm believes that reasonable retail 

investors will understand those terms.65  Several commenters suggested that the relationship 

                                                                                                                                                             

63  Form CRS defines “dual registrant” as “A firm that is dually registered as a broker or dealer registered 
under section 15 of the Exchange Act and an investment adviser registered under section 203 of the 
Advisers Act and offers services to retail investors as both a broker-dealer and an investment adviser.”  
General Instruction 11.C. to Form CRS.  This definition varies from the one proposed in that it includes 
only those investment advisers registered with the SEC, rather than with the States.  For the avoidance of 
doubt, it also includes the statutory registration provisions for broker-dealers and investment advisers.  

64  See General Instruction 2.A. to Form CRS (providing that firms should (i) use short sentences and 
paragraphs; (ii) use definite, concrete, everyday words; (iii) use active voice; (iv) avoid legal jargon or 
highly technical business terms unless firms clearly explain them; and (v) avoid multiple negatives.  Firms 
must write their responses to each item as if speaking to the retail investor, using “you,” “us,” “our firm,” 
etc.).  Delivery of the relationship summary will not necessarily satisfy the additional requirements that 
broker-dealers and investment advisers have under the federal securities laws and regulations or other laws 
or regulations.  See General Instruction 2.D. to Form CRS; Proposed General Instruction 3 to Form CRS. 

65  General Instruction 2.A. to Form CRS.  Compare to Proposed General Instruction 2 to Form CRS 
(“…avoid legal jargon or highly technical terms unless you clearly explain them or you believe that 
reasonable retail investors will understand them…”). 



 

33 

 

summary avoid the use of jargon (e.g., terms like “asset-based fee” and “load” in the fees 

section),66 and several roundtable participants and participants in the RAND 2018 interviews and 

another study said that they did not understand certain technical terms.67  Roundtable participants 

and commenters on Feedback Forms asked that the relationship summary include definitions or a 

glossary.68  In addition, the IAC recommended that a document such as the relationship summary 

use plain English and a concise format.69  As a result, we are instructing firms to avoid using 

legal jargon and highly technical terms in the relationship summary unless they are able to 

explain the terms in the space of the relationship summary.  We believe this simpler approach 

obviates the need for firms to justify what they believe a reasonable retail investor would or 

would not understand.  Firms would have the flexibility to use their own wording, including 

legal or highly technical terms as long as they explain them, or may prefer to use simpler terms, 

given the space limitations of the relationship summary.  Additionally, we have added a cover 

page for Form CRS under the Exchange Act (17 CFR 249.640) only, displaying a currently valid 

                                                                                                                                                             

66  CFA Letter I; AARP Letter; IAA Letter I. 

67  See, e.g., Miami Roundtable; Houston Roundtable; Philadelphia Roundtable; RAND 2018, supra 
footnote13 (in qualitative interviews participants asked for definitions of “transaction-based fee,” asset-
based fee,” and struggled with terms such as “mark-up,” “mark-down,” “load,” surrender “charges” and 
“wrap fee”); see also Kleimann I, supra footnote 19. 

68  See, e.g., Philadelphia Roundtable, at 64 (participant recommending a glossary at the end of the 
relationship summary); Washington, D.C. Roundtable, at 31 (“You might want to consider a glossary of 
terms.”); Feedback Forms Comment Summary, supra footnote 11 (summary of comments to Question 4) 
(10 comments asked for a definition or a better explanation of the term “fiduciary,” seven asked for 
definitions of terms such as transaction-based fee, asset-based fee or wrap fee); see also Anonymous18 
Feedback Form (“A glossary would be nice – not in “legalize” [sic] language”).  

69  See IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10; and IAC Form CRS 
Recommendation, supra footnote 10. 



 

34 

 

OMB control number and including certain statements relating to federal information law and 

requirements, and the SEC’s collection of information.70   

1. Limited Prescribed Wording  

The proposed instructions would have required firms to include prescribed wording 

throughout many sections of the relationship summary.  In particular, the fees and costs, standard 

of conduct, and the comparison section for standalone broker-dealers and investment advisers 

included a number of required statements, many that differed for broker-dealers, investment 

advisers, and dual registrants.71  The introduction, conflicts of interest, and key questions 

sections also included some required statements.72  In response to comments (as described more 

fully below) we are largely eliminating the prescribed wording and replacing those statements 

with instructions that generally allow firms to describe their own offerings with their own 

wording.  

For example, the proposed instructions would have required broker-dealers to state, “If 

you open a brokerage account, you will pay us a transaction-based fee, generally referred to as a 

commission, every time you buy or sell an investment” and “The fee you pay is based on the 

specific transaction and not the value of your account.”73  Broker-dealers also would have stated 

“The more transactions in your account, the more fees we charge you.  We therefore have an 

                                                                                                                                                             

70  Under the Advisers Act, Form CRS is Part 3 of Form ADV, which already contains a cover page. 
71  See infra discussion at Sections II.B.3 (fees and costs and standard of conduct) and II.B.6 (proposed items 

omitted in final instructions). 

72  See infra discussion at Sections II.B.1 (introduction) and II.B.3 (conflicts of interests) and supra Section 
II.A.4 (conversation starters).   

73  Proposed Items 2.B.1. and 4.B.1. of Form CRS.   



 

35 

 

incentive to encourage you to engage in transactions.”74  Instead the final instructions will 

require broker-dealers to describe the principal fees and costs that retail investors will incur, 

including their transaction-based fees, and summarize how frequently the fees are assessed and 

the conflicts of interest they create.75     

Many commenters requested more flexibility for firms to provide accurate descriptions of 

their services.76  Some argued that the mix of prescribed and firm-authored wording required by 

the proposed instructions would be inaccurate, contribute to investor confusion, or be ineffective 

for investors, particularly language that some commenters considered “boilerplate.”77  

Observations reported in the RAND 2018 qualitative interviews and other surveys and studies 
                                                                                                                                                             

74  Proposed Item 4.B.5. of Form CRS. 

75  See Items 3.A. through 3.C. of Form CRS.   

76  See, e.g., IAA Letter I; Comment Letter of Massachusetts Mutual Life Insurance Company (Aug. 7, 2018) 
(“MassMutual Letter”); Comment Letter of the Association for Advanced Life Underwriting (Aug. 7, 
2018) (“AALU Letter”); Comment Letter of Prudential Financial, Inc. (Aug. 7, 2018) (“Prudential Letter”); 
Comment Letter of Mutual of America Life Insurance Company (Aug. 3, 2018) (“Mutual of America 
Letter”); Comment Letter of John Hancock Life Insurance Company (U.S.A) (Aug. 3, 2018) (“John 
Hancock Letter”); ACLI Letter; Comment Letter of New York Life Insurance Company (Aug. 7, 2018) 
(“New York Life Letter”); Comment Letter of Transamerica (Aug. 7, 2018) (“Transamerica Letter”); 
Vanguard Letter.  See also Betterment Letter I, supra footnote 18 (arguing that investor survey conducted 
by Hotspex showed that its more customized version of the relationship summary facilitated investor 
understanding).  Some individuals submitting Feedback Forms also preferred more firm-specific 
information.  See, e.g., Anonymous13 Feedback Form (“Firm-specific info would be nice on this 
document.”); Bhupalam Feedback Form (“I would like to see additional information regarding specific firm 
rather than a general description.”); Christine Feedback Form (“I’m interested in my individual advisor’s 
orientation – small cap, mid cap, large cap or mix growth vs. value foreign, domestic or mix fundamental 
or quantitative long term or short term”). 

77  ASA Letter (“[T]he mix of prescribed and customized language will only create more confusion and 
complexity, as well as legal risk for financial institutions.”); Primerica Letter (“This mix of prescribed and 
flexible disclosure would ultimately result in a patchwork of new disclosures that fail to comprehensively 
describe a particular firm’s business model in a way that is accessible and digestible by retail investors.”); 
IAA Letter I (“Many firms would . . . be compelled to explain to prospective clients how and why their 
business is different from the boilerplate descriptions and why the comparisons are not applicable. The 
boilerplate language may thus detract from a firm’s ability to explain its own services and make it harder 
for investors to understand those services.”). 



 

36 

 

also showed that investors had difficulty understanding, were confused by, or misinterpreted 

some of the prescribed wording.78  A range of commenters asserted that the proposed prescribed 

wording could be inaccurate or inapplicable.79  For example, various providers of insurance 

products explained that references to brokerage or investment advisory accounts were not 

consistent with their business models and could confuse retail investors because customers 

generally purchase insurance products directly from the issuer, without needing to open a 

brokerage account.80  One commenter expressed concern that some of the prescribed wording 

could constitute impermissible compelled speech that could raise First Amendment concerns.81  

That same commenter, with others, also opposed providing firms with more flexibility than 

                                                                                                                                                             

78  E.g., RAND 2018, supra footnote 13 (describing that, in qualitative interviews, participants noted some 
words or phrases that needed further definition and some misunderstood differences between account types 
and professionals); Kleimann I, supra footnote 19; Betterment Letter I (Hotspex) supra footnote 18 
(finding that investors had difficulty understanding certain key information on the SEC sample version of 
standalone investment adviser relationship summary); see also Kleimann II,  supra footnote 19 (investors 
misconstrued the legal standard in alternative versions of prescribed wording used in a redesigned version 
of the relationship summary); Feedback Forms Comment Summary, supra footnote 11 (summary of 
responses to Question 4) (41 Feedback Forms included narrative responses that indicated that one or more 
topics were too technical or could be improved; of these, 20 indicated that the relationship summary 
language was too technical, wordy, confusing or should be simplified; 23 indicated that information on fees 
and costs was too technical or needed to be more clear; 23 suggested that information in sections on 
relationships and services and obligations needed clarification, and 14 suggested clarification or more 
information about conflicts of interest).    

79  See, e.g., IAA Letter I; ACLI Letter; AARP Letter; SIFMA Letter; FSI Letter I; Triad Letter; Vanguard 
Letter. 

80  See, e.g., Comment Letter of the Committee of Annuity Insurers (Aug. 7, 2018) (“Committee of Annuity 
Insurers Letter”) (“The use of the term ‘brokerage account may be confusing to retail investors purchasing 
and owning annuities, as annuities are typically ‘held’ directly by an insurance company.”); ACLI Letter; 
IAA Letter I; FSI Letter I; Comment Letter of Lincoln Financial Group (Nov. 13, 2018) (“Lincoln 
Financial Group Letter”) (“Sales of variable annuities, and variable life insurance products, typically do not 
involve the opening of a brokerage account and are not conducted in a brokerage account.”). 

81  See CFA Letter I, supra footnote 37.   



 

37 

 

proposed to implement the relationship summary, arguing that more flexibility could impair 

comparability.82 

We recognize that extensive use of prescribed wording in certain contexts could add to 

investor confusion and may not accurately or appropriately capture information about particular 

firms.  Accordingly, the final instructions permit firms, within the parameters of the instructions, 

to describe their services, investment offerings, fees, and conflicts of interest using their own 

wording.  This approach should enable firms to reflect accurately what they offer to retail 

investors, should result in disclosures that are more useful to retail investors, and should mitigate 

concerns relating to the mix of prescribed and firm-authored wording, and the extensive use of 

prescribed wording, that the proposed instructions required.   

Although we are allowing more flexibility so that firms can describe their offerings more 

accurately, firms still will be required to discuss required topics within a prescribed order, as 

discussed below.83  This approach will facilitate transparency, consistency, and comparability of 

information across the relationship summaries of different firms, helping retail investors to focus 

on information that we believe would be particularly helpful in deciding among firms, financial 

professionals, services, and accounts — namely:  relationships and services; fees, costs, conflicts, 

and required standard of conduct; disciplinary history; and how to get additional information.  

We believe that more tailored, specific, and distinct information in the required topic areas also 

                                                                                                                                                             

82  See AFL-CIO, CFA Letter. 
83  See, e.g., General Instructions 1.A and 1.B., and 2.B. to Form CRS.   



 

38 

 

will better serve the educational purpose by facilitating more robust substantive comparisons 

across firms.   

This approach addresses — and mitigates —First Amendment concerns.  Generally, the 

instructions no longer require any specific speech.84  Rather, they permit firms to use their own 

words to impart accurate information to investors.  In certain circumstances, however, we are 

continuing to require firms to use prescribed wording.  For example, the final instructions require 

firms to use standardized headings and conversation starters, which are in the form of questions 

that investors are encouraged to ask.85  These elements are organizational (the headings) or 

intended to prompt a discussion by the investor (the conversation starters).86  The final 

instructions also require firms to include prescribed statements describing their required standard 

of conduct when providing recommendations or advice.87  Requiring firms to provide a 

consistent articulation of their required legal obligations in this regard will reduce and minimize 

investor confusion, as compared with allowing firms to state their required standard of conduct 

using their own wording.88  These statements are designed to require the disclosure of purely 

factual information about the standard of conduct that applies to the provision of 

recommendations by broker-dealers and the provision of advice by investment advisers under 
                                                                                                                                                             

84  For example, the final instructions no longer require the proposed Comparisons section or other prescribed 
wording that could be perceived as requiring firms to compare their owns services unfavorably to those of 
their competitors.  See infra Section II.B.6.   

85  See infra Sections II.A.2 and II.A.4. 

86 See infra Sections II.A.2. and II.A.4. 

87  Item 3.B.(i) of Form CRS.  See infra Section II.B.3.b. 

88  See infra Sections II.A.2 and II.B.3.b. 



 

39 

 

their respective legal regimes.89  Finally, the instructions require firms to include a prescribed, 

factual statement regarding the impact of fees and costs on investments, and a prescribed 

statement encouraging retail investors to understand what fees and costs they are paying.90  As 

explained further below, the final instructions provide that if a required disclosure or 

conversation starter is inapplicable to a firm’s business or specific wording required by the 

instructions is inaccurate, firms may omit or modify it.91 

As in the proposal, the final instructions include parameters for the scope of information 

expected within the relationship summary, though we are modifying the requirements to clarify 

the scope further in light of commenter concerns.  First, all information in the relationship 

summary must be true and may not omit any material facts necessary in order to make the 

disclosures, in light of the circumstances under which they were made, not misleading.92  The 

                                                                                                                                                             

89  See Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229, 249-50 (2010) (upholding against 
First Amendment challenge a requirement that lawyers disclose their “legal status” and “the character of 
the assistance provided”);  Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985) 
(upholding required disclosure of factual information about terms of service); Pharm. Care Mgmt. Ass’n v. 
Rowe, 429 F.3d 294, 310 (1st Cir. 2005) (upholding requirement that pharmacy benefit managers disclose 
conflicts of interest and financial arrangements). 

90  See Item 3.A.(iii) of Form CRS (requiring firms to state, “You will pay fees and costs whether you make or 
lose money on your investments.  Fees and costs will reduce any amount of money you make on your 
investments over time.  Please make sure you understand what fees and costs you are paying.”).  See also 
infra footnotes 424–425 and accompanying text.   

91  See General Instruction 2.B to Form CRS.  We are adopting this provision to ensure that firms are not 
compelled to include wording in their relationship summaries that is misleading or inaccurate in the context 
of their business models.  This provision may apply in limited circumstances.  For example, the headings 
and conversation starters prescribed by the final instructions are worded at a highly generalized level and 
cover selected key topics that are broadly applicable to broker-dealers and investment advisers and their 
relationships with retail investors, irrespective of business model (i.e., relationships and services the firm 
offers to retail investors, fees and costs that retail investors will pay, specified conflicts of interest and 
standards of conduct, and disciplinary history).     

92  General Instruction 2.B. to Form CRS (“All information in your relationship summary must be true and 
may not omit any material facts necessary in order to make the disclosures required by these Instructions 

 



 

40 

 

proposed instructions required all information in the relationship summary to be true and 

prohibited firms from omitting any material facts necessary to make the disclosures required by 

the instructions and the applicable item not misleading, but did not include the clause “in light of 

the circumstances under which they were made.”93  Commenters raised concerns with respect to 

the applicability of this standard to a short document with strict page limits that is meant to 

provide only a brief summary of information.94   

We continue to believe that firms should include only as much information as is 

necessary to enable a reasonable investor95 to understand the information required by each 

                                                                                                                                                             

and the applicable Item, in light of the circumstances under which they were made, not misleading.”).  Cf. 
Proposed Instruction 3 to Form CRS (“All information in your relationship summary must be true and may 
not omit any material facts necessary to make the disclosures required by these Instructions and the 
applicable item not misleading.”). 

93  Proposed General Instruction 3 to Form CRS. 

94  See, e.g., LPL Financial Letter (raising concerns that the relationship summary raises the risk of liability for 
material omissions given its page limits and required level of detail); CCMC Letter (“The page and length 
limitations imposed by the proposed regulation, coupled with the required disclosure that is mandated by 
the proposed rules, present a substantial risk of liability for omissions that may be necessary only to ensure 
the disclosure meets the Commission’s strict formatting requirements.”); Fidelity Letter (stating that firms 
“would find it very challenging to summarize their offerings within the four-page limit and other content 
and formatting constraints of the form as proposed, let alone to do so in a manner that provides sufficient 
detail to convey meaningful information to investors, and is sufficiently accurate to avoid creating liability 
for a misstatement”). 

95  The proposed instructions referred to a “reasonable retail investor.”  For example, under the proposed 
instructions, firms would have been able to omit or modify prescribed wording or other statements required 
to be part of the relationship summary if such statements were inapplicable to a firm’s business or would 
have been misleading to a “reasonable retail investor.”  See Proposed General Instruction 3 to Form CRS.  
The final instructions no longer make reference to a “reasonable retail investor.”  By eliminating the 
reference to a “reasonable retail investor,” we are clarifying that we did not intend at the proposal, and do 
not intend now, to introduce a new standard under the federal securities laws, which generally refer to what 
a “reasonable investor” would consider important in making a decision.  See infra footnotes 95–105 and 
accompanying text.  References to a “reasonable retail investor” in the proposed instructions were meant to 
clarify how the operative Instruction or Item would apply in the context of a retail investor.  Because new 
rule 17a-14 under the Exchange Act and new rule 204-5 under the Advisers Act require firms to deliver 
relationship summaries to retail investors in accordance with such rules, we do not believe such 
clarifications are necessary.41 

 

item.96  As discussed below, we believe that investors will benefit from receiving a relationship 

summary containing high-level information that they will be more likely to read and understand, 

with the ability to access more detailed information.97  As a result, we recognize a firm’s 

relationship summary by itself is a summary of the information required to inform retail 

investors about the services a firm provides along with its fees, costs, conflicts of interest, and 

standard of conduct.  We also believe that the disclosure provided in the relationship summary 

should be responsive and relevant to the topics covered by the final instructions,98 and not omit 

information that is required to be disclosed or necessary to make the required disclosure not 

misleading.99  We are sensitive to commenters’ concerns, however, regarding expectations for 

                                                                                                                                                             

96  General Instruction 2.A. to Form CRS.  The instructions remind firms to use not only short sentences as 
proposed, but also short paragraphs.  General Instruction 2.A.(i) to Form CRS. 

97  See infra Section II.A.3. 

98  Firms should keep in mind the applicability of the antifraud provisions of the federal securities laws, 
including section 206 of the Advisers Act, section 17(a) of the Securities Act, and section 10(b) of the 
Exchange Act and rule 10b-5 thereunder, in preparing the relationship summary, including statements made 
in response to the relationship summary’s “conversation starters.”  See infra Section II.B.2.c. 

99  This approach is consistent with the approach the Commission has taken with respect to disclosure more 
broadly.  See, e.g., rule 408(a) under Regulation C [17 CFR 230.408(a)] (“In addition to the information 
expressly required to be included in a registration statement, there shall be added such further material 
information, if any, as may be necessary to make the required statements, in the light of the circumstances 
under which they are made, not misleading”); Exchange Act rule 12b-20 [17 CFR 240.12b-20] (“In 
addition to the information expressly required to be included in a statement or report, there shall be added 
such further material information, if any, as may be necessary to make the required statements, in the light 
of the circumstances under which they are made not misleading”); see also Commission Statement and 
Guidance on Public Company Cybersecurity Disclosures, Securities Act Release No. 82746 (Feb. 21, 2018)  
[83 FR 8166 (Feb. 26, 2018)] (stating that the “Commission considers omitted information to be material if 
there is a substantial likelihood that a reasonable investor would consider the information important in 
making an investment decision or that disclosure of the omitted information would have been viewed by 
the reasonable investor as having significantly altered the total mix of information available”); TSC 
Industries v. Northway, 426 U.S. 438, 449 (1976) (stating a fact is material “if there is a substantial 
likelihood that a reasonable shareholder would consider it important” in making an investment decision or 
if it “would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of 
information made available” to the shareholder); Basic, Inc. v. Levinson, 485 U.S. 224, 240 (1988) (stating 
that “materiality depends on the significance the reasonable investor would place on the withheld or 

 



 

42 

 

the scope of required information within page limits.  In this regard, the instructions continue to 

provide, as proposed, that firms may not include a disclosure in the relationship summary other 

than a disclosure that is required or permitted by the instructions and the applicable item,100 and 

that all the information contained in the relationship summary must be true.101   

In a change from the proposal, and to address commenters’ concerns, the final 

instructions provide that the information contained in the relationship summary may not omit 

any material facts necessary in order to make the disclosures, in light of the circumstances under 

which they were made, not misleading.102  We have added the phrase “in light of the 

circumstances under which they were made” to clarify that the content included or not included 

in the relationship summary should be viewed, for example, in light of the fact that the disclosure 

is intended to be a summary, that firms must adhere to the page limit, and that there will be links 

to additional information.  Any information contained in the relationship summary or omitted 

facts will not be viewed in isolation in respect of determining whether such information would 

have been viewed by a reasonable investor as having significantly altered the total mix of 

                                                                                                                                                             

misrepresented information”); Securities and Exchange Com’n v. Texas Gulf Sulphur, 258 F. Supp. 262, 
279 (S.D.N.Y. 1966) (stating that “[a]n insider’s liability for failure to disclose material information which 
he uses to his own advantage in the purchase of securities extends to purchases made on national securities 
exchanges as well as to purchases in ‘face-to-face’ transactions”); Cochran v. Channing Corporation, 211 
F. Supp. 239, 242 (S.D.N.Y. 1962) (stating that the “Securities Exchange Act was enacted in part to afford 
protection to the ordinary purchaser or seller of securities. Fraud may be accomplished by false statements, 
a failure to correct a misleading impression left by statements already made or, as in the instant case, by not 
stating anything at all when there is a duty to come forward and speak”). 

100  General Instruction 1.B. to Form CRS; see also Proposed General Instruction 1.(d) to Form CRS. 

101  General Instruction 2.B. and 2.C. to Form CRS; see also Proposed General Instruction 3 to Form CRS.  

102  Id. 



 

43 

 

information available.103  As discussed below, firms will provide additional detail and context 

through layered disclosure.  For example, the instructions require firms to include specific 

references or a link to additional information as part of the relationships and services and fees 

and conflicts sections.104  In other instances, the instructions encourage firms to reference or link 

to additional information to supplement their required disclosures.105 While this change from the 

proposal is drawn from other areas of the federal securities laws,106 Form CRS is not intended to 

create a private right of action.  

Second, firms may omit or modify required disclosures or conversation starters that are 

inapplicable to their business, or specific wording required by the final instructions that is 

inaccurate.107  The proposed instructions permitted firms to omit or modify required disclosures 

that were inapplicable to their business or would be misleading to a reasonable retail investor.108  

We modified the proposed instruction to provide a more concrete requirement allowing firms to 

omit or modify prescribed wording, rather than using a broader standard referencing a reasonable 
                                                                                                                                                             

103  See rule 10b-5 under the Exchange Act [17 CFR 240.10b-5]; supra footnote 99 and accompanying text;see 
also footnote 469 and accompanying text. 

104 See infra Section II.A.3.  

105  See, e.g., General Instruction 3.A. to Form CRS (“You are encouraged to use charts, graphs, tables, and 
other graphics or text features in order to respond to the required disclosures. . . .  You also may include: (i) 
a means of facilitating access to video or audio messages, or other forms of information (whether by 
hyperlink, website address, Quick Response Code (“QR code”), or other equivalent methods or 
technologies); (ii) mouse-over windows; (iii) pop-up boxes; (iv) chat functionality; (v) fee calculators; or 
(vi) other forms of electronic media, communications, or tools that designed to enhance a retail investor’s 
understanding of the material in the relationship summary.”).   

106  See supra footnotes 99 and 103 and accompanying text. 
107  General Instruction 2.B. to Form CRS. 

108  See Proposed General Instruction 3 to Form CRS (“If a statement is inapplicable to your business or would 
be misleading to a reasonable retail investor, you may omit or modify that statement.”). 



 

44 

 

retail investor.  This instruction is intended to ensure that no statements are misleading or 

inaccurate in the context of a firm’s particular services or business.  Rather, the objective of the 

Commission is to ensure that required disclosures are purely factual and provide investors with 

an accurate portrayal of the firm’s services and operations. 

Finally, given that firms will use mostly their own wording, we are adding instructions 

that remind firms that their responses must be factual and provide balanced descriptions to help 

retail investors evaluate the firm’s services.109  For example, firms may not include exaggerated 

or unsubstantiated claims, vague and imprecise “boilerplate” explanations, or disproportionate 

emphasis on possible investments or activities that are not made available to retail investors.110  

The relationship summary is designed to serve as disclosure, rather than marketing material, and 

should not unduly emphasize aspects of firms’ offerings that may be favorable to investors over 

those that may be unfavorable. 

2. Standard Question-and-Answer Format and Other Presentation 
Instructions  

As with the proposed instructions, the final instructions require firms to present 

information under standardized headings and to respond to all the items in the final instructions 

in a prescribed order.111  Instead of using declarative headings as proposed, however, the 

headings will be in the form of questions.112  This change responds to feedback from surveys and 

                                                                                                                                                             

109  General Instruction 2.C. to Form CRS. 

110  General Instruction 2.C. to Form CRS. 

111  General Instruction 1.B. to Form CRS. 

112  See generally Items 2.A., 3.A., 3.B., 3.C, and 4.A to Form CRS.   



 

45 

 

studies113 and commenters,114 including many submitting their own mock-ups of the relationship 

summary that suggested or used a question-and-answer format in their own documents.  Several 

commenters noted that the question-and-answer format is a more effective design for consumer 

disclosures because it focuses on questions to which a consumer wants answers and allows a 

consumer to skim quickly and understand where to get more information.115  Based on 

consideration of these comments, we are both incorporating the format generally and are 

utilizing several of the question headings suggested by commenters in mock-ups, as discussed in 

each item below. 

In addition to the standardized headings, we continue to believe that a prescribed order of 

topics facilitates comparability of different firms’ relationship summaries.  Commenters 

generally supported or did not oppose the premise of a prescribed order of topics.116  Some 

                                                                                                                                                             

113  See e.g.; RAND 2018, supra footnote 13 (reporting that about 60% of survey respondents preferred a 
question-and-answer format over the sample relationship summary format presented in the survey). 
Kleimann I, supra footnote 19 (“Participants liked the Key Questions section, but wanted the questions to 
be answered within the document.”). 

114  IAA Letter I (“A [question-and-answer] format will help keep the relationship summary short and should 
also remove the onus of the retail investor having to ask questions.  This format would encourage further 
conversation, particularly if the Commission requires firms to point investors to additional information—
including comparison information and other key questions—on the SEC’s website.”); Schwab Letter I 
(citing Kleimann Communication Group, Inc., Making Disclosures Work for Consumers (Jun. 14, 2018), 
available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac061418-slides-by-susan-
kleimann.pdf, and contemporaneous discussions); Schwab Letter II (“Form CRS should be organized 
around questions”); Fidelity Letter (redesigned relationship summary with a question-and-answer format).   

115  See Kleimann II, supra footnote 19 (“Readers ask questions when they read, especially of functional 
documents . . . .  For good design, we want to build upon this tendency by identifying the key questions 
investors should or are likely to ask and featuring them prominently in the text, thus easing the cognitive 
task for readers.); Schwab Letter I (“[Q]uestions that a consumer has . . . should be the organizing 
principle.”); see also CFA Letter I.  

116  See, e.g., Trailhead Consulting Letter (supporting a standardized order of topics to facilitate comparability); 
Fidelity Letter (“[W]e urge the SEC to consider prescribing content and topics, but not specific 
language…”).   



 

46 

 

commenters did, however, suggest changes to the organization or inclusion of topics, either 

explicitly in their comment letters, implicitly by the design of their own mock-ups, or both.117  

Results of surveys and studies that assessed comprehension of the sample proposed relationship 

summaries demonstrated the importance of context and revealed confusion caused by the 

placement of some information.  For example, the RAND 2018 qualitative interviews suggested 

that investors were confused by and had difficulty reconciling the conflicts and standard of 

conduct sections, which were separated by the fees and comparisons sections.118  Another study 

suggested that the appearance of fee information in three separate sections and separation of the 

fees and conflicts sections by the comparisons section inhibited understanding of the connection 

between fees and conflicts.119  As discussed further below, we are combining the proposed Fees 

and Costs, Conflicts of Interest, and Standard of Conduct sections into one, to address these 

comments.120  In addition, in response to suggestions that we provide more flexibility for how 

                                                                                                                                                             

117  See, e.g., CFA Letter I (suggesting changes to the order of the disclosures and the design of the relationship 
summary); IAA Letter I (suggesting a different order of topics and elimination of the Comparisons section, 
including by submitting its own mock-up); Comment Letter of Charles Schwab & Co., Inc. (Feb. 26, 2019) 
(“Schwab Letter III”) (providing sample Form CRS instructions that permit flexibility as to the order of 
sub-topics under each topic).  On Feedback Forms, 57 (about 60%) commenters responded “yes” when 
asked whether information was in the appropriate order; 8 commenters suggested moving the Key 
Questions to be first or closer to the front of the document.  See Feedback Forms Comment Summary, 
supra footnote 11 (summary of responses to Questions 3(b) and 7).  A few commenters on Feedback Forms 
suggested moving the Additional Information section forward.  See Durgin Feedback Form, Salkowitz 
Feedback Form, Starmer2 Feedback Form, Anonymous14 Feedback Form, and a few suggested changes to 
the order of discussion of obligations and conflicts.  See Anonymous28 Feedback Form, Asen Feedback 
Form, Lee2 Feedback Form.   

118  See RAND 2018, supra footnote 13.  

119  See Kleimann I, supra footnote 19, at 30 (participants “had difficulty building knowledge and relating one 
piece to another when it was separated by physical space.”).  

120  See Item 3 of Form CRS. 



 

47 

 

firms describe their services so that they can more accurately convey the information, the final 

instructions do not require firms to present the information within each section in the order 

listed.121  Therefore, firms are free to discuss the required sub-topics within each item in an order 

that they believe best promotes accurate and readable descriptions of their business. 

The final instructions provide for page limits to promote brevity, as proposed.  The 

proposed instructions limited the length of the relationship summary to four pages for both 

standalone firms and dual registrants.122  The final instructions provide that for dual registrants 

that include their brokerage services and advisory services in a single relationship summary, the 

relationship summary must not exceed four pages in paper format, or the equivalent if delivered 

electronically.123  For broker-dealers124 and investment advisers125 a relationship summary in 

                                                                                                                                                             

121  See Proposed General Instruction 1.(b) to Form CRS (“Unless otherwise noted, you must also present the 
required information within each item in the order listed.”). 

122  Proposed General Instruction 1.(c) to Form CRS. 

123  General Instruction 1.C. to Form CRS. 

124  Proposed Form CRS defined “standalone broker-dealer” as “a broker or dealer registered under section 15 
of the Exchange Act that offers services to retail investors and (i) is not dually registered as an investment 
adviser under section 203 of the Advisers Act or (ii) is dually registered as an investment adviser under 
section 203 of the Advisers Act but does not offer services to retail investors as an investment adviser.”  
We are not adopting this definition because we believe using the term “broker-dealer” is sufficient for the 
final instructions.  The final instructions provide that Form CRS applies to broker-dealers registered under 
section 15 if the Exchange Act.  See supra footnote 8. 

125  Proposed Form CRS defined “standalone investment adviser” as “an investment adviser registered under 
section 203 of the Advisers Act that offers services to retail investors and (i) is not dually registered as a 
broker or dealer under Section 15 of the Exchange Act or (ii) is dually registered as a broker or dealer 
under Section 15 of the Exchange Act but does not offer services to retail investors as a broker-dealer.”  
We are not adopting this definition because we believe using the term “investment adviser” is sufficient for 
the final instructions.  See supra footnote 8.  Furthermore, the final instructions specify that Form CRS 
applies to investment advisers registered under section 203 of the Advisers Act.   



 

48 

 

paper format must not exceed two pages, or the equivalent if delivered electronically.126  Dual 

registrants that prepare separate relationship summaries for their brokerage and advisory services 

are limited to two pages each, or the equivalent if delivered electronically.127  Unlike the 

proposed instructions, the final instructions do not prescribe paper size, font size, and margin 

width, providing instead that they should be reasonable.128  For example, we believe that 8½” x 

11” paper size, at least an 11 point font size, and a minimum of 0.75” margins on all sides, as 

proposed, could be considered reasonable, but other parameters could also be reasonable.    The 

objective of the proposed paper, font, and margin size limitations was to make the relationship 

summary easy to read.  We expect that a visually engaging and effective design, including in 

electronic format, could achieve the same objective without the prescriptive limitations.   

Many commenters preferred a shorter, one-to-two page document more heavily relying 

on layered disclosure with increased use of hyperlinks and other cross-references to more 

detailed disclosure.129  Commenters also said that investors are more likely to read a shorter 

                                                                                                                                                             

126  General Instruction 1.C. to Form CRS. 

127  General Instruction 1.C. to Form CRS.  We discuss additional considerations and requirements for dual 
registrants and affiliates in Section II.A.5 below. 

128  General Instruction 1.C. to Form CRS. 

129  See, e.g., Schwab Letter I (“Form CRS should simply be a short navigation aid to the existing Form ADV 
Part 2 disclosure” for investment advisers or “to additional information readily available on the firm’s 
website or enclosed with the account documentation” for broker-dealers.); FSI Letter I (“While we support 
the Commission’s efforts to ensure concise disclosure by limiting the required Form CRS to four pages (or 
its electronic equivalent), we suggest an even shorter document (perhaps as short as one page) with 
hyperlinks to more detailed disclosures.”); see also AARP Letter; Better Markets Letter; Comment Letter 
of the Teachers Insurance and Annuity Association of America (Aug. 7, 2018) (“TIAA Letter”); Bank of 
America Letter; CCMR Letter; LPL Financial Letter; Kleimann II, supra footnote 19 (“Form CRS should 
be as short as possible.”). 



 

49 

 

document.130  Several commenters submitted mock-ups that were shorter than four pages.131  

Others indicated that the length of Form CRS was acceptable but should not exceed four 

pages.132  On the other hand, certain commenters suggested that the length of the relationship 

summary may be too short to appropriately describe firms’ insurance services or products.133  

One commenter said that it would be challenging for dual registrants to summarize all of their 

offerings within the four-page limit.134  Investor feedback from surveys, studies, roundtables, and 

Feedback Forms also did not show consistent results.  For example, 57% of the RAND 2018 

survey respondents indicated that the proposed relationship summary was too long, 41% said it 

was about right, and roughly 2% said it was too short.135  In section-by-section questioning, 

however, the most common response from RAND 2018 survey respondents was to keep the 

section length as is.136  Similarly, some roundtable participants provided feedback that the 

                                                                                                                                                             

130  See Fidelity Letter; see also Schwab Letter I (Koski), supra footnote 21 (85% of survey participants 
answered that they would be more likely to read disclosure that is short and to the point with links to more 
information; 61% answered that they would be less likely to read a document that is longer and more 
comprehensive, but 31% answered that they would be more likely to read a longer and more 
comprehensive disclosure); Comment Letter of Glen Strong (Jul. 27, 2018). 

131  See, e.g., Schwab Letter I; Fidelity Letter; IAA Letter I. 

132  See Cambridge Letter; Comment Letter of Morningstar, Inc. (Aug. 7, 2018) (“Morningstar Letter”); 
Trailhead Consulting Letter. 

133  See, e.g., ACLI Letter; MassMutual Letter. 

134  See Fidelity Letter. 

135  RAND 2018, supra footnote 13. 

136  RAND 2018, supra footnote 13; see also Cetera Letter II (Woelfel), supra footnote 17 (when asked 
generally how the relationship summary could be improved, 10% of survey respondents said relationship 
summary could be shorter). 



 

50 

 

proposed length was right at the maximum, “about right,” or “good,”137 whereas others would 

have preferred a shorter document.138  About 40% of commenters on Feedback Forms said that 

relationship summary was an appropriate length, while about 30% indicated a preference for a 

shorter document.139   

In light of commenter and investor feedback, we have determined that the relationship 

summary should be no more than four pages, and that in many cases a document shorter than 

four pages is appropriate.  As proposed, both standalone firms and dual registrants were subject 

to a four-page limit, even though a dual registrant may have to include more disclosures 

discussing its advisory business and brokerage business as compared with standalone firms.  

Upon further consideration of the comments advocating for a more streamlined disclosure that 

includes more white space, we are adopting a four-page limit for dual registrants that prepare one 

combined relationship summary, to permit them to capture all of the required information within 

twice as much space as for standalone firms.  If dual registrants and affiliated140 standalone firms 

choose to prepare separate relationship summaries for their brokerage and investment advisory 

services, each relationship summary should not exceed two pages.141  The two-page limit will 

                                                                                                                                                             

137  Washington, D.C. Roundtable, at 18, 26.  

138  See Philadelphia Roundtable, at 5, 19 (noting that lengthy disclosure “actually prevents investor interest 
and really understanding more.  If something like [the relationship summary] can replace the 200 pages and 
then you have access to the 200 pages if you want them, that’s a better system”). 

139  See Feedback Forms Comment Summary (summary of responses to Question 6), supra footnote 11. 

140  Form CRS defines an “affiliate” as “Any persons directly or indirectly controlling or controlled by you or 
under common control with you.”  General Instruction 11.A. to Form CRS. 

141  General Instruction 1.C. to Form CRS (“Dual registrants and affiliates that prepare separate relationship 
summaries are limited to two pages for each relationship summary. . . . If delivered electronically, the 

 



 

51 

 

help to facilitate comparison of the dual registrant’s services, as investors can easily review the 

separate relationship summaries side-by-side, and will encourage firms to focus on succinctly 

and clearly explaining the required information.  Some commenters, including providers of 

insurance products, supported a longer relationship summary or expressed concern that four 

pages would not be enough to allow for a summary of all of their offerings.142  We believe that 

the elimination of certain sections (such as the comparison section)143 and most of the prescribed 

wording from the relationship summary, along with the flexibility firms will have under the final 

instructions to describe services with their own wording, and to omit or modify required 

disclosures or conversation starters that are inapplicable to their business or specific wording that 

is inaccurate, should help to alleviate the concerns of those who advocated for the relationship 

summary to be longer. 

3. Electronic and Graphical Formats, and Layered Disclosure  

We are adding instructions that clarify our support for firms wishing to use electronic 

media in preparing the relationship summary for retail investors.144  The proposed instructions 

would have permitted firms to add embedded hyperlinks within the relationship summary in 

                                                                                                                                                             

relationship summary must not exceed the equivalent of two pages or four pages in paper format, as 
applicable.”). 

142  See supra footnotes 133–134 and accompanying text.  

143  See infra Section II.B.6 (Proposed Items Omitted in Final Instructions). 

144   Delivery is discussed in Section II.C.  Firms may deliver electronic versions of the relationship summary in 
accordance with the final instructions and the Commission’s guidance regarding electronic delivery.  See 
General Instructions 10.B. through 10.D. to Form CRS. 



 

52 

 

order to supplement required disclosures145 and would have required firms to use hyperlinks for 

any document that is cross-referenced in any electronic relationship summary.146  The proposed 

instructions also permitted firms to use various graphics or text features to explain the required 

information but did not reference whether they should be electronic- or paper-based.147 

Many commenters supported electronic formats, including in connection with layered 

disclosure.148  One commenter endorsed electronic, including mobile, formats as inherently 

easier to navigate and use in a layered approach and asserted that the relationship summary 

would be more engaging to investors, and thus more effective as a disclosure, if the Commission 

encouraged more creative use of electronic formats.149  Research submitted by commenters and 

feedback from our investor roundtables indicated that investors preferred a more visually 

                                                                                                                                                             

145  Proposed General Instruction 1.(g) to Form CRS (“You may add embedded hyperlinks within the 
relationship summary in order to supplement required disclosures, for example, links to fee schedules, 
conflicts disclosures, the firm’s narrative brochure required by Part 2A of Form ADV, or other regulatory 
disclosures.”). 

146  Proposed General Instruction 1.(g) to Form CRS (“In a relationship summary that is posted on your website 
or otherwise provided electronically, you must use hyperlinks for any document that is cross-referenced in 
the relationship summary if the document is available online.”). 

147  Proposed General Instruction 1.(f) to Form CRS (“You may use charts, graphs, tables, and other graphics 
or text features to respond to explain the required information, so long as the information: (i) is responsive 
to and meets the requirements in these instructions (including space limitations); (ii) is not inaccurate or 
misleading; and (iii) does not, because of the nature, quantity, or manner of presentation, obscure or impede 
understanding of the information that must be included. When using interactive graphics or tools, you may 
include instructions on their use and interpretation.”). 

148  See, e.g., IAA Letter I (“Each key point should be made as simply and succinctly as possible, and the 
investor should then be pointed clearly and directly to specific additional plain English disclosure 
explaining the point . . . . This approach would also provide firms with the flexibility they need to use 
innovative design and delivery techniques.”).   

149  See IAA Letter I.   



 

53 

 

appealing disclosure.150  Commenters recommended a more visually-focused and designed 

experience, and many mock-ups that commenters submitted used graphics and other design 

features extensively.151  In addition, the IAC has recommended exploring the use of layered 

disclosure in certain contexts.152  The IAC has also recommended that the Commission “continue 

to explore methods to encourage a transition to electronic delivery that respect investor 

preferences and that increase, rather than reduce, the likelihood that investors will see and read 

important disclosure documents.”153  Some commenters also expressed support for the IAC’s 

recommendation relating to electronic delivery.154   

                                                                                                                                                             

150  See Betterment Letter I (Hotspex), supra footnote 18 (reporting study authors’ conclusions that survey 
respondents found a version of the standalone adviser relationship summary “more appealing and 
understandable,” where Betterment revised the form to “[i]mprove visual hierarchy (e.g., layout, shading, 
shorten and standardize paragraph lengths to improve legibility, appeal and retention of information”); 
Schwab Letter I (Koski), supra footnote 21(79% of survey respondents said they are more likely to read 
disclosure that is “visually appealing and did not seem like a legal document”); Washington, D.C. 
Roundtable, at 20; Atlanta Roundtable, at 35. 

151  See, e.g., CFA Letter I; Fidelity Letter (citing to Stanford Law School Design Principles, Use visual design 
and interactive experiences, to transform how you present legal info to lay people, available at 
http://www.legaltechdesign.com/communication-design); Betterment Letter I (mock-up); SIFMA Letter; 
IAA Letter I; Schwab Letter I; see also Kleimann II, supra footnote 19 (describing design assumptions for 
a redesigned version of the relationship summary). 

152  See IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10 (in connection with the 
disclosure of disciplinary history, the Commission “should look at whether it might be beneficial to adopt a 
layered approach to such disclosures, with the goal of developing a more abbreviated, user-friendly 
document for distribution to investors”). 

153  Investor Advisory Committee, Recommendation of the Investor as Purchaser Subcommittee:  Promotion of 
Electronic Delivery and Development of a Summary Disclosure Document for Delivery of Investment 
Company Shareholder Reports (Dec. 7, 2017), available at https://www.sec.gov/spotlight/investor-
advisory-committee-2012/recommendation-promotion-of-electronic-delivery-and-development.pdf (“IAC 
Electronic Delivery Recommendation”). 

154  See, e.g., FSI Letter I; Cambridge Letter; Comment Letter of the Institute for Portfolio Alternatives (Aug. 
7, 2018) (“Institute for Portfolio Alternatives Letter”). 



 

54 

 

Accordingly, we are adopting and adding provisions to the proposed instructions to 

encourage the use of electronic formatting and graphical, text, online features and layered 

disclosures in preparing their relationship summaries.155  Key elements of the final instructions 

include the following:  

• The instructions encourage (rather than just permit, as proposed) firms to use 

graphics or text features to respond to the required disclosures, or to make 

comparisons among their offerings, including by using charts, graphs, tables, text 

colors, and graphical cues, such as dual-column charts.156  If the chart, graph, 

table, or other graphical feature is self-explanatory and responsive to the 

disclosure item, additional narrative language that may be duplicative is not 

required.  For a relationship summary provided electronically, the instructions 

further encourage online tools that populate information in comparison boxes 

based on investor selections.157  

                                                                                                                                                             

155  We created a separate section in the instructions focused on electronic and graphical formats that includes 
these instructions.  Proposed General Instruction 1.(f) to Form CRS (“You may use charts, graphs, tables, 
and other graphics or text features to explain the required information, so long as the information: (i) is 
responsive to and meets the requirements in these instructions (including space limitations); (ii) is not 
inaccurate or misleading; and (iii) does not, because of the nature, quantity, or manner of presentation, 
obscure or impede understanding of the information that must be included.  When using interactive 
graphics or tools, you may include instructions on their use and interpretation.”). 

156  See General Instruction 3.A. to Form CRS (“You are encouraged to use charts, graphs, tables, and other 
graphics or text features to respond to the required disclosures.  You are also encouraged to use text 
features, text colors, and graphical cues, such as dual-column charts, to compare services, account 
characteristics, investments, fees, and conflicts of interest.”). 

157  See General Instruction 3.A. to Form CRS (“For a relationship summary that is posted on your website or 
otherwise provided electronically, we encourage online tools that populate information in comparison 
boxes based on investor selections.”). 



 

55 

 

• The instructions reference a non-exhaustive list of electronic media, 

communications, or tools that firms may use in their relationship summary.158  

We are including an instruction that, in a relationship summary that is posted on a 

firm’s website or otherwise provided electronically, firms must provide a means 

of facilitating access (e.g., hyperlinking) to any information that is referenced in 

the relationship summary if the information is available online.159  For 

relationship summaries delivered in paper format, firms may include URL 

addresses, QR codes, or other means of facilitating access to such information.160  

This instruction permits layered disclosure through paper disclosures and hybrid 

paper and electronic deliveries, while supporting some investors’ preference for 

paper.   

                                                                                                                                                             

158  General Instruction 3.A. to Form CRS (“You also may include: (i) a means of facilitating access to video or 
audio messages, or other forms of information (whether by hyperlink, website address, Quick Response 
Code (“QR code”), or other equivalent methods or technologies); (ii) mouse-over windows; (iii) pop-up 
boxes; (iv) chat functionality; (v) fee calculators; or (vi) other forms of electronic media, communications, 
or tools designed to enhance a retail investor’s understanding of the material in the relationship 
summary.”). 

159  General Instruction 3.B. to Form CRS. (“In a relationship summary that is posted on your website or 
otherwise provided electronically, you must provide a means of facilitating access to any information that 
is referenced in the relationship summary if the information is available online, including, for example, 
hyperlinks to fee schedules, conflicts disclosures, the firm’s narrative brochure required by Part 2A of Form 
ADV, or other regulatory disclosures.”).   

160  General Instruction 3.B. to Form CRS.  (“In a relationship summary that is delivered in paper format, you 
may include URL addresses, QR codes, or other means of facilitating access to such information.”). 



 

56 

 

• The instructions provide guidance that firms may include instructions on the use 

and interpretation of interactive graphics or tools, as proposed.161  We believe that 

these features can make the relationship summary more engaging, accessible, and 

effective in communicating to retail investors.162   

• The instructions replace the term “hyperlink” with the more evergreen concept of 

“a means of facilitating access,” which will include hyperlinks as well as website 

addresses, QR Codes, or other equivalent methods or technologies.163  Expanding 

the types of technology referenced in the instructions will make them more 

relevant as new technologies continue to be developed.  

                                                                                                                                                             

161  General Instruction 3.C. to Form CRS.  Instructions that firms provide on the use and interpretation of 
interactive graphics or tools would not be subject to the page limitation for relationship summaries under 
General Instruction 1.C to Form CRS, but should be succinct, consistent with General Instruction 2.A. 

162  Similar to the proposed instructions, the final instructions include the caveat that these graphical and text 
features and electronic media, communications, or tools, (i) must be responsive to and meet the 
requirements in these instructions for the particular item in which the information is placed; and (ii) may 
not, because of the nature, quantity, or manner of presentation, obscure or impede understanding of the 
information that must be included.  General Instruction 3.C. to Form CRS.  Cf. Proposed General 
Instruction 1.(f) to Form CRS (“You may use charts, graphs, tables, and other graphics or text features to 
explain the required information, so long as the information: (i) is responsive to and meets the requirements 
in these instructions (including space limitations); (ii) is not inaccurate or misleading; and (iii) does not, 
because of the nature, quantity, or manner of presentation, obscure or impede understanding of the 
information that must be included.”).  We deleted the reference in the proposed instructions to “is not 
inaccurate or misleading” because it is covered by another instruction. 

163  See, e.g., General Instruction 3.A. to Form CRS (“You also may include:  (i) a means of facilitating access 
to video or audio messages, or other forms of information (whether by hyperlink, website address, Quick 
Response Code (“QR code”), or other equivalent methods or technologies”); General Instruction 3.B. to 
Form CRS (“In a relationship summary that is posted on your website or otherwise provided electronically, 
you must provide a means of facilitating access to any information that is referenced in the relationship 
summary if the information is available online, including, for example, hyperlinks to fee schedules, 
conflicts disclosures, the firm’s narrative brochure required by Part 2A of Form ADV, or other regulatory 
disclosures.).”  Cf. Proposed General Instruction 1.(g) to Form CRS (“In a relationship summary that is 
posted on your website or otherwise provided electronically, you must use hyperlinks for any document 
that is cross-referenced in the relationship summary if the document is available online.”). 



 

57 

 

A number of commenters suggested different approaches for whether we would treat the 

relationship summary as “incorporating by reference” information provided in  additional 

disclosures or materials that are hyperlinked to or otherwise accessible from the relationship 

summary.164  Some of these commenters suggested that we treat certain hyperlinked information 

as “incorporated by reference.”165  Other commenters recommended that firms should be 

permitted, but not necessarily required, to incorporate in the relationship summary additional 

information provided in other documents.166   

As discussed above, we support the use of layered disclosure and believe that investors 

will benefit greatly from receiving a relationship summary containing high-level information that 

they will be more likely to read and understand, with the ability to access more detailed 

information.  Layered disclosure is an approach that can balance the goal of keeping the 

                                                                                                                                                             

164  See, e.g., Comment Letter of Cetera Financial Group (Aug. 7, 2018) (“Cetera Letter I”); IRI Letter; Schwab 
Letter I; Schwab Letter III (providing sample Form CRS instructions permitting incorporation of materials 
by reference); Comment Letter of The National Society of Compliance Professionals (Aug. 7, 2018) 
(“NSCP Letter”); Schnase Letter; LPL Financial Letter. 

165  Schwab Letter I (with respect to broker-dealers, Form CRS should navigate investors to additional 
information readily available on the firm’s website or enclosed with account information, and the additional 
information would be considered incorporated by reference); NSCP Letter (firms should be permitted to 
incorporate by reference public disciplinary disclosure events); Schnase Letter (“Firms that follow the SEC 
rules in filing, posting and linking should get the full anti-fraud benefit of the information in the Firm 
Brochure being deemed “delivered” when the Relationship Summary is delivered, without having to resort 
to arcane and outmoded language and concepts such as “incorporation by reference.”). 

166  See Cetera Letter I (suggesting that firms “should be permitted to incorporate other information in Form 
CRS by reference without reproducing the specified information in its’ [sic] entirety, so long as the location 
is reasonably accessible to the public and the other sources of information are sufficient to meet the 
standards of Form CRS”); IRI Letter (the Commission should “permit (but not require) firms to use 
incorporation by reference to satisfy particular components of the disclosures required under Regulation 
Best Interest and/or Form CRS.  In other words, if an investor already receives a particular piece of 
information in an existing disclosure document (including disclosures required under the federal securities 
laws, SEC or FINRA rules, ERISA, or DOL rules) the firm should be permitted to merely reference that 
existing document (with sufficient information for investors to locate or obtain that document.”). 



 

58 

 

relationship summary short and accessible with the goal of providing retail investors with 

fulsome and specific information.  The relationship summary is intended to be a self-contained 

document, however, and firms should be able to meet the instructions’ requirements by 

providing generalized and summary responses to each item, without relying on incorporation by 

reference to other documents providing additional information.  In contrast with other disclosure 

obligations such as prospectuses and registration statements, a firm could not satisfy the 

disclosure requirements set forth in the relationship summary instructions by incorporating 

another document (such as the Form ADV Part 2A brochure) by reference.   

At the same time, we recognize the communicative value of layered disclosure.  The 

instructions provide, as discussed above, that firms may167 (and in some cases must)168 cross-

reference other documents and use hyperlinks or other tools to give more details about the topic.  

Where firms link to content outside the relationship summary disclosure, whether on a 

permissive or mandatory basis, the information may not substitute for providing any narrative 

descriptions that the instructions require, and the additional information should be responsive 

and relevant to the topic covered by the instruction.  Firms should be mindful that the antifraud 

                                                                                                                                                             

167  See, e.g., General Instruction 3.A. to Form CRS (“You also may include: (i) a means of facilitating access 
to video or audio messages, or other forms of information (whether by hyperlink, website address, Quick 
Response Code (“QR code”), or other equivalent methods or technologies); (ii) mouse-over windows; (iii) 
pop-up boxes; (iv) chat functionality; (v) fee calculators; or (vi) other forms of electronic media, 
communications, or tools designed to enhance a retail investor’s understanding of the material in the 
relationship summary.”). 

168  See, e.g., Item 3.A.(iii) of Form CRS (“You must include specific references to more detailed information 
about your fees and costs that, at a minimum, include the same or equivalent information to that required 
by the Form ADV, Part 2A brochure (specifically Items 5.A., B., C., and D.) and Regulation Best Interest, 
as applicable.”). 



 

59 

 

standards under the federal securities laws apply to linked information, as with other securities 

law disclosures.   

All together we believe encouraging the use of electronic and graphical formatting online 

features, and layered disclosures will permit firms to create innovative disclosures that engage 

investors.  

4. Conversation Starters 

Consistent with the proposal, the relationship summary will be required to contain 

suggested follow-up questions for retail investors to ask their financial professional.  The 

relationship summary, however, will not include a separate section of “Key Questions to Ask,” at 

the end of the relationship summary, as proposed.  Instead, firms will be required to integrate 

those “key questions” for retail investors to ask their financial professionals throughout the 

relationship summary as headings to items or as “conversation starters.”   

The proposed relationship summary would have required firms to include ten questions, 

as applicable to their particular business, under the heading “Key Questions to Ask” after a 

statement that the retail investors should ask their financial professional the key questions about 

a firm’s investment services and accounts.169  In addition, we proposed to allow firms to include 

up to four additional frequently asked questions.170   

Most comment letters that discussed the “Key Questions to Ask” section generally did 

not support the proposed approach of including a separate section of up to fourteen questions at 

                                                                                                                                                             

169 See Proposed Item 8 of Form CRS. 

170  See id. 



 

60 

 

the end of the relationship summary.  Commenters who proposed keeping a key questions 

section typically suggested significant substantive or stylistic alterations.171  In a separate 

approach, many commenter mock-ups included topics and questions from “Key Questions to 

Ask” in a question-and-response format throughout the relationship summary.172  Several 

commenters suggested that the key questions be removed from the relationship summary and 

placed on the Commission’s website with other educational materials.173   

 Observations reported in the RAND 2018 report and other surveys and studies, and 

individual investor feedback at roundtables and on Feedback Forms generally indicated, that 

retail investors found the key questions helpful, however.  In the RAND 2018 survey, the “Key 

Questions to Ask” section received the highest support of all sections to “keep as is” when 

investors were asked if they would add more detail, keep as is, shorten, or delete the section, and 

a majority of RAND 2018 survey respondents also indicated that they were either “very 

comfortable” or “somewhat comfortable” with asking each of the key questions.174  Surveys and 

studies submitted by commenters also indicated that most investors who reviewed one of the 

                                                                                                                                                             

171  See, e.g., CFA Institute Letter I (suggesting interspersing questions through sections of Form CRS rather 
than including at the end); SIFMA Letter (suggesting that firms only be required to answer “four to five” 
questions to make the communication “shorter and more meaningful” to investors). 

172  See, e.g., IAA Letter I; Comment Letter of the Institute for the Fiduciary Standard (Aug. 6, 2018) (“IFS 
Letter”); LPL Financial Letter; Schwab Letter I. 

173  See, e.g., ACLI Letter; IAA Letter I; LPL Financial Letter.  One commenter representing investors argued 
that the Commission was better-placed to provide information on topics covered in the “Key Questions to 
Ask” section because financial professionals would have “room for obfuscation” in their discussions with 
retail investors.  See CFA Letter I. 

174 See RAND 2018, supra footnote 13.  RAND 2018 also reports that, in qualitative interviews, “[m]ost 
interview participants said that they liked all of the questions, that they would ask these questions in 
meeting with a financial service provider, and did not suggest dropping any of the questions.”61 

 

proposed sample relationship summaries found the suggested questions to be useful and said 

they were likely to ask the questions.175  In addition, the “Key Questions to Ask” section 

received the most “very useful” ratings from commenters who submitted Feedback Forms, and 

narrative comments on several Feedback Forms specifically indicated that the questions would 

encourage discussion with financial professionals.176  Similarly, investors at Commission-held 

roundtables indicated that they viewed the questions as helpful.177 

In light of comments, we believe that including questions for investors to ask their 

financial professionals is an important component of the relationship summary.  Several 

commenter mock-ups showed questions throughout the relationship summary grouped by subject 

matter rather than at the end of the document.  Investor studies showed that proximity and 

context are important for questions an investor may have for a financial professional.178  In 

                                                                                                                                                             

175  See Betterment Letter I (Hotspex) supra footnote 18 (82% of respondents viewing a version of the 
investment-adviser relationship summary found the suggested questions to be very or somewhat useful and 
93% were very or somewhat likely to ask the questions); Cetera Letter II (Woelfel) supra footnote 17 (85% 
of survey participants who viewed the sample dual-registrant relationship summary found the key questions 
to be “very” or “somewhat” important to cover, and 84% “strongly” or “somewhat” agreed that the key 
questions described their topics clearly); Kleimann I, supra footnote 19 (“Nearly all participants saw the 
Key Questions as essential.  They felt the questions were straight forward and raised important questions … 
Many said they would use the set of questions in their next exchange with their broker or adviser.”).   

176 See Feedback Forms Comment Summary, supra footnote 11 (51 commenters (55%) responded to Question 
2(g) that the Key Questions section was “very useful” and 28 (30%) responded that the Key Questions 
section was “useful”; in comparison, other sections were scored as “very useful” in the range of 31% to 
44%; similarly, more than 75% of Feedback Forms included a narrative response to Question 7 or other 
response indicating that the Key Questions were useful; 11 narrative responses included specific comments 
agreeing that the Key Questions would encourage discussions with financial professionals; and two others 
stated more generally that the relationship summary would encourage dialogue). 

177  See, e.g., Atlanta Roundtable (three investors responded positively to a question as to whether the key 
questions were helpful, with no dissent to that view); Houston Roundtable (one investor responding that 
“the questions for me are very, very good.”).  

178  See Kleimann I, supra footnote 19; Kleimann II, supra footnote 19 (each recommending question-and-
answer format in part to place relevant information together).  



 

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addition, some commenters’ Feedback Forms requested that questions be placed earlier in the 

relationship summary document; one specifically suggested that we put the questions with “the 

appropriate section [with] each section to which it applies.”179  We have determined to follow a 

similar approach by replacing the Key Questions to Ask section with specified “conversation 

starters” throughout the document.  We are also using some of the proposed questions as topic 

headings.   

There are required questions as conversation starters in each section other than the 

Introduction.180  These conversation starters are intended to cover the same topics as the 

proposed key questions and in many cases are substantially similar in wording to the proposed 

key questions.181  For each conversation starter, firms must use text features to make the 

conversation starters more noticeable and prominent in relation to the other discussion text.  For 

example, they may use larger or different font; a text box around the heading or questions; 

bolded, italicized, or underlined text; or lines to offset the questions from other sections.182  We 

believe the questions will be more helpful to investors when included throughout the document 

                                                                                                                                                             

179 See Feedback Forms Comment Summary, supra footnote 1111 (summary of responses to Question 7); 
Hoggan Feedback Form (“Maybe you should question at the end of each section – to help frame the 
issue”); see also Hawkins Feedback Form (commenting on obligations section that “[g]iving some 
examples of types of questions to ask would be beneficial”). 

180  See Items 2.D. (relationships and services); 3.A.(iv) and 3.B.(iii) (fees, costs, conflicts, and standard of 
conduct); 4.D.(ii) (disciplinary history); and 5.C. (additional information) of Form CRS. 

181  For example, the proposed Key Question 6 (“How will you choose investments to recommend for my 
account?”) has been included in the final relationship summary as a conversation starter to the 
Relationships and Services section (“How will you choose investments to recommend to me?”).  For 
discussion of additional conversation starter questions, see infra Section II.A.4  See also Proposed Item 8.6 
of Form CRS and Item 2.D.(iv) of Form CRS.  

182  See General Instruction 4.A. to Form CRS. 



 

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with formatting highlighting the conversation starters and organizing the conversation starters 

together with the firm’s disclosures about a particular topic, providing retail investors clearer 

context for each question.  However, if a required conversation starter is inapplicable to the 

firm’s business, the firm may omit or modify that conversation starter.183  With these changes, 

we believe that the conversation starters will better help retail investors initiate and engage in 

useful and informative conversations with their investment professionals. 

As proposed, investment advisers that provide only automated investment advisory 

services or broker-dealers that provide services only online without a particular individual with 

whom a retail investor can discuss the conversation starters must include a section or page on 

their website that answers each of the conversation starter questions and must provide in the 

relationship summary a means of facilitating access (e.g., by providing a hyperlink) to that 

section or page.184  For example, a firm could include a hyperlink, QR Code, or some other 

equivalent methods or technologies that would enable a retail investor to access that information.  

One commenter requested clarification that all firms could provide retail investors with the 

answers to each key question in writing, and then investors could call a call center for follow-up 

questions.185  All firms could choose to provide written answers to conversation starters, but the 

                                                                                                                                                             

183  See General Instruction 2.B. to Form CRS. 

184  General Instruction 4.B. to Form CRS.  As proposed, such advisers or broker-dealers would have provided 
a hyperlink in the relationship summary to the appropriate section or page.  See Proposed Item 8 of Form 
CRS.  In response to comments supporting electronic access more broadly, we broadened the instruction to 
allow for other means of facilitating access.  We also changed the term “automated advice” from the 
proposed instructions to “automated investment advisory services” in the final instructions to underscore 
the ongoing nature of the investment advisory relationship. 

185  See LPL Financial Letter.   



 

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final instructions will only require written responses in these limited circumstances to ensure that 

retail investors receive responses when they do not have access to a financial professional to ask 

questions.  We continue to believe that the requirement as adopted will encourage investor 

engagement and make the conversation starters useful where there is no firm representative to 

answer the question in-person (or by telephone) for the retail investor.  In addition, as proposed, 

if the firm provides automated investment advisory or brokerage services, but also makes a 

financial professional available to discuss the firm’s services with a retail investor, the firm must 

make the financial professional available to discuss the conversation starters with the retail 

investor.186 

Six of the proposed key questions will continue to have analogous “conversation starter” 

questions in the final Form CRS, which we discuss in each applicable section below.187  These 

questions cover services, fees and costs, conflicts, disciplinary information, and information 

about appropriate contact persons.  As described below, we revised the wording for all of these 

questions.   

We did not replace four of the key questions with analogous “conversation starter” 

questions; the topics raised by these key questions will be addressed in other ways in the 

relationship summary.  First, we have replaced the question requesting financial professionals to 

                                                                                                                                                             

186  General Instruction 4.B. to Form CRS.   

187  See infra Sections II.B.2 (relating to Item 2.D. of Form CRS), II.B.3.a (relating to Item 3.A.(iv) of Form 
CRS), II.B.3.b (relating to Item 3.B.(iii) of Form CRS); II.B.4 (relating to Item 4.D.(ii) of Form CRS), and 
II.B.5 (relating to Item 5.C. of Form CRS). 



 

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“do the math for me” with a different conversation starter.188  Commenters raised specific 

concerns about this question for operational and recordkeeping reasons.189  We are instead 

requiring that firms include a conversation starter question prompting retail investors to ask their 

financial professional to help them understand how the fees and costs might affect their 

investments and the potential impact of fees and costs on a $10,000 investment.190 As we note 

below, our intent with the proposed “Do the math for me” question was that it serve as a prompt 

to encourage retail investors to ask about the hypothetical amount they would pay per year for an 

account, what would make the fees more or less, and what services they would receive for those 

fees.  The question was not intended to require firms to generate individualized cost estimates for 

each particular retail investor.  We believe that the newly worded conversation starter makes that 

more clear.  Additionally, the required discussion of fees, costs, and conflicts, together with the 

conversation starter question, will better serve as an initial basis for understanding how fees 

                                                                                                                                                             

188  See Proposed Item 8.2 of Form CRS (“Do the math for me.  How much would I pay per year for an 
advisory account? How much for a typical brokerage account? What would make those fees more or less? 
What services will I receive for those fees?”).   

189  See, e.g., Comment Letter of Edward D. Jones and Co., L.P. (Aug. 7, 2018) (“Edward Jones Letter”) 
(“[G]iven the range of services available, it would be very difficult for financial professionals to fully 
address this question at the outset of the [customer] relationship, particularly for investors selecting 
transaction-based services.”); SIFMA Letter (“[M]ost firms do not currently have systems in place to allow 
the financial professionals to answer questions such as customer-specific ‘Do the math for me’ requests.”); 
John Hancock Letter (“We further believe that the costs and operational hurdles associated with providing 
personalized fee information have been underestimated, and encourage the SEC to provide that any “do the 
math”-type questions may be answered through the use of examples.”).  In part to avoid recordkeeping 
requirements on behalf of a financial professional, one commenter suggested reframing the questions as 
reflecting questions back to an investor with a prompt to ask the representative for help if the investor was 
unsure as to a response to the questions.  See Primerica Letter. 

 For additional discussion of recordkeeping, see infra Section II.E. 

190  See Item 3.A.(iv) of Form CRS. 



 

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affect investment returns and the fees that they will pay than the “Do the math for me” key 

question.191 

Two other proposed key questions regarding costs associated with an account and how 

firms make money192 covered information that the relationship summary as adopted requires to 

be disclosed under the section on fees, costs, conflicts, and standard of conduct.193  Specifically, 

firms must (i) summarize the principal fees and costs that retail investors will incur from their 

services (including how frequently they are assessed and the conflicts of interest they create) and 

(ii) describe any other fees related to their brokerage or investment advisory services in addition 

to those principal fees that the retail investor will incur.194  Additionally, the new conversation 

starter question included in Item 3 is intended to elicit similar points of discussion with the 

following wording: “Help me understand how these fees and costs might affect my investments.  

If I give you $10,000 to invest, how much will go to fees and costs, and how much will be 

invested for me?”  Finally, unlike the proposal, the relationship summary must include a 

description of the ways in which the firm and its affiliates make money from brokerage or 

investment advisory services and investments it provides to retail investors as well as material 

                                                                                                                                                             

191  See infra Section II.B.3. 

192  See Proposed Items 8.3 (“What additional costs should I expect in connection with my account?”) and 8.4 
(“Tell me how you and your firm make money in connection with my account.  Do you or your firm 
receive any payments from anyone besides me in connection with my investments?”) of Form CRS. 

193  See Item 3 of Form CRS.  The Item 3.C. disclosure combined with the conversation starter included therein 
would similarly cover information intended to be discussed in response to the fifth proposed key question 
(“What are the most common conflicts of interest in your advisory and brokerage accounts?  Explain how 
you will address those conflicts when providing services to my account.”).  See infra Section II.B.3.b. 

194  See Items 3.A.(i) and 3.A.(ii) of Form CRS; see also infra Section II.B.3. 



 

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conflicts of interest.195  As a result of these disclosure requirements, the separate questions from 

the proposal are not necessary.   

Finally, we are not adopting a conversation starter question analogous to the proposed 

key question asking “How often will you monitor my account’s performance and offer 

investment advice?”, because the Relationships and Services section of the adopted relationship 

summary requires disclosure about the services and advice or recommendations that firms offer 

and whether or not they monitor accounts, including the frequency and any material limitations 

on any such monitoring.196 

5. Presentation of Relationship Summaries by Dual Registrants and 
Affiliated Firms   

We are modifying the proposed instructions in order to encourage a dual registrant to 

prepare one combined relationship summary discussing both its brokerage and advisory services, 

but a dual registrant will be permitted to provide two separate relationship summaries, each 

describing one type of service.197  The proposal would have required a dual registrant to prepare 

one relationship summary, presenting most of the required items under standardized headings 

and in a tabular format, with brokerage services described in one column and advisory services 

described in another.198  We also are adding a new instruction permitting affiliates to prepare a 

                                                                                                                                                             

195  See Item 3.B.(ii) of Form CRS; see also infra Section II.B.3. 

196  See Item 2.B.(i) of Form CRS (“Explain whether or not you monitor the performance of retail investors’ 
investments, including the frequency and any material limitations.  Indicate whether or not the services 
described in response to this Item 2.B.(i) are offered as part of your standard services.”); see also infra 
Section II.B.2. 

197  General Instruction 5.A. to Form CRS. 

198  Proposed General Instruction 1.(e) to Form CRS. 



 

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single relationship summary describing both brokerage and investment advisory services that 

they offer or to prepare separate relationship summaries, one for each type of service.199  In 

comparison, the proposed instructions did not permit affiliates to deliver one combined 

relationship summary, but did allow them to state that they offer retail investors their affiliates’ 

brokerage or advisory services, as applicable.200   

We are not adopting the definitions of “standalone broker-dealer” and “standalone 

investment adviser” as proposed, because they are no longer necessary given the streamlining of the 

instructions relative to the proposal.201  Under the final instructions, however, we are defining a dual 

registrant as “[a] firm that is dually registered as a broker-dealer under section 15 of the Exchange 

Act and an investment adviser under section 203 of the Advisers Act and offers services to retail 

investors as both a broker-dealer and an investment adviser”, substantially as proposed.  To clarify, a 

firm that is dually registered as both a broker-dealer and an investment adviser but does not offer 

both brokerage and investment advisory services to retail investors would not fall within the 

definition of dual registrant.  For example, a firm that is dually registered and offers investment 

advisory services to retail investors, but offers brokerage services only to institutional customers, 

                                                                                                                                                             

199  General Instruction 5.B. to Form CRS. 

200  Proposed Item 2.D. of Form CRS. This disclosure only applied in the context of an affiliate of the firm. 
This item was not intended to describe disclosure of a financial professional’s outside business activities, 
such as an outside investment advisory business of a broker-dealer registered representative.  Cf. Comment 
Letter of Northwestern Mutual Life Insurance Company (Aug. 7, 2018) (“Northwestern Mutual Letter”) 
(interpreting Proposed Item 3 to prohibit the mention of affiliate services). 

201  See supra footnote 8. 



 

69 

 

would be required to prepare, file, and deliver the relationship summary only in accordance with the 

obligations of an investment adviser offering services to retail investors.202 

Dual Registrants.  Investor studies and surveys showed mixed results in connection with 

the dual-column, combined relationship summary.  For example, when presented with screen 

shots of each separate section in dual-column format, 85% of RAND 2018 survey respondents 

indicated that the side-by-side comparison format helped them decide whether a broker-dealer or 

investment adviser account would be right for them, but during qualitative interviews, some 

participants had difficulty with the two column format.203  On Feedback Forms, some indicated 

that they liked the side-by-side or grid presentation.204  One Feedback Form commenter said the 

dual-column format was confusing, however.205  An interview-based study also indicated that 

both the formatting and the language in the dual-column format in our proposed sample 

relationship summary contributed to investor confusion about differences between broker-dealers’ 

and investment advisers’ services.206  Both industry representatives and commenters representing 

                                                                                                                                                             

202  See also Advisers Act Rule 204-5; Exchange Act Rule 17a-14(a); General Instructions to Form CRS (“If 
you do not have any retail investors to whom you must deliver a relationship summary, you are not 
required to prepare or file one.”); General Instruction 11.C to Form CRS. 

203  See RAND 2018, supra footnote 13, at 22; see also id., at 46 (“Some participants grasped that the 
document was organized into two columns, each corresponding to an account type. Some others did not 
realize this immediately but grasped it once it was pointed out by an interviewer.”).     

204  See, e.g., Anonymous03 Feedback Form (“a side by side chart with u’s [sic] to say which type of account 
offers which service”); Anonymous14 Feedback Form (“recommend chart structure”); Anonymous28 
(“Presenting the differences in parallel columns gives the best chance for people new ot [sic] investing to 
understand what is involved”); Baker Feedback Form (“the double column format, comparing the two 
classes, was clear and easy to follow”); and Smith1 Feedback Form (“I like the side by side comparisons”).   

205  See Anonymous02 Feedback Form (“Maybe a bit hard to read the columns.”). 

206  See Kleimann I, supra footnote 19, at 30–31 (“Most participants tried to read the CRS by looking first at 
one column, usually the Broker Dealer Services, and then at the second column … when they turned to the 
second column they then tried to match the bullets …. Sometimes this matching was relatively easy to do, 

 



 

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investors also expressed concerns about the proposed formatting requirements for dual 

registrants’ relationship summaries.207  Two commenters supported using visual formatting to 

help investors understand the options dual registrants provide, but argued that the proposed 

content or design should be changed.208   

Several commenters suggested letting dual registrants choose whether to prepare one 

combined relationship summary or two separate ones.209  Commenters argued that providing 

information about both brokerage and investment advisory services as proposed would confuse 

investors.210  Another suggested requiring dual registrants to prepare and deliver different 

relationship summaries to retail investors depending on whether the investors enter into an 

advisory or brokerage relationship, and to highlight the availability and link to the relationship 

                                                                                                                                                             

as in the Types of Relationships and Services section because the bullets aligned almost exactly.  They 
struggled and found the misaligned bullets confusing in subsequent sections … Some participants simply 
took information from the first bullet they read or from bolded words or phrases.”). 

207  See AARP Letter; CFA Letter I; TIAA Letter; Fidelity Letter; MassMutual Letter; LPL Financial Letter; 
SIFMA Letter; Comment Letter of BlackRock, Inc. (Aug. 7, 2018) (“BlackRock Letter”) (expressing 
concern that investors may be confused if dual registrants were required to disclose all of their advisory and 
brokerage services in a single relationship summary); see also Schwab Letter II (“Dual-registrant firms 
recommend flexibility because of real-world concerns that the side-by-side comparison will not be 
effective.”). 

208  See AARP Letter (“[a]lthough the visual formatting is helpful, the substantive information laid out within 
the table remains technical and is likely to be confusing to the average retail investor”); CFA Letter I 
(emphasizing that investors must see all available options in order to make an informed decision, and that 
the Commission consult with disclosure design experts toward developing a form that is most likely to 
result in informed investor choice.”). 

209  See Schwab Letter III (providing sample Form CRS instructions that permit dual registrants either to 
prepare a single, comparative relationship summary, or two separate relationship summaries describing 
each type of service and providing links to each other); TIAA Letter; Fidelity Letter; MassMutual Letter; 
LPL Financial Letter; SIFMA Letter; BlackRock Letter. 

210  See, e.g., TIAA Letter (a combined relationship summary would confuse customers of dually registered 
firms that provide only one type of service and would overwhelm them with information not relevant to the 
relationship); LPL Financial Letter; SIFMA Letter; BlackRock Letter. 



 

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summary of the other type of service.211  One commenter argued that dual registrants needed 

flexibility to maintain two separate disclosures to allow each financial professional associated 

with the dual registrant to provide a tailored disclosure to his/her customer, without including 

services that he/she is not licensed to provide.212 

We encourage dual registrants to prepare a single disclosure, designed in a manner that 

facilitates comparison between their brokerage and advisory services.  Informed by comments, 

we have determined that two separate disclosures might be appropriate, depending on the 

different ways firms and their financial professionals offer services and on the particular facts 

and circumstances.  For example, financial professionals with licenses to offer services as a 

representative of a broker-dealer and investment adviser may offer services through a dual 

registrant, affiliated firms, or unaffiliated firms, or only offer one type of service notwithstanding 

their dual licensing.213  Financial professionals who are not dually licensed may offer one type of 

service through a firm that is dually registered.  Accordingly, the final instructions permit dual 

registrants and affiliates to prepare a single relationship summary, or alternatively, two separate 

ones, to describe their brokerage and investment advisory services in a way that accurately 

reflects their business models and will be the most helpful to retail investors.  The instructions 

                                                                                                                                                             

211   See IAA Letter I. 

212  See MassMutual Letter. 

213  See, e.g., LPL Financial Letter.   



 

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explicitly encourage preparation of a single relationship summary, however, given that a number 

of investors and commenters reacted positively to this presentation.214 

A firm preparing a single relationship summary will be required to employ design 

elements of its own choosing to promote comparability; however, we are not prescribing the 

two-column format, as proposed.  We agree that making retail investors aware of a range of 

options is important to help them make an informed choice,215 but we recognize the potential 

limits of a tabular format, as illustrated by results from some investor studies and surveys,216 and 

we have concluded that firms are generally in a better position than the Commission to determine 

a format and design that facilitates comparison of their specific brokerage and investment 

advisory services.  Whether a firm prepares a single relationship summary or two separate ones, 

the final instructions require a firm to present the information with equal prominence and in a 

manner that clearly distinguishes and facilitates comparison of the two types of services.217  For 

example, a firm could use a tabular format; text features such as text boxes; bolded, italicized, or 

underlined text; or lines to clearly indicate similarities and differences in its services.   

                                                                                                                                                             

214  See, e.g., RAND 2018, supra footnote 13 (reporting that 85% of survey respondents found the side-by-side 
comparison format to be helpful for purposes of deciding between a broker-dealer and investment adviser); 
see also CFA Letter I (stating it supported using one document to provide comparing brokerage and 
investment advisory services); Fidelity Letter (stating that a single Form CRS for a dual-registered firm 
could accomplish its objective); Schnase Letter (supporting the idea of having a unique form for dual 
registrants). 

215  See supra footnote 208 and accompanying text; infra footnote 1046 and accompanying text (discussing 
studies concerning the availability and presentation of comparative information on decision making).  

216  See supra footnotes 203–206 and accompanying text. 

217  General Instruction 5.A. to Form CRS. 



 

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While we are providing this flexibility, we believe investors should see a range of options.  

Accordingly, the final instructions provide that a firm preparing two separate relationship 

summaries must provide a means of facilitating access to each relationship summary (e.g., 

include cross-references or hyperlinks) and deliver both with equal prominence and at the same 

time to each retail investor, whether or not that retail investor qualifies for those retail services or 

accounts.218  We disagree with commenters suggesting that dual registrants should have the 

option to deliver to retail investors a relationship summary describing only one type of service if, 

for example, that investor does not qualify for one of the services.219  Retail investors should be 

able to learn about and compare the range of options a firm offers to retail investors, even if the 

financial professional does not believe that the retail investor meets the requirements for or is 

considering certain services at that time.  For example, a retail investor may initially seek 

ongoing advice through an advisory account, but after learning about both brokerage and 

advisory services and speaking with a financial professional, may decide that a brokerage 

account is a better choice.  Or a retail investor may not qualify for certain accounts at the time of 

receiving the relationship summary, e.g., by not being able to meet an account opening minimum, 

but may qualify for them in the future, or may qualify for a particular service at one firm but not 

another.  Furthermore, a retail investor may initially make the financial professional aware of 

only certain asset holdings (for example, he or she approaches a firm to rollover an IRA).  On 

that basis, the firm may believe the investor only qualifies for certain of the firm’s services.  

                                                                                                                                                             

218  General Instruction 5.A. to Form CRS. 

219  See IAA Letter I; Fidelity Letter. 



 

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However, the investor may also have substantial other asset holdings and thus qualify for a 

variety of accounts that the firm offers.  Knowing about the alternative brokerage and investment 

advisory options that a firm offers will help retail investors to compare firms’ offerings and 

consider whether to adjust the relationship or services as investors’ financial circumstances 

change.   

Affiliate Services.  As discussed above, the proposed instructions did not permit affiliates 

to prepare a combined relationship summary, but did permit firms with affiliates offering retail 

investors brokerage or advisory services to disclose these services.220  Several commenters 

recommended that affiliates should have the same flexibility to prepare one or two relationship 

summaries as dual registrants.221  We agree that this flexibility is appropriate for affiliates and 

are modifying the instructions to permit, but not require, delivery of a single relationship 

summary.  Affiliates preparing a single relationship summary will provide the same comparative 

benefits for investors as dual registrants doing so.  As with dual registrants, some affiliated firms 

market their services together and have financial professionals who hold licenses through each 

                                                                                                                                                             

220  Proposed Item 2.D. of Form CRS.  

221  See Fidelity Letter; LPL Financial Letter (“[D]ual-hatted financial professionals may either (i) provide 
brokerage and advisory services on behalf of LPL or (ii) provide brokerage services on behalf of LPL while 
providing advisory services on behalf of an unaffiliated RIA that is separately registered . . . .  [In the latter 
case, an investor] would receive a dual registrant relationship summary from LPL and a standalone 
investment adviser relationship summary from the RIA” without knowing which entity would be providing 
advisory services.”).  Other commenters suggested that the instructions clarify whether the requirements for 
dual registrants apply to affiliated broker-dealers and investment advisers. Comment Letter of State Farm 
Mutual Automobile Insurance Company (Aug. 6, 2018) (“State Farm Letter”) (“[T]he SEC did not provide 
a template or otherwise discuss whether affiliated broker-dealers and investment advisers can use blended 
or combined Form CRS”); Cambridge Letter (requesting that the Commission clarify that all references to 
dual registrants are applicable to broker-dealers and registered investment advisers organized under a single 
corporate structure as affiliated entities). 



 

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firm.  We recognize, however, that not all affiliates operate in the same way.  Some affiliated 

firms operate independently, do not market their services together, and do not share financial 

professionals.  The different ways in which financial professionals affiliate with firms to provide 

services also warrant this flexibility.  For example, some commenters noted that many financial 

professionals are licensed representatives of a brokerage firm and are also licensed through an 

affiliated investment advisory firm or an unaffiliated investment advisory firm (sometimes as a 

sole proprietor) separately registered with the Commission or one or more States.222  Depending 

on the relationship among affiliates and their financial professionals, a single relationship 

summary or two separate summaries may be more appropriate.223 

Many dually licensed financial professionals offer services on behalf of two affiliates, 

similar to dually licensed financial professionals offering services for a dual registrant.  One 

commenter requested that the Commission provide clarity that all references to dual registrants 

apply to broker-dealers and investment advisers organized under a single corporate structure as 

affiliated entities.224  Consistent with our discussion above, we believe that retail investors 

seeking services from dually licensed financial professionals should receive information about 

all of the services the financial professional offers, even if the services are through two affiliated 

                                                                                                                                                             

222  See, e.g., LPL Financial Letter. 

223  One commenter described arrangements in which a dual-hatted financial professional may provide 
brokerage services on behalf of a dual registrant and advisory services on behalf of an unaffiliated 
investment adviser.  The commenter expressed concern that an investor may be confused if the dual 
registrant’s and unaffiliated investment adviser’s relationship summaries both describe investment advisory 
services.  See LPL Financial Letter.  We believe the flexibility for dual registrants and affiliated firms to 
prepare combined or separate relationship summaries under the final instructions should address this 
concern, and firms can determine which presentations are most helpful for investors. 

224  See Cambridge Letter. 



 

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SEC-registered firms.  As a result, if two affiliated SEC-registered firms prepare separate 

relationship summaries, and they provide brokerage and investment advisory services through 

dually licensed financial professionals, the final instructions require the firms to deliver to each 

retail investor both firms’ relationship summaries with equal prominence and at the same time, 

without regard to whether the particular retail investor qualifies for those retail services or 

accounts.  To provide clarity, we have added a definition for dually licensed professionals in the 

final instructions that was not included in the proposal.225  The final instructions also provide that 

each of the relationship summaries must cross-reference and link to the other.226  If the affiliated 

firms are not providing brokerage and investment advisory services through dually licensed 

financial professionals, they may choose whether or not to reference each other’s relationship 

summary and whether or not to deliver the affiliate’s relationship summary with equal 

prominence and at the same time.227 

 Finally, we modified the instructions to explicitly permit a firm to acknowledge other 

financial services the firm provides in addition to its services as a broker-dealer or investment 

                                                                                                                                                             

225  General Instruction 11.B. to Form CRS (defining “dually licensed financial professional” as “A natural 
person who is both an associated person of a broker or dealer registered under section 15 of the Exchange 
Act, as defined in section 3(a)(18) of the Exchange Act, and a supervised person of an investment adviser 
registered under section 203 of the Advisers Act, as defined in section 202(a)(25) of the Advisers Act.”). 

226  General Instruction 5.B. to Form CRS.  As discussed above, as is the case for dual registrants, affiliates 
preparing separate relationship summaries must deliver them to each retail investor with equal prominence 
and at the same time, without regard to whether the particular retail investor qualifies for those retail 
services or accounts.  Each of the relationship summaries must reference and provide a means of 
facilitating access to the other.  General Instruction 5.B.(ii).a. to Form CRS. 

227  General Instruction 5.B.(ii).b. to Form CRS.  Firms that are unaffiliated will be treated as standalone 
broker-dealers and standalone investment advisers, each with an independent responsibility to create and 
deliver its own relationship summary in accordance with the final instructions. 



 

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adviser registered with the SEC, such as insurance, banking, or retirement services, or 

investment advice pursuant to state registration or licensing.228  Firms may include a means of 

facilitating access (e.g., cross-references or hyperlinks) to additional information about those 

services.229  Some commenters encouraged the SEC to allow firms to disclose services of other 

affiliates, even if those services are not regulated by the SEC, such as investment advisory 

services offered by an affiliated thrift savings institution.230  In response to our request for 

comment asking whether we should permit firms to include wording regarding other types of 

services and lines of businesses, several commenters submitting mock-ups of relationship 

summaries included language referencing banking and insurance services or products.231  We 

found these comments persuasive and believe that permitting firms to reference financial 

services not necessarily regulated by the Commission so that retail investors can see the range of 

options available to them can benefit their decision-making, as discussed above.232  This new 

instruction supports and expands upon the commenters’ suggestions.  Given that the focus of the 

relationship summary is on brokerage and/or advisory services, however, information pertaining 
                                                                                                                                                             

228  General Instruction 5.C. to Form CRS.  This would also permit a broker-dealer that is registered with one 
or more states as an investment adviser to refer to such advisory services. 

229  General Instruction 5.C. to Form CRS. 

230  See Northwestern Mutual Letter (seeking flexibility to disclose advisory services offered through an 
affiliated thrift because this would be in the clients’ best interest); ACLI Letter (asserting that Form CRS is 
not flexible enough to describe in a meaningful and accurate way investment advisory services provided by 
insurance affiliates such as banks or thrifts). 

231  See ASA Letter; Primerica Letter; Comment Letter of Stifel Financial (Aug. 7, 2018) (“Stifel Letter”) 
(referencing bank sweep accounts and also providing: “Banks and insurance brokers and agents may also 
provide access to financial planning and advice services, but these services are beyond the scope of this 
document.”); Cetera Letter I (referencing bank sweep programs). 

232  See supra footnotes 215, 218– 219, and accompanying text. 



 

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to other services should not obscure or impede understanding of the information that must be 

disclosed in accordance with the Form CRS instructions.233 

 We believe that, together, these requirements for dually registered firms, financial 

professionals, and affiliates will enhance comparability while providing flexibility for them to 

present their services and relationships in the way the firm believes to be the clearest.  

B. Items 

The relationship summary is principally designed to provide succinct information about 

(i) relationships and services the firm offers to retail investors; (ii) fees and costs that retail 

investors will pay, conflicts of interest, and the applicable standard of conduct; and (iii) 

disciplinary history.  The proposed relationship summary included this information as well as 

additional topics that we are eliminating, as explained further below.  In determining the scope of 

the relationship summary, we balanced the need for robust disclosures with the risk of 

“information overload” and reader disengagement, a theme in comment letters, investor feedback 

at roundtables and in the Feedback Forms, and observations reported in the RAND 2018 report 

and other surveys and studies. 

Some of the key changes from the proposal include: 

• We have modified the sections to place substantively related information 

generally together.  We believe this will facilitate comprehension, leading to a 

better-informed decision-making process and selection of a firm, financial 

professional, account type, services, and investments.   

                                                                                                                                                             

233  See General Instruction 5.C. to Form CRS.  



 

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• The final instructions simplify the introduction; highlight disciplinary history in a 

separate section; and integrate key questions, now characterized as “conversation 

starters,” among the remaining sections of the relationship summary.   

• After reviewing the comments and observations reported in the RAND 2018 

report and other surveys and studies, we have determined to remove prescribed 

generalized comparisons between brokerage and investment advisory services.   

1. Introduction 

The relationship summary will include a standardized introductory paragraph.  The 

instructions will require a firm to:  (i) state the name of the broker-dealer or investment adviser 

and whether the firm is registered with the Securities and Exchange Commission as a broker-

dealer, investment adviser, or both; (ii) indicate that brokerage and investment advisory services 

and fees differ and that it is important for the retail investor to understand the differences; and 

(iii) state that free and simple tools are available to research firms and financial professionals at 

the Commission’s investor education website, Investor.gov/CRS, which also provides 

educational materials about broker-dealers, investment advisers, and investing.234   

The introduction’s instructions as adopted differ from the proposal, which would have 

required prescribed wording in the introduction that differed for broker-dealers, investment 

advisers, and dual registrants.  Specifically, the prescribed wording in the proposed introduction 

was intended to highlight in a generalized sense and make investors aware that broker-dealers 

                                                                                                                                                             

234  See Item 1 of Form CRS.  Firms also must include the date prominently at the beginning of the relationship 
summary, for example, in the header or footer of the first page or in a similar location for a relationship 
summary provided electronically.  See id. 



 

80 

 

and investment advisers are different, and that investors needed to carefully consider this choice.  

We received one comment specifically addressing the introduction.  It stated that the prescribed 

wording would not capture the attention of retail investors and failed to adequately convey 

information regarding differences between investment advisers and broker-dealers.235  In 

addition, several of the mock-ups commenters submitted included other suggestions for 

beginning the relationship summary, many of which had an introduction that was generally 

shorter and included less discussion about generalized business models than the proposed 

relationship summary.236  In response to the comment and the mock-ups, a number of which we 

found conveyed useful information in a more concise manner than the proposed prescribed 

wording, we simplified and standardized the introductory paragraph, eliminating or replacing 

most of the prescribed wording we proposed, as discussed further below.  In addition, we added 

a requirement to provide a link to Investor.gov/CRS in the Introduction to highlight the tools and 

educational resources available to retail investors.  This dedicated page on Investor.gov will 

provide information specifically tailored to educate retail investors about financial professionals, 

including search tools in order to research firms and financial professionals and information 

about broker-dealers and investment advisers and their different services, fees, and conflicts.  We 

believe the changes and the new page will better focus retail investors on how the relationship 

                                                                                                                                                             

235  See CFA Letter I.  The commenter argued that the introduction would best be used to convey additional 
basic information about the differences between services offered by broker-dealers, investment advisers, 
and dual registrants.  See id. 

236  See, e.g., Primerica Letter; Schwab Letter I; SIFMA Letter.81 

 

summary can be most helpful to them, while providing a link to resources to more general 

investor education information at the front of the relationship summary.   

We made the following specific changes to the introduction:  First, the final instructions 

require all firms to include certain information without prescribing the specific words that firms 

must use.237  The proposed relationship summary would have required prescribed wording that 

differed for standalone investment advisers, standalone broker-dealers, and dual registrants.238  

These changes correspond with the general approach throughout the final instructions of 

permitting more flexibility for firms to tailor the wording of their relationship summaries to 

enhance the relationship summary’s accuracy, clarity, usability, and design.239   

Second, we eliminated the proposed requirement that standalone investment advisers 

state that they do not provide brokerage services, and vice versa.240  We believe this information 

is more succinctly conveyed by including the firm’s registration status.241  Additionally, 

commenters pointed out that the choice of financial services providers is not binary—there are 

                                                                                                                                                             

237  See Item 1 of Form CRS. 

238  See Proposed Items 1.B. (standalone broker-dealers); 1.C. (standalone investment advisers); and 1.D. (dual 
registrants) of Form CRS. 

239  See supra footnote 83 and accompanying text. 

240  In bold font, a standalone broker-dealer would have been required to state:  “We are a broker-dealer and 
provide brokerage accounts and services rather than advisory accounts and services.”  Proposed Item 1.B. 
of Form CRS.  Likewise, a standalone investment adviser would have been required to state in bold font: 
“We are an investment adviser and provide advisory accounts and services rather than brokerage accounts 
and services.”  Proposed Item 1.C. of Form CRS.  Dual registrants would have included a similar statement 
in bold font:  “Depending on your needs and investment objectives, we can provide you with services in a 
brokerage account, investment advisory account, or both at the same time.”  Proposed Item 1.D. of Form 
CRS.   

241  As noted and discussed further infra, the Introduction will also refer retail investors to Investor.gov/CRS 
for further information regarding broker-dealers and investment advisers. 



 

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more than two types of services offered that could apply.242  We agree that the proposed wording 

could be viewed as unduly constricting and potentially misleading.   

Third, we excluded the statement for dual registrants that, depending on an investor’s 

needs and investment objectives, the firm can provide services in a brokerage account, 

investment advisory account, or both at the same time.  We believe that this information is 

conveyed more effectively by the statement of a firm’s registration status and the information 

provided elsewhere in the relationship summary, such as in the description of services that the 

firm provides.243  In addition, requiring a statement of a firm’s registration status at the 

beginning of the relationship summary helps obviate a need for the Affirmative Disclosures 

under the Exchange Act and the Advisers Act proposed specifically to require a broker-dealer 

and an investment adviser to prominently disclose that it is registered as a broker-dealer or 

investment adviser, as applicable, with the Commission in print or electronic retail investor 

communications.244  As discussed below, we are not adopting the Affirmative Disclosures.245  In 

response to our request for comment relating to the Affirmative Disclosures,246 several 

commenters stated that the proposed rules were duplicative of other disclosure obligations (e.g., 

                                                                                                                                                             

242  See, e.g., ACLI Letter (describing the “binary approach that the SEC has taken, which is not entirely 
accurate for the distribution of variable annuity and variable life products”). 

243  See infra  Section II.B.2. 

244  See Proposing Release, supra footnote 5, at Section III.D. 

245  See infra Section III. 

246  See Proposing Release, supra footnote 5, at Section III.D. 



 

83 

 

Form ADV, Regulation Best Interest, Form CRS)247 and that such rules were costly and difficult 

to implement and supervise.248   

Fourth, we have included an instruction that allows (but does not require) reference to 

FINRA or Securities Investor Protection Corporation (“SIPC”) membership in a manner 

consistent with other rules and regulations (e.g., FINRA rule 2210).249   

We are not adopting the proposed requirements to include statements that:  (i) there are 

different ways an investor can get help with investments; (ii) an investor should carefully 

consider which types of accounts and services are right for him or her; (iii) the relationship 

summary gives an investor a summary of the types of services the firm provides and how the 

investor pays; and (iv) an investor should ask for more information with a specific reference to 

the key questions.250  We believe that this information is not necessary in the introduction and is 

better conveyed through the revised question-and-answer structure of the relationship summary 

and a more streamlined introduction highlighting that it is important for retail investors to 

understand the difference between brokerage and investment advisory services and fees and 

referencing Investor.gov/CRS.251  The conversation starters more directly prompt discussion 

                                                                                                                                                             

247  See, e.g., LPL Financial Letter; SIFMA Letter; IRI Letter; Committee of Annuity Insurers Letter; Trailhead 
Consulting Letter; see also infra Section III. 

248  See, e.g., LPL Financial Letter; Bank of America Letter; IRI Letter; SIFMA Letter; Comment Letter of 
Altruist Financial Advisors LLC (Aug. 7, 2018) (“Altruist Letter”); see also infra Section III.  

249  See Item 1.A. of Form CRS. 

250  See Proposed Items 1.B. (standalone broker-dealers); 1.C. (standalone investment advisers); and 1.D. (dual 
registrants) of Form CRS. 

251  Similarly, we eliminated the reference to suggested questions on a specified page because the key questions 
are now included throughout the relationship summary. 



 

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between retail investors and their investment professionals than a generalized statement to ask 

for more information, and the conversation starters relating to the Relationships and Services 

item convey that an investor should carefully consider which types of accounts and services are 

appropriate.  In addition, several commenter mock-ups demonstrated that removing the 

prescribed wording from each of these changes results in a shorter introduction and promotes 

additional white space in the relationship summary.  Our adopted instructions remove required 

text that might be unnecessary for investors, similar to introductions in mock-ups that were 

typically shorter with less discussion about generalized business models than the proposed 

relationship summary.252  As a result, we believe these changes will enhance the relationship 

summary’s clarity, usability, and design. 

Finally, we added a requirement to provide a link to Investor.gov/CRS and state that free 

and simple search tools are available at Investor.gov/CRS in order to research firms and financial 

professionals.  Firms also will state that the page provides educational materials about broker-

dealers, investment advisers, and investing. These materials include information about the 

different services and fees that broker-dealers and investment advisers offer.  We believe a focus 

on Investor.gov and specifically the Investor.gov/CRS page at the beginning of the relationship 

summary will be more helpful to retail investors than the proposed relationship summary 

introduction.  Investor.gov provides various resources that can assist with investor education 

relating to firms and their professionals.  Among other components, Investor.gov currently 

provides resources prepared by Commission staff for retail investors to: 

                                                                                                                                                             

252  See, e.g., Primerica Letter; Schwab Letter I; SIFMA Letter.    



 

85 

 

• Review the background of their investment professional; 

• Educate themselves about investment products, including the risks and unique 

characteristics of many products; 

• Perform fee calculations; 

• Review Investor Alerts and Bulletins; 

• Find contact information for the Commission; and 

• Review educational information regarding broker-dealers and investment 

advisers.253   

The Investor.gov/CRS page will bring together these types of educational materials about 

investment professionals, along with broader tools and other content specifically tailored for 

retail investors on Investor.gov, which will help them to more easily learn about different types 

of firms and find information about specific firms and financial professionals.  

As discussed further below, we are removing discussions in the proposed relationship 

summary that were more generalized or educational in nature, including the comparison sections 

for standalone broker-dealers and investment advisers and other statements comparing these two 

different types of financial services and fees.  Many commenters indicated that the Commission 

is generally better-positioned to provide investor education materials as compared to firms.254  

                                                                                                                                                             

253  See Investor Bulletin: Ten Ways to Use Investor.gov (Mar. 8, 2017), available at 
https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-bulletin-ten-ways-use-
investorgov; see also Brokers, available at https://www.investor.gov/research-before-you-invest/methods-
investing/working-investment-professional/brokers; Investment Advisers, available at 
https://www.investor.gov/research-before-you-invest/methods-investing/working-investment-
professional/investment-advisers. 

254  See supra footnote 40 and accompanying text. 



 

86 

 

As a result, the revised introduction provides the Investor.gov/CRS link at the beginning of the 

relationship summary to direct retail investors to the Commission staff’s resources and highlights 

the importance of investor education.255 

Investors and commenters also supported highlighting Investor.gov more generally.  

Investor feedback at roundtables generally indicated that Investor.gov was a useful website for 

retail investors and should be prominent in the relationship summary.256  Comment letters were 

supportive of the Commission providing educational materials to retail investors generally and 

Investor.gov specifically.257  Observations in surveys and studies also indicated that many retail 

investors would seek information at Investor.gov and would trust that information because it is a 

government site.258  Some investor studies, however, indicated that retail investors did not 

                                                                                                                                                             

255  Certain commenters provided mock-ups that did not include any introductory wording.  E.g., Fidelity 
Letter; IAA Letter I.  In our view, these mock-ups either did not include, or, at minimum, did not 
appropriately highlight, important information regarding the registration status of the firm or the 
availability of additional information for retail investors.  

256  See Denver Roundtable (Investor Nine: “Yeah, I went there [to Investor.gov], that’s good.”  Ms. Siethoff: 
“Did you think that sort of thing should be highlighted more?” Investor Nine: “More, yes.  More”); 
Philadelphia Roundtable (Investor Four: “I went to those websites [including Investor.gov] and I found 
them very useful.”).  Some Feedback Form commenters also indicated that a link to Investor.gov or a 
similar educational website would be helpful.  See, e.g., Baker Feedback Form (“I found the document 
overall extremely useful and learned, most importantly, to refer to the sec.gov website often”); Shepard 
Feedback Form (“An investing.gov [sic] website seems to be a useful source”); Smith2 Feedback Form 
(“would like to see a link included to a site or sites that contain general investment information”).   

257  See, e.g., MassMutual Letter (“The SEC provides a wealth of information at www.investor.gov for 
educational purposes… Providing general information about broker-dealers and investment advisers in a 
consistent and readily-accessible [sic] space on the SEC’s website would allow each firm to use the space 
available in Form CRS to accurately describe its brokerage and advisory services, with tailored language to 
reflect its business model, products and services offered and conflicts of interest.”). 

258  See Kleimann II, supra footnote 19 (“Many participants said that they would use the investor.gov site… 
[and] that they would put a high level of trust in whatever information would be on the site because it was a 
government site.”); RAND 2018, supra footnote 13 (finding that two-thirds of investors would be “very 
likely” or “somewhat likely” to click on a hyperlink for investor education materials). 



 

87 

 

understand what information was available at Investor.gov.259  Moving the link to 

Investor.gov/CRS and the related explanation to the front of the relationship summary (from the 

“Additional Information” section at the end of the relationship summary, as proposed) will 

address this issue by making the website more prominent and by concentrating information 

helpful to retail investors on one dedicated page on Investor.gov.   

2. Relationships and Services  

As proposed, after the introduction firms will be required to summarize the relationships 

and services that they offer to retail investors.  They will use a revised heading, “What 

investment services and advice can you provide me?”, which follows the new question-and-

answer format.260  Several commenters used this question or a similar heading in mock-ups they 

provided.261  Generally as proposed, we are requiring firms to provide information about specific 

aspects of their brokerage and investment advisory services, with modifications from the 

proposal to permit firms to use their own wording to cover these topics.   

We proposed separate instructions for firms to describe brokerage account services and 

investment advisory account services.  Firms would have used a mix of prescribed wording and 

their own wording to provide a summary overview of fees and certain required topics, including 

                                                                                                                                                             

259  See Kleimann I, supra footnote 19 (“None [of the study participants] had a clear idea of the information 
that would be provided at Investor.gov.”); see also Kleimann II, supra footnote 19 (“Many participants said 
that they would use the investor.gov site to research the firm, but few knew what specific information 
would be at that site…”).   

260  Item 2.A. of Form CRS. 

261  See, e.g., IAA Letter I; LPL Financial Letter; Primerica Letter ; SIFMA Letter; Wells Fargo Letter; Fidelity 
Letter; Schwab Letter I (mock-up). We proposed requiring the heading, “[Types of] Relationships and 
Services.”  As discussed above, many commenters recommended that the relationship summary use a 
question-and-answer format as a more engaging approach for retail investors. 



 

88 

 

the scope of advice services, investment discretion, monitoring, and significant limitations on 

investments available to retail investors.262  We received feedback from the observations in the 

RAND 2018 report, other surveys and studies and on Feedback Forms that relationships and 

services is an important area to cover,263 and that investors learned important information from 

the prescribed wording on relationships and services.264  In addition, the IAC recommended that 

the Commission adopt a uniform, plain English disclosure for retail investors that would include 

basic information “about the nature of services offered,” among other things.265 However, some 

commenters expressed concern that, without more educational content, this approach would not 

                                                                                                                                                             

262  See, e.g., Proposed Item 2.B. of Form CRS (“If you are a broker-dealer that offers brokerage accounts to 
retail investors, summarize the principal brokerage services that you provide to retail investors.”); and 
Proposed Item 2.C. of Form CRS (“If you are an investment adviser that offers investment advisory 
accounts to retail investors, summarize the principal investment advisory services that you provide to retail 
investors.”).   

263  See RAND 2018, supra footnote 13 (next to fees and costs, survey participants responded the relationships 
and services section was one of the most informative; more than 56% of survey participants said to keep 
the section the same length); see also Cetera Letter II (Woelfel) supra footnote 17 (85% of survey 
participants responded that this section was very or somewhat important); Schwab Letter I (Koski) supra 
footnote 21 (54% of survey participants selected “a description of the investment advice services the firm 
will provide to me” from a menu of 11 subjects as one of the four most important things for firms to 
communicate).  In addition, nearly 90% of Feedback Form commenters graded this section as “very useful” 
or “useful.”  See Feedback Forms Comment Summary supra footnote 11 (summary of responses to 
Question 2(a)).   

264  See RAND 2018, supra footnote 13 (in qualitative interviews, participants appeared to have “a general 
understanding that this section describes two different services or accounts that a client would choose”); 
Kleimann I, supra footnote 19 (while study authors found that participants had difficulty with “sorting out 
the similarities and differences,” this study also reports that “[n]early all participants easily identified a key 
difference between the Brokerage Accounts and Advisory Accounts as the fee structure either being tied to 
transactions or to assets. Some further identified as a key difference who had the final approval on all 
transactions, seeing the Brokerage Account as giving them more control on making the final decision.”).    

265  See IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10; and IAC Form CRS 
Recommendation, supra footnote 10. 



 

89 

 

sufficiently inform or would confuse retail investors.266  One commenter pointed out that the 

proposed instructions dictated different ways for broker-dealers and investment advisers to 

describe similar services.267  These commenters suggested including more explanatory wording 

or definitions to cover what services are typically associated with brokerage accounts and 

investment advisory accounts, to provide more background information to help retail investors 

understand the firm-specific disclosures.268  At the same time, commenters noted that summary, 

prescribed wording for this section may not accurately describe the services of every broker-

dealer or investment adviser.269  Results of the RAND 2018 survey reflected these concerns and 

                                                                                                                                                             

266  See CFA Letter I (“We believe the Commission should . . . require firms to be crystal clear about the nature 
of the services they offer. Simply telling [investors] that the account is a brokerage account or an advisory 
account doesn’t necessarily convey useful information.”); CFA Institute Letter I (“Given the similarities to 
what investment advisers offer, CRS disclosure of these additional services will likely confuse investors 
without language clarifying that they are outside of their usual broker-dealer duties and would typically 
require a separate contract.”). 

267  CFA Letter I. 

268  See CFA Letter I (suggesting prescribed wording for how typical broker-dealers and investment advisers 
might describe their services); CFA Institute Letter I (suggesting alternative wording for how broker-
dealers might describe their services).  Commenters on Feedback Forms also asked for explanatory 
wording and definitions.  See Feedback Forms Comment Summary, supra footnote 11 (summary of 
responses to Question 4) (seven commenters asked for definitions of terms such as transaction-based fee, 
asset-based fee or wrap fee; 10 asked for a definition or better explanation of the term “fiduciary”); see 
also, Bhupalam Feedback Form (“The definition of a broker dealer [sic] and investment advisory [sic] is 
not very clear.”); Daunheimer Feedback Form (“For a novice investor, all terms that seasoned investors 
take for granted, are new to them. Consider making the language as simple as possible.”); Margolis 
Feedback Form (“wording is very confusing and not very accurate”); Anonymous27 Feedback Form 
(“define better”), but see Baker Feedback Form (“the discussion of differences among the relationships is 
very useful as it describe [sic] the differences in services provided … and most importantly, the difference 
between a commission-based fee and an ‘asset-value’ fee”); Hawkins Feedback Form (“Summary does a 
good job of explaining the basis [sic] services for a brokerage vs advisory account.  Some clearer examples 
could help.”); Rohr Feedback Form (“Makes clear how a discretionary account differs from a brokerage 
account”).     

269  See, e.g., MassMutual Letter (explaining that the prescribed wording that a customer will pay a commission 
each time a security is bought and sold is not universally true, e.g., for mutual funds and variable annuities 
with internal exchange programs, which allow a customer to switch from one investment to another without 
paying a commission); CFA Letter I (recognizing that a generalized description of portfolio management 

 



 

90 

 

showed that almost a quarter of survey respondents (22.2%) described the relationships and 

services section as “difficult” or “very difficult” to understand.270  Comments from participants 

in qualitative interviews reported in the RAND 2018 report, as well as comments from 

roundtable participants and on Feedback Forms, indicated that prescribed terms such as 

“transaction-based fee,” “asset-based fee,” “discretionary account,” and “non-discretionary 

account” contributed to this difficulty.271  

As discussed in Section II.A.1. above, we are sensitive to the potential inaccuracies and 

confusion that the prescribed wording can create.  We also recognize that in some cases, 

providing instructions that require broker-dealers and investment advisers to describe similar 

services in different ways can create confusion.  Accordingly, we have revised the instructions to 

allow firms to use more of their own wording.  We also eliminated the separate instructions for 

brokerage account services and investment advisory account services, and instead are adopting 
                                                                                                                                                             

services, included for purposes of educating investors, does not apply to all business model among 
registered investment advisers). 

270  RAND 2018, supra footnote 13.  In the RAND 2018 qualitative interviews, participants noted several 
phrases that raised concerns such as “additional services” and “might pay more” and identified terms that 
needed further definition.  Id. Another interview-based investor study found that “[p]articipants were quite 
mixed in their understanding about the advice and monitoring that was offered in the two accounts” when 
presented with the proposed sample dual registrant relationship summary. Kleimann I, supra footnote 19. 

271  RAND 2018, supra footnote 13; see also Betterment Letter I (Hotspex) supra footnote 18 (finding that 
“respondents found certain terminology (e.g., ‘fiduciary,’ ‘asset-based,’ ‘ETF’) to be unclear or lack 
sufficient detail”).  Roundtable discussions found similar results.  See, e.g., Philadelphia Roundtable 
(participant finding “transaction-based fee” to be complex); Miami Roundtable (participant stating that 
“most people don’t really understand” what fiduciary duty means); see also Feedback Forms Comment 
Summary, supra footnote 11 (summary of responses to Question 4) (Seven Feedback Forms included 
narrative comments that asked for definitions of terms such as “transaction-based fee,” “asset-based fee” or 
“wrap fee;” 10 asked for explanation or definition of the term “fiduciary”); Anonymous06 Feedback Form 
(“Definitions might not be understood transaction based vs asset based fee”); Baker Feedback Form (“It 
may be more helpful to have detailed definitions (Ex. “transaction-based fee”) that, unfortunately, result in 
a longer document.”); Bhupalam Feedback Form (“definition of a broker dealer [sic] and investment 
advisory [sic] is not very clear”); Starmer2 Feedback Form (“Spell out … best interest”).   



 

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one set of instructions that generally applies the same requirements to all firms.272  To facilitate 

comparison of firms’ relationships and services, however, we have retained the concept of 

specific sub-topics that each firm must cover in this section.273   

Another change from the proposed instructions relates to a concern regarding how 

accounts were delineated.  The proposed instructions would have applied based on whether or 

not broker-dealers and investment advisers offered brokerage accounts or investment advisory 

accounts to retail investors and would have included some prescribed language referencing 

accounts.274  Insurance and variable annuity providers commented that this focus on accounts 

would not allow them to accurately describe insurance offerings and would be confusing, 

particularly to investors whose insurance or annuity products are held directly with an issuing 

                                                                                                                                                             

272  See, e.g., Item 2.B. of Form CRS (requiring all firms to summarize their principal services but requiring 
broker-dealers to state whether or not they offer recommendations and investment advisers to state the 
particular types of advisory services they offer). 

273  As discussed in Section II.A.2 above, we are not requiring that these sub-topics follow a prescribed order, 
so firms are able to tailor the presentation of their services, as well as include additional information about 
their brokerage or advisory services, so long as the description covers all applicable topics.  See supra 
footnote 121 and accompanying text. 

274  See, e.g., Proposed Items 2.B.2. (“If you offer accounts in which you offer recommendations to retail 
investors, state that the retail investor may select investments or you may recommend investments for the 
retail investor’s account . . . .”) and 2.C.4. (“If you significantly limit the types of investments available to 
retail investors in any accounts, include the following . . . .”) of Form CRS.  In addition, some of the 
prescribed wording included language specific to accounts.  See, e.g., Proposed Item 2.B.1. of Form CRS.  
Broker-dealers would state, “If you open a brokerage account, you will pay us a transaction-based fee, 
generally referred to as a commission, every time you buy or sell an investment.” 



 

92 

 

insurance company.275  We agree and have replaced references to accounts in this section with 

references to “services, accounts, or investments you make available to retail investors.”276 

a. Description of Services 

The final instructions have an overarching requirement to state that the firm offers 

brokerage services, investment advisory services, or both, to retail investors, and to summarize 

the principal services, accounts, or investments the firm makes available to retail investors.277  A 

firm also must include any material limitations on those services.278  The final instructions 

require firms to include certain information in their descriptions.  Similar to the proposal, broker-

dealers must state the particular types of principal brokerage services the firm offers to retail 

investors, including buying and selling securities, and whether or not they offer 

recommendations to retail investors (i.e., to distinguish execution-only services).279  Investment 

advisers must state the particular types of principal advisory services they offer to retail 

investors, including, for example, financial planning and wrap fee programs.280  The final 

instructions do not, however, require prescribed wording to describe the particular characteristics 

                                                                                                                                                             

275  E.g., ACLI Letter; Committee of Annuity Insurers Letter; IRI Letter; MassMutual Letter; New York Life 
Letter; Northwestern Mutual Letter. 

276  Item 2.B. of Form CRS. 

277  Item 2.B. of Form CRS. 

278  Item 2.B. of Form CRS. 

279  Item 2.B. of Form CRS. 

280  Item 2.B. of Form CRS.   



 

93 

 

of these services, as did the proposed instructions.281  Commenters argued that the proposed 

prescribed wording may not accurately describe the services of every broker-dealer or 

investment adviser.282  As discussed in Section II.A.1 above, given that investors may be 

confused by information that does not directly relate to the firm’s offerings, we are allowing 

firms to use their own wording to describe their own services.  Therefore, unlike the proposal, 

the final instructions do not prescribe specific wording for firms to describe the particular 

characteristics of these services.283   

Some commenters raised concerns about investor confusion if both broker-dealers and 

investment advisers discuss the advice they provide in the relationship summary.  To mitigate 

that confusion, some commenters called for an explicit statement that broker-dealers are in sales 

relationships.284  In response to these concerns, we added the explicit requirement that broker-

                                                                                                                                                             

281  See, e.g., Proposed Item 2.B.2. of Form CRS (requiring broker-dealers (i) that only offer accounts in which 
they offer recommendations to retail investors to state that the retail investor may select investments or the 
broker-dealer may recommend investments for the retail investor’s account, but the retail investor “will 
make the ultimate investment decision regarding the investment strategy and the purchase or sale of 
investments” and (ii) that do not offer recommendations to state that the retail investor “will select the 
investments” and “will make the ultimate investment decision regarding the investment strategy and the 
purchase or sale of investments”).  

282  See, e.g., MassMutual Letter (explaining that the prescribed wording that a customer will pay a commission 
each time a security is bought and sold is not universally true, e.g., for mutual funds and variable annuities 
with internal exchange programs, which allow a customer to switch from one investment to another without 
paying a commission); CFA Letter I (recognizing that a generalized description of portfolio management 
services, included for purposes of educating investors, does not apply to all business models among 
registered investment advisers). 

283  See generally Items 2.B.(i) through 2.B.(v) of Form CRS.     

284  See, e.g., CFA Institute Letter I; Consumers Union Letter; see also Kleimann II, supra footnote 19 
(alternative wording for redesigned relationship summary described broker-dealer services as a “sales 
relationship”).  



 

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dealers state that they buy and sell securities, in order to clarify their principal services.285  We 

also have included a note in the final instructions that broker-dealers offering recommendations 

should consider the applicability of the Investment Advisers Act of 1940, consistent with SEC 

guidance.286   

The final instructions require all firms to address the following topics in the description 

of their services: (i) monitoring; (ii) investment authority; (iii) limited investment offerings; and 

(iv) account minimums and other requirements.287  As discussed further below, the final 

instructions require firms to include much of the same substantive information as proposed, but 

rely less on prescribed wording and assumptions regarding typical brokerage and investment 

advisory accounts.288  In response to comments, we added a new requirement for firms to 

disclose whether or not they have account minimums.289  Commenters recommended that we 

include information about account minimums in the relationship summary.290  In addition, a 

                                                                                                                                                             

285  See Item 2.B of Form CRS (“For broker-dealers, state the particular types of principal brokerage services 
you offer, including buying and selling securities, and whether or not you offer recommendations to retail 
investors.”). 

286  See Item 2.B.(ii) to Form CRS.  See Solely Incidental Release, supra footnote 47. 

287  Item 2.C. of Form CRS. 

288  In the proposed instructions, assistance with developing or executing the retail investor’s strategy and 
monitoring the performance of the retail investor’s account were characterized as additional services for 
broker-dealers. The final instructions do not make this distinction and instead permit firms more flexibility 
to describe their services accurately.  See Proposed Item 2.B.3. of Form CRS.   

289  Item 2.B.(iv) to Form CRS (“Explain whether or not you have any requirements for retail investors to open 
or maintain an account or establish a relationship, such as minimum account size or investment amount.”). 

290  See, e.g., NASAA Letter (“Form CRS should specify minimum account size and include information on 
miscellaneous fees different categories of investors can expect to pay.”); Cetera Letter I (Form CRS should 
include “[w]hether or not the firm has established standards for the minimum or maximum dollar amount 
of various account types.”). 



 

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number of commenters submitting mock-ups included disclosures on account minimums in their 

forms.291  We agree this information is important to investors when they are deciding on account 

types and services, particularly as they consider the amount of funds they are planning to invest 

and whether they may incur any fees or become ineligible for certain services if their accounts 

fall under certain dollar thresholds.  We also removed requirements to discuss fees at the 

beginning of this section292 and are consolidating these requirements with other related ones in 

the fees, costs, conflicts, and standard of conduct section, as discussed below.293  We also are not 

adopting a proposed requirement to describe any regular communications with retail investors.294  

Neither the RAND 2018 report nor other surveys and studies suggested that this information was 

important to investors, as compared to fees.  Mock-ups submitted by commenters also did not 

include this disclosure, underscoring the relative importance of other topics.  Given the goal of 

limiting the length of the relationship summary so that investors remain engaged and are not 

overwhelmed by the information, we decided to prioritize requiring other information in the 

relationship summary. 

                                                                                                                                                             

291  See, e.g., Primerica Letter and Cetera Letter I. 

292  See Proposed Items 2.B.1. (broker-dealers) (“If you open a brokerage account, you will pay us a 
transaction-based fee, generally referred to as a commission, every time you buy or sell an investment.”); 
and 2.C.1. (investment advisers) (“State the type of fee you receive as compensation if the retail investor 
opens an investment advisory account.  For example, state if you charge an on-going asset-based fee based 
on the value of cash and investments in the advisory account, a fixed fee, or some other fee arrangement.  
Emphasize the type of fee in bold and italicized font.  If you are a standalone adviser, also state how 
frequently you assess the fee.”) of Form CRS. 

293  See infra footnotes 373–375 and accompanying text. 

294  See Proposed Items 2.B.3. (broker-dealers) and 2.C.2. (investment advisers) of Form CRS (“Briefly 
describe any regular communications you have with retail investors, including the frequency and method of 
the communications.”). 



 

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Monitoring.  The final instructions require both broker-dealers and investment advisers to 

explain whether or not they monitor retail investors’ investments, including the frequency and 

any material limitations of that monitoring, and if so, whether or not the monitoring services are 

part of the firm’s standard services.295  In the proposal, different instructions concerning 

monitoring applied to broker-dealers and investment advisers.  Broker-dealers would have stated 

whether they monitored the performance of retail investors’ accounts, and if so, how frequently 

they performed such monitoring, whether it constituted additional services or was part of the 

broker-dealer’s standard services, and whether a retail investor would pay more for it.296  

Investment advisers would have stated how frequently they monitor retail investors’ accounts.297     

One commenter objected to the requirement for broker-dealers to describe additional 

services, including monitoring, on the basis that the information would add little value.298  On 

the other hand, several commenters suggested that understanding the degree to which firms 

monitor the performance of their investments can be important to investors.299  One of these 

                                                                                                                                                             

295  Item 2.B.(i) of Form CRS. 

296  Proposed Item 2.B.3. of Form CRS. 

297  Proposed Item 2.C.2. of Form CRS. 

298  See Wells Fargo Letter (recommending elimination of broker-dealer description of additional services 
because it could take up substantial space and adds little value for the investor).  

299  See, e.g., Comment Letter of the St. John’s Law School Securities Arbitration Clinic (Aug. 7, 2018) (“St. 
John’s Law Letter”); CFA Letter I (discussing investors’ expectations of a fiduciary duty based on whether 
and to what degree a firm or financial professional provides monitoring services); Comment Letter of the 
Commonwealth of Massachusetts (Aug. 7, 2018) (“Massachusetts Letter”) (suggesting that the payment of 
ongoing compensation, such as a trail commission, indicates an ongoing relationship and should carry 
ongoing duties to monitor the investment); IAA Letter I (stating that, just as an adviser’s duty to monitor 
extends to all personalized advice it provides a client, so should investors expect a similar duty from 
broker-dealers when providing monitoring services).  



 

97 

 

commenters noted that broker-dealers and investment advisers have different legal obligations to 

monitor accounts, and that differences would remain even under Regulation Best Interest.300  

Observations from surveys and studies indicated that investors are interested in or may benefit 

from clarification of monitoring services.301  For example, an overwhelming majority of 

participants in the OIAD/RAND study believed that a financial professional required to act in an 

investor’s best interest would monitor the investor’s account on an on-going basis.302  In 

qualitative interviews in the RAND 2018 report, participants seemed to distinguish brokerage 

and investment advisory accounts and assess which type of relationship was a better fit for 

different investors based on assumptions concerning monitoring.303  Other surveys and studies 

also showed that participants varied in their understanding of monitoring and whether they 

should expect firms to monitor their account.304   

                                                                                                                                                             

300    See CFA Letter II. 
301  See, e.g., RAND 2018, supra footnote 13 (in qualitative interviews, “participants were sometimes unclear 

on how a financial professional would monitor an account” and “some participants were unclear on how 
frequently monitoring would occur”).  

302  See OIAD/RAND (finding that 69% of all participants in the survey, 75% of a specialized group defined as 
“investors,” and 86% of a specialized group defined as “investment advice consumers” believed that best 
interest required ongoing monitoring).   

303  See RAND 2018, supra footnote 13 (in qualitative interviews, “some felt that brokerage accounts are better 
for those with investment expertise and time to dedicate to investing, whereas advisory accounts are better 
for those who have less expertise and/or less time to monitor investments”; one participant was confused by 
a statement that the firm could provide “additional services to assist you and monitor performance” and 
wanted to know up front which services would be included and which would cost extra.). 

304  See Kleimann I, supra footnote 19 (“Participants assumed that the level of advice and monitoring provided 
in the two accounts would be the same. They defined monitoring as constant looking at the market and their 
accounts and making sure their accounts were making money”); Betterment Letter I (Hotspex) supra 
footnote 18 (among survey participants reviewing a standalone adviser relationship summary designed to 
follow the proposal sample, only 37% correctly identified as “false” a statement that broker-dealers 
typically monitor client’s portfolios and provide advice on an ongoing basis).   



 

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We disagree with the comment that requiring broker-dealers to describe monitoring 

services would add little value.  As we also state in the Regulation Best Interest Release, we 

believe that it is important for retail customers to understand (1) the types of monitoring services 

(if any) a particular broker-dealer provides, and (2) whether the broker-dealer will be monitoring 

the particular retail customer’s account.305  We also agree with commenters that monitoring is an 

important distinguishing feature of different investment services and believe that retail investors 

should have accurate expectations of the types of monitoring firms offer.  We are therefore 

requiring firms to explain whether or not they monitor retail investors’ investments, and if so, the 

frequency, material limitations, and whether or not monitoring is offered as part of the firm’s 

standard services.306   

The proposal provided different instructions for broker-dealers and investment advisers 

concerning monitoring, requiring broker-dealers to discuss monitoring of account performance 

only if they offered it, and requiring investment advisers to disclose how frequently they monitor 

retail investors’ accounts, as monitoring is generally part of ongoing advisory services.307  Even 

with the different wording for broker-dealers and investment advisers as proposed, some 

participants in investor studies still assumed that the level of monitoring was the same between 

                                                                                                                                                             

305  See Regulation Best Interest Release, supra footnote 47; see also Solely Incidental Release, supra footnote 
47. 

306  Item 2.B.(i) of Form CRS. 

307  See Fiduciary Release, supra footnote 47. 



 

99 

 

broker-dealers and investment advisers.308  As discussed above, we believe it is important for 

firms to describe more accurately and precisely the monitoring that they actually do for retail 

investors.  Therefore, we are retaining, with slight modifications, the obligation to disclose 

monitoring services, applying the same instruction to both broker-dealers and investment 

advisers, and eliminating the prescribed wording.  The final instructions pertain to monitoring 

services generally and are not limited to monitoring for account performance only; to the extent 

firms describe monitoring services, they must include the frequency and any material limitations 

on these services and whether or not they are offered as part of the firm’s standard services.  We 

believe that subjecting firms to the same requirements to describe their own monitoring services, 

including a specific statement that they do not provide monitoring, if that is the case, will better 

facilitate investor understanding of whether any monitoring is provided and if so, the scope and 

type of such service.  This approach also may result in more comparable information so that 

retail investors can understand the key differences among monitoring services by different firms 

based on firm-specific descriptions.   

Investment Authority.  The final instructions require investment adviser firms that accept 

discretionary authority to describe those services and any material limitations on that authority.  

Broker-dealers may, but are not required, to state whether they accept limited discretionary 

authority.  Both investment advisers that offer non-discretionary services and broker-dealers 

                                                                                                                                                             

308  See Kleimann I, supra footnote 19, at 10 (“Some participants assumed that the advice and level of 
monitoring was the same.”); Betterment Letter I (Hotspex) supra footnote 18 (among survey participants 
reviewing a standalone investment adviser’s relationship summary designed to follow the proposal, only 
37% correctly identified as “false” a statement that broker-dealers typically monitor client’s portfolios and 
provide advice on an ongoing basis).  



 

100 

 

must explain that the retail investor makes the ultimate decision regarding the purchase or sale of 

investments.309   

Commenters and results from the RAND 2018 qualitative interviews suggested 

modifications to the proposed investment authority disclosures in the relationship summary but 

generally supported including this topic.310  In addition, various commenters submitting their 

own mock-ups included disclosures on investment authority in their relationship summaries.311  

One commenter also alluded to disputes that can arise when investors misunderstand the 

investment authority the financial professional exercises for different accounts.312  One investor 

study indicated that only a few investors understood from the proposed sample dual-registrant 

relationship summary that non-discretionary advisory accounts offer investors the ability to 

                                                                                                                                                             

309  Item 2.B.(ii) of Form CRS. 

310  See CFA Letter I (stating that it is necessary for firms to describe the various types of discretionary and/or 
non-discretionary accounts they offer with specificity for such information to be useful to investors in 
choosing among providers for financial services); CFA Institute (suggesting that investment advisers only 
be required to discuss the type of accounts they offer (i.e., discretionary and/or nondiscretionary accounts) 
because discussing both—when not both are offered—would be confusing to customers); Betterment Letter 
I (stating that some of the prescribed language concerning investment authority may lead to more confusion 
than it clarifies); RAND 2018 report, supra note 13 (participants in qualitative interviews stated that it 
would be helpful if the relationship summary provided clearer definitions of “discretionary account” and 
“non-discretionary account”); see also Kleimann I, supra note 19 (noting that some “identified a key 
difference as who had final approval on all transactions, seeing the Brokerage Account as giving them more 
control”  and only a few “recognized that non-discretionary advisory accounts also offer this option.”).  
One Feedback Form commenter also noted that explanation of non-discretionary accounts was not clear.  
See Shaffer Feedback Form (broker-dealer recommendation and investment adviser “non-discretionary” 
account seem very similar. I was asking: “what's the difference.”), but see Asen Feedback Form (“The 
Relationship and Services section for BDs is clear in that the investment decision is the customer’s …”); 
Rohr Feedback Form (“makes clear how a discretionary account differs from a brokerage account”). 

311  See, e.g., Stifel Letter; AALU Letter; Wells Fargo Letter; Cetera Letter I; LPL Financial Letter; IAA Letter 
I; Primerica Letter; ASA Letter. 

312  See St. John’s Law Letter (describing an arbitration case in which investor was not informed of a change in 
investment authority when the account type changed).101 

 

approve recommendations.313  Some RAND 2018 interview participants indicated that further 

definitions of “discretionary account” and “non-discretionary account” would be helpful.314   

We continue to believe that it is important for investors to understand whether they or the 

firm or financial professional ultimately makes the investment decision in the relationship or 

service that they are considering.  Accordingly, the final instructions generally require disclosure 

of the same substantive information on this topic as the proposed instructions, but in a less 

prescriptive way.  As discussed in Section II.A.1, above, we believe that allowing firms to use 

their own wording to describe their discretionary and non-discretionary offerings and explaining 

what that means to retail investors in terms of who makes the ultimate investment decisions can 

lead to disclosures that are more meaningful and less confusing.  We recognize that some 

investor feedback suggested that further definitions of “discretionary account” and “non-

discretionary account” would be useful.  While the final instructions do not require prescribed 

wording including these terms, as the proposed instructions would have required, the final 

instructions do require investment advisers that accept discretionary authority to use their own 

wording to explain similar information.315   

                                                                                                                                                             

313  See Kleimann I, supra footnote 19 (noting that some “identified a key difference as who had final approval 
on all transactions, seeing the Brokerage Account as giving them more control”  and only a few 
“recognized that non-discretionary advisory accounts also offer this option.”). 

314  See RAND 2018, supra footnote 13 (participants in qualitative interviews stated that it would be helpful if 
the relationship summary provided clearer definitions of “discretionary account” and “non-discretionary 
account”). 

315  Item 2.B.(ii) to Form CRS. 



 

102 

 

The final instructions provide that investment advisers that accept discretionary authority 

will be required to describe these services and any material limitations on that authority.316  

Additionally, any such summary must include the specific circumstances that would trigger that 

discretionary authority and any material limitations.317  Investment advisers may, for example, 

explain whether they seek the retail investor’s approval before implementing or changing 

investment strategies or executing certain transactions.  In comparison, the proposed instructions 

took a more prescriptive approach.318  For example, the proposed instructions prescribed 

wording for investment advisers to include in their relationship summaries if they offer a 

discretionary account.319  We believe that the more general final instruction provides investment 

advisers with the flexibility to describe their discretionary offerings more accurately.   

For broker-dealers, the final instructions provide that they may, but are not required to, 

state whether they accept limited discretionary authority.320  We have made this disclosure 

                                                                                                                                                             

316  Item 2.B.(ii) of Form CRS. 

317   Item 2.B.(ii) of Form CRS. 

318 Compare Item 2.B.(ii) of Form CRS with Proposed Item 2.C.3 of Form CRS (“State if you offer advisory 
accounts for which you exercise discretion (i.e., discretionary accounts), accounts where you do not 
exercise discretion (i.e., non-discretionary accounts), or both. Emphasize the type of account (discretionary 
and non-discretionary) in bold and italicized font.”). 

319  See Proposed Item 2.C.3. of Form CRS (“If you offer a discretionary account, state that it allows you to buy 
and sell investments in the retail investor’s account, without asking the retail investor in advance.”). 

320 Compare Item 2.B.(ii) of Form CRS with Proposed Item 2.B.2, which instructed broker-dealers: “If you 
offer accounts in which you offer recommendations to retail investors, state that the retail investor may 
select investments or you may recommend investments for the retail investor’s account, but the retail 
investor will make the ultimate investment decision regarding the investment strategy and the purchase or 
sale of investments. If you only offer accounts in which you do not offer recommendations to retail 
investors (e.g., execution-only brokerage services), state that the retail investor will select the investments 
and the retail investor will make the ultimate investment decision regarding the investment strategy and the 
purchase or sale of investments.” 



 

103 

 

optional for broker-dealers because of our understanding that these services may not be a 

significant part of broker-dealers’ services.321  Accordingly, describing them here may detract 

from disclosure of other items that better characterize the firm’s business and would be more 

helpful to investors.  If limited discretion services are a significant part of a broker-dealer’s 

business, for example, if limited discretion services constitute material facts relating to the scope 

and terms of the relationship with the retail customer that need to be disclosed under Regulation 

Best Interest, that broker-dealer may wish to include in its relationship summary a statement that 

it offers limited discretion services.     

Finally, both broker-dealers and investment advisers that offer non-discretionary services 

must explain that the retail investor makes the ultimate decision regarding the purchase or sale of 

investments.322  Under the proposed instructions, firms would have been required to explain 

whether they offer non-discretionary services and what that means, but using prescribed 

wording.  Investment advisers would have been required to state that they give advice and the 

retail investor decides what investments to buy and sell.323  Broker-dealers would have been 

required to state that the retail investor will make the ultimate investment decision regarding the 

investment strategy and the purchase or sale of investments, in addition to other prescribed 

wording to distinguish execution-only accounts from those in which the broker-dealer would 

                                                                                                                                                             

321  See discussion on discretionary authority in Solely Incidental Release, supra footnote 47; see also footnotes 
284– 286 and accompanying text. 

322   Item 2.B.(ii) of Form CRS. 

323  See Proposed Instruction to Item 2.C.3. of Form CRS (“If you offer a non-discretionary account, state that 
you give advice and the retail investor decides what investments to buy and sell.”).   



 

104 

 

offer recommendations.324  The final instructions require firms to explain to retail investors that 

they make the ultimate investment decision in non-discretionary accounts, but do not include 

requirements to use prescribed wording or references to account types.  This change is consistent 

with our general approach described above that such prescribed wording may be confusing or 

may not sufficiently cover the discretionary and non-discretionary services a firm may offer.325   

Limited Investment Offerings.  The final instructions require firms to explain whether or 

not they make available or offer advice only with respect to proprietary products, or a limited 

menu of products or types of investments.  If so, they must also describe the limitations.326  In 

comparison, the proposed instructions included prescribed wording for firms to include if they 

significantly limit the types of investments in any accounts.327  Specifically, broker-dealers 

would have stated, “We offer a limited selection of investments.  Other firms could offer a wider 

range of choices, some of which might have lower costs.”328  Investment advisers would have 

                                                                                                                                                             

324  See Proposed Item 2.B.2. of Form CRS (“If you offer accounts in which you offer recommendations to 
retail investors, state that the retail investor may select investments or you may recommend investments 
for the retail investor’s account, but the retail investor will make the ultimate investment decision 
regarding the investment strategy and the purchase or sale of investments.  If you only offer accounts in 
which you do not offer recommendations to retail investors (e.g., execution-only brokerage services), state 
that the retail investor will select the investments and the retail investor will make the ultimate investment 
decision regarding the investment strategy and the purchase or sale of investments.”). 

325  See, e.g., CFA Letter I (suggesting that Form CRS should require advisers to discuss only what they offer 
in terms of discretionary or nondiscretionary accounts, because discussing both types when they offer only 
one would confuse investors); IAA Letter I (suggesting that the proposed prescribed wording would not 
cover sufficiently the variety of discretionary or non-discretionary advisory services a firm may offer and 
offering alternative language). 

326  Item 2.C.(iii) of Form CRS. 

327  The Proposed Items stated, “If you significantly limit the types of investments available to retail investors 
in any accounts, include the following . . . .” Proposed Items 2.B.4. and 2.C.4. of Form CRS.   

328  Proposed Item B.4. of Form CRS. 



 

105 

 

stated, “Our investment advice will cover a limited selection of investments.  Other firms could 

provide advice on a wider range of choices, some of which may have lower costs.”329  The 

proposed instructions gave examples of what might constitute a significant limitation on the 

types of investments, specifically, offering only one type of asset (e.g., mutual funds, exchange-

traded funds, or variable annuities); mutual funds or other investments sponsored or managed by 

the firm or an affiliate, i.e., proprietary products; or only a small number of investments.330  If 

these limits applied only to certain accounts the proposed instructions would have required firms 

to identify those accounts.331   

Comments were mixed on the proposed instruction concerning limited investment 

offerings.  Several commenters acknowledged the importance of investors understanding 

limitations on investments.332  Results of RAND 2018 qualitative interviews also indicated that 

investors would like to understand limits on investment offerings.333  Some commenters 

expressed concerns that the proposed disclosure would not be of sufficient value to investors.334  

A number of commenters, whether or not they supported generally requiring firms to discuss 
                                                                                                                                                             

329  Proposed Item C.4. of Form CRS. 

330  Proposed Items B.4. and C.4. of Form CRS. 

331  Proposed Items B.4. and C.4. of Form CRS. 

332  See CFA Letter I; CFA Institute Letter I; New York Life Letter; see also mock-ups submitted by 
commenters that included the “limited selection of investments” wording or substantially similar wording. 
See Fidelity Letter; IAA Letter I; IRI Letter.  These mock-ups did not elaborate on what the limitations are. 

333  See RAND 2018, supra footnote 13 (from qualitative interviews, finding that “[p]articipants reacted 
strongly to the notion of being offered limited investment options”).  

334  See CFA Letter I (“[W]e fear the proposed disclosure provides too little information to be of value to the 
investor.”); CFA Institute Letter I (suggesting that the disclosure expressly state that performance may be 
lower due to higher costs). 



 

106 

 

limitations on investments, expressed concerns that the scope of “significantly limits” in the 

proposed instructions or “limited selection of investments” was not sufficiently clear.335  

Furthermore, a few commenters expressed concern that the prescribed wording (“Other firms 

could offer a wider range of choices, some of which might have lower costs.”) unduly prioritized 

cost over other investment product features or characteristics.336
  

We continue to believe that firms that limit product menus—such as offering only 

proprietary products or a specific asset class—should be required to describe those limitations in 

the relationship summary.337  Other examples include limitations based on products that involve 

third-party arrangements, such as revenue sharing and mutual fund service fees.  We agree with 

                                                                                                                                                             

335  See CFA Letter I (“But simply stating they offer “limited” investments is not enough, as that will mean 
different things to different investors.”); Prudential Letter (“It is unclear what ‘significantly limits’ means 
for firms that offer predominantly, but not exclusively, proprietary products.  It is also unclear what 
constitutes a ‘small choice of investments.’  Additional examples or more prescriptive instructions 
regarding when firms must disclose such limitations would be helpful.”); CFA Letter I (“[F]irms should 
have to describe how they limit the selection of investments.”); Wells Fargo Letter (“This requirement 
appears to be overly broad as no firm can offer all investments and we therefore recommend that this be 
limited to those broker-dealers that only offer one type of product.”). 

336  See, e.g., New York Life Letter (“[T]he Commission’s exclusive emphasis on cost in this prescribed 
sentence does not provide consumers of insurance products with clear and complete information.”); Mutual 
of America Letter (“We believe that this focus on cost alone is not necessarily in the best interest of retail 
consumers, who may benefit from high-value products, such as variable annuities.”); Lincoln Financial 
Group Letter (suggesting that either the Form CRS or Regulation Best Interest disclosure obligation should 
allow for descriptions of product benefits to retail investors as well as costs).  Another commenter noted 
that the prescribed wording about other firms’ offerings could raise First Amendment concerns.  See CFA 
Letter I (“[R]equiring firms to compare their own services unfavorably to those of their competitors may 
raise First Amendment concerns.”).  See supra footnotes 77–85 and accompanying text.  

337  The proposed instructions stated, “If you significantly limit the types of investments available to retail 
investors in any accounts, include the following . . .”  Proposed Items 2.B.4. and 2.C.4. of Form CRS.  In 
order to give firms more flexibility to describe limitations on products or investment types in the context of 
their business models, and to avoid potential confusion with the materiality threshold of Regulation Best 
Interest (which requires disclosure of all material facts relating to the type and scope of services provided to 
the retail customer, including any material limitations on the securities or investment strategies involving 
securities that may be recommended to the retail customer), we have eliminated the word “significantly” 
from the final instructions.  Regulation Best Interest Release, supra footnote 47. 



 

107 

 

commenters who advocated for helping investors before entering into a relationship with a firm 

to understand whether a firm limits its product offerings, and to what extent.338  In light of 

comments, we have determined, however, that the proposed prescribed wording may not allow 

all firms to describe limited investment offerings, if applicable, in a way that is accurate and 

helpful to investors, and are not requiring it in the final instructions.339  Accordingly, we are 

revising the instructions to require firms to address whether or not they make available or offer 

advice only with respect to proprietary products or a limited menu of products or types of 

investments, and if so, to describe such limitations.340  We believe that the final instructions 

address the same types of limitations on investments that the proposed instructions sought to 

address, but in a less prescriptive way, and allow firms to describe their investment offerings 

more accurately to reflect their scope of products and services. 

Account Minimums and Other Requirements.  The final instructions also include a 

requirement to explain whether or not the firm has any requirements for retail investors to open 

or maintain an account or establish a relationship, such as minimum account size or investment 

amount, which is a change from the proposal.341  In response to our request for comments on 

such possible requirements, commenters recommended that we include this information in the 

                                                                                                                                                             

338  See CFA Letter I; CFA Institute Letter I. 

339  See supra footnotes 77–85 and accompanying text. 

340  Item 2.C.(iii) of Form CRS. 

341  Item 2.C.(iv) of Form CRS. 



 

108 

 

relationship summary.342  In addition, a number of commenters submitting mock-ups included 

disclosures on account minimums in their forms.343   

We agree that this is important for retail investors to understand because many firms offer 

a number of services that are only available to investors with higher account balances.344  

Furthermore, fee schedules may be tiered based on account balances.345  Investors benefit from 

being aware of and seeing a range of options in the same context, as discussed above.  We 

believe investors can use information about different account requirements for both current and 

future decision-making purposes.  Thus, the final instructions require firms to address whether or 

not they have any requirements for retail investors to open or maintain an account or establish a 

relationship, such as a minimum account size or investment amount.   

b. Additional Information  

In a change from the proposal we are requiring firms to provide specific references to 

more detailed information about their services that, at a minimum, include the same or equivalent 

information to that required by the Form ADV, Part 2A brochure (Items 4 and 7 of Part 2A or 

                                                                                                                                                             

342  See, e.g., NASAA Letter (stating that Form CRS should include a disclosure, specifying the minimum 
account size and include information on miscellaneous fees different categories of investors can expect to 
pay); see also Cetera Letter I (stating that firms should disclose as material conflict of interest whether or 
not they have established standards for the minimum or maximum dollar amount of various account types). 

343  See, e.g., Primerica Letter; Cetera Letter I.  

344  See, e.g., SIFMA Letter (stating that investment advisory services typically require a minimum account 
balance); ACLI Letter; Comment Letter of the National Association of Insurance and Financial Advisors 
(Aug. 2, 2018) (“NAIFA Letter”).  

345  See, e.g., Cetera Letter II (mock-up) (explaining tiered fee schedule). 



 

109 

 

Item 4.A and 5 of Part 2A Appendix 1) and Regulation Best Interest, as applicable.346  Broker-

dealers that do not provide recommendations subject to Regulation Best Interest (e.g., execution-

only broker-dealers) are not required to prepare more detailed information about their services, 

but to the extent they do, must include references to such information in their relationship 

summaries.347  The final instructions require firms to use text features to make this additional 

information more noticeable and prominent in relation to other discussion text.348 

As with other references to additional information, firms may include hyperlinks, mouse-

over windows, or other means of facilitating access to this additional information and to any 

additional examples or explanations of such services.349  This allows firms to summarize their 

services while making available more detailed and fulsome information for retail investors, in 

keeping with the design of the relationship summary as a short, succinct disclosure with links to 

additional information, as commenters and investors asked.  We believe that requiring firms to 

make retail investors aware of the services they offer, at a high level, and where retail investors 

can obtain more detailed information through layered disclosure, will best engage retail investors 

and help them make more informed decisions when choosing from among firms, services, or 

accounts.  

                                                                                                                                                             

346  Item 2.C. of Form CRS. See Regulation Best Interest Release, supra footnote 47, at Section II.C.1. 

347  Item 2.C. of Form CRS. See Regulation Best Interest Release, supra footnote 47, at Sections II.A., II.C.1. 

348  General Instruction 4.C. to Form CRS.  For example, firms could use larger or different font; a text box 
around the heading or questions; bolded, italicized, or underlined text; or lines to offset the information 
from other sections. 

349  Item 2.C. of Form CRS.  



 

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c. Conversation Starters  

Firms will include in this section of the relationship summary three prescribed 

conversation starters for retail investors to ask their financial professional.350  As discussed in 

Section II.A.4, these questions are taken from the Key Questions to Ask section in the proposed 

relationship summary, which a considerable majority of investors indicated were helpful.351  

Broker-dealers and investment advisers that are not dual registrants will include, respectively, 

“Given my financial situation, should I choose a brokerage service?  Why or why not?” or 

“Given my financial situation, should I choose an investment advisory service?  Why or why 

not?”352  Dual registrants will include “Given my financial situation, should I choose an 

investment advisory service?  Should I choose a brokerage service?  Should I choose both types 

of services?  Why or why not?”353  These questions are largely the same as the first proposed 

Key Question but replace the terms “brokerage account” and “advisory account” with “brokerage 

service” and “investment advisory service,” respectively.354  This revision addresses comments 

that the concept of “accounts” may not align with all firms’ business models and may cause 
                                                                                                                                                             

350  Item 2.D. of Form CRS.  Firms should keep in mind the applicability of the antifraud provisions of the 
federal securities laws, including section 206 of the Advisers Act, section 17(a) of the Securities Act, and 
section 10(b) of the Exchange Act and rule 10b-5 thereunder, in preparing the relationship summary, 
including statements made in response to the relationship summary’s “conversation starters.”  See supra 
footnote 98 and accompanying text. 

351  See supra footnotes 174–178 and accompanying text. 

352  Items 2.D.(i) and 2.D.(ii) of Form CRS. 

353  Item 2.D.(iii) of Form CRS. 

354  Cf. Proposed Item 8.1 of Form CRS (“Given my financial situation, why should I choose an advisory 
account?  Why should I choose a brokerage account?”).  We did not receive specific comments on this 
question, though some commenters included it or a variation thereof in their mock-ups.  See, e.g., 
Betterment Letter I; IRI Letter. 



 

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investor confusion.355  In addition, some commenters stated that it was inappropriate for the 

Commission to require firms to describe products and services that they do not offer and about 

which they may have limited or no expertise.356  Although the proposed instructions permitted 

firms to modify the first Key Question to reflect the type of accounts they offer to retail 

investors, we are replacing it with three formulations that are explicitly tailored to firm type in 

order to clarify that firms are obligated to discuss only the services that they offer.  Finally, we 

have rephrased the questions as “Should I choose [a/an brokerage/advisory] service?  Why or 

why not?” rather than “Why should I choose [a/an brokerage/advisory] service?” to avoid a 

presumption that the relevant service will always be an appropriate service for the retail investor.  

The questions are designed to prompt a conversation relevant to the specific retail investor’s 

circumstances. 

All firms also will include the questions “How will you choose investments to 

recommend to me?” and “What is your relevant experience, including your licenses, education 

and other qualifications?  What do those qualifications mean?”357  These questions are nearly 

identical to proposed Key Questions numbers six and nine except, again, for the removal of the 

account concept from proposed Key Question number six, and a minor revision to proposed Key 

Question number nine to encourage retail investors to ask a broader question regarding the 

                                                                                                                                                             

355  See supra footnote 80 and accompanying text. 

356  E.g., ACLI Letter; IAA Letter I.   

357  Items 2.D.(iv) and 2.D.(v) of Form CRS. 



 

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financial professional’s qualifications.358  We believe that answers to these questions will be 

helpful to retail investors as they make their choices.  In addition, a significant majority of 

participants from the RAND 2018 survey indicated that they would feel comfortable asking any 

of the Key Questions.359  Although fewer participants indicated that they would feel “very 

comfortable” asking about the financial professional’s experience and qualifications, compared 

with the other two questions,360 we believe that including this question serves as a useful 

reminder both to investors who would feel comfortable and as encouragement to those who are 

hesitant that asking such a question is acceptable. 

Requirements Removed from the Proposed Instructions.  The final instructions do not 

include several specific requirements that were proposed in this item.  First, the proposal would 

have required firms to describe their transaction-based fees and asset-based fees in this section, 

in addition to the more specific fee information required in a separate fee section.361  We learned 

                                                                                                                                                             

358  Proposed Key Question number six asked “How will you choose investments to recommend for my 
account?”  Proposed Key Question number nine asked “What is your relevant experience, including your 
licenses, education and other qualifications?  Please explain what the abbreviations in your licenses are and 
what they mean.” Proposed Items 8.6 and 8.9 of Form CRS.  

359  RAND 2018, supra footnote 13 (finding that at least two-thirds and up to 85% of survey participants 
indicated that they would be “somewhat comfortable” or “very comfortable” asking any of the Key 
Questions, including which account to choose and why, how investments would be selected for them, and 
what the financial professional’s experience and qualifications were); see also Betterment Letter I 
(Hotspex) supra footnote 18 (reporting that 93% of survey participants who viewed a version of the sample 
standalone adviser relationship summary in the proposal indicated that they were somewhat or very likely 
to ask the suggested questions.). 

360  RAND 2018, supra footnote 13. 

361  See Proposed Items 2.B.1. (“Include the following (emphasis required): “If you open a brokerage account, 
you will pay us a transaction-based fee, generally referred to as a commission, every time you buy or sell 
an investment.”) and 2.C.1. (“State the type of fee you receive as compensation if the retail investor opens 
an investment advisory account. For example, state if you charge an on-going asset-based fee based on the 
value of cash and investments in the advisory account, a fixed fee, or some other fee arrangement. 

 



 

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from an investor study submitted by commenters that dispersing information on the same topic 

throughout several sections of the relationship summary or separating that information with an 

unrelated topic could confuse investors.362  This illustrated the importance of establishing 

sufficient context and increasing the salience of related information by ensuring that it is kept 

together in the relationship summary.  We agree that fee information should be provided 

together, and have eliminated fee disclosures from the Relationship and Services section to 

locate it with other fee information in an effort to reduce investor confusion.  

In addition, the final instructions do not require firms to describe regular communications 

with retail investors, including frequency and method, as proposed.  Comments were mixed on 

the proposed instruction.  One commenter expressed the view that proposed Form CRS 

suggested that firms should contact advisory clients by phone or email every quarter and 

disagreed with this implication.  The commenter recommended that instead of mandating the 

form or frequency of contact with clients, the Commission should continue to give advisory 

clients flexibility to communicate how and when they want, as long as investment advisers are 

meeting their obligations under the Advisers Act.363  Another commenter noted that 

misunderstandings concerning broker-dealers’ duty or intention to monitor accounts can be 

                                                                                                                                                             

Emphasize the type of fee in bold and italicized font. If you are a standalone adviser, also state how 
frequently you assess the fee.”) of Form CRS. 

362  See Kleimann I, supra footnote 19 (“[W]hile the Brokerage Account was defined as using transaction-
based fees and the Investment Advisory Account as using asset-based fees in the first section, in the Costs 
and Fees section, the Investment Adviser Services column also discusses transaction fees.  This 
‘contradictory’ repetition was confusing to participants.”). 

363  See Edward Jones Letter. 



 

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avoided by proper communications, most importantly at the time the relationship is formed.364  

Mock-ups submitted by commenters generally did not refer to or describe communications 

between the firm or financial adviser and the investor.365  The proposal was not designed to 

mandate the form or frequency of contact with clients.  Nonetheless, given these mixed 

responses, our goal of keeping the relationship summary focused on a limited amount of 

information, and to allow more flexibility for firms to describe their services more accurately and 

meaningfully, firms will not be required to describe the frequency and method of their regular 

communications with retail investors.  Firms may include this information, however, to help 

investors better understand the services provided.  

3. Summary of Fees, Costs, Conflicts, and Standard of Conduct  

In response to comments, feedback from investors at roundtables and on Feedback 

Forms, and observations reported by the RAND 2018 report and other surveys and studies, we 

are adopting changes to the relationship summary’s required discussion of fees, costs, conflicts 

of interest, and standard of conduct.  Commenters generally supported the Commission’s goal of 

providing investors with reliable and straightforward information about the fees they pay, the 

standard of conduct applicable to financial professionals, and conflicts of interest relating to 

financial professional compensation.366  Some suggested that the fee disclosure should be more 

                                                                                                                                                             

364  See Schnase Letter. 

365  But see Cetera Letter II (“Regardless of the program chosen, your IAR is responsible for ongoing review of 
your account(s), regular communication with you . . . .”). 

366  See, e.g., CFA Institute Letter I (noting that “we support efforts to help retail investors educate themselves 
on the differences between broker-dealers and investment advisers – in terms of services offered, fees they 
charge, conflicts of interest, and importantly, the standard of care under which each operates”); Fidelity 
Letter (“Form CRS should … inform investors of the types of fees they may incur and direct them, via a 

 



 

115 

 

prominent in the proposed relationship summary and located towards the front of the relationship 

summary and also suggested modifications to sections of the relationship summary addressing 

financial professional conflicts of interest and standards of conduct.367  

Results of the RAND 2018 report and other surveys and studies showed that investors 

view information about fees and costs as one of the most important of the proposed sections of 

the relationship summary.368  Investor feedback at roundtables and through Feedback Forms also 

showed the importance of fees and cost information to investors.369 However, the RAND 2018 

survey and other surveys and studies also indicated that the proposed relationship summary 

                                                                                                                                                             

link, to more detailed disclosure.”); Comment Letter of the Investment Adviser Association (Dec. 4, 2018) 
(“IAA Letter II”) (describing “fees and expenses to be paid, legal obligations, conflicts of interest” as 
disclosure items that are “more critical than others”); Comment Letter of the University of Miami School of 
Law (Aug. 2, 2018) (“Investors should be provided with clear and concise information that fully and fairly 
discloses the specific charges he or she will incur as a result of the particular recommendation.”); NAIFA 
Letter (agrees that clients should receive “early in the client-advisor relationship – all of the information in 
the SEC’s proposal” which would include: “fees and charges … material conflicts of interest associated 
with a recommendation (to the extent known at the time of disclosure); [and] standards of conduct 
applicable to the services offered”); see also AARP Letter (recommending reformatting of Form CRS to 
meet “critical core components” including that “standard of care should be clear, concise and defined” 
[and] “fee structure should be straightforward and avoid technical jargon”); CCMC Letter (in connection 
with investor polling, noting that investors identify explaining “fees and costs,” “own compensation,” and 
“conflicts of interest” as “issues that matter most” to investors). 

367  See, e.g., mock-ups in IAA Letter I; Robinson Letter; SIFMA Letter; Fidelity Letter; Schwab Letter I.   

368  RAND 2018, supra footnote 13 (more than 70% of survey respondents selected the fees and costs section 
as one of the most informative; this section was least likely to be selected as not informative); see also 
Cetera II Letter (Woelfel) supra footnote 17 (reporting that 88% of survey respondents agreed that it is very 
or somewhat important to cover “fees and costs associated with those services”); Schwab Letter I (Koski) 
supra footnote 21 (reporting that 63% of survey respondents ranked “costs I pay for investment advice” as 
one of the four most important things for firms to communicate); CCMC Letter (investor polling) supra 
footnote 21(describing “explaining fees and costs” as one of three issues that “matter most” to investors). 

369  See, e.g., Houston Roundtable; Atlanta Roundtable; Philadelphia Roundtable; Miami Roundtable; 
Washington, D.C. Roundtable; Denver Roundtable; Baltimore Roundtable; CFA Letter I; see also 
Feedback Forms Comment Summary, supra footnote 11 (responses to Question 2(c)) (over 80% of 
commenters graded the section on fees and costs as “very useful” or “useful”). 



 

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presentation of fee and cost information could be difficult for investors to understand.370  The 

RAND 2018 survey and other surveys and studies also suggested that investors found sections in 

the proposed relationship summary covering the obligations of financial professionals and 

conflicts disclosure less informative,371 and indicated that investors could have difficulty 

understanding and synthesizing information about the obligations of financial professionals and 

the impact of conflicts of interest.372  As discussed more fully below, we considered all of this 

feedback, as well as comments received, in redesigning the disclosures related to the topics.   

                                                                                                                                                             

370  RAND 2018, supra footnote 13 (40% of survey respondents rated fees and costs section difficulty as “just 
right” while 35% rated the fees and cost section as difficult or very difficult; in qualitative interviews, 
participants generally found the section to be important, but also overwhelming and had trouble with 
language); see also Kleimann I, supra footnote 19 (“Participants expected to pay for transactions in a 
Brokerage Account or the quarterly fee for an Advisory Account, but they were surprised by the 
proliferation of additional fees  … commented on the introduction of many new terms and wanted 
definitions…”); Cetera Letter II (Woelfel) supra footnote 17 (78% of survey respondents agreed strongly 
or somewhat agreed that fees and costs were clearly described, well below ratings for clarity of information 
about services and obligations).  

371  See RAND 2018, supra footnote 13 (almost one quarter of survey respondents selected “our obligations to 
you” as one of the least informative sections, only one third selected the section as one of the two most 
informative; the conflicts of interest section was selected as one of the two most informative by only 15% 
of respondents and as one of the least informative by more than a third); see also Cetera Letter II (Woelfel), 
supra footnote 17 (largest percent of survey respondents (88%) strongly or somewhat agreed that the “our 
obligations to you” topic was important; smallest percent (81%) strongly or somewhat agreed that conflicts 
of interest was important); CCMC Letter (investor polling) supra footnote 21(describing “explaining fees 
and costs,” “explaining own compensation,” and “explaining conflicts of interest” as three issues that 
“matter most” to investors).  

372  See RAND 2018, supra footnote 13 (in qualitative interviews, some participants struggled with 
understanding differing obligations for different account types and reconciling information in the conflicts 
of interest section with the “our obligations to you” section); Kleimann I, supra footnote 19 (“Few 
participants could define “fiduciary standard”; participants explaining firms’ financial relationships that 
could create potential conflicts “had difficulty explaining how firms earned money from these relationships 
… often absent from these explanations was a discussion of the negative impact that these practices would 
have on them.”); Betterment Letter I (Hotspex), supra footnote 18  (reporting survey results indicating that 
some investors viewing a version of the sample proposed standalone adviser relationship summary had 
difficulty answering correctly questions about financial professional obligations and conflicts of interest).   



 

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A new Item 3 will require the relationship summary to cover three areas: (i) fees and 

costs; (ii) standard of conduct and conflicts of interest; and (iii) financial professional 

compensation and related conflicts of interest.  Some of the key elements of these disclosures 

include: 

• Integrated sections covering fees, costs, conflicts of interest, and standard of conduct.  

We have modified the proposal by combining the fees and costs section and the 

sections discussing conflicts of interest and standard of conduct into one Item 3 that 

will require three consecutive sections.  These sections will help illustrate the 

interconnectedness of fees, costs, conflicts, and standard of conduct, and will keep 

these related disclosures close in proximity to each other.   

• Distinct summaries of principal fees and costs other fees and costs, and other ways 

the firm makes money.  We are also requiring separate sections discussing certain fees 

and costs, with one section discussing principal fees and costs, another section 

discussing other fees and costs related to the firm’s services and investments, and 

another section discussing other ways the firm and its affiliates make money.  We are 

not requiring firms to discuss all of the fees and costs together as proposed, to address 

comments and feedback that the section was complicated and overwhelming.  We are 

also requiring a firm to include cross-references to more detailed information about 

the firm’s fees.  

• A description of the standard of conduct with conflicts. We are placing the description 

of the standard of conduct under the same heading as a summary of conflicts in order 

to help retail investors better understand the relationship between the standard of 

conduct and conflicts. 



 

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• Broadening the types of conflicts disclosure.  We are requiring firms to disclose 

information on the topics that were required in the proposal—i.e., proprietary 

products, third-party payments (shelf space and revenue sharing arrangements), and 

principal trading.  But we are requiring firms without these conflicts to disclose at 

least one material conflict.  We are also requiring a firm to include cross-references to 

more detailed information about the firm’s conflicts of interest. 

• Financial professional compensation.  We are adding a separate section that will 

require a firm to highlight how its financial professionals are compensated and the 

conflicts of interest those payments create.  This disclosure will distinguish firm-level 

from financial professional-level conflicts. 

The proposal would have included one section summarizing fees and costs, one section 

summarizing conflicts of interest, and one section discussing the applicable standards of conduct.  

The principal fees were also discussed at the beginning of the services section, and for 

standalone investment advisers and broker-dealers, the section discussing fees and costs and the 

section discussing conflicts of interest were separated by a section discussing comparisons 

between investment advisers and broker-dealers.  Commenters suggested locating fee and 

conflict disclosures more closely together, and several sample relationship summaries submitted 

by commenters placed the fees and conflicts sections in close proximity to each other.373  As 

noted, we learned from an interview-based study submitted by a commenter that investors could 

                                                                                                                                                             

373  See, e.g.,  LPL Financial Letter; Betterment Letter I; Primerica Letter; SIFMA Letter; Wells Fargo Letter; 
Schwab Letter I. 



 

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have trouble connecting related information when those sections were not closely located.374  

Observations in the RAND 2018 qualitative interviews and comments submitted on Feedback 

Forms also suggested that investors’ level of understanding varied significantly with regard to 

the relationship between the applicable standard of conduct and conflicts, and that investors 

might be more confused by this relationship when the relationship summary placed these 

sections far apart from one another.375  We agree that it is important to illustrate the relationship 

between fees, conflicts, and standards of conduct.  We are therefore combining in Item 3 of the 

final instructions the discussions on fees and costs with discussions of firms’ conflicts of interest, 

and combining the standard of conduct discussion with the discussion of certain other conflicts 

of interest.   

a. Description of Principal Fees and Costs and Other Fees  

Similar to the proposal, firms will be required to summarize the principal fees and costs 

that retail investors incur with respect to their brokerage and investment advisory accounts, and 

the conflicts of interest they create.   

                                                                                                                                                             

374  See supra footnote 362 and accompanying text. 

375  See RAND 2018, supra footnote 13 (in qualitative interviews, participants struggled to reconcile 
information in the conflicts of interest section with obligations section).  Among commenters on Feedback 
Forms who indicated that the relationship summary was too technical or that topics could be improved, 
many commented that sections addressing fees and costs, obligations and conflicts of interest needed 
clarification or better explanation.  See Feedback Forms Comment Summary, supra footnote 11 (summary 
of responses to Question 4).  Some Feedback Form commenters suggested changes to the order of 
information about fees, conflicts and obligations or offered other comments suggesting that the order of the 
topics was confusing.  See Anonymous28 Feedback Form (“Conflicts of Interest should come right after 
Obligations to You.”); Asen Feedback Form (“Somewhat I would prefer to see conflicts before fees”); 
Lee2 Feedback Form (comment responding to Question 3(b), whether order is appropriate, “[c]onflicts 
seems buried too deeply”); Smith1 Feedback Form (“The transactions comment in the fees section seems 
like it would also fall under the conflicts of interst [sic] section”).     



 

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As noted above, commenters generally supported the Commission’s goal of providing 

investors with reliable and straightforward information about the fees they pay and suggested 

making this information more prominent and located towards the front of the relationship 

summary.376  Similarly, observations in the RAND 2018 report, and other surveys and studies, 

and comments from investors at roundtables and in Feedback Forms, overwhelmingly supported 

including fee disclosure in the relationship summary and showed that investors believe that 

information about fees and costs is important to understanding their relationship with a financial 

professional.377  The RAND 2018 survey reported, however, that survey participants were more 

likely to rate the proposed relationship summary section on fees and costs as “difficult” or “very 

difficult” to understand and would add more detail.378  In the RAND 2018 qualitative interviews, 

participants generally understood that this section would provide information on the types of fees 

they could possibly pay, but also found the section overwhelming with the number of various 

types of fees and had some difficulty with language, including certain terms.379  Some 

participants also did not appear to synthesize information about fees and conflicts of interest to 

                                                                                                                                                             

376  See supra footnotes 366–367 and accompanying text. 

377  See supra footnotes 368–369 and accompanying text. 

378  See RAND 2018, supra footnote 13 (in the RAND 2018 survey about 40% rated the difficulty of the 
section on fees and costs as “just right” and 35% rated the section on fees and costs as “difficult” or “very 
difficult”; about 30% of survey respondents suggested adding more detail). 

379  See RAND 2018, supra footnote 13 (“Participants struggled with terms in this section. … Words that 
participants flagged include ‘markup,’ ‘markdown,’ ‘load,’ ‘surrender charges,’ ‘wrap fee’ and 
‘custody.’”).121 

 

be able to apply it.380  Other surveys and studies, and comments provided on Feedback Forms, 

also indicate that investors both want additional information about fees and costs and found this 

information difficult to understand.381  Several commenters also said that information on fees 

and costs was not straightforward and used too much technical jargon.382  In addition, the IAC 

recommended that the Commission adopt a uniform, plain English document that covers basic 

information about fees and compensation, among other topics.383  The Feedback Form 

commenters and observations reported in the RAND 2018 report and other surveys and studies 

reaffirms our view that it is critical for retail investors to better understand the fees and costs 

incurred with their investments and related conflicts of interest.  This section has been revised to 

further our policy objective of helping investors better understand such fees, costs, and conflicts 

of interest. 

                                                                                                                                                             

380  See RAND 2018, supra footnote 13 (“[O]ne participant could clearly put differences in fees related to each 
type of account [but] when asked about which type of financial professional has an incentive to encourage 
investors to buy and sell securities frequently … incorrectly answered.”). 

381  See Kleimann I, supra footnote 19 (finding that “[p]articipants expected to pay for transactions in a 
Brokerage Account or the quarterly fee for an Advisory Account, but they were surprised by the 
proliferation of additional fees.  … Participants also commented on the introduction of many new terms); 
Cetera Letter II (Woelfel) supra footnote 17 (78% of survey respondents strongly or somewhat agreed that 
information on fees and costs was clearly presented, rating below sections describing the firm’s obligations 
and the services that the firm provides.); Feedback Forms Comment Summary, supra footnote 11 
(summary of responses to Question 4) (41 commenters on Feedback Forms (44%) indicated that one or 
more topics on the relationship summary is too technical or could be improved; 23 included comments 
indicating that information about fees and costs is too technical or needed to be more clear). 

382  See e.g., IAA Letter I (stating that retail investors are unlikely to understand the use of “technical terms and 
industry jargon” with respect to fees in the relationship summary); see also AARP Letter; Fidelity Letter.   

383  See IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10. 



 

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Description of Principal Fees and Costs.  First, using the heading “What fees will I 

pay?”,384 firms will summarize their principal fees and costs that retail investors will incur for 

brokerage or investment advisory services, including how frequently such fees are assessed and 

the conflicts of interest they create.385  Broker-dealers must describe their transaction-based 

fees386 and investment advisers must describe their ongoing asset-based fees, fixed fees, wrap fee 

program fees, or other direct fee arrangements.387  The fees described by investment advisers 

should align with the type of fee(s) disclosed in response to Form ADV Part 1A, Item 5.E, but 

they should be summarized in a way that provides retail investors a high-level overview.388   

Although the proposal required firms to include information about their principal fees and 

costs, much of the wording was prescribed.  For instance, the proposed instructions included 

prescribed wording to describe transaction-based fees and asset-based fees and the incentives 

that each of those fees create.389  The proposed instructions also required firms to use technical 

                                                                                                                                                             

384  Item 3.A. of Form CRS. 

385  Item 3.A.(i) of Form CRS. 

386  Item 3A.(i)(a) of Form CRS. 

387  Item 3.A.(i)(b) of Form CRS. 

388  Item 3.A.(i)(b) of Form CRS.  In addition, investment advisers must include information about each type of 
fee they report in Form ADV that is responsive to Item 3.A. of Form CRS. 

389  Dual registrant broker-dealers, for example, were required to include the following wording on transaction 
based fees: “You will pay us a fee every time you buy or sell an investment.  This fee, commonly referred 
to as a commission, is based on the specific transaction and not the value of your account.”  Proposed Item 
4.B.1. of Form CRS.  Dual registrant investment advisers were required to include the following wording 
on asset-based fees: “You will pay an on-going fee [at the end of each quarter] based on the value of the 
cash and investments in your advisory account.”  If the asset manager charged another type of fee instead 
of an asset-based fee, it was required to briefly describe that fee and how frequently it was assessed. 
Investment advisers that charged an ongoing asset-based fee would have been required to include the 
following: “The more assets you have in the advisory account, including cash, the more you will pay us.  

 



 

123 

 

terms and explain their definitions (e.g., “mark-up” or “mark-down,” “load,” and “custody”).390  

Additionally, firms providing advice about investing in wrap fee programs were required to 

include several more prescribed sentences.391  Finally, dual registrants were required to state 

when a retail investor may prefer a brokerage or investment advisory service from a cost 

perspective,392 and wrap fee program providers had to explain when a retail investor may prefer 

a wrap fee program.393  Commenters argued that in many cases the prescribed wording was 

                                                                                                                                                             

We therefore have an incentive to increase the assets in your account in order to increase our fees.  You pay 
our fee [insert frequency of fee (e.g., quarterly)] even if you do not buy or sell.”  Broker-dealers would 
have been required to include the following: “The more transactions in your account, the more fees we 
charge you.  We therefore have an incentive to encourage you to engage in transactions.” Proposed Items 
4.B.5. and 4.C.8. of Form CRS.   

390  Broker-dealers were required to state the following (emphasis required): “With stocks or exchange-traded 
funds, this fee is usually a separate commission.  With other investments, such as bonds, this fee might be 
part of the price you pay for the investment (called a ‘mark-up’ or ‘mark down’).  With mutual funds, this 
fee (typically called a ‘load’) reduces the value of your investment.”  Proposed Item 4.B.2.(a) of Form 
CRS.  Investment advisers were required to state, if applicable, that “a retail investor will pay fees to a 
broker-dealer or bank that will hold the retail assets and that this is called custody.”  Proposed Item 4.C.6. 
of Form CRS. 

391  Investment advisers that provided advice to retail investors about investing in wrap fee programs were 
required to include the following (emphasis required): “We offer advisory accounts called wrap fee 
programs.  In a wrap fee program, the asset-based fee will include most transaction costs and fees to a 
broker-dealer or bank that will hold your assets (called ‘custody’), and as a result wrap fees are typically 
higher than non-wrap advisory fees.”  If the investment adviser offered a wrap fee program as well as 
another type of advisory account, it was required to include: “For some advisory accounts, called wrap fee 
programs, the asset-based fee will include most transaction costs and custody services, and as a result wrap 
fees are typically higher than non-wrap advisory fees.” 

392  Dual registrants were required to include the following: “An asset-based fee may cost more than a 
transaction-based fee, but you may prefer an asset-based fee if you want continuing advice or want 
someone to make investment decisions for you.”  Proposed Item 4.C.10. of Form CRS. 

393  Investment advisers that provided advice to retail investors about investing in wrap fee programs were 
required to include the following (emphasis required):  “You may prefer a wrap fee program if you prefer 
the certainty of a [insert frequency of the wrap fee (e.g., quarterly)] fee regardless of the number of 
transactions you have.”  Proposed Item 4.C.10. of Form CRS. 



 

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confusing and not accurate.394  For example, several commenters indicated the proposed fee 

discussion was unnecessarily technical and suggested the relationship summary avoid the use of 

jargon (e.g., terms like “asset-based fee” and “load”) in this section.395  Several roundtable 

participants also said that they did not understand these terms,396 as did some participants in 

investor studies and surveys.397  Other commenters noted that the wording in the proposal was 

too binary.398  Another commenter argued that certain prescribed wording was obvious to retail 

investors and did not add value to the retail investor.399   

In an effort to balance the goal of educating retail investors with the need to provide firms 

with enough flexibility to tailor the disclosure to their services and investments, we have decided 

                                                                                                                                                             

394  See, e.g., CFA Institute Letter I (suggesting that the Commission revise the proposed wording to reflect the 
effect on costs in a more even-handed manner); ACLI Letter (stating that the prescriptive nature of the 
disclosures does not sufficiently allow for diverse business models to be explained); IAA Letter I (stating 
that the prescribed language comparing investment advisers to broker-dealers does not include important 
information and may confuse retail investors, and that the prescribed language associated with fees based 
on assets under management, while technically correct, misses an important point—namely that an adviser 
earns more when the client’s portfolio performs better and earns less when the portfolio performs less well 
aligns the adviser’s interest with the client’s interest, rather than the reverse); FSI Letter I (stating that 
prescribing language in the relationship summary may confuse retail investors); Comment Letter of Paul 
Hynes (Jul. 31, 2018) (“Paul Hynes Letter”) (stating that the prescribed wording is inaccurate by suggesting 
that investment advisers can sell variable annuities); ACLI Letter (stating that the Fees and Costs section is 
replete with required statements that may be unnecessary/misleading).   

395  CFA Letter I; AARP Letter; IAA Letter I. 

396  See, e.g., Miami Roundtable; Houston Roundtable; Philadelphia Roundtable.  

397 See RAND 2018, supra footnote 13 (in qualitative interviews participants asked for definitions of 
“transaction-based fee,” asset-based fee,” and struggled with terms such as “mark-up,” “mark-down,” 
“load,” surrender “charges” and “wrap fee”); see also Kleimann I, supra footnote 19.   

398  See, e.g., CFA Letter I; Margolis Feedback Form (stating that the wording assumed that a retail investor 
would pay either a transaction-based fee or an asset-based fee for a brokerage or advisory account, 
respectively, and did not capture other fee structures).  

399  See Wells Fargo Letter. 



 

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to remove from the Instructions the prescribed wording we proposed about fees and costs.400  

Specifically we are replacing the prescribed wording with a requirement to describe the firm’s 

principal fees and the conflicts of interest they create.  We have also included examples in the 

instructions of statements that would describe certain principal fees.  We have concluded, based 

on consideration of the comments and investor feedback, that the proposed requirements did not 

reflect the fees for all firms and, depending on firms’ business models, could be confusing.  

Instead the relationship summary will focus on a high level summary of fees.  Having considered 

comments, we believe this more flexible approach will better facilitate meaningful disclosure in 

the relationship summary, as well as conversations between the retail investor and his or her 

financial professional, and help the retail investor decide on the types of services that are right 

for him or her.  Additionally, we believe that certain definitions and concepts explained in the 

proposed relationship summary can be better explained in other ways, such as through layered 

disclosure that explain technical terms as appropriate for the specific firm (e.g., “hovers”).401  

Further, requiring firms to draft their own descriptions will allow them to tailor the description to 

their particular business models, including the fees their prospective customers and clients will 

most commonly incur, which will make the discussion more accurate and relevant and further 

help facilitate retail investors’ comprehension.   

                                                                                                                                                             

400  As discussed further below, we are not eliminating all prescribed wording for this section and are requiring 
firms to include the following statement: “You will pay fees and costs whether you make or lose money on 
your investments.  Fees and costs will reduce any amount of money you make on your investments over 
time.  Please make sure you understand what fees and costs you are paying.”.  

401  Firms are also encouraged to fully explain any technical terms that they use to describe their fees.  We also 
believe that Investor.gov can be a resource for this information, and the relationship summary will highlight 
Investor.gov/CRS where educational material is available.   



 

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In addition, we are not including the proposed prescribed wording with respect to wrap 

fee programs.402  Instead, investment advisers that offer these services to retail investors should 

include disclosure about the relevant fees and conflicts of interest, and explain the program.  We 

are including instructions encouraging investment advisers with wrap fee programs to explain 

that asset-based fees associated with the wrap fee program will include most transaction costs 

and fees to a broker-dealer or bank that has custody of these assets, and therefore are higher than 

a typical asset-based advisory fee.403   

We also removed the proposed disclosures about which type of service or account is 

better for a retail investor.  Specifically, the proposal would have required firms to include 

prescribed wording about when a retail investor may prefer paying a transaction-based fee or an 

asset-based fee. 404  Although some commenters did not object to the proposed prescribed 

wording and some included it in their mock-ups,405 several commenters raised concerns.406  For 

                                                                                                                                                             

402  The proposal required certain prescribed wording describing wrap fee programs.  See Proposed Item 4.C.3. 
of Form CRS. 

403  Item 3.A.(i)(b) of Form CRS. 

404  The proposal required standalone investment advisers and standalone broker-dealers to state that a retail 
investor may prefer paying “a transaction-based fee from a cost perspective, if you do not trade often or if 
you plan to buy and hold investments for longer periods of time.” or “an asset-based fee if you want 
continuing advice or want someone to make investment decisions for you, even though it may cost more 
than a transaction-based fee.”  Proposed Items 5.A.4. and 5.B.6. of Form CRS.  Dual registrant broker-
dealers were required to include the following: “From a cost perspective, you may prefer a transaction-
based fee if you do not trade often or if you plan to buy and hold investments for longer periods of time.”  
Proposed Item 4.B.6. of Form CRS.  Dual registrant investment advisers that charged an ongoing asset-
based fee were required to include the following: “An asset-based fee may cost more than a transaction-
based fee, but you may prefer an asset-based fee if you want continuing advice or want someone to make 
investment decisions for you.”  Proposed Item 4.C.10. of Form CRS. 

405  See, e.g., LPL Financial Letter; Betterment Letter I; IRI Letter. 

406  See supra footnote 394. 



 

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example, one commenter argued that the required wording could be false and misleading, noting 

that the required statements do not take into account that transaction-based fees are not 

necessarily more affordable for buy-and-hold investors who do not trade often, many broker-

dealers offer higher-cost investment products (e.g., variable annuities, non-traded REITs, and 

private placements), and many investment advisers recommend investments with lower 

operating expenses than those sold by brokers.407  We have concluded that the proposed required 

wording did not capture all of the information that, in certain circumstances, would be necessary 

to help retail investors reasonably assess whether a particular service and its associated fees will 

be better for them.  Instead, the relationship summary provides information about what the firm 

offers and encourages discussion with conversation starters.  Such a discussion—facilitated by 

Form CRS—is more appropriate between the financial professional and the retail investor about 

the firm’s specific offerings and associated fees and conflicts, and the retail investor’s specific 

circumstances.   

The proposal also required firms to state whether their fees vary and are negotiable and to 

describe the key factors that would help a reasonable retail investor understand the fee that he or 

she is likely to pay for services.408  In the RAND 2018 qualitative interviews, some participants 

were confused by the statement about fees being negotiable and most mock-ups commenters 

                                                                                                                                                             

407  See CFA Letter I. 

408  Proposed Items 4.B.3. and 4.C.5 of Form CRS.  The instructions included examples of such key factors (for 
a broker-dealer, this may be how much the retail investor buys or sells, what type of investment the retail 
investor buys or sells, and what kind of account the retail investor has with a firm; for an investment 
adviser, this may include the services the retail investor receives and the amount of assets in the retail 
investor’s account).  Investment advisers were also required to state that a retail investor could be required 
to pay fees when certain investments are sold (e.g., surrender charges for selling variable annuities). 



 

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submitted did not include this disclosure.409  We did not include this requirement in the final 

instruction.  It is important to instead focus the relationship summary on information about fees 

that retail investors identified as important to their assessment of firms.  Given the comments and 

investor testing results showing that the fee section was technical and difficult to understand, we 

believe that the final instructions will help investors focus on the information the final 

instructions do require.  We believe that removing information about negotiability should help 

achieve this objective.  

In another modification from the proposal, we are requiring firms to discuss the conflicts 

of interest created by their principal fees and costs rather than prescribing specific wording about 

those conflicts.  We are making this change in response to commenters, who pointed out that the 

conflicts of interest created by principal fees can vary in more ways than our prescribed wording 

contemplated.410  Instead of prescribed wording, the final instructions include a requirement that 

firms explain the conflict of interest their principal fees create, as well as examples of how a firm 

may communicate certain conflicts of interest.  These examples are the same conflicts the 

proposed instructions required.  For instance, a broker-dealer could disclose its conflicts of 

interest related to transaction-based fees by stating that a retail investor would be charged more 

                                                                                                                                                             

409  See RAND 2018, supra footnote 13 (noting that the phrase stating that fees are negotiable and may vary 
concerned participants, and many noted that it made them feel as if they pay too much).  Similarly, see 
Anonymous28 Feedback Form (“If fees are negotiable, when is this done?”); see also mock-ups in IAA 
Letter I; Robinson Letter; Primerica Letter; LPL Financial Letter, SIFMA Letter; Schwab Letter I; Fidelity 
Letter. 

410  See, e.g., Comment Letter of Invesco Advisers, Inc. (Aug. 7, 2018) (“Invesco Letter”); Committee of 
Annuity Insurers Letter; IAA Letter I; see also CFA Institute Letter I (noting that investors “will most 
likely focus on the fees and costs discussion and should be alerted to the fact that in addition to different fee 
arrangements and structures, different practices and conflicts may also result in higher costs.”).  



 

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when there are more trades in his or her account and that the firm may therefore have an 

incentive to encourage a retail investor to trade often.411  Investment advisers that charge an 

asset-based fee could disclose related conflicts of interest by stating that the more assets in a 

retail investor’s advisory account, the more the retail investor will pay in fees, and the firm may 

therefore have an incentive to encourage the retail investor to increase the assets in his or her 

account.412  Firms that offer variable annuity and variable life insurance products could disclose 

that they have a financial incentive to offer a contract that includes optional benefit features, 

which may entail additional fees on top of the base fee associated with the contract, that they 

may encourage contract owners to select investment options with relatively higher fees, or that 

they may offer the contract owner a new contract in place of the one that he or she already owns.  

Finally, we also have included a note in the final instructions that an investment adviser 

receiving compensation in connection with the purchase or sale of securities should consider the 

applicability of the broker-dealer registration requirements of the Exchange Act and any 

applicable state securities statutes.413 

Description of Other Fees and Costs.  Firms also will be required to describe other fees 

and costs related to their brokerage and investment advisory services and investments, in 

addition to the firm’s principal fees and costs, that the retail investor will pay directly or 

indirectly.  Firms must list examples of the categories of the most common fees and costs that 

                                                                                                                                                             

411  Item 3.A.(i).a. of Form CRS. 

412  Item 3.A.(i).b. of Form CRS. 

413  See Item 3.A.(i).b of Form CRS.  This statement is consistent with Part 2A of Form ADV. 



 

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their retail investors will pay directly or indirectly.414  Those fees and costs may include, for 

example, custodian fees, account maintenance fees, fees related to mutual funds and variable 

annuities, and other transactional fees and product-level fees.415  With regard to product-level 

fees, in particular, firms may wish to highlight certain fees such as distribution fees, platform 

fees, shareholder servicing fees and sub-transfer agency fees, in order to enhance the retail 

investor’s understanding of these fees to the extent applicable to the customer’s transactions, 

holdings, and accounts. 

We recognize that the fees and costs that a firm determines to be the most common will 

vary and depend on particular products and services the firm offers and the fee arrangements 

associated with those products and services.  Generally, in making this determination, firms 

should consider, for example, the amount of the fee (including whether the fee varies based on 

options the investor may select such as optional benefits and the investment options that a 

contract owner may select in the context of variable annuities and variable life insurance 

products), the likelihood that the fee will be applicable, whether the fee is ordinarily assessed on 

a significant number of the firm’s clients, whether the fee is associated with a product or service 

that the firm frequently recommends or provides, whether the fee is contingent upon certain 

events the investor should be made aware of, the effect on returns, and the magnitude of the 

conflict of interest it may create.  For example, an investment adviser should consider discussing 

commissions that are charged when an investment is bought or sold.  A firm that commonly 

                                                                                                                                                             

414  Item 3.A.(ii) of Form CRS.   

415  Item 3.A.(ii) of Form CRS.   



 

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offers an investment that includes a surrender fee—for example, a variable annuity or variable 

life insurance contract is sold as a long-term investment that may entail relatively high surrender 

fees—should consider disclosing that a retail investor could be required to pay fees when certain 

investments are sold.   

The proposal similarly required firms to state that retail investors will pay other fees in 

addition to the firm’s principal fees.  Like the final instructions, the proposal required disclosure 

of the other fees related to the services or account such as custodian fees, account maintenance 

fees, and account inactivity fees, and included these other fees in the same section discussing the 

firm’s principal fees.416  The proposal also required that all firms disclose that certain 

investments imposed additional fees, including fees that reduce the value of investments over 

time (e.g., mutual funds and variable annuities) and fees paid when an investment is sold (e.g., 

surrender charges for selling variable annuities).417  Observations reported from RAND 2018 

qualitative interviews and another study indicated that some investors could become 

overwhelmed with the number of various types of fees and many were surprised that so many 

different types of fees could apply in addition to a firm’s principal fee.418  At the same time, 

                                                                                                                                                             

416  Proposed Items 4.B.4. and 4.C.6. of Form CRS.  Specifically, the proposal required broker-dealers to state, 
if applicable, that a retail investor will pay other fees in addition to the firm’s principal fees, including, but 
not limited to, custodian fees, account maintenance fees and account inactivity fees.  The proposal required 
investment advisers to state, if applicable, that a retail investor will pay transaction-based fees when it buys 
and sells an investment for the retail investor and that retail investors will pay, if applicable, custodian fees, 
and other fees such as those for account maintenance services. 

417  Proposed Items 4.B.2.(b) and 4.C.4. of Form CRS. 

418  RAND 2018, supra footnote 13 (qualitative interview results); Kleimann I, supra footnote 19.  Similarly, 
see Anonymous02 Feedback Form (“Do companies charge all these fees? Maybe use words like ‘may 
charge’”); Anonymous28 Feedback Form (“The section on fees might better be presented in a chart—no 
mention is made of front and backend loads.”). 



 

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investors participating in surveys and studies and investors providing comments on Feedback 

Forms have indicated that more information would be helpful.419  Industry commenters, 

commenters representing investors, and commenters on Feedback Forms, and roundtable 

participants supported some disclosure regarding product-level fees, though commenters differed 

in the level of suggested detail on such fees.420  For instance, one commenter stated that the 

relationship summary should reveal all fees and commissions for all purchases.421 Other 

commenters, however, believed that a link to the prospectus should sufficiently satisfy disclosure 

requirements regarding mutual fund fees and expenses.422  Another urged the Commission to 

provide a list of examples of transaction-based fees.423   

We agree that understanding these fees is important so that retail investors have the 

necessary information to evaluate between firms, firm types (i.e., investment adviser, brokerage, 

or dually registered), and firm services, accounts, and products so that they can select what is 
                                                                                                                                                             

419  See RAND 2018, supra footnote 13 (qualitative interview results), Kleimann I, supra footnote 19; 
Kleimann II, supra footnote 19 (in study testing investor reaction to alternate design of relationship 
summary, participants continued to focus on additional fees and wanted additional information on fees); see 
also Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Question 5) (of 48 
Feedback Forms with narrative comments suggesting additional information to be required in the 
relationship summary, 29 suggested that additional information about fees and costs would be helpful).   

420  See Fidelity Letter; CFA Letter I; see also Anonymous11 Feedback Form (“…disclose specific fees for 
different types of securities”); Caddess Feedback Form (“description of brokers buying one ‘loaded’ fund 
and then selling it soon after to buy a more ‘suitable loaded’ fund is not vivid enough.”); Fontaine 
Feedback Form (“More on the mutual fund loads and class shares Load”); Malone Feedback Form 
(“Suggest fees monthly associated with each fund by type”); Mennella Feedback Form (“In addition to 
paying a management fee what is the cost of the underlying investments such as mutual funds, liquid 
alternatives, seperately [sic] managed accounts, transaction costs, etc.?”); Houston Roundtable; 
Philadelphia Roundtable. 

421  Comment Letter of Tony Greiner (Jul. 14, 2018).   

422  Comment Letter of Oppenheimer Funds (Aug. 7, 2018) (“Oppenheimer Letter”); TIAA Letter. 

423  Comment Letter of the Investment Company Institute (Aug. 7, 2018) (“ICI Letter”).  



 

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right for them.  We continue to believe drawing retail investors’ attention to these additional fees 

is important because they have an impact on investors’ investment returns over time.  

Accordingly, we are requiring disclosure of these types of fees and listing examples of categories 

as proposed.  The final instructions, however, make clear that firms can use their own wording, 

and only require examples of the most common fees and costs.  As discussed below, firms will 

be required to include cross-references to more specific information, and will be permitted to use 

tools to help investors learn about these fees and costs in an interactive way without 

overwhelming retail investors with the additional information.  We believe that this approach 

balances providing short, understandable disclosures about additional fees and costs with 

investors’ interest in understanding more about fees and costs. 

Additional Information.  Finally, in a change from the proposal, firms will be required to 

state:  “You will pay fees and costs whether you make or lose money on your investments.  Fees 

and costs will reduce any amount of money you make on your investment over time.  Please 

make sure you understand what fees and costs you are paying.”424  The first sentence replaces a 

statement in the proposal that some investments impose additional fees that will reduce the value 

of the retail investor’s investment over time.  Given the importance of assisting investors to 

understand the impact of fees and costs, we are requiring prescribed wording in this instruction.  

The prescribed wording discloses to investors a key term under which a service will be offered, 

                                                                                                                                                             

424  Item 3.A.(iii) of Form CRS. 



 

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namely the fact that the service will not be free and that the cost of using the service will exist 

regardless of investment performance.425 

Firms must also include specific cross-references to more detailed information about their 

fees and costs.426  The cross-reference must, at a minimum, include the same information as, or 

contain information equivalent to that required by, the Form ADV Part 2A brochure (specifically 

Items 5.A., B., C., and D.) and Regulation Best Interest, as applicable.427  If the firm is a broker-

dealer that does not provide recommendations subject to Regulation Best Interest, to the extent it 

prepares more detailed information about its fees, it must include specific references to such 

information.428  The final instructions require firms to use text features to make this additional 

information more noticeable and prominent in relation to other discussion text.429  Firms may 

choose to provide a hyperlink, or other means of facilitating access, that leads directly to the 

relevant Regulation Best Interest disclosure or section of Form ADV, or they may choose to 

create an additional page that contains the same or equivalent information.430  For example, a 

firm may decide to include information on a different website.   

                                                                                                                                                             

425  See Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985) (upholding required disclosure of 
factual information about terms of service, including that clients would still be liable to litigation costs even 
if their lawsuits were unsuccessful). 

426  Item 3.A.(iii) of Form CRS. 

427  Item 3.A.(iii) of Form CRS. 

428  Item 3.A.(iii) of Form CRS. 

429  General Instruction 4.C to Form CRS.  For example, firms could use larger or different font; a text box 
around the heading or questions; bolded, italicized, or underlined text; or lines to offset the information 
from other sections. 

430  While drafting these disclosures for Form CRS, investment advisers also are encouraged to consider 
whether they can describe the information about fees more clearly in the Form ADV brochure in a more 

 



 

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The proposed instructions did not include a specific cross-reference to additional fee 

disclosure, but the proposal required a cross-reference in the Additional Information section 

about where the retail investor could find information about the services offered, and we 

requested comment on whether to require firms to include a fee schedule.431  In the RAND 2018 

survey, a potential hyperlink to information on fees, however, generated the most interest among 

survey participants.432  Some industry commenters suggested that the relationship summary 

should permit hyperlinks to fee schedules, arguing that additional information would be helpful 

for retail investors, but that including the fee schedule itself would be unwieldy.433  Another 

commenter, however, suggested requiring a fee schedule that includes typical breakpoints and 

information on likely and/or maximum fees.434   

Given the feedback from investors that fee information is important, we believe that 

requiring specific references to more detailed information about fees balances the goals of the 

relationship summary, to highlight information covering several topics, with investors’ interest in 

                                                                                                                                                             

reader-friendly format.  See also General Instructions 3. and 4. of Form CRS (instructions applicable to 
electronic delivery).  For further discussion of these provisions, see supra Section II.A.3. and footnotes 156 
and 158 and accompanying text, and Section II.B.2.(b) and footnotes 348–349. 

431  Proposed Item 7.E. of Form CRS.  

432  See RAND 2018, supra footnote 13 (58% of participants selecting “very likely” and another 32% selecting 
“somewhat likely” to click on a hyperlink relating to fees; no other potential hyperlink generated a majority 
with “very likely” usage among any investor or education subgroup).  Other investor studies indicated that 
participants wanted descriptions of the hyperlinks to be more concrete in terms of what information they 
would find, and that, while some participants were interested in additional information, others admitted 
they would not follow the links because it was extra effort, they were uninterested, or the link did not itself 
suggest what would be there.  See Kleimann II, supra footnote 19.  In addition, numerous commenters 
supported layered disclosure.  See supra footnote 31 and accompanying text. 

433  See CFA Letter I; IAA Letter I; LPL Financial Letter. 

434  See Morningstar Letter.  



 

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understanding more about fees.  This approach will give retail investors information about the 

types of fees at a higher level and then offer more details, permitting the relationship summary to 

cover other important topics as well.435  Including a fee schedule in the relationship summary 

could make it more difficult to also cover the other topics while maintaining short, digestible 

disclosures.  Instead, we are not including a fee schedule in the relationship summary but are 

requiring cross references to balance providing a shorter document with giving retail investors 

easy access to more detailed information.  

Conversation Starter.  We are also adopting a conversation starter that is designed to 

prompt a more personalized discussion regarding the fees and costs that will impact the 

particular retail investor’s account.  A firm must include the following question for the retail 

investor to ask his or her financial professional: “Help me understand how these fees and costs 

might affect my investments.  If I give you $10,000 to invest, how much will go to fees and 

costs, and how much will be invested for me?”436   

As discussed above, the proposal included the following “Key Question,” which was 

intended to serve as a conversation starter between the retail investor and the financial 

professional and to provide the investor an opportunity to receive a quantitative example of the 

impact of fees:  “Do the math for me.  How much would I expect to pay per year for an advisory 

account?  How much for a typical brokerage account?  What would make those fees more or 

                                                                                                                                                             

435  See supra Section II.A.3. 

436  Item 3.A.(iv) of Form CRS. 



 

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less?  What services will I receive for those fees?”437  The Proposing Release discussed the 

option of including an example of the impact of fees in the relationship summary, and requested 

comment on whether we should require an example showing how sample fees and charges apply 

to a hypothetical advisory account and a hypothetical brokerage account, as applicable.438  We 

also requested comment on what assumptions firms should make in preparing such an example 

and how the information should be presented.439   

Feedback from the RAND 2018 report, other surveys and studies, roundtables, and the 

Feedback Forms showed that retail investors want more information about fees and the impact of 

those fees on their investments.440  At some of the roundtables, for example, participants 

discussed the utility of adding a hypothetical example in the relationship summary to illustrate 

fees.441  Commenters on Feedback Forms also asked for more specific information about the 

                                                                                                                                                             

437  Proposed Item 8 of Form CRS. 

438  Proposing Release, supra footnote 5. 

439  Proposing Release, supra footnote 5. 

440  See e.g., RAND 2018, supra footnote 13 (noting survey results finding that the fees and costs section was 
“the section for which the largest share of respondents suggest adding more detail” and investors were 
more likely than non-investors to suggest adding more detail to the section on fees and costs (31 percent 
versus 25 percent), and in qualitative interviews, “participants expressed that this section is overwhelming . 
. . and at the same time felt more information would be helpful.” ); Feedback Forms Comment Summary, 
supra footnote 11 (summary of responses to Question 5) (narrative answers on 29 Feedback Forms 
indicated that additional information about fees and costs would be helpful). 

441  See Washington, D.C. Roundtable (an investor stated that it would be useful for comparing understanding 
costs if hypothetical examples were given about how cost affects the investor’s returns); Atlanta 
Roundtable (an investor stated that it would be helpful to know the cost of investing a hypothetical amount 
of money); and Philadelphia Roundtable (an investor stated that it would be helpful to see hypothetical 
broker and investment adviser fee arrangements for a given investment portfolio to aid in determining 
which arrangement may be more appropriate for the investor). 



 

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impact of fees on their investments, such as example fee calculations or ranges of fees.442  

Commenters supported including a question highlighting fees a retail investor pays.443  

Commenters, including commenters representing investors and individual investors, also 

overwhelmingly supported requiring more information to help retail investors understand the 

fees and costs associated with their investments, particularly specific examples about how those 

fees could affect them.444  Several commenters, however, objected to the inclusion of the key 

question addressed above because of the operational challenges present in answering such a 

question with respect to a particular retail investor.445  Some argued that anticipated fees are 

unknown for broker-dealer customers, while others believed that it is too difficult for firms to 

                                                                                                                                                             

442  See, e.g., Lee1 Feedback Form (“fees should tell me the fees I can expect to pay”); Anonymous03 
Feedback Form (“Create a calculator . . .  where the investor fills in the amount and the fees for both 
scenarios are calculated”); Anonymous06 Feedback Form (“Provide monetary examples. If you invest 
$100, then your fees are…”); Anonymous24 Feedback Form (requesting “more specific examples showing 
specific costs”); Baker Feedback Form (“Graphic and hypothetical examples could be helpful. Mary invests 
$50,000 with a broker-dealer and Jane invests $50,000 with an investment adviser and present some 
scenarios with each . . . As fees, commissions, etc. may vary and be negotiable, a range of typical, usual, 
main-stream commission charges and asset-based fees would be helpful to alert the client to possible 
overcharges.”); Bhupalam Feedback Form (“What would make it better is if it has samples of costs in 
particular with each firm a client is dealing with.”); Hawkins Feedback Form (“Including some ranges as to 
what to expect in fees could help. Also, including information as to the impact that increased fees have on 
investment returns, long term, would help the average investor.”); Mennella Feedback Form (“I want to 
know what an investment is going to cost me over my time horizon ….”).  

443  See IAA Letter I; LPL Financial Letter; New York Life Letter; Primerica Letter; RAND 2018, supra 
footnote 13 (91% of participants indicated they were “very likely” or “somewhat likely” to ask a 
supplemental question that addressed the amount of a $1,000 investment that would go to fees and costs 
rather than being invested for them). 

444  See, e.g., CFA Institute Letter I; CFA Letter I; Betterment Letter I; Morningstar Letter; John Hancock 
Letter; Comment Letter of Barbara Greenwald (Jul. 12, 2018).  See, e.g., Anonymous25 Feedback Form 
(“give examples with numbers, showing examples of hypothetical accounts”); Baker Feedback Form 
(“Graphic and hypothetical examples would be helpful”); Coleman Feedback Form (“Need simple 
examples”); Manella Feedback Form (“I want to know what an investment is going to cost me over my 
time horizon”); Schreiner Feedback Form (“Provide a hypothetical example with industry standard fees 
…”); see also Atlanta Roundtable; Houston Roundtable; Washington, D.C. Roundtable.    

445  See supra footnote 189. 



 

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build out systems for individualized fees.446  Other commenters suggested eliminating this 

particular key question and instead requiring firms to include links to investor education 

materials prepared by the Commission.447  Many commenters were concerned that this key 

question would impose new disclosure or recordkeeping requirements.448   

Commenters that supported more fee disclosure had a range of suggestions as to how to 

include the additional information.  For example, one commenter believed that if hypothetical or 

personal fee disclosures are included in the relationship summary, such disclosures should focus 

on helping investors understand the effect expenses have on an investment and should make 

clear that such an example is for educational purposes.449  One individual advocated for more 

transparent fee information, suggesting the relationship summary provide individualized fees or a 

specific range of fees.450  Another commenter noted that, in response to a previously 

commissioned report revealing participants’ lack of knowledge about fees as well as their desire 

for a better understanding of fees, a general chart or graph that depicts the effects of fees on an 

account would be helpful for investors.451  Another commenter included a sample mock 

                                                                                                                                                             

446  See NSCP Letter; Edward Jones Letter (noting that given the range of services available, it would be very 
difficult for financial professionals to fully address this question at the outset of the relationship, 
particularly for investors selecting transaction-based services); TIAA Letter; LPL Financial Letter; 
Primerica Letter; ICI Letter; SIFMA Letter (noting most firms do not currently have systems in place to 
allow financial professionals to answer customer-specific questions). 

447  See Prudential Letter. 

448  See Edward Jones Letter; see also supra Section II.A.4. 

449  See Invesco Letter (stating that this could be achieved by, for example, a side-by-side bar graph showing 
the growth of an investment gross of costs and net of costs). 

450  See Wahh Letter. 

451  See AARP Letter. 



 

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relationship summary with a numerical example of how the fees might impact a hypothetical 

account.452   

Given the importance of fees, we want to encourage retail investors and their financial 

professionals to have a conversation to further discuss the particular fees and costs that would 

apply to the retail investor, and the impact fees and costs could have on the retail investor’s 

investment returns over time, in order to promote investor understanding.  After consideration of 

the comments received, we are adopting a conversation starter that is designed to elicit a more 

personalized discussion regarding the fees and costs that will impact the particular retail 

investor’s account, while mitigating the concerns regarding the proposed “Do the math for me” 

question posed.453  We believe that this conversation starter will allow financial professionals to 

tailor the conversation to the particular retail investor even if the financial professional does not 

provide precise fee information for that individual during the conversation.  For instance, if the 

financial professional intends to recommend mutual funds to the retail investor, he or she may 

choose to discuss firm- and product-level fees that may apply.  The financial professional should 

be in a position to explain the fees and costs relevant to that particular retail investor if the 

investor chooses a certain type of account and certain investment, even if the financial 

professional provides examples and estimated ranges rather than a precise prediction of how 

much the investor will pay.  In addition, the financial professional should explain how those fees 

                                                                                                                                                             

452  See Betterment Letter I (Hotspex), supra footnote 18 (noting that investors who viewed a redesigned 
version of the standalone adviser relationship summary appeared to appreciate the example of how fees 
would impact a hypothetical account). 

453  See supra Section II.A.4.141 

 

and costs will work (for example, whether they are upfront charges, taken out of the initial 

investment amount, taken out over time, future charges, or charged in another manner) and how 

the fees and costs could impact the retail investor’s investment returns over time.  Firms may 

consider including calculators, charts, graphs, tables, or other graphics or text features to enhance 

an investor’s understanding of these fees.  Firms may also consider reviewing with their retail 

investors the impact of fees on the retail investor’s account on a periodic basis.454 

While we agree that examples are important to illustrate the potential impact of fees, we 

decline to require firms to provide a hypothetical example in the relationship summary.455  Our 

intent with the proposed “Do the math for me” question was that it serve as a conversation starter 

and a prompt to encourage the retail investor to ask about the amount she would typically pay 

per year for the account, what would make the fees more or less, and what was included in those 

fees.456  We believe that the conversation starter that is being adopted here is consistent with the 

proposal’s intent to prompt retail investors to have a conversation with their financial 

professional about fees that may impact their investments and account while also addressing the 

concerns raised by commenters.  We encourage firms to consider ways to provide more 

personalized disclosures to retail investors, and we will continue to consider whether to require 

more personalized fee disclosure, particularly as operational and technological costs fall.   

                                                                                                                                                             

454  See Regulation Best Interest Release, supra footnote 47, at Section II.C.1.a. 
455  See infra Section IV.D.4 (Alternatives to the Relationship Summary) for a discussion on the inclusion of a 

hypothetical fee example. 

456  Proposing Release, supra footnote 5. 



 

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b. Other Ways of Making Money, Standard of Conduct, and 
Conflicts of Interest 

 Firms will be required to include disclosure under a single heading describing their 

standard of conduct and a summary of certain firm-level conflicts, including the specific 

conflicts the proposal required.457  The proposal required disclosure on both conflicts and the 

standard of conduct, but in separate sections.  The final relationship summary requires discussion 

in one section of other firm-level revenues and conflicts of interest, and the applicable standard 

of conduct.458   

We are placing these disclosures together, including the related conversation starter, 

because we believe they will more effectively allow retail investors to understand the standards 

of conduct for broker-dealers and investment advisers.459  We are also modifying the 

requirements for the standard of conduct and conflict of interest disclosures, as discussed in more 

detail below. 

We continue to believe it is important to highlight the presence of conflicts and their 

interconnectedness with how the firm makes money.  We recognize that investment advisers, 

                                                                                                                                                             

457  Item 3.B. of Form CRS.  For broker-dealers, the heading will state “What are your legal obligations to me 
when providing recommendations?  How else does your firm make money and what conflicts of interest do 
you have?”; for investment advisers, the heading will state “What are your legal obligations to me when 
acting as my investment adviser?  How else does your firm make money and what conflicts of interest do 
you have?”; and for dual registrants that prepare a single relationship summary, the heading will state 
“What are your legal obligations to me when providing recommendations as my broker-dealer or when 
acting as my investment adviser?  How else does your firm make money and what conflicts of interest do 
you have?”. 

458  Id. 

459  In addition, retail investors may learn more about investment advisers, broker-dealers, and investing at 
Investor.gov/CRS, which will be referenced in a relationship summary’s introduction.  See Instruction to 
Item 1.B. of Form CRS. 



 

143 

 

broker-dealers, and their financial professionals have conflicts that affect their retail investor 

clients and customers and believe it is important to underscore this for retail investors.460  

Similarly, we continue to believe that it is important to provide retail investors with disclosure 

regarding a broker-dealer or investment adviser’s legal obligations regarding the required 

standard of conduct in a way that is understandable for retail investors.   

Standard of Conduct.  As proposed, we are adopting a requirement that firms describe 

their legal standard of conduct using prescribed wording (the “standard of conduct 

disclosure”).461  In a change from the proposal, however, the final instructions modify both the 

                                                                                                                                                             

460  See infra footnote 495 and accompanying text. 

461  Under the proposal, broker-dealers that offer brokerage accounts to retail investors would have been 
required to include the following: “[We must act in your best interest and not place our interests ahead of 
yours when we recommend an investment or an investment strategy involving securities.] When we 
provide any service to you, we must treat you fairly and comply with a number of specific obligations. 
Unless we agree otherwise, we are not required to monitor your portfolio or investments on an ongoing 
basis.”  The bracketed wording would have been included only if the broker-dealer offered 
recommendations subject to Exchange Act Rule 15l-1.  See Proposed Item 3.B.(1) of Form CRS.  In 
addition, such broker-dealers would have had to include the following: “Our interests can conflict with 
your interests. [When we provide recommendations, we must eliminate these conflicts or tell you about 
them and in some cases reduce them].”  The bracketed wording would only have been included if the 
broker-dealer offered recommendations subject to Regulation Best Interest.  See Proposed Item 3.B.(2) of 
Form CRS. 

 Under the proposal, investment advisers that offer investment advisory accounts to retail investors would 
have had to include the following: “We are held to a fiduciary standard that covers our entire investment 
advisory relationship with you. [For example, we are required to monitor your portfolio, investment 
strategy and investments on an ongoing basis.]”  The bracketed wording would have been omitted if the 
investment adviser did not provide ongoing advice.  See Proposed Item 3.C.(1) of Form CRS.  In addition, 
such investment advisers would have had to include the following: “Our interests can conflict with your 
interests. We must eliminate these conflicts or tell you about them in a way you can understand, so that you 
can decide whether or not to agree to them.”  See Proposed Item 3.C.(2) of Form CRS. 

 The section also required a statement that the firm’s interests may conflict with a retail investor’s interests 
and explain the firm’s obligations with respect to those conflicts using prescribed wording.  See Proposed 
Item 3 of Form CRS. 



 

144 

 

content of the standard of conduct disclosure462 and its placement in the relationship summary.  

As discussed in more detail below, the final instructions require broker-dealers, investment 

advisers, and dual registrants to include a brief statement of the applicable standard of 

conduct.463  In addition, as discussed above, this disclosure is required to be included in the 

conflicts of interest section rather than a separate standard of conduct section.  

Most commenters did not object to the proposal’s requirement that broker-dealers and 

investment advisers provide disclosure regarding their standards of conduct or that such 

disclosure be standardized.464  Results of the RAND 2018 report and other investor studies and 

surveys indicate that retail investors view this information as helpful.465 Similarly, commenters 

on Feedback Forms indicated that this information was useful.466  In addition, the IAC 

recommended that investors would benefit from receiving uniform, plain-English disclosure 

documents with topics, such as, to the extent the Commission does not adopt a uniform fiduciary 

                                                                                                                                                             

462  Form CRS also includes a conversation starter regarding broker-dealers and investment advisers’ standards 
of conduct.  See infra footnote 495 and accompanying text. 

463  Item 3.B.(i) of Form CRS. 

464  See, e.g., AARP Letter; CFA Institute Letter I; IAA Letter II. 

465  See RAND 2018, supra footnote 13 (almost one third of survey respondents selected this section as one of 
the two most useful; almost 60% would keep the length as is and over 15% would add detail); Cetera Letter 
II (Woelfel), supra footnote 17 (88% of survey respondents somewhat or strongly agreed “the firm’s 
obligations to you” is a “very or somewhat important” topic); see also Schwab Letter I (Koski), supra 
footnote 21 (“obligations of the firm” ranked third where survey participants were asked to identify four 
topics as most important for a firm to communicate”). 

466  Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Question 2(b)) (36  
commenters (39%) graded the “Our Obligations to You” section of the relationship summary as “very 
useful” and 42 commenters (45%) graded this section as “useful”).  



 

145 

 

standard, “what is your legal obligation to me?”467  Certain commenters, however, suggested that 

the Commission discuss generally applicable information, including standards of conduct, in 

investor educational materials instead of requiring firms to do so in their relationship 

summaries.468 A number of these commenters argued that this wording might unintentionally 

create an implied contractual relationship subject to a customer’s private right of action.469  The 

prescribed language describing the standard of conduct broker-dealers and investment advisers 

owe to their customers and clients is not intended to create a private right of action. 

Many commenters, however, found that the specific wording we proposed470 did not 

effectively address investor confusion concerning legal duties applicable to broker-dealers and 

investment advisers.  Commenters indicated that the proposed wording in this section was 

confusing and did not clarify the applicable legal standards.471  Some commenters argued that 

this section included legal jargon inaccessible to retail investors.472  Others believed that retail 

investors are unlikely to understand the difference between “best interest” and “fiduciary,” with 

some suggesting that relationship summaries more clearly define the applicable legal standards 

                                                                                                                                                             

467 IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10. 

468  See, e.g., Primerica Letter.   

469  See ASA Letter; Primerica Letter; Transamerica Letter (requesting a statement from the Commission that 
any such private right of action was not intended). 

470  See supra footnote 461. 

471  See, e.g., AARP Letter; Betterment Letter I; CFA Letter I. 

472  See Comment Letter of Fisher Investments (Jul. 31, 2018) (“Fisher Letter”); see also Kleimann I, supra 
footnote 19; RAND 2018, supra footnote 13; Kleimann II, supra footnote 19. 



 

146 

 

or communicate the differences between “fiduciary” and “best interest.”473  Investment advisers 

also expressed concern that retail investors may “wrongly” view “best interest” as a higher 

standard of conduct as compared to the fiduciary standard.474   

Investor feedback through surveys and studies and in comments at roundtables and on 

Feedback Forms also showed some confusion.  For example, some participants in investor 

studies and at one of the roundtables did not understand why conflicts of interest existed if 

broker-dealers and investment advisers were held to the standards of conduct described.475  

Investor studies and surveys showed that participants varied in their understanding of differing 

obligations for different account types, some viewing brokerage accounts and advisory accounts 

as subject to similar standards of conduct but others interpreting the section as conveying that the 

two account types are subject to different standards.476  Observations reported by the RAND 

2018 report, other surveys and studies and comments received on Feedback Forms demonstrated 

                                                                                                                                                             

473  See, e.g., AARP Letter; CFA Letter I; Comment Letter of the Financial Planning Coalition (Aug. 7, 2018) 
(“Financial Planning Coalition Letter”).   

474  See, e.g., Betterment Letter I; Fisher Letter; IAA Letter I; IAA Letter II. 

475  See RAND 2018, supra footnote 13 (in qualitative interviews, participants felt that the conflicts of interest 
section contradicted the “Our Obligations to You” section); Miami Roundtable. 

476  See RAND 2018, supra footnote 13; see also Kleimann I, supra footnote 19 (“Most participants did not 
draw a parallel between the ‘best interest standard’ of the Broker-Dealers and the ‘fiduciary standard’ of 
Investment Advisers.  Rather, they drew a parallel between ‘specific obligations’ with Broker-Dealers and 
‘fiduciary standards’ with Investment Advisers … [and] saw these two as similar regulatory obligations.”); 
Betterment Letter I (Hotspex), supra footnote 18 (in a survey that tested participant’s comprehension after 
viewing a version of the proposed sample standalone adviser relationship summary, only 26% correctly 
identified as false a statement that broker-dealers are held to a fiduciary standard; 71% correctly identified 
as true that an adviser (Betterment) would be held to a fiduciary standard). 



 

147 

 

that many participants did not understand the meaning of the word “fiduciary” in particular.477  

Investor studies also further observed that, when presented with alternative mock-ups of a 

relationship summary designed to clarify this section, some investors still struggled with 

understanding the legal obligations of brokers and advisers.478 

We proposed this section to address investor confusion concerning legal duties applicable 

to broker-dealers and investment advisers and, in combination with the key questions about the 

financial professional’s legal obligations, to encourage a conversation between the retail investor 

and the financial professional about applicable standards of conduct.479  The prescribed wording 

was intended to promote consistency in communicating these standards to retail investors.480   

We continue to believe that it is appropriate for the final instructions to require broker-

dealers and investment advisers to describe their standards of conduct to investors, because, as 

discussed above, we believe that it is important to promote retail investors’ understanding of 

these obligations.  We also agree with commenters that requiring these firms to include 

                                                                                                                                                             

477  See, e.g., RAND 2018, supra footnote 13 (“Some participants had never heard of the word, whereas others 
had heard it but did not know what it meant in this context.  Others thought the word “fiduciary implies 
acting in best interest …”); Kleimann I, supra footnote 19 (“Few participants could define ‘fiduciary 
standard’”); see also Feedback Forms Comment Summary, supra footnote 11 (summary of responses to 
Question 4) (On 10 Feedback Forms, commenters specifically asked for a definition or better explanation 
of the term “fiduciary.”). 

478  See, e.g., Kleimann II, supra footnote 19 (explains that, after redesign of obligations section participants 
still struggled to understand the implications of the fiduciary standard for advisers compared to the best 
interest standard for broker-dealers); Betterment Letter I (Hotspex), supra footnote 20 (almost one half of 
survey participants reviewing a version of the standalone adviser relationship summary designed by 
Betterment did not correctly identify as false a statement that broker-dealers are held to a fiduciary 
standard). 

479  See Proposing Release, supra footnote 5, at n.114 and accompanying text. 

480  Proposing Release, supra footnote 5, at n.115 and accompanying text. 



 

148 

 

prescribed disclosure regarding these standards of conduct is important in achieving this goal.481  

While the final instructions generally do not require prescribed disclosure in other contexts,482 

we believe that investors should be provided with a consistent articulation of their firm’s legal 

obligations regarding their standard of conduct and that the rationale for allowing firms 

flexibility to tailor their disclosure in other aspects of the relationship summary does not apply 

with respect to the standard of conduct.  In this regard, some commenters stated that Form CRS 

should be an educational document, which would be a standardized document published and 

maintained by the Commission.483  While the content of disclosure regarding a firm’s standard of 

conduct should be uniform, this disclosure should appear in the relationship summary, which 

must be delivered to all retail investors, rather than a separate SEC-staff-created and maintained 

publication.  In addition, prescribing language for this disclosure does not raise the same 

concerns that commenters raised about prescribed language generally.  For example, we are 

permitting more flexibility in how firms describe their fees and services in response to comments 

that some of the prescribed wording, for example, was not necessarily applicable to their 

business and could make investors confused.484  

By contrast, a legal standard of conduct, whether through an investment adviser’s 

                                                                                                                                                             

481  But see footnotes 468–469 and accompanying text. 

482  As discussed in more detail above, many commenters who believed that the final instructions should not 
require prescribed disclosure focused on other aspects of the relationship summary, such as disclosure 
regarding a description of a firm’s services. See supra Section II.A.1. 

483  See, e.g., Primerica Letter.   

484  See supra Section II.A.1. One commenter noted that requiring prescribed disclosure in some circumstances 
may not be accurate for all business models and could mislead investors.  See CFA Letter I. 



 

149 

 

fiduciary duty, Regulation Best Interest, or both, will apply to all firms delivering the 

relationship summary that provide recommendations or investment advice, and prescribing 

language will avoid investor confusion when describing the applicable standard.  Indeed, it may 

be confusing to investors comparing relationship summaries among prospective firms to see the 

same legal standard described differently among these firms.  The required statements about the 

legal standard of conduct are disclosures of purely factual information about the terms under 

which the firms’ services will be made available to investors.485 

We have determined, however, that the proposed standard of conduct disclosure may not 

have appropriately addressed investor confusion.  While the proposal was intended to provide 

retail investors with simple, easily understood disclosure, we agree with commenters and results 

from investor studies and surveys,486 that the relationship summary could be revised in a manner 

that would be more beneficial to retail investors,487 especially in light of the similarity between 

broker-dealers’ and investment advisers’ legal obligations to retail investors with respect to their 

standards of conduct when providing recommendations or advice under the rules and 

interpretations we are adopting concurrently.488  In this regard, we have modified the standard of 

conduct disclosure to include it within the conflicts of interest section of the relationship 

summary and to contain simplified wording that is short, plain language, and user-friendly but 

                                                                                                                                                             

485  See Zauderer, 471 U.S. at 651; Milavetz, 559 U.S. at 250. 

486  See supra Section II.A. 

487  See, e.g., AARP Letter. 

488  See Fiduciary Release, supra footnote 47; Regulation Best Interest Release, supra footnote 47. 



 

150 

 

still describes the key components of a broker-dealer’s or investment adviser’s standard of 

conduct when providing recommendations or advice.489   

First, we are modifying the standard of conduct disclosure so that it is required to be 

provided under a modified heading490 in the conflicts of interest section.491  While broker-dealers’ 

and investment advisers’ legal obligations regarding their standard of conduct apply not just in 

the context of conflicts of interest,492 we believe that requiring this disclosure to be included in 

the conflicts of interest section will provide a retail investor with a greater ability to discern how 

a particular legal obligation regarding a standard of conduct may affect him or her by describing 

the application of that obligation in the context of conflicts of interest, which was a primary 

concern for retail investors and commenters alike.493  In addition, this placement is supported by 

observations reported in the RAND 2018 qualitative interviews and another study, which 

indicated that some participants struggled with how to reconcile the conflicts of interest section 

with the legal obligations section because they were discussed separately.494 

                                                                                                                                                             

489  The final instructions provide that if a required disclosure or conversation starter is inapplicable or specific 
wording required by the instructions is inaccurate, firms may omit or modify that disclosure or 
conversation starter.  See General Instruction 2.B. to Form CRS.  We note that, like the proposal, the 
standard of conduct disclosure distinguishes between broker-dealers that provide recommendations subject 
to Regulation Best Interest and broker-dealers that do not provide recommendations subject to Regulation 
Best Interest.  See infra footnote 507 and accompanying text. 

490  Item 3.B. of Form CRS; see also supra footnote 457. 

491  Item 3 of Form CRS. 

492  See Regulation Best Interest Release, supra footnote 47 and Fiduciary Release, supra footnote 47.  

493  See Proposing Release, supra footnote 5, at Section II.B.6; supra footnote 475 and accompanying text. 

494  See, e.g., RAND 2018, supra footnote 13 (noting that “[s]ome participants expressed appreciation that the 
firm was being transparent about its conflicts of interest, but many participants struggled with how to 

 



 

151 

 

Second, in the conversation starter relating to this section, we are requiring firms to 

include the following question: “How might your conflicts of interest affect me, and how will 

you address them?”495  As discussed above, we believe that including questions for investors to 

ask their financial professionals is an important component of the relationship summary.  This 

question also underscores for retail investors that investment advisers and broker-dealers have 

conflicts that may create incentives to put their interests ahead of the interests of their retail 

clients and customers.496  As a corollary, it also underscores for retail investors how investment 

advisers and broker-dealers address these conflicts of interest in discharging their legal 

obligations regarding their standards of conduct to these investors.  We believe that this 

requirement will improve a retail investor’s understanding of the standard of conduct owed by 

his or her financial professional by helping the investor to better understand its application to 

him or her.   

Unlike the proposal,497 the final instructions do not require prescribed disclosure 

summarizing how a firm’s standard of conduct would require it to address conflicts of interest.  

As discussed above, commenters found the proposal’s standard of conduct disclosure 

confusing.498 After considering comments and observations reported in surveys and studies, we 

                                                                                                                                                             

reconcile the information in this section with the previous ‘Our Obligations to You’ section.”); Kleimann I, 
supra footnote 19; see also infra footnote 505 and accompanying text. 

495  Item 3.B.(iii) of Form CRS. 

496  See supra Section II.A.4. 

497  See Proposed Items 3.B.2. and 3.C.2. of Form CRS. 

498  See supra footnote 471 and accompanying text.  See also RAND 2018, supra footnote 13 (noting that one 
“participant pointed out that the obligations section had said that any conflicts of interest would be reduced 

 



 

152 

 

recognize that the proposed disclosures were confusing, particularly the prescribed disclosure 

attempting to explain concepts of full and fair disclosure, mitigation, and informed consent.499  

Accordingly, we are removing this wording to shorten the disclosure and to provide more focus 

on the rest of the disclosure required in this section, as we believe this should improve investor 

comprehension. We believe that clearly disclosing to investors that firms have an obligation to 

act in the best interest of a client or customer and also simultaneously have conflicts of interest is 

more important than describing the particular aspects of firms’ general duty to disclose, mitigate, 

or obtain informed consent to conflicts, as applicable.  Instead of this disclosure, we are requiring 

a conversation starter to encourage firms to discuss with retail investors how their standards of 

conduct require them to address conflicts of interests.  In addition, we believe that the discussion 

prompted by the conversation starter accompanied by examples of conflicts of interest500 will 

provide retail investors with specific illustrations of how a firm’s standard of conduct can apply, 

which could encourage investors to ask more detailed questions about how firms address their 

conflicts. 

Finally, we have modified the standard of conduct disclosure for broker-dealers and 

investment advisers to reduce the amount of required disclosure,501 to focus the disclosure on the 

                                                                                                                                                             

and disclosed [but] the conflicts of interest section does not mention disclosing or reducing conflicts); 
Kleimann II, supra footnote 19 (“Most participants did not understand how conflicts would be resolved … 
they read the disclosure as indicating that Brokerage Accounts were under no obligation to notify clients of 
a conflict …”).  

499  See Fiduciary Release, supra footnote 47 (discussing the concepts of full and fair disclosure, mitigation, 
and informed consent).  

500  Item 3.B.(ii) of Form CRS. 

501  Items 3.B.(i).a. and 3.B.(i).b. of Form CRS. 



 

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standard of conduct that applies to the provision of recommendations and advice,502 and to 

require that portions of the disclosure be presented in bold and italicized font.503  We believe that 

streamlining the standard of conduct disclosure and tailoring the disclosure to the type of firm 

providing such disclosure will clarify for retail investors the applicable legal standard of conduct 

to which their particular firm is subject when providing recommendations or advice or when 

providing broker-dealer services without recommendations.   

Most commenters found the proposal’s standard of conduct disclosure confusing because 

it included legal or technical words.  For example, some commenters, and results from investor 

studies and surveys, indicated that many did not understand the meaning of “fiduciary” or had 

never heard of the word.504  Accordingly, the modified standard of conduct disclosure both 

eliminates technical words, such as “fiduciary,” and describes the standards of conduct of 

broker-dealers, investment advisers, or dual registrants using similar terminology in a plain-

English manner.  In particular, the final instructions use the term “best interest” to describe how 

broker-dealers, investment advisers, and dual registrants must act regarding their retail customers 

or clients when providing recommendations as a broker-dealer or acting as an investment 

adviser.505  We believe that requiring firms—whether broker-dealers, investment advisers, or 

dual registrants—to use the term “best interest” to describe their applicable standard of conduct 
                                                                                                                                                             

502  Item 3.B. of Form CRS (heading).   

503  Items 3.B.(i).a., 3.B.(i).b., and 3.B.(i).c. of Form CRS. 

504  See supra footnote 477 and accompanying text; see also CFA Letter I (citing to “man on the street” 
interviews suggesting that average investors do not understand the term “fiduciary”); Consumer Reports 
Letter (commenting on the RAND 2018 report). 

505  Item 3.B.(i) of Form CRS. 



 

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will clarify for retail investors their firm’s legal obligation in this respect, regardless of whether 

that obligation arises from Regulation Best Interest or an investment adviser’s fiduciary duty 

under the Investment Advisers Act.506  The modified language, however, highlights a key 

difference in when a firm must exercise its obligation—specifically, when providing a 

recommendation (in the case of a broker-dealer),507 or when acting as an investment adviser,508 

or either providing a recommendation or acting as an investment adviser (in the case of a dual 

registrant).509  Portions of the modified standard of conduct disclosure also are required to be 

                                                                                                                                                             

506  See Fiduciary Release, supra footnote 47; Regulation Best Interest Release, supra footnote 47. 

507  Item 3.B.(i).a. of Form CRS (requiring broker-dealers that provide recommendations subject to Regulation 
Best Interest to include (emphasis required): “When we provide you with a recommendation, we have to 
act in your best interest and not put our interest ahead of yours.  At the same time, the way we make money 
creates some conflicts with your interests.  You should understand and ask us about these conflicts because 
they can affect the recommendations we provide you.  Here are some examples to help you understand 
what this means,” and broker-dealers that do not provide recommendations subject to Regulation Best 
Interest to include (emphasis required):  “We do not provide recommendations.  The way we make money 
creates some conflicts with your interests.  You should understand and ask us about these conflicts because 
they can affect the services we provide you.  Here are some examples to help you understand what this 
means.”). 

508  Item 3.B.(i).b. of Form CRS (requiring investment advisers to include (emphasis required): “When we act 
as your investment adviser, we have to act in your best interest and not put our interest ahead of yours.  At 
the same time, the way we make money creates some conflicts with your interests.  You should understand 
and ask us about these conflicts because they can affect the investment advice we provide you.  Here are 
some examples to help you understand what this means.”). 

509  Item 3.B.(i).c. of Form CRS (requiring dual registrants that prepare a single relationship summary and 
provide recommendations subject to Regulation Best Interest to include (emphasis required): “When we 
provide you with a recommendation as your broker-dealer or act as your investment adviser, we have to 
act in your best interest and not put our interest ahead of yours.  At the same time, the way we make money 
creates some conflicts with your interests.  You should understand and ask us about these conflicts because 
they can affect the recommendations and investment advice we provide you.  Here are some examples to 
help you understand what this means,” and dual registrants that prepare a single relationship summary and 
do not provide recommendations subject to Regulation Best Interest to include (emphasis required): “We 
do not provide recommendations as your broker-dealer.  When we act as your investment adviser, we have 
to act in your best interest and not put our interests ahead of yours.  At the same time, the way we make 
money creates some conflicts with your interest.  You should understand and ask us about these conflicts 
because they can affect the services and investment advice we provide you.  Here are some examples to 
help you understand what this means.”  Also requiring that dual registrants that prepare two separate 

 



 

155 

 

presented in bold and italicized font.510  The final instructions are designed to provide retail 

investors with a clear understanding of when a firm’s legal obligations regarding its standard of 

conduct is required to be discharged.  In addition, with respect to broker-dealers, the modified 

standard of conduct disclosure, like the proposal,511 distinguishes between broker-dealers that 

provide recommendations subject to Regulation Best Interest and broker-dealers that do not 

provide recommendations subject to Regulation Best Interest (e.g., execution-only brokers).  The 

modified standard of conduct disclosure also requires that broker-dealers, investment advisers, 

and dual registrants to state that conflicts of interest will remain despite the existence of these 

legal obligations, and to provide examples of these conflicts.512  This change is designed to 

address commenters’ concerns that we clarify for retail investors the interaction between broker-

dealers’ or investment advisers’ legal obligations regarding their standards of conduct and their 

conflicts of interest.  

Examples of Ways the Firm Makes Money and Conflicts of Interest.  Following the 

standard of conduct prescribed wording, a firm must summarize the following ways in which it 

                                                                                                                                                             

relationship summaries follow the instructions for broker-dealers and investment advisers in Items 3.B., 
3.B.(i).a. and 3.B.(i).b.).  

510  Items 3.B.(i).a. (“When we provide you with a recommendation” and “do not”),  3.B.(i).b. (“When we act 
as your investment adviser”), and 3.B.(i).c. (“When we provide you with a recommendation as your broker-
dealer or act as your investment adviser,” “do not,” and “When we act as your investment adviser”) of 
Form CRS. 

511  See Proposed Item 3.B. of Form CRS. 

512  Broker-dealers that do not provide recommendations subject to Regulation Best Interest will be required to 
include substantially the same conflict disclosure, except that it will reflect that conflicts of interest can 
affect the services provided, rather than referring to recommendations.  See Items 3.B.(i).a. and 3.B.i.(c) of 
Form CRS.  



 

156 

 

and its affiliates make money from brokerage or investment advisory services and investments it 

provides to retail investors, to the extent they are applicable to the firm.513  The specific wording 

is not prescribed, but firms must include specific information to describe each of the applicable 

conflicts. 

• Proprietary Products: investments that are issued, sponsored, or managed by you or 

your affiliates;  

• Third-Party Payments: compensation received from third parties when a firm 

recommends or sells certain investments;  

• Revenue Sharing: investments where the manager or sponsor of those investments or 

another third party (such as an intermediary) shares with the firm revenue it earns on 

those investments; and  

• Principal Trading: investments the firm buys from a retail investor, and/or 

investments the firm sells to a retail investor, for or from the firm’s own accounts, 

respectively.514  

If none of those conflicts apply to the firm, it must summarize at least one of its material 

conflicts of interest that affect retail investors.  Firms will be required to explain the incentives 

created by each of these examples.515 

                                                                                                                                                             

513  Item 3.B.(iv) of Form CRS. 

514  Items 3.B.(iv)(a) through 3.B.(iv)(d) of Form CRS. 

515  Item 3.B.(iv) of Form CRS. 



 

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The proposal would have required a firm to discuss these same enumerated topics, to the 

extent they were relevant.  If none of the four specified conflicts applied to a firm, the firm was 

not required to discuss any other conflicts that applied to its business.  The proposal did not 

require a firm to summarize other ways its affiliates made money from the services and products 

the firm provides to retail investors.   

We are adopting a heading that specifically asks how else the firm makes money in an 

effort to further highlight the firm’s financial incentives and emphasize that they are intertwined 

with conflicts.  In a departure from the proposal, the relationship summary will not include an 

introductory sentence explaining that the firm benefits from the services it provides to the retail 

investor because we believe that the new heading and required content of this item make this 

sentence unnecessary.  We are also expanding the required conflicts disclosures to ensure that 

firms without any of the enumerated conflicts will still summarize at least one other material 

conflict of interest.  Firms will include the four enumerated conflicts (if applicable) that were in 

the proposal, or otherwise at least one material conflict of interest, and a specific cross-reference 

to more detailed information about conflicts.  Firms with none of the enumerated conflicts 

should carefully consider their operations in their entirety when selecting a material conflict to 

disclose to retail investors.  While we think it is unlikely that a firm will not have any material 

conflicts to disclose, if this item is inapplicable, firms may omit or modify this disclosure.516  

Commenters generally believed that at least some conflicts disclosure was important to 

include in the relationship summary, but many suggested changes to the approach, including 

                                                                                                                                                             

516  General Instruction 2.B. of Form CRS. 



 

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fewer conflicts disclosures and increased use of layered disclosure.517  Commenters generally 

supported requiring firms to disclose the types of conflicts of interest related to these financial 

incentives identified in the proposal, specifically disclosure regarding proprietary products,518 

compensation received from third parties,519 revenue sharing,520 and principal trading.521   

Investor feedback, however, was mixed.  Results from the RAND 2018 survey and 

another survey indicated that many survey participants did not find this section to be as 

informative as other sections,522 and some participants in surveys and studies indicated that this 

section was “difficult” or “very difficult” to understand.523  About 75% of Feedback Form 

commenters rated the conflicts of interest section as either “very useful” or “useful,” while 
                                                                                                                                                             

517  See, e.g., IAA Letter I (suggesting leveraging disclosures made elsewhere on Part 2 of Form ADV); 
SIFMA Letter (suggesting leveraging disclosures that would be required by Regulation Best Interest); 
Fidelity Letter and Schwab Letter I (suggesting using examples of conflicts, with links to additional 
disclosure). 

518  See Fidelity Letter; Schwab Letter I; SIFMA Letter. 

519  See, e.g., IFS Letter; IAA Letter I; Wells Fargo Letter; Primerica Letter (suggesting including in additional 
layered disclosure). 

520  See Fidelity Letter (third-party revenue sharing agreements in mock-up). 

521  See mock-ups in IAA Letter I; Primerica Letter; Wells Fargo Letter. 

522  See RAND 2018, supra footnote 13 (conflicts of interest was selected as one of the two most informative 
sections by only 15% of survey respondents and selected as one of the two least informative by 36%); 
Cetera Letter II (Woelfel), supra footnote 17 (81% of survey respondents strongly or somewhat agreed that 
conflicts of interest is an important topic in the relationship summary, fewer than for any other topic); see 
also Margolis Feedback Form (stating that the conflicts of interest section is very confusing, particularly 
with respect to fee-sharing arrangements and referral fees). 

523  See RAND 2018, supra footnote 13 (about one third of survey respondents found this section to be difficult 
or very difficult to understand; in qualitative interviews, participants demonstrated misunderstanding of 
how this section reconciled with the “obligations to you” section and how conflicts would be resolved); 
Kleimann I, supra footnote 19 (interview participants had difficulty explaining how firms earned money 
from financial relationships that could cause conflicts and were unclear how conflicts would be resolved); 
Betterment Letter I (Hotspex), supra footnote 18 (noting that further improvements could be made to 
improve respondents understanding of differences in conflicts). 



 

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narrative comments on the Feedback Forms suggested that the conflicts of interest disclosure 

could be clarified or otherwise improved.524 

Several commenters suggested that we broaden the disclosures to require a firm to inform 

its retail investors of all of the conflicts related to its business.525  Commenters also supported 

highlighting conflicts of interest stemming from affiliates,526 and several commenters included 

disclosure about affiliates in their mock-ups.527  One industry commenter expressed concern that 

including solely the proposed conflicts in isolation and on a standalone basis may lead investors 

to think these are the only meaningful conflicts.528  Other commenters pointed out that if only the 

proposed conflicts were required to be included, then some firms would not include any conflicts 

                                                                                                                                                             

524  Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Question 2(e) and 
Question 4).  Among the 41 Feedback Forms with narrative comments suggesting that one or more topics 
were too technical or could be improved, 14 included a narrative comment suggesting clarification or more 
information about conflicts of interest.  See, e.g., Baker Feedback Form (“A sampling of possible conflict-
of-interest situations is most desirable”); Bhupalam Feedback Form (“It doesn’t clearly tell me whether the 
company will do this or not.  In fact, it tells me that the company may do this and I should be fine with it.”); 
Lee2 Feedback Form (“What can I expect and not expect about the independence and conflict-free nature 
of the advice”); Margolis Feedback Form (“While I agree that fee-sharing arrangements and referral fees 
need to be disclosed, your wording is confusing”); Schreiner Feedback Form (“highlight implications of 
conflicts of interest”). 

525  See CFA Institute Letter I; Trailhead Consulting Letter. 

526  See Comment Letter of Jackson, Grant Investment Advisers, Inc. (Aug. 7, 2018) (“Jackson Grant Letter”) 
(stating that other compensation (such as recommending proprietary products and products of affiliates) 
needs to be addressed for the investor to fully understand the potential for conflicts in any relationship). 

527  See SIFMA Letter; Wells Fargo Letter; Schwab Letter I; Comment Letter of Ron A. Rhoades, Western 
Kentucky University (Dec. 6, 2018) (“Rhoades Letter”); Stifel Letter (mock-up); Cetera Letter I; 
Betterment Letter I; ASA Letter (mock-up).   

528  IAA Letter I. 



 

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disclosures because their conflicts do not fall within the requisite categories.529  Furthermore, 

one commenter proposed to allow firms to affirmatively state that they did not have any of these 

conflicts without further disclosure of the firm’s other conflicts of interest.530   

We continue to believe that the conflicts we identified in the proposal should be 

highlighted to retail investors in the relationship summary.  Accordingly, we are including in the 

final instructions a requirement that firms describe these four conflicts to the extent that any of 

these conflicts apply to them.  Like other sections in the relationship summary, this section will 

provide firms with more flexibility in the way in which they describe their particular conflicts so 

that they can tailor the summary to more accurately reflect their specific business.  While we are 

maintaining the proposal’s approach of requiring firms to provide information about certain 

types of conflicts applicable to them, we are not requiring firms to state as many specific details 

with respect to such conflicts.531  For example, the proposed instructions would have required 

firms to provide specific examples of advising on proprietary or affiliated investments or 

investments paying the firm a share of revenue, and we have removed such requirements from 

the final instructions.  Instead, the relationship summary will focus on four specific ways a firm 

could make money from retail investors’ investments to highlight that firms have conflicts of 

interest and encourage retail investors to ask and learn more about them.   
                                                                                                                                                             

529  See Paul Hynes Letter; Betterment Letter I (stating that their business model avoids the proposed conflicts 
of interest, and proposing an alternate “alignment of interest” section for the section on conflicts of 
interest). 

530  Betterment Letter I (indicating that the firm had none of the proposed enumerated conflicts). 

531  In addition, the IAC recommended that the Commission adopt a uniform, plain English document that 
covers basic information about conflicts of interest, among other topics.  See IAC Broker-Dealer Fiduciary 
Duty Recommendations, supra footnote 10.161 

 

Additionally, as some commenters pointed out, we agree that not mentioning any 

conflicts, or permitting the firm to affirmatively state that it has none of the enumerated conflicts, 

could lead retail investors to conclude that the particular firm does not have any material 

conflicts.  Accordingly, the instructions require a firm that does not have any of the four required 

categories of conflicts to provide at least one example of the firm’s conflicts of interest.  

Specially, the instructions require a firm to summarize at least one material conflict of interest 

that affects retail investors.532  Firms are not expected to disclose every material conflict of 

interest, and should instead consider what would be most relevant for retail investors to know in 

deciding whether to select or retain the particular firm.     

We determined to require an example of a conflict, rather than broadening the instruction 

to include all conflicts, as some commenters suggested.  The language disclosing firms’ standard 

of conduct and existence of conflicts includes wording to make explicit that the conflicts 

described in the relationship summary are examples.  Firms will disclose at least one of their 

material conflicts of interest that impact their retail investors, and such a conflict is not limited 

expressly to financial conflicts.  In addition, with respect to broker-dealers, this conflict 

disclosure (unlike the conflict disclosure obligation in Regulation Best Interest)533 is not limited 

to conflicts associated with a recommendation.534  To determine whether a conflict of interest 

                                                                                                                                                             

532  As discussed in Section II.A.1. above, if a required disclosure is inapplicable to a firm’s business, a firm 
would be permitted to omit or modify that disclosure.  General Instruction 2.B.  We believe, however, that 
most firms will have at least one material conflict of interest that they would need to disclose.     

533  See Regulation Best Interest Release, supra footnote 47, at Section II.C.1 (Disclosure Obligation). 

534  For instance, broker-dealers may include conflicts that affect product offerings to customers who do not 
obtain recommendations from the firm. 



 

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should be disclosed, a firm could consider, for example, the benefit to the firm or its affiliate or 

the cost to the retail investor. 

We believe that an exhaustive list of conflicts in the relationship summary would not as 

effectively enhance investor understanding of conflicts.  More details could inundate investors 

with information that makes it difficult for them to focus on the fact that conflicts exist and will 

impact them, and they may not focus on or may not realize the importance of the specific 

conflicts firms are required to summarize.  We also agree with comments that disclosure of all 

conflicts would be too cumbersome535 and lengthy for the relationship summary’s intended 

purpose — that is, highlighting certain aspects of a firm and its services to help retail investors to 

make an informed choice and to find additional information about a topic.  The approach we are 

adopting of requiring firms to provide examples will make retail investors aware that these types 

of conflicts exist, but will avoid providing a laundry list of conflicts.  Taking into account all of 

these considerations, we believe that these examples of conflicts of interest should be highlighted 

for the investor.  We recognize that this will be a high-level summary of conflicts and generally 

will not be a complete description.  As discussed further below, we are requiring firms to include 

a link to additional information on their conflicts of interest.536  This layered disclosure will 

facilitate investors’ ability to review additional information on conflicts while balancing the 

high-level nature of the relationship summary.   
                                                                                                                                                             

535  See, e.g., CFA Letter I; SIFMA Letter; Prudential Letter. 

536  Item 3.B.(iv) of Form CRS (Firms must include specific references to more detailed information about their 
conflicts of interest that, at a minimum, include the same or equivalent information to that required by the 
Form ADV, Part 2A brochure and Regulation Best Interest, as applicable, and broker-dealers that do not 
provide recommendations subject to Regulation Best Interest, to the extent they prepare more detailed 
information about their conflicts, must include specific references to such information.). 



 

163 

 

Conversation Starter and Additional Information.  To promote access to information 

about other firm conflicts, as well as to clarify for retail investors the application of their firms’ 

standard of conduct as discussed above, firms will include a conversation starter prompting 

investors to ask about conflicts and a hyperlink to additional information.  Specifically, firms 

must include the following question as a conversation starter: “How might your conflicts of 

interest affect me, and how will you address them?”537   

The proposal included a longer key question asking about the most common conflicts of 

interest in the firm’s advisory and brokerage accounts and how the firm will address those 

conflicts when providing services to the retail investor.538  One commenter noted that this key 

question elicited the same information as provided elsewhere in the relationship summary.539  

We shortened the question to avoid this duplication.  In addition, the firm’s other conflicts will 

be disclosed as part of the summary of material conflicts or in the additional conflicts disclosure 

that firms will cross-reference.  The new conversation starter is meant to complement these other 

disclosures and elicit more information about how specifically the firm’s conflicts of interest 

could affect the retail investor.   

Firms will also include specific cross-references to more detailed information about 

conflicts of interest that, at a minimum, includes the same or equivalent information to that 

                                                                                                                                                             

537  Item 3.B.(iii) of Form CRS.  

538  Proposed Item 8 of Form CRS.  The proposal included the following question: “What are the most common 
conflicts of interest in your advisory and brokerage accounts?  Explain how you will address those conflicts 
when providing services to my account.” 

539  See LPL Financial Letter. 



 

164 

 

required about a firm by the Form ADV, Part 2A brochure and/or Regulation Best Interest.540  If 

a firm is a broker-dealer that does not provide recommendations subject to Regulation Best 

Interest, to the extent it prepares more detailed information about its conflicts, it must include 

specific references to such information.541  Firms may include hyperlinks, mouse-over windows, 

or other means of facilitating access to this additional information and to any additional 

examples or explanations of such conflicts of interest.542     

Over 60% of RAND 2018 survey respondents indicated that they would be “very likely” 

or “somewhat likely” to click on hyperlinks related to conflicts of interest.543  While the proposal 

did not require firms to link to additional information with respect to their conflicts, several 

commenters suggested that the relationship summary include a link to all conflicts.544  We 

believe that using layered disclosure through cross-references to a more detailed discussion of 

conflicts balances the Commission’s objective of concise disclosure while providing interested 

investors with tools to easily access additional, useful information. 

Many industry commenters also suggested that Regulation Best Interest’s and Form 

CRS’s conflicts disclosures be coordinated, and that any conflict disclosure obligations under 

                                                                                                                                                             

540  Item 3.B.(iv) of Form CRS. 

541  Item 3.B.(iv) of Form CRS. 

542  Item 3.B.(iv) of Form CRS.  See also General Instructions 3. and 4. of Form CRS (instructions applicable 
to electronic delivery).  For further discussion of these provisions, see supra Section II.A.3. and footnotes 
156 and 158 and accompanying text, and Section II.B.2.(b) and footnotes 348–349 

543  RAND 2018, supra footnote 13.  But see Kleimann II, supra footnote 19 (only one interview participant 
said he would use the link in the conflicts of interest section). 

544  See, e.g., Fidelity Letter (mock-up); IAA Letter I (mock-up); see also Kleimann II, supra footnote 19 
(redesigned relationship summary suggests a link to more information about conflicts). 



 

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Regulation Best Interest should be satisfied upon delivery of the relationship summary.545  We 

recognize that broker-dealers may need to disclose additional conflicts or disclose additional 

conflicts at a point in time other than at the beginning of the relationship with an investor or 

other times the relationship summary is required to be delivered.546  The relationship summary 

will provide a high-level summary for investors so that they can engage in a conversation with 

their financial professional about investment advisory or brokerage services, and so that the 

investors can choose the type of service that best meets their needs.  Furthermore, as discussed 

above in Section II.A (Presentation and Format),547 we believe it is essential to limit the length of 

the relationship summary and keep the disclosures focused, highlighting these topic areas while 

encouraging questions and providing access to additional information.  As a result, we believe 

many firms may not be able to capture all of the necessary disclosures about their conflicts in 

this short summary disclosure.548  The layered disclosure approach should strike a balance 

between alerting investors of these conflicts while keeping with the intended purpose of the 

relationship summary. 

                                                                                                                                                             

545  See, e.g., ACLI Letter; Cambridge Letter; Massachusetts Letter; FSI Letter I; MassMutual Letter; Schwab 
Letter I; SIFMA Letter; Transamerica Letter; see also Regulation Best Interest Release, supra footnote 47, 
at n.438 and accompanying text. 

546  See Regulation Best Interest Release, supra footnote 47. 

547  See supra Section II.A (Presentation and Format). 

548  For example, investment advisers must make full and fair disclosure to all clients of all material facts 
relating to the advisory relationship, including conflicts of interest.  See Fiduciary Release, supra footnote 
47; General Instruction 3 to Form ADV Part 2.  Broker-dealers subject to Regulation Best Interest must 
also provide full and fair disclosure of material facts, including all material facts relating to conflicts of 
interest that are associated with the recommendation.  See Regulation Best Interest Release, supra footnote 
47.   



 

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Finally, some commenters argued that the relationship summary should require firms to 

explain how conflicts will be mitigated or minimized, or that firms should be permitted to state 

that a particular firm has fewer conflicts than other firms.549  While we agree that firms should 

have increased flexibility to describe conflicts, as discussed above, we are not permitting this 

additional disclosure.  The purpose of this section is to highlight for investors that conflicts of 

interest exist.   

c. Payments to Financial Professionals 

Finally, in a change from the proposal, we are adding an additional section to Item 3 that 

requires a firm to include in its relationship summary the heading “How do your financial 

professionals make money?”550  A firm will summarize how its financial professionals are 

compensated (including cash and non-cash compensation) and the conflicts of interest those 

payments create.551  For example, the firm must, to the extent applicable, disclose whether 

financial professionals are compensated based on factors such as: the amount of client assets they 

service; the time and complexity required to meet a client’s needs; the product sold (i.e., 

differential compensation); product sales commissions; or revenue the firm earns from the 

financial professional’s advisory services or recommendations.552      

                                                                                                                                                             

549  See AARP Letter; Betterment Letter I. 

550  Item 3.C. of Form CRS. 

551  Item 3.C.(i) of Form CRS. 

552  Item 3.C.(ii) of Form CRS. 



 

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In the Proposing Release, we asked if the relationship summary should include disclosure 

of compensation received by financial professionals and the related conflicts of interest such 

compensation might pose.  Several commenters supported including disclosures related to the 

conflicts of interest that financial professionals’ compensation arrangements create.553  Several 

commenters suggested featuring financial professionals’ compensation in the relationship 

summary, including in a separate section.554  A number of commenters illustrated the importance 

of these disclosures by including sections discussing financial professionals’ compensation in 

their mock-ups.555  These disclosures generally included more detailed information about how 

broker-dealers and investment advisers earn money from various sources, in addition to what the 

retail investor may pay directly.   

We have concluded that disclosure of conflicts of interest related to a financial 

professional’s compensation is useful to highlight for retail investors in the relationship 

summary.556  In particular, the commenters’ mock-up disclosures highlighted the benefit of 

                                                                                                                                                             

553  See Proposing Release, supra footnote 5 (requesting comments on whether there are other considerations 
related to fees and compensation that we should require firms to highlight for retail investors that were not 
captured in the proposal); see also Jackson Grant Letter; Schwab Letter I; SIFMA Letter; Stifel Letter. 

554  See, e.g., Schwab Letter I; SIFMA Letter; Stifel Letter; Jackson Grant Letter.  One industry commenter also 
stated that we should focus on conflicts that result from a financial professional’s financial compensation. 
SIFMA Letter (also stating this view is consistent with FINRA’s 2013 Conflicts of Interest Report, which 
specifically identified financial compensation as the major source of conflicts of interest for associated 
persons); see also CCMC Letter (investor polling) supra footnote 21 (in connection with investor polling, 
noting that investors identify explaining “own compensation” as one of three “issues that matter most” to 
them).   

555  See Primerica Letter and ASA Letter (including disclosure stating that financial professional compensation 
is typically affected by the amount of client assets the financial professional is responsible for and the fees 
and commissions those assets generate); see also SIFMA Letter and Schwab Letter I (including disclosure 
on how the firm pays professionals who provide investment advice). 

556  See Regulation Best Interest Release, supra footnote 47, at Section II.C.1.b. 



 

168 

 

separately summarizing financial professionals’ compensation to help retail investors identify 

and assess these conflicts of interest that may affect the services they receive.557  We believe that 

requiring specific information on financial professional compensation and conflicts related to 

that compensation will provide improved clarity from the proposal and better help retail 

investors understand these conflicts and how they might impact a financial professional’s 

motivation.  We also believe it is useful to specifically highlight this conflict for retail investors, 

as it is a different type of payment and a different type of conflict than a conflict at the firm level.  

We further believe that by placing this discussion directly after the discussion on fees, costs and 

conflicts, it will mitigate potential investor confusion.  This approach is also consistent with 

Regulation Best Interest, which treats compensation to financial professionals and the conflicts 

of interest that such compensation creates as material facts that must be disclosed.558   

4. Disciplinary History 

The relationship summary will include a separate section about whether a firm or its 

financial professionals have reportable disciplinary history and where investors can conduct 

further research on these events.559  Inclusion of a separate disciplinary history section is a 

change from the proposed relationship summary, where this information was included in the 

Additional Information section.560  Certain commenters suggested that we remove the 

                                                                                                                                                             

557  See, e.g., Primerica Letter; SIFMA Letter; Schwab Letter I. 

558  See Regulation Best Interest Release, supra footnote 47. 

559  As proposed, we used the terms “legal or disciplinary events.”  However, we are adopting the terms “legal 
or disciplinary history” for greater precision.  

560  See Proposing Release, supra footnote 5, at nn.270–71 and accompanying text. 



 

169 

 

requirement that firms disclose whether or not they have disciplinary history.561  Similarly, some 

commenters suggested that any disciplinary information should simply direct retail investors to 

resources where they could review a firm’s or a representative’s disciplinary history, without any 

firm-specific information in the relationship summary.562 

We have concluded, however, based on consideration of commenters and investor 

feedback received through surveys and studies, at roundtables and in Feedback Forms, to include 

the disciplinary history as a separate section of the relationship summary.563  These comments 

emphasized the importance of disciplinary history information and advocated that it should be 

placed in a more prominent position than as part of the Additional Information section.564  

Commenters also generally supported firm-specific disclosure as to whether the firm has 

disciplinary history.565  About 70% of commenters on Feedback Forms responded that they 

                                                                                                                                                             

561  See, e.g., Wells Fargo Letter (arguing that any firm-based aspect of disciplinary disclosure is not fair to 
representatives of the firm without any history of wrongdoing); see also ACLI Letter; New York Life 
Letter (arguing that any firm-specific disciplinary history disclosure would prejudice large firms). 

562  See, e.g., LPL Financial Letter (mock-up suggested that “[f]or free tools to research our firm, our financial 
advisors and other firms, including our disciplinary events…” investors should visit BrokerCheck or 
IAPD). 

563  The IAC also recommended including disciplinary history in the relationship summary.  See IAC Broker-
Dealer Fiduciary Duty Recommendations, supra footnote 10 (“[W]e encourage the Commission to develop 
an approach to disclosure of disciplinary record that makes it easier for investors to assess the significance 
of disclosed events, particularly for firms that may have a large number of relatively insignificant technical 
violations.”). 

564  See, e.g., CFA Letter I (“The required disclosure regarding disciplinary events does not give adequate 
prominence to this issue.”); NASAA Letter (“The descriptor ‘Additional Information’ is too vague to 
describe the important information in this section [and] should be recast as ‘Disciplinary History and 
Customer Rights and Remedies . . . .”); Trailhead Consulting Letter (“Legal and Disciplinary Actions are 
very important for an investor to consider and should not be ‘hidden’ in an Additional Information section.  
This information deserves its own separate section.”); IAA Letter.   

565  See, e.g., CFA Letter I (“We believe this information is important enough to be highlighted under its own 
separate heading, ‘Do you have a disciplinary record?’”). 



 

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would seek out additional information about a firm’s disciplinary history.566  Similarly, more 

than 70% of investors surveyed in the RAND 2018 report reported that they were “very likely” 

or “somewhat likely” to look up the disciplinary history of a financial professional.567   

However, results from investor studies and surveys and investor comments on Feedback 

Forms supported the concern that the Additional Information section may not provide enough 

salience.  For example, in the RAND 2018 survey, the Additional Information section was most 

often selected as one of the two least useful sections of the proposed relationship summary.568  

On Feedback Forms, commenters rated the Additional Information section as “very useful” or 

“useful” less often than any other section of the relationship summary.569  One investor study 

                                                                                                                                                             

566  See Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Question 3(e)). 
Some commented that, before viewing the relationship summary, they had not known that they could ask or 
how to check.  See, e.g., Anonymous02 Feedback Form (“did not know how to do that”); Anonymous03 
Feedback Form (“I looked up my advisor while reading through the summary”); Anonymous26 Feedback 
Form (“Now I know where to go”); Anonymous29 Feedback Form (“I didn’t know if asked – they had to 
answer”); see also Philadelphia Roundtable (investor participant noting that “checking your broker’s 
disciplinary record” is “something that people should do”).  

567  See RAND 2018, supra footnote 13 (“More than 40 percent of respondents reported being very likely to 
look up the disciplinary history based on the information provided in the Relationship Summary, and 
another 35 percent reported being somewhat likely to look it up.  Only 5 percent reported being not at all 
likely to do so.”); see also Kleimann II, supra footnote 19 (study participants who viewed a redesigned 
form reported that they would research the company they are doing business with”); but see Schwab Letter 
I (Koski), supra footnote 21 (only 20% of survey participants selected “How to find disciplinary 
information about a firm or its representatives” when asked to select the four most important topics for a 
firm to communicate, from a list of 11 topics). 

568  See RAND 2018, supra footnote 14 (Additional Information section rated as one of the two “least 
informative” sections by 66% of respondents; only 3% selected it as one of the two “most informative”); 
see also Cetera Letter II (Woelfel), supra footnote 17 (84% of survey respondents strongly or somewhat 
agreed that the “how to find additional information about a broker/adviser” and “how to find additional 
information about the firm,” fewer than for most other topics out of a series of nine topic options).   

569  Feedback Forms Comment Summary, supra footnote 11 (summary of responses to Question 2(f)) 
(Additional Information section rated as “not useful” or “unsure” by more commenters (20%) and “very 
useful” by fewer commenters (32%) relative to other sections of the relationship summary). 



 

171 

 

suggested a reason for these mixed results, finding that participants would skip the Additional 

Information section, in part because they did not understand that the websites in the section 

would allow them to review the disciplinary history of the investment adviser or broker-dealer 

that they were considering.570  Comments on Feedback Forms similarly suggest that information 

about how to research a firm’s disciplinary information should be presented more prominently 

and more simply in the relationship summary.571  After taking comments into consideration, we 

believe that a separate disciplinary history section is appropriate, with a requirement that firms 

explicitly state whether or not they have legal or disciplinary history so that investors can find 

the information in the summary with ease.   

The section will begin with the heading: “Do you or your financial professionals have 

legal or disciplinary history?”  Firms will answer “yes” or “no,” depending upon whether they or 

one of their financial professionals have a triggering event enumerated in the instructions, as 

discussed below.  The proposed relationship summary required a statement that the firm has 

legal and disciplinary events but did not require an affirmative statement that a firm or its 

financial professionals did not have disclosable events.  We are requiring a “No” answer in the 

                                                                                                                                                             

570  See Kleimann I, supra footnote 19; see also Kleimann II, supra footnote 19 (noting that interview 
responses to links in the relationship summary “suggest that use is dependent on perceived relevance … 
Some of that relevance can be built in with more specific descriptions of what can be found at the link.”). 

571  Some commenters on Feedback Forms suggested moving the Additional Information section forward in the 
relationship summary.  See Anonymous14 Feedback Form (“Recommend add this to beginning of the 
pamphlet”); Durgin Feedback Form (“Additional info needs to be moved up”); Salkowitz Feedback Form 
(“Move this section to near the beginning”); Starmer2 Feedback Form (“put Key Questions and Additional 
Info up front to stimulate a conversation.”). Others commented that the presentation should be clearer.  See, 
e.g., Anonymous28 Feedback Form (“Would be better titled ‘How to find out about us’ or ‘Other 
information you need to know’”); Anonymous29 Feedback Form (“plain language”); Calderon Feedback 
Form (“say expressly where that information is found, with linked URL's”); Shepard Feedback Form (“the 
easier it is to access, the better”); Baker Feedback Form (“Please explain IAPD”).  



 

172 

 

final instructions where applicable, given the importance of disciplinary history and to provide a 

complete answer to the question in the heading.      

Regardless of whether firms report a “Yes” or “No” answer as to whether they or their 

financial professionals have legal or disciplinary history, the relationship summary will direct the 

retail investor to visit Investor.gov/CRS to research the firm and its financial professionals, as 

proposed.572  This is responsive to RAND 2018 survey results, which indicated that 37% of 

investors did not know where to research disciplinary history.573  Directing retail investors to the 

search tool is also consistent with the Commission’s Office of Investor Education and Advocacy 

initiative to encourage retail investors to do background checks on financial professionals and is 

intended to increase awareness of available search tools.574  In addition to disciplinary history, 

the search tools also can provide useful information regarding registration and licensing and 

financial professional employment history.    

                                                                                                                                                             

572  Item 4.D.(i) of Form CRS.  Investor.gov includes a search function that searches the databases Web CRD® 
and IARD, and this search will direct an investor to BrokerCheck and/or IAPD, as appropriate, where the 
investor can research disciplinary history.   

573  See RAND 2018, supra footnote 13. By contrast, 19% of surveyed investors cited the time and effort 
required and 10% of surveyed investors indicated that they would not look up a firm or financial 
professional’s disciplinary history because the information was not very important to the investor.  Id.  We 
believe this is also consistent with the IAC’s recommendation to “look at whether it might be beneficial to 
adopt a layered approach to [disciplinary history] disclosures, with the goal of developing a more 
abbreviated, user-friendly document for distribution to investors.”  IAC Broker-Dealer Fiduciary Duty 
Recommendations, supra footnote 10. 

574  See https://www.investor.gov/research-before-you-invest.  



 

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The triggering events for a statement that a firm does have legal or disciplinary history 

are the same as proposed.575  Following the heading, firms will be required to state “Yes” in 

response to the heading questions if they currently disclose or are required to disclose (i) 

disciplinary information per Item 11 of Part 1A or Item 9 of Part 2A of Form ADV,576 or (ii) 

legal or disciplinary history per Items 11A–K of Form BD (“Uniform Application for Broker-

Dealer Registration”)577 except to the extent such information is not released to BrokerCheck 

pursuant to FINRA Rule 8312.578  Regarding their financial professionals, firms will determine 

                                                                                                                                                             

575  See Proposed Item 7.B. of Form CRS.  In the proposal, firms with such events would have been required to 
state the following: “We have legal and disciplinary events.” Id.  For reasons discussed supra, we believe 
the question-and-answer formatting will make the relationship summary more useful to investors.   

576  Item 4.B. of Form CRS.  Generally, investment advisers are required to disclose on Form ADV Part 2A any 
legal or disciplinary event, including pending or resolved criminal, civil and regulatory actions, if it 
occurred in the previous 10 years, that is material to a client’s (or prospective client’s) evaluation of the 
integrity of the adviser or its management personnel, and include events of the firm and its personnel.  See 
Amendments to Form ADV, Investment Advisers Act Release No. 3060 (Jul. 28, 2010) [75 FR 49233 
(Aug. 12, 2010)], at 22–27 (“Brochure Adopting Release”).  Items 9.A., 9.B., and 9.C. provide a list of 
disciplinary events that are presumptively material if they occurred in the previous 10 years.  However, 
Item 9 requires that a disciplinary event more than 10 years old be disclosed if the event is so serious that it 
remains material to a client’s or prospective client’s evaluation of the adviser and the integrity of its 
management.   

577  Item 11 of Form BD requires disclosure on the relevant Disclosure Reporting Page (“DRP”) with respect 
to:  (A) felony convictions, guilty pleas, “no contest” pleas or charges in the past ten years; (B) investment-
related misdemeanor convictions, guilty pleas, “no contest” pleas or charges in the past ten years; (C) 
certain SEC or the Commodity Futures Trading Commission (“CFTC”) findings, orders or other regulatory 
actions (D) other federal regulatory agency, state regulatory agency, or foreign financial regulatory 
authority findings, orders or other regulatory actions; (E) self-regulatory organization or commodity 
exchange findings or disciplinary actions; (F) revocation or suspension of certain authorizations; (G) 
current regulatory proceedings that could result in “yes” answers to items (C), (D) and (E) above; (H) 
domestic or foreign court investment-related injunctions, findings, settlements or related civil proceedings; 
(I) bankruptcy petitions or SIPC trustee appointment; (J) denial, pay out or revocation of a bond; and (K) 
unsatisfied judgments or liens.  Some of these disclosures are only required if the relevant action occurred 
within the past ten years, while others must be disclosed if they occurred at any time.   

578  Under FINRA Rule 8312, FINRA limits the information that is released to BrokerCheck in certain respects.  
For example, pursuant to FINRA Rule 8312(d)(2), FINRA shall not release “information reported on 
Registration Forms relating to regulatory investigations or proceedings if the reported regulatory 
investigation or proceeding was vacated or withdrawn by the instituting authority.”  We believe it is 

 



 

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whether they need to include an affirmative statement based on legal and disciplinary 

information on Form U4,579 Form U5,580 or Form U6.581  In particular, firms will be required to 

state “Yes” if they have financial professionals for whom disciplinary history is reported per 

Items 14 A through M on Form U4, Items 7A or 7C through F on Form U5,582 or Form U6 

except to the extent such information is not released to BrokerCheck pursuant to FINRA Rule 

8312.583  Firms that do not have disclosable events for themselves or their financial professionals 

in connection with these provisions will state “No” in answer to the heading.584   

As noted above, several commenters opposed the approach of requiring firms to indicate 

in their relationship summaries whether they or their financial professionals have disciplinary 

history, questioning the value of the disclosure to retail investors,585 or citing to prejudicial or 

                                                                                                                                                             

appropriate to limit disclosure in the relationship summary to disciplinary information or history that would 
be released to BrokerCheck.   

579  Form U4 (Uniform Application for Securities Industry Registration or Transfer) requires disclosure of 
registered representatives’ criminal, regulatory, and civil actions similar to those reported on Form BD as 
well as certain customer-initiated complaints, arbitration, and civil litigation cases. 

580  Form U5 (Uniform Termination Notice for Securities Industry Registration) requires information about 
representatives’ termination from their employers. 

581  Form U6 (Uniform Disciplinary Action Reporting Form) is used by SROs, regulators, and jurisdictions to 
report disciplinary actions against broker-dealers and associated persons.  This form is also used by FINRA 
to report final arbitration awards against broker-dealers and associated persons. 

582  Item 7(b) of Form BD (Internal Review Disclosure) is not released to BrokerCheck by FINRA, pursuant to 
FINRA Rule 8312(d)(3). 

583  Item 4.B.(iii) of Form CRS.   

584  Item 4.C. of Form CRS. 

585  See NSCP Letter (“NSCP members believe that extending the disclosure of disciplinary history to be 
included in Form CRS would add additional administrative burden and costs outweighing any true benefit 
to the customer.”); Wells Fargo Letter (“such a broad statement will add no value”). 



 

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competitive concerns.586  These firms recommended that the relationship summary include only 

a prompt for investors to research the disciplinary history of the firm or financial professional, 

directing them to Investor.gov/CRS.587   

We recognize that the disciplinary history of firms and their financial professionals is 

already publicly available, as commenters have noted.  From studies and investor feedback, 

however, we also understand that investors view disciplinary history as significant to their 

decision of whether or not to engage with a firm or a financial professional, but in many cases 

are unaware of the need for researching or the tools available to research whether disciplinary 

history exists.588  Highlighting disciplinary history in this way provides information to retail 

investors before they enter into a relationship with a particular firm and financial professional 

and a “yes” response will alert retail investors that there is disciplinary history they may want to 

                                                                                                                                                             

586  See Wells Fargo Letter (arguing that the statement will lead clients to draw unfair conclusions about both 
the firm and its financial professionals); New York Life Letter (arguing that the statement prejudices 
larger, established firms that will usually have a small number of disclosure events to report for 
current or former registered representatives); ACLI Letter (same). 

587  See Wells Fargo Letter; New York Life Letter; ACLI Letter.   

588  See, e.g., Staff of the Securities and Exchange Commission, Study Regarding Financial Literacy Among 
Investors as Required by Section 917 of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Aug. 2012), at iv, v, xiv, 37, 73, 121–23 and 131–32, at nn.317–19 and accompanying text, available at 
https://www.sec.gov/news/studies/2012/917-financial-literacy-study-part1.pdf (“917 Financial Literacy 
Study”) ([A]bout 76.5% of the online survey respondents reported that, in selecting their current adviser, 
they did not use an SEC-sponsored website to find information about the adviser.  73% of respondents 
stated that they would check IAPD if they were made aware of its existence.  Of that subset—those who 
reported not using an SEC-sponsored website—approximately 85.2% indicated that they did not know that 
such a website was available for that purpose.  Of that majority (i.e., a further subset)—those who were 
unaware of such a website—approximately 73.5% reported that they would review information about their 
adviser on an SEC-sponsored website if they knew it were available); see also RAND 2018, supra footnote 
13 (when investors were asked why they would not look up disciplinary history, 37 percent of all 
respondents indicated that they did not know where to get the information, whereas 19 percent of all 
respondents indicated that it would take too much time or effort). 



 

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research, review, or discuss with their financial professional.589  As there is no required waiting 

period between the delivery of the relationship summary to the retail investor and the time that 

the retail investor may enter into a relationship with or an order placed by a firm, highlighting the 

disciplinary information allows the retail investor time to consider any disciplinary history before 

moving forward or to monitor the relationship or financial professional more closely if the retail 

investor decides to move forward at that time.  By basing this disclosure on information that is 

already reported elsewhere and also requiring the relationship summary to include details about 

where to find more information, we give retail investors the tools to learn more about firms and 

financial professionals. 

We are not persuaded by commenters who believed that these disclosures are unduly 

prejudicial or would have sufficient competitive concerns and argued that we should not require 

this information.  Firms or financial professionals would have the opportunity to provide more 

information about and encourage retail investors to ask follow-up questions regarding the nature, 

scope, or severity of any disciplinary history, so that retail investors have the information they 

need to decide on a relationship.  In particular, financial professionals who themselves have no 

disciplinary history can make clear that a “Yes” disclosure in response to the heading question 

relates to the firm and other personnel (if applicable) and not to them.  While we recognize that 

larger firms might be more likely to respond affirmatively to this question than smaller firms, we 

have determined to require this disclosure because we believe that, on balance, the potential 

benefit to the retail investor of seeing at a glance whether a firm or its financial professionals 
                                                                                                                                                             

589  See Miami Roundtable (investor noting that she had gone on Investor.gov to learn about the disciplinary 
history of her financial professional and noting that she was “happy when [she] checked” the website). 



 

177 

 

have disciplinary history (which may encourage the investor to conduct further research or 

monitor the relationship or financial professional more closely) justifies requiring the disclosures 

notwithstanding the concerns raised by commenters, particularly given the importance that 

commenters placed on disciplinary history. 

A few commenters suggested revisions to the specific events that would trigger a 

disciplinary event disclosure in the proposed relationship summary.590  We have considered 

these comments but have determined to adopt the triggers as proposed.  As noted in the 

Proposing Release, those disclosable events are those that we believe may generally assist retail 

investors in evaluating the integrity of a firm and its financial professionals.591  Additionally, 

these triggering events are already disclosed on existing systems for other regulatory purposes.  

As such, there will not be additional regulatory burdens for a determination of disciplinary 

history for the purposes of the relationship summary.   

Different requirements between other aspects of Form ADV or Form BD and the 

relationship summary also could cause confusion and compliance uncertainty.  One commenter 

suggested basing the relationship summary disciplinary disclosure around a standardized set of 

events that would trigger disclosures specific to the relationship summary.592  This approach may 

have led to advisers or broker-dealers having publicly listed disclosure events on BrokerCheck or 
                                                                                                                                                             

590  See CFA Institute Letter I (“For parity and comparability, we suggest requiring that the specific events that 
would trigger disclosure under these requirements be the same for both investment advisers and broker-
dealers”); Comment Letter of the Business Law Section of the State Bar of Texas, Investment Funds 
Committee (Aug. 7, 2018) (advocating that an investment adviser disclose that it has a disciplinary event 
only based on Item 9 of Part 2A of Form ADV, rather than both Items 9 and 11). 

591  See Proposing Release, supra footnote 5, at nn.271–73 and accompanying text. 

592  See CFA Institute Letter I. 



 

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IAPD yet answering “No” to a question of whether they or their financial professionals have 

legal or disciplinary history.  We believe that result could have been confusing or misleading to 

retail investors.  By contrast, the approach we adopt allows for consistency across public 

information as to whether or not a firm or financial professional has a disciplinary event and 

leverages existing disclosure reporting systems.  We believe that this consistency justifies not 

adopting a standardized set of events triggering disclosure on the relationship summary.  

Furthermore, the statement encouraging retail investors to visit Investor.gov/CRS for more 

information will help retail investors to more easily learn and compare additional details from the 

firms themselves and from their existing disclosures.593  

Firms also will include the following conversation starter:  “As a financial professional, 

do you have any disciplinary history?  For what type of conduct?”594  This conversation starter is 

intended to take the place of a similarly worded key question.595  However, because this item’s 

heading asks a similar question about disciplinary history with respect to the firm, we believe 

that the conversation starter would be most useful specifically with respect to the financial 

professional.  This question will allow retail investors to assess that financial professional’s 

disciplinary history as well as engage in further discussion about those events or any events 

applicable to the firm.  In addition, this conversation starter is designed to encourage a discussion 

about any differences between the firm’s disciplinary history and that financial professional’s 

                                                                                                                                                             

593  Item 4.D. of Form CRS.   

594  Item 4.D.(ii) of Form CRS.   

595  See Proposed Item 8.8 of Form CRS (“Do you or your firm have a disciplinary history?  For what type of 
conduct?”); see also supra Section II.A.4 (discussing removal of the “Key Questions to Ask” section). 



 

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history, if applicable (e.g., if the financial professional has no disciplinary history while his or 

her firm has reportable discipline necessitating a “Yes” response to the heading question). 

5. Additional Information 

At the end of the relationship summary, firms will state where the retail investor can find 

additional information about their brokerage or investment advisory services, as proposed.596  

This information should be disclosed prominently at the end of the relationship summary.  

However, unlike the proposed relationship summary, the adopted instructions do not prescribe 

the different references that a broker-dealer and investment adviser must include for such 

direction and do not require a heading for the section.597  This approach is consistent with our 

intent to provide firms additional flexibility to provide information most useful to retail 

investors.598  In addition, removing the prescribed wording from this section avoids potentially 

duplicative disclosure, as the Introduction now includes a statement that free and simple tools are 

available to research firms and financial professionals at Investor.gov/CRS.  Investor.gov 

                                                                                                                                                             

596  See Proposed Item 7.E. of Form CRS.  We are also requiring a statement of where retail investors can 
request a copy of the relationship summary.   

597  As proposed, broker-dealers would have had to state that, to find additional information, retail investors 
should visit BrokerCheck, the firm’s website, and the retail investor’s account agreement.  In addition, 
broker-dealers would link to a portion of their website with up-to-date information and a link to 
BrokerCheck.  If the firm did not have a public website, the broker-dealer would have been required to 
include a toll-free telephone number where retail investors could request up-to-date information.  See 
Proposed Item 7.E.1. of Form CRS. 

 Investment advisers would have had to state that, to find additional information, retail investors should see 
the firm’s Form ADV brochure on IAPD on Investor.gov and any brochure supplement the firm provides.  
If the adviser maintains its current Form ADV on a public website, it would have had to state the website 
address.  If the adviser had no such website, a link to adviserinfo.sec.gov would have had to be provided as 
well as a toll-free telephone number where retail investors could request up-to-date information.  See 
Proposed Item 7.E.2. of Form CRS. 

598  See supra footnotes 76–83 and accompanying text. 



 

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provides investors access to search for firms on BrokerCheck and IAPD, references to both of 

which would have been required in prescribed wording in the proposed relationship summary.599  

The flexibility is also responsive to observations reported in surveys and studies and comments 

from investors at roundtables and on the Feedback Forms indicating that investors found the 

proposed “Additional Information” section less helpful compared to other sections in the 

relationship summary.600  Consistent with our layered disclosure approach, we encourage 

hyperlinks, QR codes, or other means of facilitating access for retail investors to obtain 

additional information.601 

We also are not adopting the proposed requirement that firms include information on how 

retail investors should report complaints about their investments, investment accounts, or 

financial professionals in the relationship summary.602  While some commenters supported 

                                                                                                                                                             

599  See Item 1.A. of Form CRS.  As discussed above, we are requiring firms to include the reference to 
Investor.gov/CRS in the Introduction in part to highlight to retail investors the ability to research firms and 
financial professionals as well as the ability to review educational materials at the website.  See supra 
Section II.B.1. 

600  See supra footnote 568–569 and accompanying text; see also Philadelphia Roundtable (confusion 
regarding the difference between FINRA and the Commission as well as a statement that there are “too 
many Websites” in the Additional Information section). 

601  See supra Section II.A.3. 

602  The proposal included the following instruction in the Additional Information section:  “To report a 
problem to the SEC, visit Investor.gov or call the SEC’s toll-free investor assistance line at (800) 732-0330.  
[To report a problem to FINRA, [ ].]  If you have a problem with your investments, investment account or a 
financial professional, contact us in writing at [insert your primary business address].”  If you are a broker-
dealer or dual registrant, include the bracketed language.  It is your responsibility to review the current 
telephone numbers for the SEC and FINRA no less often than annually and update as necessary.”  
Proposed Item 7.D. of Form CRS.181 

 

including information on how retail investors could report complaints,603 others disagreed with 

this approach604 or suggested that it may not be information that is as critical at the beginning of 

a relationship.605  Commenters submitting their own mock-ups of the relationship summary 

likewise took different approaches as to whether or not to include this information.606 

We are requiring a conversation starter in this part of the relationship summary, which 

incorporates and adapts a key question from the proposal: “Who is my primary contact person?  

Is he or she a representative of an investment adviser or a broker-dealer?  Who can I talk to if I 

have concerns about how this person is treating me?”607  With required text features to highlight 

this conversation starter, as well as information from the Introduction to direct retail investors to 
                                                                                                                                                             

603  See, e.g., NASAA Letter (suggesting that the Additional Information section be recast as “Disciplinary 
History and Customer Rights and Remedies” and include, among other things, a discussion of the legal 
rights and the remedies available to customers in the event of breach (including whether the customer will 
be subject to mandatory arbitration) and contact information for regulators where investors may file 
complaints or ask questions about disciplinary history); see also Philadelphia Roundtable (investor 
expressing that she would like to know where to file a complaint, but not realizing that the desired 
information was on the proposed relationship summary). 

604  See Wells Fargo Letter (“We also don’t agree that Form CRS needs to get into details on how an investor 
can report a problem.  Such a disclosure is outside of the overall purpose of the summary and will detract 
from both the readability and length of the document.”). 

605  See Trailhead Consulting Letter (“[T]his document is encouraged or required to be delivered prior to 
entering into a relationship or transaction, so hopefully problems have yet to occur. The account statements 
or investment adviser reports should include statements informing investors how to report a problem.”).  
But see Cetera Letter II (Woelfel) (86% of survey respondents strongly or somewhat agreed that “how to 
report a problem with your investments” was an important topic to be discussed in the relationship 
summary and 84% of survey respondents strongly or somewhat agreed that “how to report a problem with a 
financial professional” was an important topic; within a range of 88% to 81% of ratings for 9 different 
topics). 

606  Compare, e.g., LPL Financial Letter (including hyperlinks to BrokerCheck and IAPD in part “to report a 
problem” in mock-up) and IAA Letter I (no reference to problems or reporting complaints in mock-up).   

607  Item 5.C. of Form CRS.  In comparison, the analogous proposed key question was “Who is the primary 
contact person for my account, and is he or she a representative of an investment adviser or a broker-
dealer?  What can you tell me about his or her legal obligations to me?  If I have concerns about how this 
person is treating me, who can I talk to?”  Proposed Item 8.10 of Form CRS.   



 

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Investor.gov/CRS, we believe that retail investors will be able to find information on who to 

contact and how to report a complaint to the firm at the appropriate time, and Investor.gov 

includes links to submit questions and complaints to the Commission.  In light of the mixed 

feedback from commenters and the changes to the form designed to enhance flexibility and 

usability, we are not requiring firms to include more detailed information about submitting 

complaints, as proposed, to enable the disclosures in the relationship summary to focus on other 

information about the firm and its services. 

We are also requiring firms to include a telephone number where retail investors can 

request up-to-date information and request a copy of the relationship summary.608  This differs 

from the proposal, which required only those firms that do not have a public website to include a 

toll-free number that retail investors may call to request documents.609  Some of the commenter 

mock-ups included a telephone number even though the firms maintained a public website.610  A 

commenter who recommended including a contact telephone number in the relationship 

summary did not specify that it must be toll-free and we received a mock-up with a placeholder 

for a telephone number that was not specifically toll-free.611   

After consideration of these comments and mock-ups, we determined that all firms 

should include a telephone number in the relationship summary.  We continue to believe it is 

important for retail investors to have firm contact information in the event that they would like to 
                                                                                                                                                             

608  Item 5.B. of Form CRS. 

609  See Proposed General Instruction 8.(a) to Form CRS.   

610  See, e.g., Fidelity Letter (mock-up) and Primerica Letter (mock-up).  

611  See IAA Letter I and Primerica Letter (mock-up). 



 

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request disclosures and there is no public website for that firm that the investor may easily 

access.  In addition, we anticipate that requiring all firms to include a telephone number will 

more readily accommodate retail investors who prefer communicating with firms over the phone 

and will facilitate their requests for up-to-date information and a copy of the relationship 

summary.  If firms do not already have a toll-free telephone number, they will not be required to 

obtain one to comply with the requirements of the relationship summary.  Firms will have the 

flexibility to decide whether or not the telephone number they provide in their relationship 

summary will be toll-free.   

6. Proposed Items Omitted in Final Instructions 

The proposal included two sections that we are not adopting as separate sections in the 

relationship summary.612  As discussed above, the relationship summary will not include a 

separate section for “Key Questions to Ask;” instead, the topics covered by the proposed key 

questions will be integrated throughout the relationship summary as headings to items or as 

“conversation starters.”613 

The relationship summary will also not include the Comparisons section for investment 

advisers and broker-dealers, as proposed.  Standalone broker-dealers would have been required 

to include the following information, using prescribed wording, about a generalized retail 
                                                                                                                                                             

612  In addition to the reasons discussed below, removing these sections also may help alleviate concerns from 
commenters that the proposed relationship summary was trying to “do too much.”  E.g., Schwab Letter I; 
SIFMA Letter; Comment Letter of UBS Global Wealth Management (Aug. 7, 2018) (“UBS Letter”); see 
also AARP Letter (suggesting that the relationship summary be shortened to avoid “information 
overload”); CFA Institute Letter I (the proposed relationship summary is “too wordy, lacks design elements 
that engage the reader, and, in many respects, is too nuanced for the average retail investor who is trying to 
understand the differences between broker-dealers and investment advisers”). 

613  See supra Section II.A.4.   



 

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investment adviser:  (i) the principal type of fees; (ii) services investment advisers generally 

provide; (iii) the applicable legal standard of conduct; and (iv) certain incentives based on an 

investment adviser’s asset-based fee structure.  For standalone investment advisers, this section 

would have required them to include parallel categories of information regarding broker-

dealers.614    

Many commenters opposed including discussions comparing investment advisers and 

broker-dealers.  Some commenters stated that it was inappropriate for the Commission to require 

firms to describe products and services that they do not offer and about which they may have 

limited or no expertise.615  Other commenters had concerns with the prescribed wording, which 

they said may increase investor confusion or be misleading with prescribed wording that would 

not reflect the likely relationship that an investor would have with a specific firm.616  Some 

commenters believed that the wording in the comparison section favored broker-dealers over 

investment advisers.617  Others indicated that the comparisons should allow for discussions 

regarding insurance products.618  As an alternative, some commenters suggested that the 

Commission include the information intended for the proposed Comparison section on the 

                                                                                                                                                             

614  See Proposed Item 5 of Form CRS. 

615  See, e.g., ACLI Letter.   

616  See IAA Letter I (arguing that the wording of the section was “too boilerplate” and would prohibit firms 
from providing useful information about what the specific investor’s relationship would be with a firm). 

617  See CFA Letter I (arguing that “there are a number of statements … that many, if not most, advisers would 
likely object to” in the prescribed wording); IAA Letter I. 

618  See New York Life Letter; Northwestern Mutual Letter. 



 

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Commission’s website as educational material,619 and that firms could link to the educational 

material from their relationship summaries.620  Given such concerns and suggestions, a number 

of mock-ups did not include a comparison section.621 

Comments on Feedback Forms indicated that this section was less useful than other 

sections of the relationship summary; fewer commenters rated this section as either “very useful” 

or “useful” compared to the other sections of the relationship summary.622 Many narrative 

comments on Feedback Forms relating to this section (even from those who graded the section as 

“useful”) indicated that these commenters did not find this section informative and wanted more 

information to help them compare firms.623  Feedback on this section from the RAND 2018 

report and other surveys and studies was limited because the RAND 2018 report, and other 

surveys and studies, generally focused on the sample proposed dual registrant relationship 

summary.  However, in a survey that focused on the standalone investment adviser relationship 

                                                                                                                                                             

619  See IAA Letter I; Schnase Letter; Pickard Djinis and Pisarri Letter.  

620  See, e.g., SIFMA Letter; Schwab Letter I. 

621  See, e.g., IAA Letter I; SIFMA Letter; Schwab Letter I.  Other mock-ups included a “first level” disclosure 
that involved generalized comparisons between investment advisers and broker-dealers, with the 
relationship summary including firm-specific information.  See LPL Financial Letter; Primerica Letter. 

622  Twenty-nine commenters (about 30%) on Feedback Forms rated the comparison section as “Very Useful”; 
39 (about 40%) rated it as “Useful”; 17 (almost 20%) responded that they did not find this section useful or 
were unsure.  See Feedback Forms Comment Summary (responses to Question 2(d), supra footnote 11.  

623  See, e.g., Anonymous07 Feedback Form (“Any example of how you use either or both for achieving 
goals”); Anonymous13 Feedback Form (“... list what is the same for both, as much is, then only list 
differences in separate columns. What I really want is what's the differences”); Brantley Feedback Form 
(“when is it best to use each type of account - maybe some examples”); Coleman Feedback Form (“…a 
word that suggests when one type of relationship would be more beneficial”); Hawkins Feedback Form 
(“There are so many different account types and investment options.  More information needed”); Murphy 
Feedback Form (“Too complicated to follow”); Schreiner Feedback Form (“highlight differences”).  



 

186 

 

summary, most survey respondents indicated that this section was not useful in helping them to 

understand differences between firms.624  

We have determined not to require a separate Comparisons section in the relationship 

summary for broker-dealers and investment advisers that are not dual registrants.  In lieu of the 

separate section with prescribed wording, the final instructions include several requirements that 

will help facilitate comparisons among firms.  First, each relationship summary will be required 

to provide answers to the same questions in a standard order.625  Second, dual registrants will be 

required to provide either a combined relationship summary describing both brokerage and 

advisory services, presenting the information with equal prominence and in a manner that 

facilitates comparison of the two types of services or, alternatively, will be required to provide 

separate relationship summaries that clearly distinguish and facilitate comparison of the firm’s 

brokerage and investment advisory services.626  Similarly, a firm that has an affiliate providing 

brokerage or advisory services may choose to prepare a single relationship summary, or two 

separate relationship summaries, discussing the services provided by both firms, but only if the 

                                                                                                                                                             

624  See Betterment Letter I (Hotspex), supra footnote 18 (only 23% of survey respondents indicated that the 
disclosure on a version of the sample proposed standalone adviser relationship summary helped them to 
understand how other investment firms differed from Betterment).  

625  See supra Section II.A.2.  

626  See supra Section II.A.5.  Additionally, and as noted above, firms that prepare two separate relationship 
summaries must deliver both relationship summaries to each retail investor with equal prominence and at 
the same time, without regard to whether the particular retail investor qualifies for those retail services or 
accounts.  See id.; see also General Instruction 5.A. to Form CRS. 



 

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relationship summary or summaries are designed in a manner that facilitates comparison of the 

brokerage and investment advisory services.627 

These changes enhance the relationship summary’s usability and design and, we believe, 

will improve comparisons among firms by retail investors using the relationship summaries.  The 

relationship summaries will have differentiated, firm-specific information in a comparable 

format as compared to the proposed approach of requiring prescribed and more generalized 

information.  We believe this comparability and differentiation among firm relationship 

summaries will enhance usability for retail investors.  In addition, removing the prescribed 

wording allows firms to describe their services and fees more accurately while simultaneously 

mitigating concerns commenters raised regarding potentially misleading or inappropriate 

prescribed wording.  Investors seeking more general information about investment advisers and 

broker-dealers will know they can refer to educational materials that are available on the 

Commission’s website, Investor.gov, and elsewhere for investor research and education, 

including Investor.gov/CRS, which the relationship summary’s Introduction must reference.628   

C. Filing, Delivery, and Updating Requirements  

We are adopting the filing, delivery, and updating requirements with several 

modifications from the proposal.  Firms will file copies of their relationship summaries with the 

Commission, will update the disclosures when the information becomes materially inaccurate, 

and will communicate any changes to retail investors who are existing clients or customers.  The 

                                                                                                                                                             

627  See General Instruction 5.B.(i) to Form CRS. 

628  See Item 1.B. of Form CRS. 



 

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delivery requirements are designed to ensure a relationship summary is provided before or at the 

time a retail investor enters into a relationship with the firm and when changes are made to the 

services the firm provides.   

We made several modifications to the proposed requirements in response to comments, in 

order to make it easier for retail investors to discern changes in updated relationship summaries, 

streamline the filing requirements, and provide greater clarity regarding several of the delivery 

requirements.  As described further below, some of the key revisions include:  

• Broker-Dealer Initial Delivery Obligations.  Broker-dealers will be 

required to deliver the relationship summary before or at the earliest of:  (i) a 

recommendation of an account type, a securities transaction, or an investment strategy 

involving securities; (ii) placing an order for the retail investor; or (iii) the opening of a 

brokerage account for the retail investor, instead of before or at the time the retail 

investor first engages the broker-dealer’s services, as proposed.  We encourage delivery 

of the relationship summary to new or prospective clients or customers at the first 

possible opportunity, including the initial point of contact. 

• Other Delivery Obligations.  Firms will deliver the relationship summary 

to existing retail investor clients and customers before or at the time firms open a new 

account that is different from the retail investor’s existing account, as was proposed.  In 

addition, firms will deliver the relationship summary when they recommend that the 

retail investor roll over assets from a retirement account, or when they recommend or 

provide a new service or investment outside of a formal account (e.g., variable annuities 

or a first-time purchase of a direct-sold mutual fund through a “check and application” 

process).  In response to commenters’ concerns, these changes are intended to replace the 



 

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proposed instruction that firms deliver the relationship summary when making changes to 

an existing account that would “materially change the nature and scope” of the firm’s 

relationship with the retail investor with more concrete delivery triggers. 

• Highlighting Changes.  In a change from the proposal, we are adding a 

requirement that firms delivering updated relationship summaries to existing clients or 

customers also highlight the most recent changes by, for example, marking the revised 

text or including a summary of material changes.  This additional disclosure must be filed 

as an exhibit to the unmarked amended relationship summary (but would not be counted 

toward the two-page or four-page limit, as applicable). 

• New Filing Requirements.  As proposed, we are requiring that firms file 

the relationship summary using a text-searchable format.  However, in response to 

comments received, we are also requiring that the filings contain machine-readable 

headings to enhance the ability to compare information submitted by different firms.  

Also in response to comments, which we solicited on this topic, we are changing the 

system that broker-dealers will use to file Form CRS from EDGAR, as proposed, to Web 

CRD®.  Dual registrants will be required to file their relationship summaries using both 

IARD and Web CRD®. 

Finally, we are revising the definition of retail investor to align more closely with the 

definition of “retail customer” in Regulation Best Interest.  As discussed, below, we do not 

believe that this results in substantive changes in the definition as proposed.   

1. Definition of Retail Investor  

For purposes of Form CRS, “retail investor” is defined as “a natural person, or the legal 

representative of such natural person, who seeks to receive or receives services primarily for 



 

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personal, family or household purposes.”629  The proposal defined the term retail investor as “a 

prospective or existing client or customer who is a natural person (an individual), including trusts 

or other similar entities that represent natural persons, even if another person is a trustee or 

managing agent.”  This definition was different from the definition of “retail customer” in 

proposed Regulation Best Interest630 because the relationship summary was intended for an 

earlier stage of the relationship between an investor and a financial professional, and we thought 

it would be beneficial for all natural persons to receive information to facilitate their account 

choices.631   

Many commenters recommended that we use a single definition for both “retail investor” 

and “retail customer” because consistent definitions would facilitate compliance and 

administrative efficiency.632  Commenters were concerned that differences between the 

definitions could result in a requirement to deliver the relationship summary to broker-dealer 

                                                                                                                                                             

629  General Instruction 11.E. to Form CRS. 

630  Compare Proposed Exchange Act rule 15l-1(b)(1) (defining retail customer to mean “a person, or the legal 
representative of such person, who: (A) Receives a recommendation of any securities transaction or 
investment strategy involving securities from a broker, dealer, or a natural person who is an associated 
person of a broker or dealer; and (B) Uses the recommendation primarily for personal, family, or household 
purposes.”). 

631  Proposing Release, supra footnote 5, at Section II, at n.29. 

632  See Committee of Annuity Insurers Letter (“a standardized definition … would be more efficient and 
enable firms to more easily comply”); ICI Letter (“a single definition … would provide important 
administrative efficiencies, facilitate compliance, and avoid confusion”); see also Bank of America Letter; 
CFA Letter I; Cetera Letter I; Fidelity Letter; Comment Letter of Franklin Resources, Inc. (Aug. 6, 2018); 
Invesco Letter; Comment Letter of Morgan Stanley Smith Barney, LLC (Aug. 7, 2018) (“Morgan Stanley 
Letter”); Oppenheimer Letter; Comment Letter of Raymond James Financial (Aug. 7, 2018) (“Raymond 
James Letter”); SIFMA Letter; TIAA Letter; Transamerica Letter.  



 

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customers who may not be “retail customers” for purposes of Regulation Best Interest.633  Many 

commenters further recommended that the definitions of “retail investor” and “retail customer” 

should both be conformed to rules issued by FINRA, which use a net worth test to distinguish 

institutional and “retail” customers.634  Commenters also asked us to clarify that the relationship 

summary need not be delivered to certain professionals retained to represent a natural person635 

and address whether participants in workplace retirement plans will be retail investors who 

should receive the relationship summary.636   

In response to comments, the final instructions adopt a definition of retail investor that is 

consistent with the definition of retail customer in Regulation Best Interest, but differs to reflect 

differences between the relationship summary delivery requirement and the obligations of 

broker-dealers under Regulation Best Interest, including that the relationship summary is 

required whether or not there is a recommendation and covers any prospective and existing 

clients and customers (i.e., a person who “seeks to receive or receives services”) of investment 

advisers as well as broker-dealers.637  Specifically, under Regulation Best Interest, retail 

                                                                                                                                                             

633  See, e.g., SIFMA Letter; TIAA Letter.   

634  See, e.g., SIFMA Letter (referring to FINRA Rule 2210); Cetera Letter I; Investacorp Letter; Morgan 
Stanley Letter; TIAA Letter; UBS Letter; Wells Fargo Letter. 

635  E.g., Comment Letter of the American Bankers Association (Aug. 7, 2018) (“American Bankers 
Association Letter”); IAA Letter I; ICI Letter; Oppenheimer Letter; Prudential Letter; T. Rowe Letter; 
Wells Fargo Letter.  

636  E.g., Comment Letter of Empower Retirement (Aug. 2, 2018) (“Empower Retirement Letter”); Fidelity 
Letter; Comment Letter of Groom Law Group (Aug. 7, 2018) (“Groom Law Letter”); IAA Letter I; ICI 
Letter; IRI Letter; Invesco Letter; Comment Letter of the National Association of Government Defined 
Contribution Plans (Aug. 7, 2018) (“NAGDA Letter”); Oppenheimer Letter; Comment Letter of SPARK 
Institute, Inc. (Aug. 7, 2018) (“SPARK Letter”); T. Rowe Letter.   

637  See Regulation Best Interest Release, supra footnote 47, at Section II.B.3.c. 



 

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customer will be defined as “a natural person, or the legal representative of such natural person, 

who: (A) receives a recommendation of any securities transaction or investment strategy 

involving securities from a broker, dealer, or a natural person who is an associated person of a 

broker or dealer; and (B) uses the recommendation primarily for personal, family, or household 

purposes.”638  Like the definition of retail customer in Regulation Best Interest, the definition of 

retail investor in the final instructions includes natural persons639 who seek to receive or receive 

services “primarily for personal, family or household purposes” and the “legal representatives of 

such natural persons.”  In addition, we provide an interpretation on who would be considered to 

be a “legal representative” for purposes of this definition. 

The proposed definition of retail investor did not include the phrase “personal, family or 

household purposes.”  No commenters addressed whether or not to include this phrase in the 

Form CRS definition of retail investor, other than commenting generally that they supported 

conforming both definitions.  Commenters did comment and request clarification of this aspect 

of the definition of “retail customer” in Regulation Best Interest.640  

We believe the final definition of retail investor remains consistent with our objective to 

provide all natural persons with information to facilitate their understanding of their choices 

among firms and types of accounts.  Firms will be required to deliver the relationship summary 

                                                                                                                                                             

638  Exchange Act Rule 15l-1(b)(1). 

639  The proposed definition used the language “a natural person (an individual).”  While the final definition 
excludes the parenthetical reference to “an individual,” we do not intend any substantive change because a 
reference to a natural person typically includes any individual.  

640  See Regulation Best Interest Release, supra footnote 47, at Section II.B.3a (describing comments).   



 

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to individuals seeking brokerage and investment advisory services in connection with any of the 

many different reasons that an individual may seek these services, including, for example, 

retirement, education and other personal, family or household saving and investing objectives.  

The final definition of retail investor will exclude natural persons seeking these services for 

commercial or business purposes, such as, for example, where an employee seeks services for an 

employer or an individual seeks services for a small business or on behalf of another non-natural 

person entity such as a charitable trust.  However, firms must deliver the relationship summary to 

natural persons who might be seeking services for a mix of personal and commercial or other 

non-personal purposes, such as a sole proprietor or small business owner who may engage a firm 

or financial professional for multiple accounts and for personal as well as business purposes.  

Where firms do not know whether a natural person is seeking services for something other than 

personal, family, or household purposes at the beginning of a relationship, they may treat that 

natural person as a retail investor for purposes of delivery of the relationship summary.641 

As in the proposal, the final retail investor definition will capture natural persons without 

any distinction based on net worth.  While a number of commenters argued that firms should not 

be required to deliver a relationship summary to investors that meet certain asset or net worth 

thresholds,642 others opposed narrowing the definition based on a net worth test or other test.643  

                                                                                                                                                             

641  As explained in Regulation Best Interest Release, supra footnote 47, at Section II.B.3a, we interpret 
“personal, family or household purposes” as used in the definition of retail customer to mean any 
recommendation to a natural person for his or her account, and we believe that, pursuant to the Care 
Obligation of Regulation Best Interest, broker-dealers are able to obtain sufficient facts to determine the 
purpose for which a recommendation will be used. 

642  For example, SIFMA’s comments refer to FINRA Rule 2210, which treats accounts of natural persons with 
$50 million or more in assets as institutional investors; SIFMA explains that these investors are “among the 
wealthiest and most sophisticated customers and often have multiple professional fiduciaries and advisers, 

 



 

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We continue to believe that the retail investor definition should not distinguish based on a net 

worth or other asset threshold test and that all individual investors would benefit from clear and 

succinct disclosure regarding key aspects of available brokerage and advisory relationships.  As 

noted in the proposal, section 913 of the Dodd-Frank Act defines “retail customer” to include 

natural persons and legal representatives of natural persons without distinction based on assets or 

net worth.644  Further, we believe that it also may be impractical to include a net worth or other 

test based on asset thresholds in the definition because it could be difficult for firms to determine 

a retail investor’s net worth at the outset of the relationship when the relationship summary must 

be provided. 

To conform definitions, the final definition of retail investor substitutes the language “the 

legal representative of such natural person” for language in the proposal referring to “a trust or 

other similar entity that represents natural persons, even if another person is a trustee or 

managing agent of the trust.”645  We believe this is a clarification and not a substantive change 

from the proposal because it retains coverage of trusts and other similar legal entities that 

                                                                                                                                                             

apart from their broker-dealer relationships” and “do not function as ‘retail customers’”; see also Cetera 
Letter I; Investacorp Letter; Morgan Stanley Letter; TIAA Letter; UBS Letter; Wells Fargo Letter.  Other 
commenters suggested different tests of financial sophistication, e.g., Advisers Act Rule 205-3 definition of 
“qualified clients” (a $2 million net worth test), see Comment Letter of American Investment Council (Aug. 
7, 2018) (“American Investment Council Letter”); Comment Letter of Loan Syndications and Trading 
Association (Aug. 7, 2018); Comment Letter of the Managed Funds Association Alternative Investment 
Management Association (Aug. 7, 2018); or the section 2(a)(51) of the Investment Company Act definition 
of “qualified purchaser” ($5 million net worth test).  See Fidelity Letter; Pickard Djinis and Pisarri Letter.  

643  See, e.g., Morningstar Letter (“any unequal distribution of this information would be arbitrary”); see also 
AARP Letter; CFA Letter I; Trailhead Consulting Letter. 

644  Proposing Release, supra footnote 5, at Section II, at text accompanying nn.31–32.  

645  General Instruction 11.E. to Form CRS. 



 

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represent natural persons, and the proposal contemplated that certain legal representatives, e.g., a 

trustee or managing agent, would receive a relationship summary on behalf of a trust or other 

similar legal entity.  Further, we clarify that we interpret a “legal representative” of a natural 

person to cover only non-professional legal representatives (e.g., a non-professional trustee that 

represents the assets of a natural person and similar representatives such as executors, 

conservators, and persons holding a power of attorney for a natural person).646  In referring to 

non-professional legal representatives, we intend to capture persons who are acting on behalf of 

natural persons and are not regulated financial services professionals retained by natural persons 

to exercise independent professional judgment. This responds to those commenters who argued 

that it should not be necessary to provide a relationship summary to regulated professionals in 

the financial services industry, such as registered investment advisers and broker-dealers, 

corporate fiduciaries (e.g., banks, trust companies and similar financial institutions) and 

insurance companies, and the employees or other representatives of such advisers, broker-dealers, 

corporate fiduciaries and insurance companies.647  Accordingly, non-professional legal 

representatives would not include such regulated financial services professionals.  We agree with 

these commenters that delivery of the relationship summary to such regulated financial services 

professionals retained by natural persons to exercise independent judgment will not further our 

                                                                                                                                                             

646  See ICI Letter (recommending that the Commission “make explicit in the definition of ‘retail investor’ that 
a ‘legal representative’ of a natural person “means an executor, conservator, or a person holding a durable 
power of attorney for a natural person”). 

647  See, e.g., American Bankers Association Letter; Bank of America Letter; IAA Letter I; Invesco Letter; ICI 
Letter; Oppenheimer Letter; Prudential Letter; T. Rowe Letter. 



 

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objective of facilitating retail investors’ understanding of their account choices.648  Importantly, 

however, this will not relieve firms or financial professionals retained to represent the assets of 

natural persons from their own obligations to deliver the relationship summary to clients or 

customers who are retail investors.   

Commenters offered varying points of view about whether participants of workplace 

retirement plans should be treated as retail investors who receive the relationship summary.  

Some recommended that the definition of retail investor should include plan participants.649  

Others argued against delivering a relationship summary to plan participants, explaining that a 

relationship summary would confuse participants and would duplicate other required 

disclosures.650  Several commenters suggested that only plan participants that choose to retain a 

firm or financial professional in connection with assets in his or her plan account should receive 

a relationship summary.651  Commenters also asked us to clarify whether the definition of retail 

investor would include participants in plans not subject to ERISA, such as governmental or other 

                                                                                                                                                             

648  See, e.g., American Bankers Association Letter; Bank of America Letter; IAA Letter I; Invesco Letter; ICI 
Letter; Oppenheimer Letter; Prudential Letter; T. Rowe Letter. 

649  See ICI Letter; Invesco Letter; Oppenheimer Letter; Trailhead Consulting Letter; see also IRI Letter 
(permit delivery of Form CRS using media approved by the plan sponsor). 

650  See Empower Retirement Letter (noting that plans covered by ERISA “have named fiduciaries responsible 
for ensuring each plan is operated in the best interest of plan participants … [and who] are already 
obligated pursuant to ERISA §404a-5 to provide participants with detailed disclosures related to those 
investment choices.”); Groom Law Letter (noting that “the decision to engage a broker- dealer for purposes 
of providing services to the plan is made at the plan sponsor level and not at the participant level); 
Comment Letter of Principal Financial Group (Aug. 7, 2018) (“Principal Letter”). 

651  See T. Rowe Letter (noting that Form CRS should apply “if an individual chooses to retain a broker-dealer 
or advisor to provide recommendations or management regarding his or her retirement plan accounts … 
[but] “if a plan fiduciary selects a broker-dealer or adviser to provide such services to its plan participants 
… we do not think Form CRS should apply); Prudential Letter; SPARK Letter. 



 

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non-ERISA workplace retirement plans meeting requirements under section 403(b) or 457 of the 

Internal Revenue Code of 1986, as amended (“Internal Revenue Code” or “Code”), and 

individual retirement accounts (“IRAs”) (including SEPs and SIMPLE IRAs).652   

In response to comments, we are clarifying that the relationship summary applies when 

retail investors seek services for their retirement accounts as well as non-retirement accounts 

because retirement savings is a personal, household or family purpose.  Accordingly, the 

definition of retail investor will include a natural person seeking to select and retain a firm to 

provide brokerage or advisory services for his or her own retirement account, including but not 

limited to IRAs and individual accounts in workplace retirement plans, such as 401(k) plans and 

other tax-favored retirement plans.653  For example, firms will be required to deliver a 

relationship summary to plan participants seeking advice about whether to take a distribution 

from a 401(k) plan or other workplace retirement plan and how to invest that distribution.  

Similarly, a firm will be required to deliver a relationship summary to a plan participant seeking 

to retain the firm to provide brokerage or advisory services for the participant’s individual 
                                                                                                                                                             

652  See ICI Letter; Invesco Letter; Oppenheimer Letter; T. Rowe Letter.  

653  Such IRAs include, for example, individual retirement accounts and individual retirement annuities 
described by section 408(a) and (b) of the Internal Revenue Code, “simplified employee pensions” (or 
(SEPs) described by section 408(k) of the Code, and simple retirement accounts described by section 
408(p) of the Code (SIMPLE IRAs).  In response to commenters, we also clarify that workplace  retirement 
plans include any arrangement available at a workplace that provides retirement benefits or allows saving 
for retirement, including, for example, any 401(k) plan or other plan that meets requirements for 
qualification under Code section 401(a), deferred compensation plans of state and local governments and 
tax-exempt organizations described by Code section 457, and annuity contracts and custodial accounts 
described by Code section 403(b).  Likewise, the definition of retail investor includes natural persons 
seeking brokerage or advisory services for other tax-favored savings arrangements such as an Archer 
Medical Savings Account described by Code section 220(d), a Health Savings Accounts described by 
Internal Revenue Code section 223(d) and any similar tax-favored health plan saving arrangement, a 
Coverdell education savings account described by Code section 530 and a qualified tuition program or “529 
plan” established pursuant to Code section 529. 



 

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account held in a 401(k) plan or other workplace retirement plan.654   

However, participants in 401(k) plans and other workplace retirement plans will not be 

retail investors for purposes of the Form CRS delivery obligation when making certain ordinary 

plan elections that do not involve selecting or retaining a firm to provide brokerage or advisory 

services.  We understand, for example, that participants in workplace retirement plans generally 

do not choose the firm that provides brokerage or advisory services in connection with certain 

ordinary plan elections, such as whether to enroll in the plan, make or increase plan contributions, 

or how to allocate contributions and plan account balances among a designated menu of plan 

investment options.  We designed the relationship summary to assist investors in understanding 

their choices when they seek to engage a firm to provide brokerage and advisory services.  Even 

if a financial professional or other firm representative assists a participant directly, e.g., at an 

enrollment meeting or through a call center interaction, the participant generally would not be 

making the type of account or firm choice contemplated by a relationship summary because the 

plan’s sponsor or another representative designated by the terms of the plan (e.g., a trustee or 

other fiduciary or other responsible party) (a “plan representative”) already has selected the firm, 

has negotiated the terms of service, and remains responsible for supervising the firm.655  We 

                                                                                                                                                             

654  For example, we understand that, although not common, some 401(k) plans and other individual account 
plans provide participants total discretion to choose an investment adviser or broker-dealer to provide 
services for their individual plan account.  See, e.g., 29 CFR 2550.404c-1(f), Example 9.  

655  This approach differs from our approach to defining retail customer for purposes of Regulation Best 
Interest to recognize differences between the relationship summary requirement and the obligations of 
broker-dealers under Regulation Best Interest.  As discussed in the Regulation Best Interest Release, supra 
footnote 47, at Section II.B.3.a, a participant receiving recommendations for the participant’s individual 
account held in a 401(k) or other workplace retirement plan would be a retail customer for purposes of 
Regulation Best Interest. 



 

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agree with commenters that delivering a relationship summary under these circumstances could 

be confusing to participants and duplicative of already required disclosures.  Accordingly, plan 

participants should not be viewed as “seeking or receiving services” for purposes of the Form 

CRS definition of retail investor when they are merely electing among plan features offered by 

firms and financial professionals retained and supervised by a plan representative.  This includes 

a participant’s decision to invest his or her account balance through an in-plan self-directed 

brokerage account option or to select an in-plan managed account service option, where a plan 

representative retains and supervises the broker-dealer or investment advisory firm providing 

such services to the plan.       

Finally, commenters asked us to address whether workplace retirement plans and their 

representatives (e.g., plan sponsors, trustees, and other fiduciaries) and service providers will be 

retail investors entitled to receive Form CRS.  In the proposal, we excluded workplace retirement 

plans and their representatives from the definition of retail investor.656  Most commenters agreed 

with this approach; some noting that workplace retirement plans and their representatives would 

not benefit from receiving a Form CRS.657  Two commenters argued that workplace retirement 

plans and their representatives should receive Form CRS.658  

                                                                                                                                                             

656  Proposing Release, supra footnote 5, at Section II.  

657  See IAA Letter I (“Institutional trusts such as employee benefit or pension plans … would not benefit from 
a Form CRS”); T. Rowe Letter (“… where a plan fiduciary selects a broker-dealer or adviser to provide 
such services to its plan participants … we do not think Form CRS should apply. ERISA and governmental 
plans are already subject to extensive disclosures to participants and rules related to conflicts.  
Consequently, a Form CRS in this context would be duplicative of existing disclosures and cause potential 
confusion, without providing any additional benefits”); see also Comment Letter of the American 
Retirement Association (Aug. 3, 2018) (professional investment experts retained by a plan to perform 
investment advisory services in a fiduciary capacity should not be included); Fidelity Letter (“establish a 
uniform definition … [that] excludes ERISA and non-ERISA employer sponsored retirement plans 

 



 

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We understand that plan representatives of workplace retirement plans typically are not 

seeking or receiving services primarily for personal, family or household purposes when they 

consider whether to engage a broker-dealer or investment adviser to provide services to a 

retirement plan established, maintained and operated by an employer to provide pension or 

retirement savings benefits to employees.  Further, the relationship summary—designed to 

provide succinct information relevant to individual retail investors—is not designed to facilitate 

account and firm choices by the representatives of these workplace retirement plans.  In this 

regard, we understand that plan representatives typically seek brokerage and advisory services 

bundled together with, or that will be complimentary with, other services supporting the plan’s 

establishment, maintenance and operation, such as plan design, recordkeeping and other 

administrative services, and compliance services to meet applicable requirements under the 

Internal Revenue Code and ERISA (or applicable state law for non-ERISA governmental 

plans).659 

Accordingly, the final definition of retail investor does not include most workplace 

retirement plans or their plan representatives seeking services for a plan established, maintained 

and operated by an employer to provide pension or retirement savings benefits to employees, 

                                                                                                                                                             

regardless of size, as well as their sponsors, trustees and advisers …”); ICI Letter (a retail investor should 
not include retirement plans, their sponsors or trustees or plan fiduciaries); NAGDA Letter (requesting 
clarification); Prudential Letter (“‘retail investor’ for purposes of Form CRS should not include retirement 
plan representatives”); Transamerica Letter (same).   

658  See Comment Letter of Fisher Investments (Dec. 13, 2018) (“many individuals overseeing retirement plans 
… would benefit from a better understanding of concepts in proposed Form CRS”); Trailhead Consulting 
Letter. 

659  See, e.g., Groom Law Letter (describing business models of firms offering brokerage and advice services to 
plans together with other services); SPARK Letter (same).201 

 

because such plans and their representatives are not seeking services primarily for personal, 

family or household purposes.  We note, however, that some plan representatives may participate 

under their employer’s workplace plan, e.g., in the case of a workplace IRA or other workplace 

retirement plan is established and maintained by a sole proprietor or other self-employed 

individual that includes one or more employees in addition to the plan representative.  If a plan 

representative who decides the services arrangements for a workplace retirement plan is a sole 

proprietor or other self-employed individual who will participate in the plan, the plan 

representative also would be a retail investor seeking services for personal, family or household 

purposes and must receive a copy of the firm’s relationship summary.660  

2. Filing Requirements 

As proposed, all broker-dealers and investment advisers will file their relationship 

summaries with the Commission, and the relationship summaries will be accessible via the 

Commission’s public website, Investor.gov,661 in addition to each firm’s website.  There are 

several reasons we are requiring the relationship summaries to be filed with the Commission.  

First, the public will benefit by being able to access any firm’s relationship summary by using 

one website, Investor.gov.  This should make it easier to make comparisons across firms.  

                                                                                                                                                             

660  This is consistent with the final definition of retail customer for purposes of Regulation Best Interest, which 
to the extent that the plan representative who decides services arrangements is a sole proprietor or other 
self-employed individual who will participate in the plan, the plan representative will be a retail customer 
for purposes of Regulation Best Interest to the extent that the plan representative receives recommendations 
directly from a broker-dealer primarily for personal, family or household purposes.  See Regulation Best 
Interest Release, supra footnote 47, at Section II.B.3a. 

661  For broker-dealers, relationship summaries will be filed through Web CRD®, and for investment advisers, 
relationship summaries will be filed through IARD.  Investors will be able to access relationship summaries 
using BrokerCheck and IAPD, the public interfaces of Web CRD® and IARD, respectively, and through the 
Commission’s Investor.gov website, which has a search tool that links to both BrokerCheck and IAPD.  



 

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Second, some firms may not maintain a website, and therefore their relationship summaries will 

not otherwise be accessible to the public.  Third, by having firms file their relationship 

summaries with the Commission, Commission staff can more easily monitor the filings for 

compliance.  Commenters generally supported requiring broker-dealers and investment advisers 

to file their relationship summaries with the Commission.662 

We are requiring that the filing be in a text-searchable format, as proposed, and in 

addition, the final instructions will require that the filing be structured with machine-readable 

headings.  Two commenters advocated that the relationship summary should be filed not only in 

a text-searchable, but also machine-readable, format,663 in response to our solicitation for 

comment on filing formats.  Both commenters stated that this would allow third parties to 

develop online comparison tools, making it easier for retail investors to compare firms with one 

another, including across key categories, such as fees.664  We agree that requiring this formatting 

will enable investors and other data users, industry participants, and the Commission and 

                                                                                                                                                             

662  See, e.g., CFA Letter I; Schnase Letter; Trailhead Consulting Letter; Institute for Portfolio Alternatives 
Letter. 

663  See CFA Letter I (“[P]ast experience regarding investors’ limited use of existing databases, such as IARD 
and BrokerCheck, cautions against placing too much reliance on investors’ accessing the documents 
directly.  We therefore urge the Commission to require that the documents be filed, not just in a text-
searchable format, but in a machine-readable format.”); Schnase Letter (“[T]he data contained in the 
Relationship Summary should be required to be filed in a structured data format, so the document can be 
utilized as a stand-alone human-readable document and serve as the source for a machine-readable data 
set.”). 

664  CFA Letter I (“We can envision a time when third parties could develop online tools to help investors 
search for a firm or account that meets their preferred parameters, much like the tools Kelly Blue Book or 
Edmunds provide to help car buyers narrow their selections.”); Schnase Letter (“Retail investors may not 
be able or inclined to build their own algorithms and spreadsheets to manipulate machine-readable data 
themselves, but third-party providers will likely step in when demand exists to provide investors publicly 
accessible comparison tools fueled by the machine-readable data made available by the SEC.”). 



 

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Commission staff to better collect and analyze reported information and facilitate the 

development of tools to aggregate and compare the information.  We are requiring that only the 

headings be machine-readable, given that firms will use their own wording in the narrative 

responses for each of the relationship summary items, and the responses will not be uniform.  

The machine-readable, structured headings could, for example, be implemented in PDF by 

creating a bookmark for each of the headings of the relationship summary that matches the text 

of the heading and that has the heading as its destination.  We believe this promotes aggregation 

and comparison of responses to specific items across different relationship summaries but also 

limits the costs of preparing the relationship summary.  This is consistent with the Commission’s 

ongoing efforts to modernize our forms by taking advantage of technological advances both in 

the manner in which information is reported to the Commission and how it is provided to 

investors and other users.665  These instructions are not intended to require firms to prepare a 

relationship summary in paper format.  A firm that prepares and delivers a relationship summary 

only in an electronic format could, for example, file a rendering of the electronic disclosures with 

the Commission.   

In a change from the proposal, broker-dealers will file through Web CRD® instead of 

EDGAR.  Investment advisers will file their relationship summaries through IARD in the same 

                                                                                                                                                             

665 See, e.g., Inline XBRL Filing of Tagged Data, Advisers Act Release No. 10514 (Jun. 28, 2018) [83 FR 
40846] (Aug. 16, 2018); Optional Internet Availability of Investment Company Shareholder Reports, 
Investment Company Act Release No. 33115 (Jun. 5, 2018) [83 FR 29158] (Jun. 22, 2018) (“Shareholder 
Reports Release”); Investment Company Reporting Modernization, Investment Company Act Release No. 
32314 (Dec. 8, 2017) [82 FR 58731 (Dec. 14, 2017)].     



 

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manner as they currently file Form ADV Parts 1A and 2A, as proposed.666  Whether dual 

registrants prepare a single relationship summary or two, they will file their relationship 

summaries using both IARD and Web CRD®.667  We are requiring filing of the relationship 

summary through Web CRD® and IARD because they are currently used by and familiar to 

broker-dealers and investment advisers, respectively.  This should minimize the systems changes 

firms would need to make, because they would not need to establish new systems in order to file 

their relationship summaries with the Commission.  One commenter supported using EDGAR 

for analyzing and comparing fee information.668  Several commenters, however, generally 

preferred Web CRD®, arguing that Web CRD® is more accessible for broker-dealers, which 

already make filings through Web CRD®, and that Web CRD® data provided on BrokerCheck is 

more familiar to retail investors.669  In light of comments, we have determined that requiring 

broker-dealers to file their relationship summaries through Web CRD® should streamline broker-

                                                                                                                                                             

666  General Instruction 7.A.(i) to Form CRS.  Several commenters supported using IARD as the filing system 
for investment advisers.  See, e.g., Trailhead Consulting Letter; Schnase Letter.  Investment advisers may 
instead file a paper copy of the Form ADV with the Commission if they apply for a hardship exemption by 
filing Form ADV-H. 

667  General Instruction 7.A.(i) to Form CRS.  Information for investment advisers on how to file with IARD is 
available on the SEC’s website at www.sec.gov/iard.  Information for broker-dealers on how to file through 
Web CRD® is available on FINRA’s website at http://www.finra.org/industry/web-crd/web-crd-system-
links.  See General Instruction 7.A.(ii) to Form CRS. 

668  See Morningstar Letter (advocating for fee information to be filed in a standard table with brief examples 
“in the EDGAR system in a standardized data format facilitating analysis and comparison”). 

669  See Schnase Letter (“[I]t is not clear why BDs should be filing their Relationship Summary through a 
different filing system than IAs (IARD, which is operated by FINRA) and through a different filing system 
than BDs already use for Form BD (CRD, also operated by FINRA).”); NASAA Letter (“[B]roker-dealers 
should file Form CRS on the WebCRD platform maintained by FINRA for its BrokerCheck reports (and 
which is related to IARD).”); Institute for Portfolio Alternatives Letter (“CRD and its public-facing 
BrokerCheck is a system familiar to both the brokerage industry as well as investors.  We believe that 
CRD/BrokerCheck will address potential investor confusion and streamline broker requirements.”).    



 

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dealer filing requirements relative to requiring broker-dealers to file on EDGAR.  Broker-dealers 

already use Web CRD® for filing their own registration records and those of their associated 

persons, and retail investors already can find broker-dealers’ disciplinary history and other 

information on BrokerCheck.  In addition, Investor.gov already has a prominent search tool on 

its main landing page that links to BrokerCheck and IAPD, which investors can use to search for 

information about firms and financial professionals.  This minimizes the implementation changes 

needed to make relationship summaries easily accessible through Investor.gov because new 

search tools would not need to be created and existing search tools could be linked to the 

Investor.gov/CRS webpage referenced in the relationship summary.   

We also received comment that dual registrants should file only on one system, instead of 

on both EDGAR and IARD as proposed.670  One commenter, however, implicitly supported the 

requirement that dual registrants file on two systems.671  The final instructions require dual 

registrants to file their relationship summaries using both systems— Web CRD® and IARD.672  

This approach ensures a complete and consistent filing record for each firm and facilitates the 

Commission’s data analysis, examinations, and other regulatory efforts.  Firms offering 

brokerage or investment advisory services through affiliates will follow the same filing 

requirements as standalone firms. 

                                                                                                                                                             

670  See, e.g., Prudential Letter (“The Commission should clarify that a single filing [for dual registrants], in 
either IARD or EDGAR, would constitute compliance with the filing requirement.”). 

671  See Schwab Letter III (providing sample Form CRS instructions for dual registrants to file on IARD and 
EDGAR). 

672  General Instruction 7.A.(i) to Form CRS. 



 

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For investment advisers, we are also adopting clarifications in the General Instructions to 

Form ADV that relate to the amending and filing of the relationship summary.673  First, 

investment advisers may file an amended relationship summary as an other-than-annual 

amendment or by including the relationship summary as part of an annual updating amendment, 

within the 30 days in which they are required to file the amendment.674  Second, the instructions 

provide that advisers may, but are not required to, submit amended versions of their relationship 

summary as part of their annual updating amendment and include additional technical references 

to implement this instruction.675  Third, we added provisions to mirror the requirements of the 

General Instructions to Form CRS as to when amendments and exhibits showing changes to Part 

3 must be made and filed.676  We believe that investment advisers will benefit from these 

clarifications.  Finally, we are adopting certain amendments to the General Instructions to Form 

ADV to add conforming technical changes and references to the Form ADV, Part 3.677 

                                                                                                                                                             

673  See infra Section II.C.4 generally for a discussion of amendments to the relationship summary. 

674  See amended General Instruction 4 to Form ADV (revised to add the following language: “If you are 
registered with the SEC, you must amend Part 3 of your Form ADV within 30 days whenever any 
information in your relationship summary becomes materially inaccurate by filing with the SEC an 
additional other-than-annual amendment or by including the relationship summary as part of an annual 
updating amendment.”).  Compare Proposed General Instruction 4 to Form ADV (“You must amend your 
relationship summary and file your relationship summary amendments in accordance with the Form ADV, 
Part 3 (Form CRS), General Instructions, 6.”). 

675  See amended General Instruction 4 to Form ADV (revised with language that investment advisers must 
update responses to all items “in Part 1A, 1B, 2A and 2B (as applicable),” and “You may, but are not 
required, to submit amended versions of the relationship summary required by Part 3 as part of your annual 
updating amendment.”). 

676  See infra footnotes 769–774, 781–783, and accompanying text. 

677  See amended General Instruction 3 to Form ADV (indicating that Form ADV, as amended to add Part 3, 
now contains five instead of four parts); amended General Instruction 4 to Form ADV (“Part 3 requires 
advisers to create a relationship summary (Form CRS) containing information for retail investors.  The 

 



 

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3. Delivery Requirements 

a. Form of Delivery 

The final instructions provide, as proposed, that firms will be able to deliver the 

relationship summary (including updates) within the framework of the Commission’s existing 

guidance regarding electronic delivery.678  This framework consists of the following elements: 

(i) notice to the investor that information is available electronically; (ii) access to information 

comparable to that which would have been provided in paper form and that is not so burdensome 

that the intended recipients cannot effectively access it; and (iii) evidence to show delivery, i.e., 

reason to believe that electronically delivered information will result in the satisfaction of the 

delivery requirements under the federal securities laws.679  In the Proposing Release, we also 

provided proposed guidance that a firm would be able to deliver the relationship summary to 

new or prospective clients or customers in a manner that is consistent with how the retail investor 

requested information about the firm or financial professional, and that this method of initial 

                                                                                                                                                             

requirements in Part 3 apply to all investment advisers registered or applying for registration with the SEC, 
but do not apply to exempt reporting advisers.  Every adviser that has retail investors to whom it must 
deliver a relationship summary must include in the application for registration a relationship summary 
prepared in accordance with the requirements of Part 3 of Form ADV.  See Advisers Act Rule 203-1.”); 
amended General Instruction SEC’s Collection of Information section (removing “promptly” to reflect 
filing requirements for relationship summary changes). 

678  See Use of Electronic Media by Broker-Dealers, Transfer Agents, and Investment Advisers for Delivery of 
Information; Additional Examples Under the Securities Act of 1933, Securities Exchange Act of 1934, and 
Investment Company Act of 1940, Exchange Act Release No. 37182 (May 9, 1996) [61 FR 24644 (May 
15, 1996)] (“96 Guidance”); see also Use of Electronic Media, Exchange Act Release No. 42728 (Apr. 28, 
2000) [65 FR 25843 (May 4, 2000)] (“2000 Guidance”); and Use of Electronic Media for Delivery 
Purposes, Exchange Act Release No. 36345 (Oct. 6, 1995) [60 FR 53458 (Oct. 13, 1995)] (“95 Guidance”).  
Recognizing the growth of different forms of electronic media, other technological developments, and the 
passage of time since these releases were issued, the Commission plans to revisit its existing guidance 
regarding electronic delivery. 

679  96 Guidance, supra footnote 678. 



 

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delivery for the relationship summary would be consistent with the Commission’s electronic 

delivery guidance.680  We have included this provision in the final instructions to provide 

additional clarity and certainty on what is permissible for initial delivery of the relationship 

summary.681  This approach applies only to the initial delivery of the relationship summary to 

new or prospective clients or customers, and not to any other delivery obligation of any other 

required disclosure.  With respect to existing clients or customers, as proposed, firms should 

deliver the relationship summary in a manner consistent with the firm’s existing arrangement 

with that client or customer and with the Commission’s electronic delivery guidance.  The above 

delivery instructions are based on the assumption that retail investors are able to access and 

prefer to receive communications and disclosures through the same medium in which they 

request information from the firm or financial professional.  If this assumption is not correct, 

retail investors can request a copy of the relationship summary in a format they prefer, as 

discussed below, and can establish their delivery preferences with the firm once they have 

entered into a relationship.   

Numerous commenters expressed support for electronic delivery, including for 

modifications to the instructions to make electronic delivery a more accessible option for the 

                                                                                                                                                             

680  See Proposing Release, supra footnote 5, at nn.344–45 and accompanying text; see also 2000 Guidance, 
supra footnote 678, at 65 FR 25845–46; 96 Guidance, supra footnote 678, at 61 FR 24647; and 95 
Guidance, supra footnote 678, at 60 FR 53461.  

681  General Instruction 9.B. to Form CRS (“You may deliver the relationship summary to new or prospective 
clients or customers in a manner that is consistent with how the retail investor requested information about 
you or your financial professional.”). 



 

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relationship summary as well as other disclosures.682  A number of commenters further 

advocated for the “notice plus access” model, in which posting the relationship summary to the 

firm’s website, in combination with a notice to the retail investor that the relationship summary 

is available there, would constitute delivery.683  Some of these commenters argued that this 

approach should suffice for delivery, even if the retail investor had not previously consented to 

electronic delivery in an affirmative way.684  A few commenters cited to the Commission’s 

recently adopted rule 30e-3 under the Investment Company Act685 as a possible model for 

delivering the relationship summary.686  Some of these commenters also advocated for a more 

comprehensive updating of the Commission’s guidance concerning electronic delivery, not just 

                                                                                                                                                             

682  See, e.g., CFA Institute Letter I (“Whatever design is finalized for CRS, it should accommodate electronic 
delivery to investors.  We also believe a design with interactive components is needed in today’s 
electronically savvy investor base.”); TIAA Letter (“the SEC could make the disclosure requirements in . . . 
Form CRS more flexible, such that broker-dealers have more options with respect to the method of delivery 
of required disclosures. . . .”); MassMutual Letter; SIFMA Letter; SPARK Letter; Morgan Stanley Letter; 
Cetera Letter II; Fidelity Letter.  

683  See, e.g., Primerica Letter; Cetera Letter II; Schwab Letter (advocating a notice plus access model for 
annual or more frequent updates to the relationship summary); Pickard Djinis and Pisarri Letter; IAA Letter 
I; SIFMA Letter; MassMutual Letter; Comment Letter of the Money Management Institute (Aug. 7, 2018) 
(“MMI Letter”); Wells Fargo Letter. 

684  See, e.g., LPL Financial Letter (supporting an implicit consent model on the basis that, among other things 
“It simply is not feasible to obtain an investor’s affirmative consent to electronic delivery before the 
investor makes a final decision about the [investment relationship]”); FSI Letter I (supporting a negative 
consent model, rather than an opt-in approach); IAA Letter I (supporting an implied consent model).  

685  17 CFR 270.30e-3 (Internet availability of reports to shareholders); Shareholder Reports Release, supra 
footnote 665. 

686  See, e.g., T. Rowe Letter (“In cases where no email address is on file with the firm, we think a notice and 
access protocol akin to Rule 30e-3 is appropriate.”); SPARK Letter (“The SEC has recently demonstrated a 
willingness to embrace electronic disclosure as the default delivery method for other disclosures and we 
encourage the SEC to consider whether the disclosures added by the SEC’s Proposal, including Form CRS, 
should be able to tap into the benefits of electronic delivery.”). 



 

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for the relationship summary but for other disclosures as well.687  Commenters advocating for 

more widespread use of electronic delivery cited to arguments including the potential cost 

savings and improved security of delivery to investors.688 

On the other hand, some commenters expressed reservations about a notice plus access 

equals delivery approach and supported the Commission’s proposed approach.689  The RAND 

2018 survey and another investor survey also showed mixed results relating to electronic 

delivery, with many participants indicating that they would prefer to receive the disclosures in 

paper.690  Similarly, the IAC has stated that nearly half of investors (49%) still prefer to receive 

paper disclosures through the mail, compared with only 33% who prefer to receive disclosures 

electronically, either through email (27%) or by accessing them online (6%).691  Additionally, we 

                                                                                                                                                             

687  See, e.g., LPL Financial Letter (“Modern communication practices underscore the need for the Commission 
to provide more flexibility to broker-dealers and investment advisers to satisfy their document delivery 
obligations by delivering materials to customers and clients who have implicitly consented to electronic 
delivery as well as to current customers and clients who have affirmatively consented to electronic delivery 
in a manner contemplated by the existing guidance.”); SPARK Letter (“strongly urges the SEC to permit . . 
. electronic delivery as the default delivery method for satisfying the disclosure requirements under 
[Regulation Best Interest, as well as Form CRS].”); Cetera Letter II (“We believe that adoption of Reg. BI 
and the Form CRS represents something of a watershed moment. . . .”); Pickard Djinis and Pisarri Letter; 
IAA Letter I; MMI Letter. 

688  See, e.g., Cetera Letter II (asserting that electronic delivery is safer and more environmentally friendly); IRI 
Letter; SPARK Letter; Primerica Letter.  

689  CFA Letter I (“We greatly appreciate that, in discussing this issue, the Release specifically references the 
obligation to provide ‘evidence to show delivery.’  This should help to clarify that firms could not meet the 
disclosure requirement simply by making the disclosures accessible on a public website and providing 
notice of their availability, under an ‘access equals delivery’ model. . . .”); AARP Letter (“The SEC should 
prohibit advisers from simply providing an electronic address for disclosures. . . .  A paper copy should be 
provided to the retail investor.”).  

690  See supra footnote 699.  

691  IAC Electronic Delivery Recommendation, supra footnote 153 (citing FINRA Investor Education 
Foundation, Investors in the United States 2016 (Dec. 2016), available at 
http://www.usfinancialcapability.org/downloads/NFCS_2015_Inv_Survey_Full_Report.pdf).  While the 

 



 

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are aware, based on our filing data, that a number of firms do not host public websites and would 

not be able to make available an updated, electronic version of their relationship summary for 

their retail investors at all times.692  Some commenters noted that some retail investors may lack 

readily available internet access.693   

The relationship summary is designed to be delivered when a retail investor selects a firm 

or financial professional and which services to receive, including updated versions upon certain 

events when retail investors are again making decisions about whether to invest through an 

advisory account or a brokerage account.  These selections affect all of the retail investor’s 

subsequent investments under that relationship.  In comparison, documents such as shareholder 

reports and prospectuses typically relate to investment decisions on single products; once the 

product is purchased, reporting is most commonly delivered at regular intervals, unlike the 

relationship summary.  We are preserving an investor’s ability to receive the relationship 

                                                                                                                                                             

FINRA 2016 Investors Study was conducted prior to the Form CRS proposal (and does not specify what 
disclosure materials are contemplated in the survey, e.g., shareholder reports, summary prospectuses, 
statutory prospectuses, account statements, etc.), it presents general investor survey data regarding investor 
disclosure preferences. 

692  Based on IARD system data, 8.4% of investment advisers with individual clients do not report at least one 
public website. 

693  See, e.g., Comment Letter of C. Frederick Reish (Sept. 12, 2018); SIFMA Letter (acknowledging that firms 
would need to provide linked disclosures to customers and prospective customers who do not have internet 
access); LPL Financial Letter (citing Investment Company Institute, 2015 Investment Company Fact Book, 
(55th ed. 2015), at 129, available at https://www.ici.org/pdf/2015_factbook.pdf.  The study found the 
following with respect to internet access in mutual fund owning households: (i) head of household age 65 
or older, 14% lack access; (ii) education level of high school diploma or less, 16% lack access; and (iii) 
household income of less than $50,000, 16% lack access.). 



 

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summary in paper, by maintaining the protections provided by the Commission’s electronic 

delivery guidance.694  

We recognize the benefits to retail investors of receiving the relationship summary as 

early as possible when considering a firm or financial professional and that electronic 

communication can facilitate earlier delivery, provided that retail investors can readily access the 

form of communication used.  As noted above, we have adopted the instruction that delivery of 

the relationship summary to new or prospective clients or customers in a manner that is 

consistent with how that retail investor requested information about the firm or financial 

professional would be consistent with the Commission’s electronic delivery guidance.695  This 

approach applies only to the initial delivery of the relationship summary to new or prospective 

clients or customers, and not to any other delivery obligation of any other required disclosure.  

Moreover, to ensure that a relationship summary delivered electronically is noticeable for retail 

investors and not hidden among other disclosures, we are adopting a new instruction that a 

relationship summary delivered electronically must be presented prominently in the electronic 

medium and must be easily accessible for retail investors.696  For example, a firm can use a 

direct link or provide the relationship summary in the body of an email or message.697  We are 

                                                                                                                                                             

694  See supra footnote 678. 

695  See Proposing Release, supra footnote 5, at nn.344–45 and accompanying text; see also 2000 Guidance, 
supra footnote 678, at 65 FR 25845-46; 96 Guidance, supra footnote 678, at 61 FR 24647; and 95 
Guidance, supra footnote 678, at 60 FR 53461.  

696   General Instruction 10.C. to Form CRS. 

697   General Instruction 10.C. to Form CRS. 



 

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also requiring firms to post the current version of the relationship summary prominently on their 

public website, if they have one, as proposed.698   

We understand that, while many investors prefer receiving disclosures about investment 

advice in electronic format, many also value the option to receive them in paper.699  We are 

adopting several additional requirements relating to relationship summaries in paper format.  

First, in a relationship summary that is delivered in paper format, firms may link to additional 

information by including URL addresses, QR codes, or other means of facilitating access to such 

information.700  Second, if a relationship summary is delivered in paper format as part of a 

package of documents, the firm must ensure that the relationship summary is the first among any 

documents that are delivered at that time, substantially as proposed.701  All firms will be required 

to make a copy of the relationship summary available upon request without charge.702  However, 

we are not requiring that firms make the relationship summary available in paper format.  We 

                                                                                                                                                             

698  Advisers Act rule 204-5(b)(3) and Exchange Act rule 17a-14(c)(3); General Instruction 10.A. to Form 
CRS.  The most recent versions of firms’ relationship summaries will be accessible through Investor.gov.  
Firms will be required to include in their relationship summaries a phone number where investors can 
request up-to-date information and (if applicable) request a copy of the relationship summary.  See Item 
5.B. of Form CRS.  Firms also could include their relationship summaries on other electronic media, such 
as mobile apps and other similar technologies.  

699  See RAND 2018, supra footnote 13 (when surveyed about how and when they would prefer to receive the 
relationship summary, “two-fifths reported that they would be most likely to view a paper document”); 
Schwab Letter I (Koski) supra footnote 21 (26% of survey participants preferred to receive disclosures 
about investment advice on paper; 46% preferred online or digital disclosures with the option for paper). 

700  General Instruction 3.B. to Form CRS. 

701  General Instruction 10.D. to Form CRS.  Cf. Proposed General Instruction 8.(c) to Form CRS (“If the 
relationship summary is delivered on paper and not as a standalone document, you must ensure that the 
relationship summary is the first among any documents that are delivered at that time.”). 

702  General Instructions 1.C. to Form CRS. 



 

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understand that some firms’ business models – for example, those of advisers providing 

automated investment advisory services and broker-dealers that provide services only online – 

are based on delivering substantially all disclosures and conducting substantially all 

correspondence with clients and customers electronically.  We do not intend to change these 

practices and believe that retail investors that prefer paper communications will have the 

opportunity to establish relationships with firms that accommodate paper delivery. 

b. Initial Delivery 

The final instructions require an investment adviser registered with the SEC to deliver a 

relationship summary to each retail investor before or at the time the firm enters into an 

investment advisory contract, even if the agreement is oral, as proposed.703  The timing for 

standalone investment advisers to deliver the relationship summary to new or prospective retail 

clients generally tracks the initial delivery requirement for Form ADV Part 2A.704  As described 

further below, we are changing the instruction for broker-dealers to require delivery before or at 

earliest of one of three triggers.705  In comparison, under the proposal, broker-dealers would have 

                                                                                                                                                             

703  General Instruction 7.B.(i) to Form CRS.  The final instructions for investment advisers are streamlined 
from the proposal, but remain substantively the same.  Compare to Proposed Advisers Act rule 204-5(b)(1) 
and Proposed General Instruction 5.(b) to Form CRS (“You must give a relationship summary to each retail 
investor, if you are an investment adviser, before or at the time you enter into an investment advisory 
agreement with the retail investor, or if you are a broker-dealer, before or at the time the retail investor first 
engages your services.  See Advisers Act rule 204-5(b)(1) and Exchange Act rule 17a-14(c)(1).  You must 
deliver the relationship summary even if your agreement with the retail investor is oral.”).  We replaced the 
word “agreement” with “contract” to mirror the wording in the current Advisers Act rules and Form ADV 
instructions.  See, e.g., Item 5.D of Part 2.A. of Form ADV.  We also clarified that the delivery 
requirements apply to investment advisers registered with the SEC. 

704  See General Instruction 1 to Part 2A of Form ADV. 

705  General Instruction 7.B.(ii) to Form CRS (“If you are a broker-dealer, you must deliver a relationship 
summary to each retail investor, before or at the earliest of:  (i) a recommendation of an account type, a 
securities transaction, or an investment strategy involving securities; (ii) placing an order for the retail 

 



 

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delivered the relationship summary before or at the time the retail investor first engages their 

services.706  Under the final rules, dual registrants, and affiliated broker-dealers and investment 

advisers that jointly offer their services to retail investors, must deliver at the earlier of the initial 

delivery triggers for an investment adviser or a broker-dealer, including a recommendation of 

account type.707  This applies whether the dual registrant or affiliated firms prepare one single 

relationship summary describing both brokerage and investment advisory services, or two 

separate relationship summaries describing each type of service. 

Some commenters supported keeping the initial delivery requirements as proposed.708  

Other commenters expressed concern that under the proposal, the relationship summary would 

be delivered only after the investor has already made a decision about which firm to engage and 

which type of account to open, and recommended variations on the proposed initial delivery 

requirements, including mandating even earlier delivery.709  The variations include, for example, 

                                                                                                                                                             

investor; or (iii) the opening of a brokerage account for the retail investor.”).  As described below, dual 
registrants will continue to deliver the relationship summary at the earlier of the requirements for 
investment advisers or broker-dealers.  General Instruction 7.B.(iii) to Form CRS (“A dual registrant must 
deliver the relationship summary at the earlier of the timing requirements in General Instruction 7.B.(i) or 
(ii).”). 

706  See Proposed Exchange Act rule 17a-14(c)(1); Proposed General Instruction 5.(b) to Form CRS. 

707  General Instruction 7.B.(iii) to Form CRS (“A dual registrant must deliver the relationship summary at the 
earlier of the timing requirements in General Instruction 7.B.(i) or (ii).”). 

708  See, e.g., Trailhead Consulting Letter; Schnase Letter (agreeing that the relationship summary should be 
required to be delivered along the lines proposed in the Proposing Release); SIFMA Letter (“For the initial 
delivery most brokerage firms likely will include [the relationship summary] with account applications or 
other account opening materials, while investment advisers will include it with their Form ADV.”). 

709  See, e.g., CFA Letter I; CFA Institute Letter I; AARP Letter; NASAA Letter; Consumers Union Letter; 
Consumer Reports Letter. In the RAND 2018 survey, supra footnote 13, 70% of respondents reported that 
they would prefer to receive the relationship summary at the outset of the relationship, i.e., “before or at the 
time you first engage the investment professional” and slightly more than 30% of respondents would prefer 

 



 

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delivery at the point of first contact or inquiry between the retail investor and firm, whenever 

possible;710 at the earlier of when a customer contacts the firm or enters into an advisory 

agreement or engagement of services;711 and upon the first interaction with a prospective retail 

investor.712  For dual registrants, one commenter recommended requiring delivery no later than 

the point at which a recommendation is made regarding which type of account to open.713  One 

commenter asserted that the Commission should not permit delivery “at” the time of service but 

rather should always require delivery “before” the provision of service.714  The IAC 

recommended providing “a uniform, plain English disclosure document . . . to customers and 

potential customers of broker-dealers and investment advisers at the start of the engagement, and 

periodically thereafter.”715 

                                                                                                                                                             

to receive the relationship summary “before the investment professional first recommends a transaction or 
investment strategy”; see also Schwab Letter I (Koski), supra footnote 21 (when asked “[w]hich of the 
following best describes your preference for when you would like to receive information about how a 
Brokerage Firm or a Registered Investment Adviser (RIA) does business with you?”, 41% preferred “[a]t 
or before I open my account, plus any updates on an annual basis,” 22% preferred “[a]vailable on an 
ongoing basis, such as on a firm’s website,” 19% preferred at “[a]t or before I open my account only,” and 
17% preferred “[e]very single time I receive investment advice.”). 

710  See CFA Letter I. 

711  See CFA Institute Letter I. 

712  See AARP Letter. 

713  See CFA Letter I. 

714  See NASAA Letter.   

715  See IAC Broker-Dealer Fiduciary Duty Recommendations, supra footnote 10. 



 

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A few commenters supported requiring a period of time between delivery of the 

relationship summary and the beginning of the relationship.716  One commenter suggested 

allowing time for retail investors to review the relationship summary, subsequent to delivery 

when the firm first interacts with a retail investor.717  A number of investors at Commission-held 

roundtables also supported a waiting period.718  Other commenters, however, opposed a 

mandated delay between delivery of the relationship summary and engaging in services.719     

Various commenters explained logistical and recordkeeping issues if firms were required 

to deliver the relationship summary at first contact or prior to engaging a firm’s services.720  For 

example, one commenter stated that it would not be feasible to obtain an investor’s affirmative 

consent to electronic delivery before the investor decides to engage the firm.721  Tracking 

whether or not prospective customers had consented to electronic delivery of the relationship 

summary would be difficult because prospective customers who do not open accounts would not 
                                                                                                                                                             

716  See, e.g., AARP Letter; CFA Institute Letter I; NASAA Letter. 

717  See AARP Letter. 

718  See, e.g., Houston Roundtable, at 51 (one investor suggesting a “cool-off period”); Washington, D.C. 
Roundtable, at 58 (at least two investors supporting a “lapse” of time between receipt of a relationship 
summary and having to sign it).   

719  Comment Letter of John Neil Conkle (Aug. 7, 2018) (arguing that a waiting period is not necessary for the 
relationship summary to fulfill its purpose); Edward Jones Letter (arguing that a waiting period could harm 
investors by preventing them from meeting IRA contribution or rollover deadlines, for example, or at a 
minimum cause frustration); SIFMA Letter (arguing that the relationship summary is designed to be 
contemporaneously read and understood). 

720  See, e.g., Edward Jones Letter (asserting that requiring firms to record the delivery of the relationship 
summary to prospective clients that subsequently become clients would impose a significant burden 
without providing meaningful benefits to investors); SIFMA Letter (“[I]t would be very burdensome and 
not practical in many instances to keep track of Forms CRS that are provided to retail investors who never 
seek to establish a relationship with a firm.”); Primerica Letter; LPL Financial Letter. 

721  See LPL Financial Letter. 



 

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have account numbers or other unique identifiers for the firm’s recordkeeping purposes.722  

Other commenters argued that keeping records of when a relationship summary was given to a 

prospective retail investor would be unnecessarily burdensome for firms and would likely 

provide de minimis benefits.723  Still other commenters discussed the difficulty of defining when 

a customer first engages the firm’s services, the terminology used in the proposal.724   

We encourage investment advisers and broker-dealers to deliver the relationship 

summary far enough in advance of a prospective retail investor’s final decision to engage the 

firm to allow for meaningful discussion between the financial professional and retail investor, 

including by using the conversation starters, so that the retail investor has time to understand the 

relationship summary and to weigh available options.  We believe that prospective clients or 

customers would benefit from receiving the relationship summary as early as possible when 

deciding whether to engage the services of a firm or financial professional.  In response to 

comments on initial delivery, including those relating specifically to broker-dealers, we are 

modifying the broker-dealer initial delivery requirements, as discussed below.  However, we are 

declining to mandate a delivery requirement based on first contact or inquiry, or to impose a 

waiting period.  First, “first contact or inquiry” may include circumstances that are not limited to 

the seeking of investment services, such as business interactions for other purposes or social 

interactions, and therefore could create compliance uncertainty.  Second, we believe the 

                                                                                                                                                             

722  See LPL Financial Letter. 

723  See infra footnote 803; see also infra footnotes 798–816 and accompanying text regarding recordkeeping 
requirements. 

724  See, e.g., Fidelity Letter; SIFMA Letter; Primerica Letter; TIAA Letter. 



 

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availability of each firm’s relationship summary through Investor.gov and on its own website, if 

the firm has one, helps to address the concern that investors will not have the opportunity to 

review and compare relationship summaries before entering into an investment advisory contract 

or receiving services from a broker-dealer.725  Third, some investors may not want to wait to 

begin services,726 and those who do can always take as much time as needed to review the 

relationship summary and wait to sign an advisory agreement or begin receiving brokerage 

services at a later time.  Fourth, firms will be permitted to deliver the relationship summary well 

before they enter into an advisory agreement or provide brokerage services, and as noted, we 

encourage firms to deliver the relationship summary early in the process.  Finally, dual 

registrants, and affiliated broker-dealers and investment advisers that jointly offer their services 

to retail investors, must deliver their relationship summaries at the earlier of the delivery triggers 

for broker-dealers or investment advisers.  To the extent the initial delivery requirements for a 

broker-dealer are earlier than the delivery requirements would be for an investment adviser, the 

earlier requirements will apply to an investment adviser that is a dual registrant or that offers 

services jointly with a broker-dealer affiliate.  We believe this will provide a significant benefit 

to retail investors, given the substantial percentage of regulatory assets under management 

                                                                                                                                                             

725  See CFA Institute Letter I (“We strongly support the requirement that firms with public websites must post 
their CRSs on their sites in an easily accessible location and format. . . .  Investors can review the 
disclosures provided there before deciding on a service provider and showing up for a meeting. Then when 
presented with the CRS ‘before or at the time’ of entering into an agreement or engaging a firm’s services, 
an investor will have already had an opportunity to review the disclosures and come armed with 
questions.”). 

726  See, e.g., Edward Jones Letter (stating that some investors have a very specific timeframe for opening a 
new account, such as meeting an IRA contribution or rollover deadline); SIFMA Letter (stating that 
requiring a waiting period would frustrate a retail customer’s efforts to begin his or her relationship with a 
financial services provider). 



 

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(“RAUM”) managed by dual registrants and investment advisers with broker-dealer affiliates, 

relative to the total RAUM managed by investment advisers overall.727   

To facilitate earlier delivery, as discussed above, the final instructions allow firms to 

deliver the relationship summary to a new or prospective client or customer in a manner that is 

consistent with how the retail investor requested information about the firm or financial 

professional, clarifying that this approach would be consistent with the SEC’s electronic delivery 

guidance.728  We believe this approach alleviates concerns expressed by commenters that 

obtaining the consent of prospective clients or customers to receive electronic delivery and 

maintaining records of that consent would be challenging.729  While we recognize recordkeeping 

burdens relating to the delivery of the relationship summary to prospective clients – for example, 

we are not imposing a delivery requirement upon first contact or inquiry by a retail investor, as 

discussed above – we disagree that they are insurmountable and would outweigh the benefits to 

retail investors.  As discussed further in Section II.E. below, investment advisers and broker-

dealers have experience with similar recordkeeping requirements.730  Moreover, we believe there 

is considerable benefit to retail investors in receiving the relationship summary before deciding 

                                                                                                                                                             

727  As of December 31, 2018, 1,878 SEC-registered investment advisers report in their Form ADV an affiliate 
that is a broker-dealer also registered with the SEC.  These 1,878 SEC-registered investment advisers 
manage approximately $58.48 trillion, or approximately 70% of total RAUM managed by SEC-registered 
investment advisers.  Furthermore, 359 SEC-registered investment advisers that are also dually-registered 
as broker-dealers manage approximately $5.18 trillion, or 6.12% of total RAUM.  Thus, SEC-registered 
investment advisers that report registered broker-dealer affiliates and dual registrants together manage over 
75% of RAUM.  See also infra footnotes 855, 888–889, and accompanying text.   

728  General Instruction 10.B. to Form CRS. 

729 See supra footnotes 720–722 and accompanying text. 

730 See infra footnotes 809–810 and accompanying text.221 

 

to engage a firm, to allow time for questions and discussion with the financial professional, to 

understand the relationship summary, and to weigh available options.    

Commenters suggested modifications to the proposed initial delivery requirements 

specifically for broker-dealers.  Several commenters requested that we require broker-dealers to 

deliver the relationship summary at the point of first contact, inquiry, or interaction with a retail 

investor.731  A number of commenters also raised questions about the meaning of “engaging the 

services” of a broker-dealer, noting that it was unclear when that may ultimately occur and that it 

is a new and undefined concept in the context of a customer relationship with a broker-dealer.732  

Other commenters suggested that we exclude or exempt certain types of broker-dealers that 

provide limited services to retail investors from the requirement to deliver the relationship 

summary or from the requirements of Form CRS more generally.733    

In response to these concerns, we are modifying the initial delivery requirements for 

broker-dealers.  Instead of “at the time the retail investor first engages a broker-dealer’s 

services,” broker-dealers will be required to deliver the relationship summary to each retail 

investor before or at the earliest of:  (i) a recommendation of an account type, a securities 

                                                                                                                                                             

731  See CFA Institute Letter I; AARP Letter; and NASAA Letter.  

732  See Primerica Letter; SIFMA Letter; and Fidelity Letter. 

733  See, e.g., Fidelity Letter (recommending “that the SEC exclude limited-purpose broker-dealers acting 
solely as mutual fund general distributors from the obligation to deliver Form CRS to direct mutual fund 
investors that invest on an unsolicited basis, and shareholders investing through an intermediary (such as a 
full service broker-dealer or bank) that has an independent obligation to deliver such information to its 
client” and suggesting “that the SEC explicitly exempt from the Form CRS requirement certain categories 
of broker-dealers, including clearing firms, principal underwriters, and distributors of mutual funds, as 
these firms do not have a direct relationship with the end investor based on their business models”); ICI 
Letter; Wells Fargo Letter; Invesco Letter; ACLI Letter; Comment Letter of Great-West Financial (Aug. 6, 
2018); T. Rowe Letter and Oppenheimer Letter. 



 

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transaction, or an investment strategy involving securities; (ii) placing an order for the retail 

investor; or (iii) the opening of a brokerage account for the retail investor.734  We believe that 

these more concrete initial delivery triggers for broker-dealers avoid the uncertainty of when a 

retail investor first engages a broker-dealer’s services and include scenarios that encompass 

earlier delivery, in response to commenters’ concerns.   

As noted, the proposal would have required broker-dealers to deliver the relationship 

summary before or at the time the retail investor first engages the firm’s services.  This proposed 

requirement was intended to capture the earliest point in time at which a retail investor engages 

the services of a broker-dealer, including instances when a customer opens an account with the 

broker-dealer, or effects a transaction through the broker-dealer in the absence of an account, for 

example, by purchasing a mutual fund through the broker-dealer via “check and application”.  

The proposed rule would not have required delivery to a retail investor to whom a broker-dealer 

makes a recommendation, if that retail investor did not open or have an account with the broker-

dealer, or that recommendation did not lead to a transaction with that broker-dealer.735  If the 

recommendation led to a transaction with the broker-dealer who made the recommendation, the 

retail investor would have been considered to be “engaging the services” of that broker-dealer at 

the time the customer places the order or an account is opened, whichever occurred first.  Instead, 

in response to comments advocating for earlier delivery, the final requirement expands on the 

proposed initial delivery requirement and potentially pushes it earlier, to require delivery (even 

                                                                                                                                                             

734  See Exchange Act rule 17a-14(c)(1); General Instruction 6.B.(ii) to Form CRS. 

735  Proposing Release, supra footnote 5. 



 

223 

 

where a brokerage account has not been established) before or at the time a broker-dealer 

recommends an account type, a securities transaction, or an investment strategy involving 

securities without regard to whether the retail investor acts on the recommendation.  We believe 

that revising the delivery requirement in this way will give retail investors the opportunity to 

consider the information included in the relationship summary earlier in the process of 

determining whether to establish a brokerage relationship with the broker-dealer, as well as in 

evaluating the recommendation.  

Compared to the proposal, the final requirement also pushes earlier the time at which 

broker-dealers must deliver the relationship summary in instances in which the retail investor 

does not open an account but still engages in a securities transaction such as the “check and 

application” example described above.  Under these circumstances, broker-dealers must deliver 

the relationship summary before or at the time an order is placed for the retail investor, instead of 

before or at the time the transaction is effected, as proposed.  This delivery obligation would be 

triggered to the extent this type of transaction were unsolicited, because, as described above, if a 

recommendation preceded this type of transaction, delivery would have been triggered before or 

at the time of the recommendation.   

To the extent the broker-dealer had not already made a recommendation of an account 

type, a securities transaction or an investment strategy involving securities, or placed an order for 

the retail investor, delivery would be triggered before or at the time the retail investor opens a 

brokerage account with the broker-dealer.  As revised, we believe that the initial delivery triggers 

for broker-dealers avoid the uncertainty of the proposed initial delivery standard and include 

scenarios that encompass earlier delivery, in response to commenters’ concerns. 



 

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In response to the comments requesting exemptions or exclusions from the relationship 

summary obligations generally and the delivery obligations for certain broker-dealers that 

engage in limited activities, we are clarifying that we do not intend for the Form CRS 

requirements to apply to certain types of relationships between a broker-dealer and a retail 

investor.  Pursuant to Exchange Act Rule 17a-14, the scope of the Form CRS requirement 

applies “to every broker or dealer registered with the Commission pursuant to section 15 of the 

Act that offers services to a retail investor” (emphasis added).  Solely for purposes of Form CRS, 

we are describing here the types of relationships between a broker-dealer and a retail customer 

that we would not consider to be “offer[s] [of] services to a retail investor”.  

Specifically, clearing and carrying broker-dealers that are solely providing services to 

third party or affiliated introducing broker-dealers would not be considered to be offering 

services to a retail investor for purposes of Exchange Act Rule 17a-14, and would not be subject 

to the Form CRS requirements when acting in such capacity.  As described above, the 

relationship summary is designed to make it easier for retail investors to get the facts they need 

when deciding among investment firms or financial professionals and the accounts and services 

available to them.  When a retail investor is establishing or has a relationship with an introducing 

broker-dealer, we believe that the retail investor would benefit most from focusing on that 

broker-dealer’s services, fees, standard of conduct, conflicts of interest and disciplinary history.  

In these circumstances, we believe that receiving an additional relationship summary from a 

clearing or carrying broker-dealer could create confusion and detract from the goals of this 

disclosure.   

Additionally, we would not consider a broker-dealer that is serving solely as a principal 

underwriter to a mutual fund or variable annuity or variable life insurance contract issuer to be 



 

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offering services to a retail investor for purposes of Exchange Act Rule 17a-14, when acting in 

such capacity.  As with clearing and carrying broker-dealers, broker-dealers serving solely as 

principal underwriters do not typically establish the kind of relationship with retail investors that 

Form CRS has been designed to address.  To the extent such broker-dealers interact with a retail 

customer in a different capacity (beyond serving as a principal underwriter to the mutual fund or 

variable contract that the retail investor owns), we believe the nature of their relationship could 

become one where delivery of the Relationship Summary would be useful.  Accordingly, Form 

CRS’s obligations would apply in those instances.736 

We are adopting as proposed the approach to delivery for dual registrants, whereby they 

must deliver the relationship summary to a new or prospective retail investor at the earlier of the 

delivery triggers applicable to investment advisers and broker-dealers.737  One commenter 

argued that a dual registrant should be required to deliver the relationship summary at the earlier 

of providing an investment recommendation or the time a retail investor opens an account with 

the firm.738  We believe that the broker-dealer initial delivery requirements, as adopted, 

accommodate this comment.  Another commenter asserted that dual registrants should be 

required to deliver the relationship summary no later than when a recommendation is made as to 

                                                                                                                                                             

736  For example, we would expect the requirements of Form CRS to apply in the event the broker-dealer 
makes a recommendation of an account type, securities transaction or investment strategy involving 
securities, the retail investor places an order for the purchase of different securities, or the retail investor 
opens a new brokerage account with the broker-dealer. 

737  Advisers Act rule 204-5(b)(1) and Exchange Act rule 17a-14(c)(1); see also General Instruction 7.B.(iii) to 
Form CRS. 

738  See State Farm Letter. 



 

226 

 

the type of account to open.739  We believe that the final initial delivery requirements 

accommodate this comment also.  Broker-dealers will be required to deliver the relationship 

summary before or at the earliest of (i) a recommendation of an account type, a securities 

transaction, or an investment strategy involving securities, (ii) placing an order for the retail 

investor, or (iii) the opening of a brokerage account for the retail investor.740  Investment 

advisers will be required to deliver the relationship summary before or at the time of entering 

into an investment advisory contract with the retail investor.741  Dual registrants will be required 

to deliver the relationship summary when recommending an account type to the retail investor if 

it is the earliest occurrence among the initial delivery triggers for broker-dealers and investment 

advisers, which we believe will typically precede the opening of a brokerage account or entering 

into an investment advisory contract.742 

c. Additional Delivery Requirements to Existing Clients and 
Customers 

We are adopting requirements for firms to re-deliver the relationship summary to existing 

clients and customers under certain circumstances, with some modifications from the proposal.  

We continue to believe that these investors will benefit from being reminded of the information 

contained in the relationship summary, including about the different services and fees that the 

firm offers, when they are again making decisions about whether to invest through an advisory 

                                                                                                                                                             

739   See CFA Letter I. 

740  See Exchange Act rule 17a-14(c)(1); General Instruction 7.B.(ii) to Form CRS. 

741  See Advisers Act rule 204-5(b)(1); General Instruction 7.B.(i) to Form CRS. 

742  See General Instruction 7.B.(iii) to Form CRS. 



 

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account or a brokerage account.  Specifically, after an initial delivery of the relationship 

summary to existing clients and customers who are retail investors, firms will be required to 

deliver the most recent version of the relationship summary to a retail investor if they (i) open a 

new account that is different from the retail investor’s existing account(s); (ii) recommend that 

the retail investor roll over assets from a retirement account into a new or existing account or 

investment; or (iii) recommend or provide a new brokerage or investment advisory service or 

investment that does not necessarily involve the opening of a new account and would not be held 

in an existing account, for example, the first time purchase of a direct-sold mutual fund or 

insurance product that is a security through a “check and application” process, i.e., not held 

directly within an account.   

In comparison, as proposed, the instructions would have required a firm to deliver a 

relationship summary to existing clients or customers when: (i) a new account is opened that is 

different from the retail investor’s existing account, or (ii) changes are made to the existing 

account that would materially change the nature and scope of the relationship.  The proposed 

instructions provided that whether a change was material for these purposes would depend on the 

specific facts and circumstances and gave as examples transfers from an investment advisory 

account to a brokerage account, transfers from a brokerage account to an investment advisory 

account, and moves of assets from one type of account to another in a transaction not in the 

normal, customary or already agreed course of dealing.   

In the RAND 2018 survey, 50% of respondents reported that they would like to receive 

an updated relationship summary “whenever there is a material change in the Relationship 

Summary, such as a change in fees or commission structure,” about 30% would prefer to receive 

the relationship summary periodically and almost 40% preferred to receive the summary on 



 

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request.743  One commenter supported the additional delivery requirements to existing clients 

and customers as proposed, agreeing that investors are again making decisions about 

relationships and account types under these circumstances and would benefit from the 

information the relationship summary provides.744  Another commenter recognized the value of 

delivering the relationship summary to existing clients and customers but recommended specific 

limitations to the requirements.745  One commenter supported once a year or periodic updates 

and continued availability of a current version on a firm’s website,746 while another commenter 

opposed any requirement to provide periodic updates.747  Several commenters argued that some 

or all of the additional delivery requirements are not necessary, given the prior initial delivery 

and online availability of relationship summaries.748  A few commenters argued that the 

                                                                                                                                                             

743  RAND 2018, supra footnote 13. 
744  See CFA Letter I (“We support this proposal and agree with the Commission that, in these instances, ‘retail 

investors are again making decisions about whether to invest through an advisory account or a brokerage 
account and would benefit from information about the different services and fees that the firm offers to 
make an informed choice.’”).  

745  See SIFMA Letter (arguing that a “material change” should be defined as changes from an advisory 
account to a brokerage account or vice versa, and not include asset movements from one type of account to 
another or “other material changes”).  

746  See Schwab Letter I; Schwab Letter III. 
747 See CFN Letter. 
748  See, e.g., LPL Financial Letter (“It is not clear what additional benefits obtain from delivering an identical 

copy of a document an investor has already received.”); SIFMA Letter (“[W]e do not believe these 
additional trigger points [other than changing from one type of account to another] are necessary because 
customers will receive Form CRS at periodic intervals throughout the relationship, and customers will have 
continual online access to a firm’s Form CRS via a website posting, making the need to “push out” the 
Form CRS at additional points unnecessary.”); Institute for Portfolio Alternatives Letter (“We suggest that 
delivery of a new or updated Form CRS with every transaction would be excessive, impractical and without 
commensurate investor benefit”); UBS Letter (“If a client already has both a brokerage account and an 
advisory account and is transferring assets from one to another . . . the client already would have the critical 
disclosures applicable to both account types . . . .”).    



 

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additional delivery requirements could confuse investors because of either an apparent 

duplication or difference from delivery requirements of existing disclosures.749  One commenter 

also stated that the proposed additional delivery requirements could overwhelm investors in a 

counterproductive way.750  Furthermore, commenters requested additional guidance or examples 

for what would “materially change” the relationship.751   

In addition, some commenters expressed concerns about administrative and operational 

burdens relating to the proposed additional delivery requirements.752  For example, one 

commenter asserted that firms would be required to build entirely new operational and 

supervisory processes to identify asset movements divorced from any account opening process 

                                                                                                                                                             

749  See, e.g., Comment Letter of AXA (Aug. 7, 2019) (“[E]xisting customers have already decided which firm 
to work with, so requiring firms to send the Relationship Summary to those customers is likely to cause 
customer confusion.”); Pickard Djinis and Pisarri Letter (“The disharmony between the existing ADV 
brochure delivery requirements and the proposed requirements under Rule 204-5 are likely to confuse 
clients. . . .”); UBS Letter (“[R]eceiving the Form CRS again in such circumstances would likely lead to 
confusion rather than an improved understanding.”). 

750  See SIFMA Letter (“Providing Form CRS to investors beyond [changes from one type of account to 
another] could overwhelm them with duplicative or redundant information,” making it “less likely they will 
digest the information.”). 

751  See, e.g., Prudential Letter (“[M]ore guidance is needed on this point; additional examples of triggering 
events would provide clarity.”); TIAA Letter (“SEC should identify additional instances beyond account 
changes that would trigger re-delivery.”); Cambridge Letter (requesting further guidance on a material 
change to the nature and scope of the relationship and encouraging SEC to provide a broad set of 
examples); SIFMA Letter (“[I]t is not clear what ‘other material’ changes or assets movements ‘not in the 
normal, customary, or already agreed course of dealing’ would be”); Institute for Portfolio Alternatives 
Letter (requesting guidance on what facts and circumstances would trigger a “material” change and require 
delivery of a new, or updated, Form CRS); Comment Letter of Sorrento Pacific Financial, LLC (Aug. 7, 
2018).  

752  See SIFMA Letter; LPL Financial Letter; Institute for Portfolio Alternatives Letter; Pickard Djinis and 
Pisarri Letter (additional delivery requirements “would impose unjustifiable administrative burdens on 
advisers, the majority of whom are small businesses.”).  



 

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that could trigger an additional delivery requirement.753  This commenter also argued that the 

review that would be required prior to effecting potentially triggering asset movements could 

cause delays that are detrimental to the retail investor.754  Similarly, another commenter 

explained that most of the proposed additional delivery triggers would be relatively easy to 

identify and address through existing processes, such as new account openings and when a 

brokerage account is converted to an investment advisory account and vice versa.755  Other 

potential delivery triggers, however, such as investments of inheritances or proceeds of a 

property sale, or a significant migration from savings to investment, would present operational 

challenges and compliance costs.756  These commenters recommended limiting additional 

delivery requirements to circumstances in which a brokerage account is converted to an 

investment advisory account and vice versa.757 

We disagree that delivery of the relationship summary to existing clients and customers is 

unnecessary if the investor has already received one.  As noted above, when investors are again 

making decisions about whether to choose an investment advisory or brokerage account, we 

                                                                                                                                                             

753  See SIFMA Letter (explaining that, because additional delivery triggers could be divorced from any 
account opening process, entirely new operational and supervisory processes would need to be designed (i) 
to identify potentially triggering asset movements; (ii) to review for whether a proposed asset movement is 
not in the normal, customary, or already agreed course of dealing; and (iii) depending on whether delivery 
were required, create and preserve either a record of the delivery or of the conclusion that no such delivery 
was required). 

754  See SIFMA Letter. 

755  See LPL Financial Letter. 

756  See LPL Financial Letter (explaining that its existing systems are not designed to monitor and record dates 
of non-ordinary course events or to distinguish those events from routine account changes). 

757  See SIFMA Letter; LPL Financial Letter. 



 

231 

 

believe they will benefit from being reminded that different options are available and where they 

can get more information to inform their choice.  We are not requiring that the relationship 

summary be delivered at periodic intervals or at every transaction; thus we disagree with 

comments that the additional delivery obligations will not provide commensurate benefit to 

investors, or will confuse or overwhelm investors.  We are therefore adopting additional delivery 

requirements that apply to a firm’s existing clients and customers, with some modifications from 

those proposed.   

First, as proposed (and supported by two commenters as noted above), we are adopting 

the requirement that a firm deliver the relationship summary when opening any new account that 

is different from the retail investor’s existing account(s).758  Second, in response to comments we 

are replacing the proposed standard of “materially change the nature and scope of the 

relationship” with two, more specific and easily identifiable, triggers that we believe would not 

implicate the same operational or supervisory burdens described by commenters to meet the 

proposed requirement.759  Instead, firms will be required to deliver a relationship summary to 

existing clients and customers when recommending that the retail investor roll over assets from a 

retirement account, or recommending or providing a new brokerage or investment advisory 

service or investment that does not necessarily involve the opening of a new account and would 

not be held in an existing account, for example, the first-time purchase of a direct-sold mutual 

fund or insurance product (e.g., variable annuities) that is a security through a “check and 

                                                                                                                                                             

758  General Instruction 9.A. to Form CRS. 

759  See supra footnotes 752–757 and accompanying text. 



 

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application” process, i.e., not held directly within an account.760  While these requirements will 

still impose operational and supervisory burdens, we believe they are more easily identified and 

monitored, such that firms will not need to create new systems or processes to the extent that 

commenters said would be necessary to comply with the proposed “material change” standard.  

These more specific triggers are intended to provide investor protection under these 

circumstances in a more cost-effective manner, while still addressing the objectives that the 

“material changes” language sought to address, that is, to ensure that a firm does not switch 

existing customers or clients into accounts or services without explaining or giving them the 

opportunity to consider other available options.761  Also, as proposed, we are adopting the 

instruction that firms must deliver the relationship summary to a retail investor within 30 days 

upon the retail investor’s request.762  While some commenters requested changes to the proposed 

delivery requirements, they nonetheless supported requiring delivery upon request.763 

Finally, delivery of the relationship summary will not necessarily satisfy any other 

disclosure obligations the firm has under the federal securities laws or other laws or regulations, 

as proposed.  The relationship summary requirement will be in addition to, and not in lieu of, 

other disclosure and reporting requirements or other obligations for broker-dealers and 

                                                                                                                                                             

760  General Instruction 9.A. to Form CRS. 

761  Recommendations of account types to existing customers and clients also are addressed in the Regulation 
Best Interest Release and Fiduciary Release, supra footnote 47. 

762  General Instruction 9.B. to Form CRS. 

763  See Fidelity Letter; SIFMA Letter. 



 

233 

 

investment advisers.764  One commenter suggested that we require that the relationship summary 

include a prominent statement that it does not replace, but rather should be read in conjunction 

with, Form ADV or Form BD.765  This commenter also suggested that the relationship summary 

should include a hyperlink to the appropriate Form ADV or Form BD, as applicable.766  We 

believe that the required links in the Additional Information section, discussed in Section II.B.5. 

above, addresses these comments. 

Some commenters argued that investment advisers should not be required to deliver a 

relationship summary to retail clients because they already deliver a Form ADV Part 2A 

brochure.767  We disagree.  By requiring both investment advisers and broker-dealers to deliver a 

relationship summary that discusses at a high level both types of services and their differences in 

a comparable format, the relationship summary would help all retail investors compare not only 

among investment advisory services, but also between investment advisory and brokerage 

services.  We do not believe that existing disclosures provide this level of transparency and 

comparability across investment advisers, broker-dealers, and dual registrants.  Form CRS is a 

summary disclosure designed to provide a high-level overview of services, fees, costs, conflicts 

                                                                                                                                                             

764  For example, the relationship summary would not necessarily satisfy the disclosure requirements under 
Regulation Best Interest.  See Regulation Best Interest Release, supra footnote 47.  

765  See Financial Engines Letter. 

766  See Financial Engines Letter. 

767  Comment Letter of Registered Advisor Services (Apr. 20, 2018); Comment Letter of Franklin Templeton 
Investments (Aug. 6, 2018); IAA Letter I; Triad Letter; Pickard Djinis and Pisarri Letter; Prudential Letter; 
see also State Farm Letter (arguing that investment advisers should be required to include in their 
relationship summaries only those disclosures that are not otherwise available, provided that a 
representative heading or introductory statement and a hyperlink to such disclosures are provided in the 
Relationship Summary). 



 

234 

 

of interest, standard of conduct, and disciplinary history, to retail investors in order to help them 

decide whether to engage a particular firm or financial professional, including deciding whether 

to seek investment advisory or brokerage services.  Form ADV Part 2A, in contrast, requires 

more detailed disclosures specific to advisory services.  If a firm does not have retail investor 

clients or customers and is not required to deliver a relationship summary to any clients or 

customers, the firm will not be required to prepare or file a relationship summary, as proposed.768 

4. Updating Requirements 

We are adopting substantially as proposed a requirement for firms to update the 

relationship summary within 30 days whenever the relationship summary becomes materially 

inaccurate.769  Firms also must post the latest version on their website (if they have one), and 

electronically file the relationship summary with the Commission.770  Although some 

commenters expressed different views on the requirement to communicate updated information 

to retail investors, as discussed below, most commenters did not object to the proposed 

requirements to update the relationship summary within 30 days of a material change and the 

                                                                                                                                                             

768  See amended Advisers Act rule 203-1, note to paragraph (a)(1); Exchange Act rule 17a-14(a), (b).  See 
introduction of General Instructions to Form CRS. 

769  Advisers Act rule 204-1(a)(2) and Exchange Act rule 17a-14(b)(3); General Instruction 8.A. to Form CRS.  
For investment advisers, we are also adopting amendments to the General Instructions to Form ADV to 
mirror this requirement and to clarify the filing type.  See amended General Instruction 4 to Form ADV 
(revised to add the following language:  “If you are registered with the SEC, you must amend Part 3 of your 
Form ADV within 30 days whenever any information in your relationship summary becomes materially 
inaccurate by filing with the SEC an additional other-than-annual amendment or by including the 
relationship summary as part of an annual updating amendment.”); see also supra footnotes 673–677 and 
accompanying text.   

770 Advisers Act rules 203-1(a)(1), 204-5(b)(3) and Exchange rules 17a-14(b)(2), 17a-14(c)(3); General 
Instructions 8.A., 8.C., and 10.A. to Form CRS.   



 

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associated posting and filing obligations.771  On the other hand, one commenter advocated that 

firms be allowed 60 days to update the relationship summary to address operational issues, but 

did not describe the specific operational challenges.772  Based on our experience with other 

similar filings, we believe the proposed approach is consistent with the current requirements for 

investment advisers to update the Form ADV Part 2A brochure,773 and with broker-dealers’ 

current obligations, including to update Form BD if its information is or becomes inaccurate for 

any reason.774  We continue to believe that allowing 30 days for firms to make updates provides 

sufficient time for firms to make the necessary revisions.  Therefore, we are adopting these 

requirements as proposed. 

The proposed instructions also would have required firms, without charge to the retail 

investor, to communicate updated information by delivering the amended relationship summary 

or by communicating the information another way.775  As noted above, commenters expressed 

different views regarding this approach.  Some commenters advocated for posting the 

                                                                                                                                                             

771  See, e.g., Trailhead Consulting Letter (“If the form is kept to a more generalized and educational nature, 
material changes shouldn’t occur too often.”); NASAA Letter; LPL Financial Letter; Prudential Letter; 
Primerica Letter. 

772  See Morgan Stanley Letter (30 days “may not be sufficient to address the related operational issues”). 

773  See, e.g., Advisers Act rule 204-5(b)(4); General Instruction 8 to Form CRS.  Generally, an investment 
adviser registered with the SEC is required to amend its Form ADV promptly if information provided in its 
brochure becomes materially inaccurate.  See Advisers Act rule 204-1(a)(2); General Instruction 4 to Form 
ADV.     

774 See, e.g., Exchange Act rule 15b3-1. 

775  See Proposed General Instruction 6.(b) to Form CRS. 



 

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relationship summary on a firm’s website in order to meet the communication requirement.776  

On the other hand, one commenter advocated for requiring firms to deliver updated relationship 

summaries whenever a change is made, rather than permitting firms to communicate the 

information in another way.777  We are adopting slightly revised final instructions to eliminate 

the proposed wording “another way” in order to clarify that a firm may communicate the 

information through another disclosure, and that disclosure must be delivered to the retail 

investor.778  In other words, merely providing notice of or access to another disclosure or the 

relationship summary would not satisfy this final instruction.  For example, if an investment 

adviser communicated a material change to information contained in its relationship summary to 

a retail investor by delivering an amended Form ADV brochure or Form ADV summary of 

material changes that also contained the updated information, this would support a reasonable 

belief that the information had been communicated to the retail investor, and the investment 

adviser will not be required to deliver an updated relationship summary to that retail investor.  

This requirement provides firms the flexibility to disclose changes to the relationship summary 

without requiring them to incur additional delivery costs.   

                                                                                                                                                             

776  See, e.g., Fidelity Letter (“We also support the SEC’s position that with respect to material changes of 
information provided in a Form CRS, firms must either provide an updated Form CRS to retail investors or 
communicate the changes in another way such as posting on the firm’s website.”); Morgan Stanley Letter; 
Primerica Letter. 

777  See NASAA Letter. 

778  General Instruction 8.B. to Form CRS (“You can make the communication by delivering the amended 
relationship summary or by communicating the information through another disclosure that is delivered to 
the retail investor.”).   



 

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In another modification from the proposal, the rules as adopted will allow firms to 

communicate the information in an amended relationship summary to retail investors who are 

existing clients or customers within 60 days after the updates are required to be made, instead of 

30 days as proposed.779  Two commenters advocated that allowing 60 days for the 

communication would increase the likelihood that firms could deliver an updated relationship 

summary along with other disclosures that firms commonly deliver on a quarterly basis, rather 

than in a separate delivery.780  Delivery with other disclosures is consistent with the instructions 

regarding the way in which relationship summary updates may be communicated.  We are 

clarifying this, as noted above, and adopting the requirement that firms must communicate 

updates to the relationship summary within 60 days after the updates are required to be made.   

In a further change from the proposal, firms must highlight the changes in an amended 

relationship summary by, for example, marking the revised text or including a summary of 

material changes and attaching the changes as an exhibit to the unmarked amended relationship 

summary.781  The unmarked amended relationship summary and exhibit must be filed with the 

                                                                                                                                                             

779  Advisers Act rule 204-5(b)(4) and Exchange Act rule 17a-14(c)(4); Proposed General Instruction 6.(b) to 
Form CRS.  

780  See LPL Financial Letter; Morgan Stanley Letter.  For example, NASD Rule 2340 requires broker-dealers 
to deliver account statements generally on a quarterly basis. 

781  General Instruction 8.C. to Form CRS (“Each amended relationship summary that is delivered to a retail 
investor who is an existing client or customer must highlight the most recent changes by, for example, 
marking the revised text or including a summary of material changes.  The additional disclosure showing 
revised text or summarizing the material changes must be attached as an exhibit to the unmarked amended 
relationship summary.”).  As an addition to the proposal, we are also amending General Instruction 4 to 
Form ADV to mirror this requirement (“You must include an exhibit highlighting the most recent changes 
required by Form ADV, Part 3 (Form CRS), General Instruction 8.C.”); see also supra footnotes 673–677 
and accompanying text. 



 

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Commission.782  We believe that including this exhibit is important in assisting retail investors to 

assess changes that may impact their accounts or their relationships with their firm or financial 

professional.  A retail investor will be able to find the latest version of the relationship summary 

through Investor.gov and on the firm’s website, if it has one, and firms will be required to deliver 

a relationship summary within 30 days upon the retail investor’s request, as proposed.783   

As discussed in the proposal, for purposes of the requirement to communicate updates to 

the relationship summary, it is important that broker-dealers identify their existing customers 

who are retail investors and recognize that a customer relationship may take many forms.  For 

example, a broker-dealer will be required to provide the relationship summary to customers who 

have so-called “check and application” arrangements with the broker-dealer, under which a 

broker-dealer directs the customer to send the application and check directly to the issuer.  We 

continue to believe this approach will facilitate broker-dealers building upon their current 

compliance infrastructure in identifying existing customers784 and will enhance investor 

protections to retail investors engaging the financial services of broker-dealers. 

                                                                                                                                                             

782  General Instruction 8.A. to Form CRS; see also General Instruction 4 to Form ADV.   

783  Advisers Act rules 204-5(b)(3) and 204-5(b)(5) and Exchange Act rules 17a-14(c)(3) and 17a-14(c)(5); 
General Instruction 9.B. to Form CRS.  

784  For example, broker-dealers may already have compliance infrastructure to identify customers pursuant to 
FINRA’s suitability rule, which applies to dealings with a person (other than a broker or dealer) who opens 
a brokerage account at a broker-dealer or who purchases a security for which the broker-dealer receives or 
will receive, directly or indirectly, compensation even though the security is held at an issuer, the issuer’s 
affiliate or custodial agent, or using another similar arrangement.  See Guidance on FINRA’s Suitability 
Rule, FINRA Regulatory Notice 12-55 (Dec. 2012), at Q6(a).  



 

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D. Transition Provisions 

To provide adequate notice and opportunity to comply with the adopted relationship 

summary filing requirements, firms that are registered, or investment advisers who have an 

application for registration pending, with the Commission prior to June 30, 2020 will have a 

period of time beginning on May 1, 2020 until June 30, 2020 to file their initial relationship 

summaries with the Commission.785  On and after June 30, 2020, newly registered broker-dealers 

will be required to file their relationship summary with the Commission by the date on which 

their registration with the Commission becomes effective, and the Commission will not accept 

any initial application for registration as an investment adviser that does not include a 

relationship summary that satisfies the requirements of Form ADV, Part 3: Form CRS.786  The 

adopted transition period is longer than we proposed.  The proposal would have required broker-

dealers to comply with their relationship summary obligations beginning six months after the 

effective date of the new rules and rule amendments.787  Similarly, in the proposal, investment 

advisers or dual registrants would have been required to comply with the new filing requirements 

as part of the firm’s next annual updating amendment to Form ADV that would have been 

required after six months after the rule’s effective date.788  The extended time to comply with the 

                                                                                                                                                             

785  See Exchange Act rule 17a-14(f), Advisers Act rules 203-1(a)(2) and 204-1(e); Instruction 7.C. to Form 
CRS. 

786  See Exchange Act rule 17a-14(f) and Advisers Act rule 203-1(a)(2); Instruction 7.C. to Form CRS.  

787  See Proposed Instruction 5.c. to Form CRS. See Advisers Act proposed rule 203-1(a)(2) and Exchange Act 
proposed rule 17a-14 (f)(1). 

788  See id. 



 

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relationship summary requirements reflects our consideration of comments we received from 

firms and the modifications to the proposed requirements of the relationship summary.   

In the proposal, we asked for comment on the proposed implementation requirements and 

whether the six-month period was enough time for newly registered broker-dealers and 

investment advisers to prepare an initial relationship summary.789  A number of commenters 

requested a longer implementation period, ranging from 12 to 24 months from the effective 

date.790  One commenter suggested a phased-in approach, such that requirements may be effected 

at different points in time.791  Commenters cited a number of reasons for a longer 

implementation period, including the time needed to hire additional staff and create and deploy 

new disclosures, procedures, training, and technology,792 as well as to have the opportunity to 

apply innovative technology and designs.793   

We are mindful of the time needed to create the relationship summary, as well as to 

update a firm’s policies, procedures, and systems in order to provide these new disclosures.  We 

are, however, lengthening the time that firms will have to comply relative to the proposal after 

considering commenters’ suggestions for a longer implementation period.  We expect that 

                                                                                                                                                             

789  See Proposing Release. 

790  See, e.g., IAA Letter I (requesting a 12 month implementation period from the effective date); CCMC 
Letter (requesting 18 months); IRI Letter (requesting 18–24 months); Comment Letter of HD Vest 
Financial Services (Aug. 7, 2018) (“HDVest Letter”) (requesting 18 months); Cetera Letter I; SIFMA 
Letter (requesting at least 24 months from the date the final rules are approved).  

791  See SIFMA Letter. 

792  See HDVest Letter. 

793  See IAA Letter I.241 

 

approximately twelve months will be adequate for firms to conduct the requisite operational 

changes to their systems and to establish internal processes to satisfy their relationship summary 

obligations.   

Some commenters expressed the view that the proposed one-time, initial delivery to 

existing clients and customers is not necessary.794  One survey reported, on the other hand, that 

over 90% of survey respondents with an existing financial professional relationship stated that 

they knew more about their relationship with the adviser after reading the proposed relationship 

summary.795  We believe the information contained in the relationship summary could improve 

existing investors’ ability to monitor and make more informed decisions related to their existing 

relationships with firms during their duration, including whether to terminate a relationship.  For 

example, as discussed above in Section II.A., retail investors that may learn of account types 

whose minimum requirements they did not meet when they first opened their existing account, 

through a one-time, initial delivery to existing clients and customers.  Upon seeing this range of 

options, existing clients and customers could seek to take advantage of cost savings or additional 

                                                                                                                                                             

794  See, e.g., Fidelity Letter (existing customers are already familiar with the services offered to them by their 
broker-dealer or investment adviser. . . but can of course access a copy posted on the firm’s website); AXA 
Letter (delivering the relationship summary to existing customers is likely to be confusing); Cetera Letter I 
(firms should not be required to deliver a new or amended Form CRS to [existing] clients except in limited 
circumstances, such as when the client establishes a different type of account than they already have).  

795  See Cetera Letter II (Woelfel), supra footnote 17 (84% of respondents stated that they knew a lot or a little 
more about their financial adviser after reviewing the Form CRS than they did before; among respondents 
with current relationships with a broker or adviser, over 90% said they knew more); see also CCMC Letter 
(investor polling), supra footnote 21 (in a survey of investors with investments outside of a work sponsored 
401(k), pension or personal real estate, 72% of participants responding to a question describing that new 
rules could require financial professionals to deliver “ a standardized four page document that explains the 
relationship between the financial professional and clients” agreed that the new disclosure document “will 
boost transparency and help build stronger relationships between me and my financial professional” and 
62% indicated that they were “very interested” in reading the document).   



 

242 

 

services offered through these other account types.  We believe that existing clients and 

customers would benefit from this one-time delivery of the relationship summary and therefore 

are adopting the requirement as proposed.  Firms will be required to deliver their relationship 

summary to new and prospective clients and customers who are retail investors as of the date by 

which they are first required to electronically file their relationship summary with the 

Commission.796  In addition, as proposed, firms will be required, as part of the transition, to 

deliver their relationship summaries to all existing clients and customers who are retail investors 

on an initial one-time basis within 30 days after the date the firm is first required to file its 

relationship summary with the Commission.797  

E. Recordkeeping Amendments 

We are adopting amendments to the recordkeeping and record retention requirements 

under Advisers Act rule 204-2 and Exchange Act rules 17a-3 and 17a-4, as proposed.  These 

rules set forth requirements for firms to make, maintain, and preserve specified books and 

records.  Pursuant to paragraph (a)(14)(i) of Advisers Act Rule 204-2 as amended, investment 

advisers will be required to make and preserve a record of the dates that each relationship 

summary was given to any client or prospective client who subsequently becomes a client.798  

New paragraph (a)(24) of Exchange Act Rule 17a-3 as adopted will require broker-dealers to 

create a record of the date on which each relationship summary was provided to each retail 

                                                                                                                                                             

796  See Advisers rule 204-5(e)(2) and Exchange Act rule 17a-14(f)(4); Instruction 7.C.iii. to Form CRS. 

797  See Advisers rule 204-5(e)(1) and Exchange Act rule 17a-14(c) and (f)(3); adopted Instruction 7.C.iv. to 
Form CRS. 

798  See amended Advisers Act rule 204-2(a)(14)(i). 



 

243 

 

investor, including any relationship summary provided before such retail investor opens an 

account.799  In addition, paragraph (a)(14)(i) of Advisers Act rule 204-2, as amended, will 

require investment advisers to retain copies of each relationship summary and each amendment 

or revision thereto while paragraph (e)(10) of Exchange Act rule 17a-4, as amended, will require 

broker-dealers to maintain and preserve a copy of each version of the relationship summary as 

well as the records required to be made pursuant to new paragraph (a)(24) of Exchange Act rule 

17a-3 as adopted by the Commission.800  The amended rules set forth the manner in which and 

the period of time for which these record must be retained.801  These records will facilitate the 

Commission’s ability to inspect for and enforce compliance with the relationship summary 

requirements.   

We received no comments on the proposed manner and time period for records 

preservation or the requirement to maintain a copy of each version of the relationship summary 

                                                                                                                                                             

799  See Exchange Act rule 17a-3(a)(24). 

800  The effect of the amended and adopted rules will require both investment advisers and broker-dealers to 
maintain copies of all versions of the relationship summary and the dates they are provided or given to 
existing or prospective retail customers; see also General Instruction 6.A. to Form CRS (requiring firms to 
maintain a copy of each version of the relationship summary and make it available to the SEC staff upon 
request).  The Commission notes that pursuant to Exchange Act rule 17a-3(e), for purposes of transactions 
in municipal securities by municipal securities broker-dealers, compliance with Rule G-8 of the Municipal 
Securities Rulemaking Board (“MSRB”) will be deemed to be in compliance with the recordkeeping 
requirements for broker-dealers.  Accordingly, for purposes of transactions in municipal securities, a 
broker-dealer may satisfy its recordkeeping obligations under Exchange Act rule 17a-3(a)(24), as adopted, 
by complying with Rule G-8 of the MSRB. See Exchange Act rule 17a-3(e). 

801  Investment advisers will be required to maintain and preserve these records in an easily accessible place for 
a period of not less than five years from the end of the fiscal year during which the last entry was made on 
such record, the first two years in an appropriate office of the investment adviser.  See Advisers Act rule 
204-2(e)(1).  Broker-dealers will be required to maintain these records in an easily accessible place until six 
years after such record or relationship summary is created.  See Exchange Act rules 17a-3(a)(24) and 17a-
4(e)(10) as amended. 



 

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and each amendment or revision to the relationship summary.802  We are adopting these 

requirements as proposed.  Some commenters expressed concern with the potential costs and 

feasibility of complying with the proposed recordkeeping requirements for broker-dealers.803  

Several commenters argued that keeping records of when a relationship summary was given to a 

prospective retail investor would be unnecessarily burdensome for firms and would likely 

provide de minimis benefits.804  Some investment adviser and broker-dealer commenters stated 

that most firms’ recordkeeping systems and procedures are not designed to maintain records 

relating to prospective clients and that conforming such systems and procedures to the proposed 

rule requirements would be burdensome and costly and would not result in an offsetting 

benefit.805  Others noted they may have to retain records for an indefinite length of time because 

their interactions with prospective clients about engaging services often span weeks, months or 

years and may include numerous phone calls, meetings or other forms of contact.806   

As an alternative, commenters suggested that firms only be required to maintain a record 

of the most recent date they delivered the relationship summary to a prospective client that 

                                                                                                                                                             

802  See Exchange Act rule 17a-4(e)(10) as proposed to be amended and Advisers Act rule 204-2(e)(1) (which 
would apply to amended rule 204-2(a)(14)(i) as proposed to be amended).  The recordkeeping requirements 
for investment advisers will mirror the current recordkeeping requirements for Form ADV Part 2.  See 
Advisers Act amended rule 204-2(a)(14)(i) as proposed to be amended and rule 204-2(e)(1). 

803  See, e.g., CCMC Letter; Committee of Annuity Insurers Letter; Edward Jones Letter; Morgan Stanley 
Letter; Primerica Letter; SIFMA Letter; IPA Letter. 

804  See id. 

805  See, e.g., Committee of Annuity Insurers Letter; Edward Jones Letter; Morgan Stanley Letter; Primerica 
Letter; SIFMA Letter. 

806  See, e.g., Edward Jones Letter; Primerica Letter; SIFMA Letter. 



 

245 

 

becomes an actual client preceding the opening of an account.807  Commenters suggested only 

requiring a record that the relationship summary was delivered at account opening or when a 

retail investor becomes an investment advisory client.808  

Based on our experience with similar recordkeeping requirements for the Form ADV Part 

2A brochure, requiring firms to create and maintain records of the dates they provide or give a 

relationship summary to an existing, new, or potential retail investor will facilitate examiners’ 

ability to inspect and examine for compliance with the relationship summary delivery and 

content requirements.  Specifically, the dates will help examiners to identify the relationship 

summary disclosures that retail investors may have relied on to decide whether to engage a 

firm’s services.  Absent having these dates to examine, we believe that it would be exceedingly 

difficult for examiners to evaluate firms’ compliance with the relationship summary delivery and 

content requirement.  These records also may assist firms in monitoring their compliance with 

the relationship summary delivery requirements. 

Recordkeeping obligations for the relationship summary may be less burdensome if firms’ 

recordkeeping and compliance systems are already capable of creating and maintaining records 

related to communications with prospective clients.  For example, investment advisers are 

required to keep similar records for the delivery of the Form ADV Part 2A brochure809 and 

broker-dealers, especially those registered with FINRA, are subject to comparable recordkeeping 

                                                                                                                                                             

807  See, e.g., CCMC Letter; SIFMA Letter. 

808  See, e.g., SIFMA Letter; Morgan Stanley; Edward Jones Letter. 

809  See, e.g., Advisers Act rule 204-2. 



 

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requirements with respect to communications and correspondence with prospective retail 

investors.810  

Several firms also requested clarification and expressed concern regarding the potential 

recordkeeping implications related to the “Key Questions to Ask” provision of the proposal.811  

Some commenters stated that requiring firms to make and maintain records of their answers to 

the “Key Questions to Ask” and of supplemental information cross-referenced in or linked from 

the relationship summary would result in substantial and unnecessary burdens and/or might stifle 

potentially beneficial discussions between firms, clients and/or prospective clients.812 

Commenters requested clarification that “Key Questions to Ask” are intended to promote dialog 

between firms and clients rather than creating any sort of recordkeeping requirement, which 

commenters believed could lead to less robust discussions between firms and clients.813  

                                                                                                                                                             

810  See, e.g., Exchange Act rule 17a-4(b)(4) requiring broker-dealers to maintain a record of all 
communications sent relating to its business as such; see also, e.g., FINRA Rule 2210(a)(5) (defining 
“retail communication” to mean “any written (including electronic) communication that is distributed or 
made available to more than 25 retail investors within any 30 calendar-day period.”);  FINRA Rule 
2210(b)(4) (requiring all FINRA members to “maintain all retail communications and institutional 
communications for the retention period required by SEA Rule 17a-4(b) and in a format and media that 
comply with SEA Rule 17a-4...[and]…all correspondence in accordance with the record-keeping 
requirements of [FINRA] Rules 3110.09 [on supervision, requiring FINRA members to retain the internal 
communications and correspondence of associated persons relating to the member's investment banking or 
securities business for the period of time and accessibility specified in SEA Rule 17a-4(b)] and 4511 
[establishing general requirements for members to “preserve books and records as required under the 
FINRA rules, the Exchange Act and the applicable Exchange Act rules”]). 

811  See, e.g., CCMC Letter; TIAA Letter; LPL Financial Letter; IPA Letter; NSCP Letter.  

812  See, e.g., Edward Jones Letter; CCMC Letter; NSCP Letter; SIFMA Letter; Morgan Stanley Letter; TIAA 
Letter; LPL Financial Letter. 

813  See, e.g., Edward Jones Letter; CCMC Letter; TIAA Letter; LPL Financial Letter. 



 

247 

 

As discussed above, the “Key Questions to Ask” section of the relationship summary has 

been eliminated, but firms will be required to include “conversation starters” in their relationship 

summary.814  We are not establishing new or separate recordkeeping obligations related to the 

conversation starters or the answers provided by firms in response to the conversation starters. 

We are also not adding separate or new recordkeeping obligations related to the use of layered 

disclosure in the relationship summary.  Current recordkeeping rules for investment advisers and 

broker-dealers already impose recordkeeping and retention requirements related to a firm’s 

disclosures and other communications with retail investors, which will include responses to 

conversation starters or information cross-referenced in the relationships summary.815  

Responses to conversation starters or hyperlinked material may trigger recordkeeping 

requirements under other federal securities statutes and rules or the rules of self-regulatory 

organizations of which firms are members or registrants.816  Further, firms may wish to develop 

scripts for their financial professionals in responding to conversation starters to ensure the 

quality and consistency of responses and then preserve the scripts for compliance purposes. 

                                                                                                                                                             

814  See supra Section II.A.4. 

815  For example, with respect to investment advisers, if a conversation starter prompts a written 
communication that includes a recommendation made or proposed to be made or any advice given or 
proposed to be given by the investment adviser, such a communication may be subject to the recordkeeping 
requirements of Advisers Act rule 204-(2)(a)(7).  Also, for example, broker-dealers, under Exchange Act 
Rule 17a-4(b)(4), are required to maintain records of the “[o]riginals of all communications received and 
copies of all communications sent (and any approvals thereof) by the member, broker or dealer (including 
inter-office memoranda and communications) relating to its business as such…”; see also the 
recordkeeping requirements of FINRA Rule 2210. 

816  See id. 



 

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III. DISCLOSURES ABOUT A FIRM’S REGULATORY STATUS AND A 
FINANCIAL PROFESSIONAL’S ASSOCIATION  

In connection with Form CRS, we recognized that the education and information that 

Form CRS provides to retail investors could potentially be overwhelmed by the way in which 

financial professionals present themselves to potential or current retail investors, including 

through advertising and other communications.817  This concern was particularly acute where 

such communications could be misleading in nature, or where advertising and communications 

precede the delivery of Form CRS and may have a disproportionate impact on shaping or 

influencing retail investor perceptions.818  To mitigate these concerns, we proposed additional 

rules as part of the Proposing Release.  One of our proposed rules required disclosure of a firm’s 

regulatory status and a financial professional’s association with a firm.  Specifically, we 

proposed rules under the Exchange Act and the Advisers Act that would have required a broker-

dealer and an investment adviser to prominently disclose that it is registered as a broker-dealer or 

investment adviser, as applicable, with the Commission in print or electronic retail investor 

communications.819  The proposed Exchange Act rule also would have required an associated 

natural person of a broker or dealer to prominently disclose that he or she is an associated person 

of a broker-dealer registered with the Commission in print or electronic retail investor 

communications.820  Similarly, the proposed Advisers Act rule would have required a supervised 

person of an investment adviser registered under section 203 to prominently disclose that he or 

                                                                                                                                                             

817  See Proposing Release, supra footnote 5, at footnotes 374–375 and accompanying text.  
818  See id.  
819  See id., at footnotes 437–439 and accompanying text. 
820  See id.  



 

249 

 

she is a supervised person of an investment adviser registered with the Commission in print or 

electronic retail investor communications.821  As we discussed in the Proposing Release, we 

believed that requiring a firm to disclose whether it is a broker-dealer or an investment adviser in 

print or electronic retail investor communications would assist retail investors in determining 

which type of firm is more appropriate for their specific investment needs.822  For similar 

reasons, we noted that because retail investors interact with a firm primarily through financial 

professionals, it is important that financial professionals disclose the firm type with which they 

are associated.823   

Several commenters expressed general support for the proposed Affirmative 

Disclosures.824  Some of these commenters believed that the rules could be beneficial in helping 

investors to understand the legal distinctions between broker-dealers and investment advisers.825 

Another commenter in support of the Affirmative Disclosures stated that investors would benefit 

more if they were also provided with readily accessible regulatory and disciplinary histories of 

                                                                                                                                                             

821  See id. 
822  See Proposing Release, supra footnote 5, at footnotes 440–441 and accompanying text. 
823  See id.  We also proposed rules that would have restricted broker-dealers and their associated persons from 

using the terms “adviser” or “advisor” as part of a name or title when communicating with retail investors 
in certain circumstances.  We are not adopting those rules, as further discussed in the Regulation Best 
Interest Release.  See Regulation Best Interest Release, supra footnote 47. 

824  See CFA Letter I; CFA Institute Letter I (stating that “[r]equiring them to call themselves what they legally 
are will enable investors to better understand the distinction”); Better Markets Letter.   

825  See CFA Institute Letter I; CFA Letter I; LPL Financial Letter. 



 

250 

 

the financial professional.826  However, one commenter noted that while “the required disclosure 

could have some modest benefit, … it is important not to overstate [its] likely value.”827    

Several commenters also opposed the Affirmative Disclosures.828  Some commenters 

believed that the proposed rules were duplicative, noting that Regulation Best Interest, Form 

CRS, and/or other required disclosure obligations (e.g., Form ADV, FINRA Rule 2210) would 

inform retail investors of the capacity of a firm and its financial professionals, obviating the need 

for the additional rules.829  Some of these commenters stated that Form CRS alone or in 

combination with FINRA Rule 2210(d)(3) (providing specific requirements for disclosure of the 

broker-dealer’s name in retail communications and correspondence) would provide retail 

investors with a firm’s capacity and its name, making the Affirmative Disclosures duplicative.830  

                                                                                                                                                             

826  See Better Markets Letter. 
827  See CFA Letter I.  
828  Some commenters also opposed the proposed Affirmative Disclosures because investors do not understand 

what it means to be registered or what the legal terms mean.  See Altruist Letter; IRI Letter.  See also LPL 
Financial Letter (noting that regulatory status is not important to an investor when being casually 
introduced for the first time to a financial professional and receiving a business card); Bank of America 
Letter; SIFMA Letter. 

829  See, e.g., LPL Financial Letter (stating that Form ADV, Form CRS, and Regulation Best Interest already 
“communicate to investors the capacity in which they are acting on behalf of the investor and the material 
facts related to the investor’s relationship with the firm and its financial professionals.”); SIFMA Letter 
(stating that “information regarding regulatory status is contained in Proposed Form CRS, and Proposed 
Form CRS is available at all times on a firm’s website, in addition to periodic distribution to clients.”); IRI 
Letter; Committee of Annuity Insurers Letter; Letter from Mari-Anne Pisarri, Pickard Djinis and Pisarri 
LLP (“Pickard Letter”) (stating “the Commission should determine whether the existing Form ADV 
brochure supplement adequately informs retail investors of the registration status of the advisory 
representatives they deal with….”)  

830  See, e.g., IRI Letter; Bank of America Letter; Committee of Annuity Insurers Letter.  See also SIFMA 
Letter (noting that Form CRS resolves any confusion that may exist regarding whether a financial 
professional or firm is a broker-dealer or an investment adviser and would be available on a firm website 
and given periodically to investors). 



 

251 

 

Several commenters also opposed the Affirmative Disclosures because they believed the 

costs to implement and comply with the proposed rules did not justify the benefits.831  In 

particular, these commenters noted a range of cost-related impacts, such as replacing new and 

existing business cards832 and amending numerous electronic and print marketing materials.833  

Several commenters also noted the difficultly in implementing and supervising specific types of 

communication including business cards, oral communications, and voice overlay and on-screen 

text in televised or video presentations.834 

After considering the comments received and the obligations we are adopting under 

Regulation Best Interest and Form CRS, we have concluded that the capacity disclosure 

requirement in Regulation Best Interest and Form CRS are sufficient to achieve the objectives of 

the proposed Affirmative Disclosures. These rules enhance retail investor awareness of the firm 

and professional type that they are engaging or seeking to engage and would therefore assist a 

retail investor in choosing the type that best suits his or her financial goals.   

As discussed in the Regulation Best Interest Release, as part of its disclosure obligations, 

a broker-dealer and its associated natural persons must disclose when they are acting as a broker-

dealer when making a recommendation.  This type of disclosure is designed to improve 

awareness among retail customers such that a retail customer can more readily identify and 

                                                                                                                                                             

831  See, e.g., LPL Financial Letter; Bank of America Letter; IRI Letter; SIFMA Letter.  
832  See IRI Letter.  See also SIFMA Letter (noting also that firms would need to reprint all business cards and 

modify “firm technologies and electronic communications”). 
833  See LPL Financial Letter (noting “significant financial costs”).  
834  See Bank of America Letter; IRI Letter; SIFMA Letter; Altruist Letter. See also Committee of Annuity 

Insurers Letter (noting also that there are operational challenges in situations where marketing materials or 
account statements are used or distributed by a product sponsor rather than the firm itself). 



 

252 

 

understand their relationship.835  This capacity disclosure requires a broker-dealer and its 

financial professionals to disclose that the firm or the financial professional is acting as a broker-

dealer, as a material fact relating to the scope and terms of the relationship subject to its 

disclosure obligation.836  As noted in the Regulation Best Interest Release, a broker-dealer and its 

financial professionals must disclose the required information prior to or at the time of a 

recommendation but Regulation Best Interest does not mandate the form, specific time, or 

method of delivering disclosures pursuant to its disclosure obligation.837  In fulfilling this 

obligation, a broker-dealer that is not a dual registrant generally will be able to satisfy the 

requirement to disclose the broker-dealer’s capacity by delivering the Relationship Summary to 

the retail customer.  For broker-dealers who are dually registered, and for associated persons who 

are either dually licensed or are not dually licensed and only offer broker-dealer services through 

a firm that is dually registered, the information contained in the Relationship Summary will not 

be sufficient to disclose their capacity in making a recommendation.838  As discussed in the 

Regulation Best Interest Release, although some commenters expressed concerns about potential 

investor confusion caused by “additional” disclosure regarding a dual registrant’s capacity, the 

disclosure obligations of Regulation Best Interest will not duplicate or confuse, but instead will 

                                                                                                                                                             

835  See Regulation Best Interest Release, supra footnote 47, at Section II.C.1.a. 
836  See id.  
837  See id. 
838  See id.  



 

253 

 

provide clarifying detail on capacity to supplement the information contained in the Relationship 

Summary.839     

Additionally, as discussed above, Form CRS includes a requirement for firms to state 

their name and whether they are “registered with the Securities and Exchange Commission as a 

broker-dealer, investment adviser, or both.”840  Form CRS is required to be delivered before or at 

the time the financial professional enters into an investment advisory relationship or, for a 

broker-dealer, before or at the earliest of a certain recommendation, the execution of a securities 

transaction, or the opening of a brokerage account.841  Additionally, Form CRS will need to be 

prominently posted on the firm’s public website, if it maintains one, in a location and format that 

is easily accessible to retail investors842 and must be provided to retail investors 60 days after a 

material change is made.843  These requirements highlight for an investor’s attention, and 

promote access to, the capacity information at times that we believe are crucial to a retail 

investor when seeking to make a choice of financial firms.   

We recognize that the proposed Affirmative Disclosures would have included capacity 

requirements on more communications than what is required by Form CRS and capacity 

disclosure requirement in Regulation Best Interest.  Specifically, under the Affirmative 

Disclosures, all forms of communications used by broker-dealers, investment advisers and their 

                                                                                                                                                             

839  See id. 
840  See Item 1.A. of Form CRS.  See also supra Section II.B.1.  
841  See General Instruction 7.B to Form CRS.  See also supra Section II.C. 
842  See General Instruction 10.A. to Form CRS.  See also supra Section II.C.3.a.  
843  See General Instruction 8.B. to Form CRS.  See also supra Section II.C.4. In addition, the most recent 

versions of firms’ relationship summaries will be accessible through Investor.gov.  See supra footnote 698 
and accompanying text.  



 

254 

 

financial professionals, such as business cards, letterheads, social media profiles, and signature 

blocks would have included these required capacity disclosures.  However, several commenters 

questioned whether the benefit provided by covering more communications justified the costs of 

implementing the requirements.844  While commenters did not provide quantitative data that 

would demonstrate the cost impact on firms, certain commenters did describe the scope of the 

impact along with the operational challenges in implementing the rule.845  One commenter stated 

that “the costs of such requirement would be significant” as firms would need to reprint all 

business cards to include this disclosure and make changes to firm technology and electronic 

communications to make the disclosure.846  Additionally, another commenter stated that adding a 

voice overlay and on-screen text for video presentations would be difficult to implement, costly, 

and challenging to supervise.847  

                                                                                                                                                             

844  See, e.g., IRI Letter (stating that the costs to amend “tens of thousands of business cards to add the new 
required disclosure outweighs any intended benefit, particularly since the Form CRS already accomplishes 
the same objective…”); Committee of Annuity Insurers Letter (stating that the Affirmative Disclosure rules 
provide little benefit to investors and present operational challenges with respect to marketing materials 
created by product sponsors or issuers); LPL Financial Letter (noting that the benefits of these rules are 
outweighed by the “significant financial cost” to amend “numerous electronic and print marketing 
materials, business cards, and other retail customer communications.”) 

845  See IRI Letter (noting that a voice overlay and on-screen text may be difficult to implement and to 
effectively supervise.  Additionally, firms will incur “significant costs and resources to monitor such 
presentations” for the required disclosures “even though that same client already received the Form CRS 
disclosure.”); LPL Financial Letter. See also Bank of America Letter (“the [Affirmative Disclosure rules] 
will impose significant costs to implement since tens of thousands of business cards will need to be 
amended in order to add the new required disclosures.”) 

846          See SIFMA Letter (noting that “we do not believe the regulatory status disclosure would have an obvious 
benefit to investors. At the same time, the costs of such a requirement would be significant.”) 

847  See Bank of America Letter (stating further that “it would be virtually impossible to supervise whether [the 
required] disclosure was made in oral communications.”); see also Altruist Letter (stating that including the 
disclosure in oral communications would be “awkward for a practitioner to implement.”); Committee of 
Annuity Insurers Letter (stating that “it may not be feasible for a broker-dealer to include this information 
on marketing materials for investment products created and provided by a product sponsor.”) 



 

255 

 

After considering the comments received and the obligations we are adopting under 

Regulation Best Interest and Form CRS, we have concluded that the policy concerns underlying 

the Affirmative Disclosures are addressed by the rulemaking package we are adopting, 

particularly the disclosure obligations in Regulation Best Interest and Form CRS, as discussed 

above.848  We therefore believe that the costs of the Affirmative Disclosures do not justify any 

incremental benefit of requiring registration status on all communications and as a result, we are 

not adopting the Affirmative Disclosures. 

IV. ECONOMIC ANALYSIS 

A. Introduction 

The Commission is sensitive to the economic effects, including the benefits and costs and 

the effects on efficiency, competition, and capital formation that will result from the new rules 

and amendments to existing rules. Whenever the Commission engages in rulemaking and is 

required to consider or determine whether an action is necessary or appropriate in the public 

interest, section 3(f) of the Exchange Act requires the Commission to consider whether the 

action would promote efficiency, competition, and capital formation, in addition to the protection 

of investors.849  Further, when making rules under the Exchange Act, section 23(a)(2) of the 

Exchange Act requires the Commission to consider the impact such rules would have on 

competition.850 Section 23(a)(2) of the Exchange Act also prohibits the Commission from 

                                                                                                                                                             

848  See Regulation Best Interest Release, supra footnote 47. 
849  See 15 U.S.C. 77b(b) and 15 U.S.C. 78c(f). 

850  See 15 U.S.C. 78w(a)(2).  



 

256 

 

adopting any rule that would impose a burden on competition not necessary or appropriate in 

furtherance of the purposes of the Exchange Act.851 

Section 202(c) of the Advisers Act requires the Commission, when engaging in 

rulemaking and required to consider or determine whether an action is necessary or appropriate 

in the public interest, to also consider whether the action will promote efficiency, competition, 

and capital formation, in addition to the protection of investors.852 The Commission provides 

both a qualitative assessment of the potential effects and where feasible, quantitative estimates of 

the potential aggregate initial and aggregate ongoing costs. In some cases, however, 

quantification is not feasible due to lack of relevant data, or the difficulty of predicting how 

market participants would act under the conditions of the proposed rules. For example, to the 

extent that the relationship summary will increase retail investors’ understanding of the services 

provided to them, investors are likely to respond differently to the increased understanding.  

Such responses could be transferring to a different financial firm or professional, hiring a 

financial professional for the first time, not taking any action, deciding to invest on their own 

without advice, or entirely abandoning the brokerage or investment advisory market while 

moving their assets to other products or markets (e.g., bank deposits or insurance products). 

Given the number and complexity of assumptions that would be required to be able to estimate 

how the relationship summary will affect investors’ understanding and their decision-making, the 

Commission is not able to estimate the propensity of investors to respond in one way or another.  

                                                                                                                                                             

851  Id. 

852  15 U.S.C. 80b-2(c).   



 

257 

 

In the economic analysis that follows, we first examine the current regulatory and 

economic landscape to form a baseline for our analysis. The economic effects of the adopted 

changes are discussed below.   

B. Baseline 

This section discusses, as it relates to this rulemaking, the current state of the broker-

dealer and investment adviser markets, the current regulatory environment, and the current state 

of retail investor perceptions in the market.  

1. Providers of Financial Services853 

a. Broker-Dealers  

This rule will affect registrants in the market for broker-dealer services, including dual 

registrants854 and broker-dealers offering services to retail investors that are affiliated with an 

                                                                                                                                                             

853  In addition to broker-dealers and Commission-registered investment advisers discussed below in the 
baseline, there are a number of other entities, such as state registered investment advisers, commercial 
banks and bank holding companies, and insurance companies, which also provide financial advice services 
to retail customers; however, because of unavailability of data, the Commission is unable to estimate the 
number of some of those other entities that are likely to provide financial advice to retail customers. A 
number of broker-dealers (see infra footnote 862) have non-securities businesses, such as insurance or tax 
services. As of December 2018, there are approximately 17,300 state-registered investment advisers. The 
Department of Labor in its Regulatory Impact Analysis identifies approximately 398 life insurance 
companies that could provide advice to retirement investors. See U.S. Department of Labor, Regulating 
Advice Markets: Definition of the Term 'Fiduciary,' Conflicts of Interest, Retirement Investment Advice: 
Regulatory Impact Analysis for Final Rule and Exemptions (Apr. 2016), available at 
https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/rules-and-regulations/completed-
rulemaking/1210-AB32-2/ria.pdf (“Regulatory Impact Analysis”) 

854  Not all firms that are dually registered as an investment adviser and a broker-dealer offer both brokerage 
and advisory accounts to retail investors. For example, some dually registered firms offer advisory accounts 
to retail investors but offer only brokerage services, such as underwriting services, to institutional clients. 
For the purposes of the relationship summary, we define a dual registrant as a firm that is dually registered 
as a broker-dealer and an investment adviser and offers services to retail investors as both a broker-dealer 
and investment adviser. General Instruction 11.C to Form CRS.  



 

258 

 

investment adviser. 855  The market for broker-dealer services encompasses a small set of large 

and medium sized broker-dealers and thousands of smaller broker-dealers competing for niche or 

regional segments of the market.856 The market for broker-dealer services includes many 

different markets for a variety of services, including, but not limited to, managing orders for 

customers and routing them to various trading venues; providing advice to customers that is in 

connection with and reasonably related to their primary business of effecting securities 

transactions; holding retail customers’ funds and securities; handling clearance and settlement of 

trades; intermediating between retail customers and carrying/clearing brokers; dealing in 

corporate debt and equities, government bonds, and municipal bonds, among others; privately 

placing securities; and effecting transactions in mutual funds that involve transferring funds 

directly to the issuer. Some broker-dealers may specialize in just one narrowly defined service, 

while others may provide a wide variety of services.  

As of December 2018, there were approximately 3,764 registered broker-dealers with 

over 140 million customer accounts.  In total, these broker-dealers have over $4.3 trillion in total 

                                                                                                                                                             

855  Some broker-dealers may be affiliated with investment advisers but are not dually registered. From 
Question 10 on Form BD, 2,098 (55.7%) broker-dealers report that directly or indirectly, they control, are 
controlled by, or are under common control with an entity that is engaged in the securities or investment 
advisory business. Comparatively, 2,421 (18.2%) SEC-registered investment advisers report an affiliate 
that is a broker-dealer in Section 7A of Schedule D of Form ADV, including 1,878 SEC-registered 
investment advisers that report an affiliate that is a registered broker-dealer. Approximately 77% of total 
regulatory assets under management of investment advisers are managed by these 2,421 SEC-registered 
investment advisers. 

856  See Risk Management Controls for Brokers or Dealers with Market Access, Securities Exchange Act 
Release No. 63241 (Nov. 3, 2010) [75 FR 69791 (Nov. 15, 2010)]. For simplification, we present our 
analysis as if the market for broker-dealer services encompasses one broad market with multiple segments, 
even though, in terms of competition, it could also be discussed in terms of numerous interrelated markets. 



 

259 

 

assets, which are total broker-dealer assets as reported on Form X-17a-5.857  More than two-

thirds of all brokerage assets and close to one-third of all customer accounts are held by the 17 

largest broker-dealers, as shown in Table 1, Panel A.858  Of the broker-dealers registered with the 

Commission as of December 2018, 359 broker-dealers are dually registered as investment 

advisers.859  These firms hold over 90 million (63%) customer accounts. Approximately 539 

broker-dealers (14%) report at least one type of non-securities business, including insurance, 

retirement planning, mergers and acquisitions, and real estate, among others.860 Approximately 

73.5% of registered broker-dealers report retail customer activity.861  

                                                                                                                                                             

857  Assets are estimated by Total Assets (allowable and non-allowable) from Part II of the FOCUS filings 
(Form X-17A-5 Part II, available at https://www.sec.gov/files/formx-17a-5_2.pdf) and correspond to 
balance sheet total assets for the broker-dealer.  The Commission does not have an estimate of the total 
amount of customer assets for broker-dealers. We estimate broker-dealer size from the total balance sheet 
assets as described above. 

858  Approximately $4.27 trillion of total assets of broker-dealers (99%) are at firms with total assets in excess 
of $1 billion.  Of the 39 dually registered broker-dealers with total assets in excess of $1 billion, total assets 
for these dually registered broker-dealers are $2.32 trillion (54%) of aggregate broker-dealer assets.  Of the 
remaining 99 broker-dealers with total assets in excess of $1 billion that are not dually registered, 91 have 
affiliated investment advisers. 

859  Because this number does not include the number of broker-dealers who are also registered as state 
investment advisers, the number undercounts the full number of broker-dealers that operate in both 
capacities.   

860  We examined Form BD filings to identify broker-dealers reporting non-securities business. For the 539 
broker-dealers reporting such business, staff analyzed the narrative descriptions of these businesses on 
Form BD, and identified the most common types of businesses: insurance (202), 
management/financial/other consulting (99), advisory/retirement planning (71), mergers and acquisitions 
(70), foreign exchange/swaps/other derivatives (28), real estate/property management (30), tax services 
(15), and other (146).  Note that a broker-dealer may have more than one line of non-securities business. 

861  The value of customer accounts is not available from FOCUS data for broker-dealers.  Therefore, to obtain 
estimates of firm size for broker-dealers, we rely on the value of broker-dealers’ total assets as obtained 
from FOCUS reports.  Retail sales activity is identified from Form BR, which categorizes retail activity 
broadly (by marking the “sales” box) or narrowly (by marking the “retail” or “institutional” boxes as types 
of sales activity).  We use the broad definition of sales as we preliminarily believe that many firms will just 
mark “sales” if they have both retail and institutional activity.  However, this may capture some broker-
dealers that do not have retail activity, although we are unable to estimate that frequency.   



 

260 

 

Panel B of Table 1 is limited to the broker-dealers that report some retail investor activity.  

As of December 2018, there are approximately 2,766 broker-dealers that served retail investors, 

with over $3.8 trillion in total assets (89% of total broker-dealer assets) and almost 139 million 

(97%) customer accounts.862  Of those broker-dealers serving retail investors, 318 are dually 

registered as investment advisers.863 

Table 1, Panel A: Registered Broker-Dealers as of December 2018 

Cumulative Broker-Dealer Total Assets and Customer Accounts 

 

Size of Broker-Dealer  

(Total Assets) 

Total Num. of 

Broker-Dealers 

Num. of Dually 

Registered Broker-

Dealers 

Cumulative 

Total Assets  

Cumulative 

Number of 

Customer 

Accounts864 

> $50 billion  17 10 $2,879 bil. 40,550,200 

$1 billion to $50 billion  114 22 $1,363 bil. 96,037,591 

$500 million to $1 billion  35 7 $23 bil. 397,814 

$100 million to $500 million 105 19 $23 bil. 1,603,818 

                                                                                                                                                             

862  Total assets and customer accounts for broker-dealers that serve retail customers also include institutional 
accounts. Data available from Form BD and FOCUS data is not sufficiently granular to identify the 
percentage of retail and institutional accounts at firms. 

863  Of the 31 dually registered firms in the group of retail broker-dealers with total assets in excess of $500 
million, total assets for these dually registered firms are nearly $2.32 trillion (60%) of aggregate retail 
broker-dealer assets (Table 1, Panel B). Of the remaining 81 retail broker-dealers with total assets in excess 
of $500 million that are not dually registered, 69 have affiliated investment advisers. 

864  Customer Accounts includes both broker-dealer and investment adviser accounts for dually-registered 
firms.261 

 

Size of Broker-Dealer  

(Total Assets) 

Total Num. of 

Broker-Dealers 

Num. of Dually 

Registered Broker-

Dealers 

Cumulative 

Total Assets  

Cumulative 

Number of 

Customer 

Accounts864 

$10 million to $100 million  490 101 $17 bil. 4,277,432 

$1 million to $10 million  1021 130 $3.6 bil. 460,748 

< $1 million 1982 70 $0.5 bil. 5,675 

Total 3,764 359 $4,309 bil. 143,333,278 

865 
866 

Table 1, Panel B: Registered Retail Broker-Dealers as of December 2018 

Cumulative Broker-Dealer Total Assets and Customer Accounts 

 

Size of Broker-Dealer (Total 

Assets) 

Total Num. of 

Retail-Facing 

Broker-

Num. of Dually 

Registered Retail-

Facing Broker-

Cumulative 

Total Assets  

Cumulative 

Number of 

Customer 

                                                                                                                                                             

865  The data is obtained from FOCUS filings as of December 2018. Note that there may be a double-counting 
of customer accounts among, in particular, the larger broker-dealers, as they may report introducing broker-
dealer accounts as well accounts in their role as clearing broker-dealers.  

866  In addition to the approximately 143 million individual accounts at broker-dealers, there are approximately 
302,000 omnibus accounts (0.2% of total accounts at broker-dealers), with total assets of $32.1 billion, 
across all 3,764 broker-dealers, of which approximately 99% are held at broker-dealers with greater than $1 
billion in total assets. See also infra footnote 872. Omnibus accounts reported in FOCUS data are the 
accounts of non-carrying broker-dealers with carrying broker-dealers. These accounts may have securities 
of multiple customers (of the non-carrying firm), or securities that are proprietary assets of the non-carrying 
broker-dealer. We are unable to determine from the data available how many customer accounts non-
carrying broker-dealers may have. The data does not allow the Commission to parse the total assets in those 
accounts to determine to whom such assets belong. Therefore, our estimate may be under inclusive of all 
customer accounts held at broker-dealers. 



 

262 

 

Dealers Dealers Accounts 

> $50 billion  16 8 $2,806 bil. 40,545,792 

$1 billion to $50 billion  75 18 $990 bil. 91,991,118 

$500 million to $1 billion  21 5 $13 bil. 365,632 

$100 million to $500 million 84 16 $18 bil. 1,603,818 

$10 million to $100 million  378 91 $14 bil. 3,762,620 

$1 million to $10 million  783 120 $2.8 bil. 450,132 

< $1 million 1409 60 $0.4 bil. 5,672 

Total BDs867 2,766 318 $3,844 bil. 138,724,784 

868 
Table 2 reports information on brokerage commissions,869 fees, and selling concessions 

from the fourth quarter of 2018 for all broker-dealers, including dually-registered firms.870  We 

observe significant variation in sources of revenues for broker-dealers, with large broker-dealers, 

on average, generating substantially higher levels of commission and fee revenues than smaller 

broker-dealers. On average, broker-dealers, including those that are dually registered as 

investment advisers, earn about $5.1 million per quarter in revenue from commissions and nearly 
                                                                                                                                                             

867  Total Broker-dealers includes all retail-facing broker-dealers, including those dual registrants that have 
both retail-facing broker-dealers and retail-facing investment advisers. 

868  See infra footnote 1397 for how broker-dealers who engage in retail sales activity are identified. In addition 
to the 318 retail-facing dually registered broker-dealers, we estimate 30 broker-dealers that are registered as 
investment advisers but do not have a retail-facing investment advisory business.  

869  Mark-ups or mark-downs are not included as part of the brokerage commission revenue in FOCUS data; 
instead, they are included in Net Gains or Losses on Principal Trades, but are not uniquely identified as a 
separate revenue category.   

870  Source: FOCUS data.  



 

263 

 

four times that amount in fees, although the Commission notes that fees encompass a variety of 

fees.871  The level of revenues earned from broker-dealers for commissions and fees increases 

with broker-dealer size, but also tends to be more heavily weighted toward commissions for 

broker-dealers with less than $10 million in assets and is weighted more heavily toward fees for 

broker-dealers with assets in excess of $10 million. For example, for the 114 broker-dealers with 

assets between $1 billion and $50 billion, average revenues from commissions are approximately 

$45 million, while average revenues from fees are approximately $225 million.872  

In addition to revenue generated from commissions and fees, broker-dealers may also 

receive revenues from other sources, including margin interest, underwriting, research services, 

and third-party selling concessions, such as from sales of investment company (“IC”) shares. As 

shown in Table 2, Panel A, these selling concessions are generally a smaller fraction of broker-

dealer revenues than either commissions or fees, except for broker-dealers with total assets 

between $10 million and $100 million. For these broker-dealers, revenue from third-party selling 

                                                                                                                                                             

871  Fees, as detailed in the FOCUS data, include fees for account supervision, investment advisory services, 
and administrative services. Beyond the broad classifications of fee types included in fee revenue, we are 
unable to determine whether fees such as 12b-1 fees, sub-accounting, or other such service fees (e.g., 
payments by an investment company for personal services and/or maintenance of shareholder accounts) are 
included. The data covers both broker-dealers and dually registered firms. FINRA’s Supplemental 
Statement of Income, Line 13975 (Account Supervision and Investment Advisory Services) denotes that 
fees earned for account supervision are those fees charged by the firm for providing investment advisory 
services where there is no fee charged for trade execution. Investment Advisory Services generally 
encompass investment advisory work and execution of client transactions, such as wrap arrangements.  
These fees also include fees charged by broker-dealers that are also registered with the Commodity Futures 
Trading Commission (“CFTC”), but do not include fees earned from affiliated entities (Item A of question 
9 under Revenue in the Supplemental Statement of Income). 

872  A rough estimate of total fees in this size category would be 114 broker-dealers with assets between $1 
billion and $50 billion multiplied by the average fee revenue of $225 million, or $25.65 billion in total fees.  
Divided by the number of customer accounts, not all of which may pay fees, in this size category 
(96,037,591), each account would be charged on average approximately $267 in fees per quarter, or $1,068 
per year. 



 

264 

 

concessions is the largest category of revenues and constitutes approximately 42% of total 

revenues earned by these firms. 

Table 2, Panel B below provides aggregate revenues by revenue type (commissions, fees, 

or selling concessions from sales of IC shares) for broker-dealers delineated by whether the 

broker-dealer is also a dually-registered firm. Broker-dealers dually registered as investment 

advisers have a significantly larger fraction of their revenues from fees other than commissions 

or selling concessions, whereas commissions are approximately 42% of the revenues of broker-

dealers that are not dually registered.  

 

Table 2, Panel A: Average Broker-Dealer Revenues from Revenue Generating Activities 

 

Size of Broker-Dealer  

in Total Assets 

Number of 

Broker-

Dealers 

Commissions Fees873 
Sales of IC 

Shares 

> $50 billion  17 $170,336,258  $414,300,268  $23,386,192  

$1 billion - $50 billion  114 $45,203,225  $225,063,257  $53,671,602  

$500 million - $1 billion  35 $8,768,547  $30,141,270  $5,481,248  

$100 million - $500 million  105 $12,801,889  $33,726,336  $16,610,013  

$10 million - $100 million 490 $3,428,843  $8,950,892  $9,092,971  

                                                                                                                                                             

873  Fees, as detailed in the FOCUS data, include fees for account supervision, investment advisory services, 
and administrative services. The data covers both broker-dealers and dually registered firms.  



 

265 

 

$1 million - $10 million 1,021 $996,130  $1,037,825  $652,905  

< $1 million 1,982 $197,907  $269,459  $85,219  

Average of All Broker-Dealers 3,764 $5,092,808  $21,948,551  $4,368,823  

874 
Table 2, Panel B: Aggregate Total Revenues from Revenue Generating Activities for 

Broker-Dealers based on Dually-Registered Status 

Broker-Dealer Type Number 

of 

Broker-

Dealers 

Commissions Fees875 

Sales of IC 

Shares 

Dually Registered as IAs 359 $4.52 bil. $17.54 bil. $2.63 bil. 

 Broker-Dealers 3,405 $4.16 bil. $3.25 bil. $2.57 bil. 

All 3,764 $8.68 bil. $20.79 bil. $5.20 bil. 

 

As shown in Table 3, based on responses to Form BD, broker-dealers most commonly 

provided business lines include private placements of securities (62.7% of broker-dealers); retail 

sales of mutual funds (55.4%); acting as a broker or dealer retailing corporate equity securities 

over the counter (52.0%); acting as a broker or dealer retailing corporate debt securities (47.2%); 

acting as a broker or dealer selling variable contracts, such as life insurance or annuities (41.0%); 

acting as a broker of municipal debt/bonds or U.S. government securities (39.8% and 37.4%, 

                                                                                                                                                             

874         The data is obtained from December 2018 FOCUS reports and averaged across size groups. 

875  See id.  



 

266 

 

respectively); acting as an underwriter or selling group participant of corporate securities 

(31.2%); and investment advisory services (26.4%); among others.876  

Table 3: Lines of Business at Retail Broker-Dealers as of December 2018 

 Total 

Line of Business 

Number of 

Broker-

Dealers 

Percent of 

Broker-

Dealers 

Private Placements of Securities 1,735 62.7% 

Mutual Fund Retailer 1,533 55.4% 

Broker or Dealer Retailing:   

    Corporate Equity Securities OTC 1,438 52.0% 

    Corporate Debt Securities 1,306 47.2% 

    Variable Contracts 1,132 40.9% 

Municipal Debt/Bonds – Broker 1,101 39.8% 

U.S. Government Securities Broker 1,035 37.4% 

Put and Call Broker or Dealer or Options Writer 993 35.9% 

Underwriter or Selling Group Participant - Corporate Securities 862 31.2% 

Non-Exchange Member Arranging for Transactions in Listed Securities by 

Exchange Member 

785 
28.4% 

Investment Advisory Services 730 26.4% 

                                                                                                                                                             

876  Form BD requires applicants to identify the types of business engaged in (or to be engaged in) that 
accounts for 1% or more of the applicant’s annual revenue from the securities or investment advisory 
business. Table 3 provides an overview of the types of businesses listed on Form BD, as well as the 
frequency of participation in those businesses by registered broker-dealers as of December 2018.   

 



 

267 

 

Broker or Dealer Selling Tax Shelters or Limited Partnerships – Primary 

Market 

619 
22.4% 

Trading Securities for Own Account 614 22.2% 

Municipal Debt/Bonds – Dealer 475 17.2% 

U.S. Government Securities – Dealer 339 12.3% 

Solicitor of Time Deposits in a Financial Institution 308 11.1% 

Underwriter - Mutual Funds 237 8.6% 

Broker or Dealer Selling Interests in Mortgages or Other Receivables 216 7.8% 

Broker or Dealer Selling Oil and Gas Interests 207 7.5% 

Broker or Dealer Making Inter-Dealer Markets in Corporate Securities OTC 207 7.5% 

Broker or Dealer Involved in Networking, Kiosk, or Similar Arrangements 

(Banks, Savings Banks, Credit Unions) 

197 
7.1% 

Internet and Online Trading Accounts 192 6.9% 

Exchange Member Engaged in Exchange Commission Business Other than 

Floor Activities 

171 
6.2% 

Broker or Dealer Selling Tax Shelters or Limited Partnerships – Secondary 

Market 

164 
5.9% 

Commodities 162 5.9% 

Executing Broker 107 3.9% 

Day Trading Accounts 89 3.2% 

Broker or Dealer Involved in Networking, Kiosk, or Similar Arrangements 

(Insurance Company or Agency) 

88 
3.2% 

Real Estate Syndicator 94 3.4% 

Broker or Dealer Selling Securities of Non-Profit Organizations 71 26% 

Exchange Member Engaged in Floor Activities 61 2.2% 

Broker or Dealer Selling Securities of Only One Issuer or Associate Issuers 43 1.6% 

Prime Broker 21 0.8% 



 

268 

 

Crowdfunding FINRA Rule 4518(a) 21 0.8% 

Clearing Broker in a Prime Broker 14 0.5% 

Funding Portal 8 0.3% 

Crowdfunding FINRA Rule 4518(b) 5 0.2% 

Number of Retail-Facing Broker-Dealers 2,766 
 

 

 

(1) Disclosures for Broker-Dealers  

As discussed above, broker-dealers register with and report information, including about 

their business, affiliates, and disciplinary history, to the Commission, Self-Regulatory 

Organizations (“SROs”), and other jurisdictions through Form BD.877  Form BD requires 

information about the background of the applicant, its principals, controlling persons, and 

employees, as well as information about the type of business the broker-dealer proposes to 

engage in and all control affiliates engaged in the securities or investment advisory business.878  

Broker-dealers report whether a broker-dealer or any of its control affiliates have been subject to 

criminal prosecutions, regulatory actions, or civil actions in connection with any investment-

related activity, as well as certain financial matters.879  Once a broker-dealer is registered, it must 

keep its Form BD current by amending it promptly when the information is or becomes 

                                                                                                                                                             

877  See Proposing Release, supra footnote 5, at Section IV.A.1.i.; see also generally Form BD. 

878  See generally Form BD. 

879  See Item 11 and Disclosure Reporting Pages of Form BD. 



 

269 

 

inaccurate for any reason.880  In addition, firms report similar information and additional 

information to FINRA pursuant to FINRA Rule 4530.881   

A significant amount of information concerning broker-dealers and their associated 

natural persons, including information from Form BD, Form BDW, and Forms U4, U5, and U6, 

is publicly available through FINRA’s BrokerCheck system.882  This information includes 

violations of and claims of violations of the securities and other financial laws by broker-dealers 

and their financial professionals; criminal or civil litigation, regulatory actions, arbitration, or 

customer complaints against broker-dealers and their financial professionals; and the 

employment history and licensing information of financial professionals associated with broker-

dealers, among other things.883 

 Broker-dealers are subject to other disclosure obligations under the federal securities laws 

and SRO rules.  For instance, under existing antifraud provisions of the Exchange Act, a broker-

dealer has a duty to disclose material information to its customers conditional on the scope of the 

relationship with the customer.884  Disclosure has also been a feature of other regulatory efforts 

related to financial services, including certain FINRA rules.885   

                                                                                                                                                             

880  See Exchange Act rule 15b3-1(a). 

881  See Proposing Release, supra footnote 5, at Section II.B.7. Pursuant to FINRA Rule 4530, broker-dealers 
are required to disclose certain information to FINRA that is not reported on Form BD (e.g., customer 
complaints and arbitrations). 

882  FINRA Rule 8312 governs the information FINRA releases to the public via BrokerCheck. See Proposing 
Release, supra footnote 5, at n.280.   

883  See Proposing Release, supra footnote 5, at Section II.B.7. 

884  A broker-dealer also may be liable if it does not disclose “material adverse facts of which it is aware.”  See, 
e.g., Chasins v. Smith, Barney & Co., 438 F.2d 1167, 1172 (1970); SEC v. Hasho, 784 F. Supp. 1059, 1110 

 



 

270 

 

b. Investment Advisers  

As discussed above, SEC-registered investment advisers that offer services to retail 

investors will be subject to the final rule. In addition, although not required to comply with the 

final rule, state-registered investment advisers will also be affected, because the final rule will 

impact the competitive landscape in the market for the provision of financial advice.886  This 

section first discusses SEC-registered investment advisers, followed by a discussion of state-

registered investment advisers. 

As of December 2018, there are approximately 13,300 investment advisers registered 

with the Commission.  The majority of SEC-registered investment advisers report that they 

provide portfolio management services for individuals and small businesses.887   

                                                                                                                                                             

(S.D.N.Y. 1992); In the Matter of RichMark Capital Corp., Exchange Act Release No. 48758 (Nov. 7, 
2003) (“When a securities dealer recommends stock to a customer, it is not only obligated to avoid 
affirmative misstatements, but also must disclose material adverse facts of which it is aware. That includes 
disclosure of “adverse interests” such as “economic self-interest” that could have influenced its 
recommendation.”) (citations omitted).  

885  See FINRA Requests Comment on Concept Proposal to Require a Disclosure Statement for Retail Investors 
at or Before Commencing a Business Relationship, FINRA Regulatory Notice 10-54 (Oct. 2010).  
Generally, all registered broker-dealers that deal with the public must become members of FINRA, a 
registered national securities association, and may choose to become exchange members. See section 
15(b)(8) of the Exchange Act and Exchange Act rule 15b9-1.  FINRA is the sole national securities 
association registered with the SEC under section 15A of the Exchange Act.  Accordingly, for purposes of 
discussing a broker-dealer’s regulatory requirements when providing advice, we focus on FINRA’s 
regulation, examination, and enforcement with respect to member broker-dealers. FINRA disclosure rules 
include, but are not limited to, FINRA Rules 2210(d)(2) (communications with the public), 2260 
(disclosures), 2230 (customer account statements and confirmations), and 2270 (day-trading risk disclosure 
statement). 

886  In addition to SEC-registered investment advisers, which are the focus of this section, this rule could also 
affect banks, trust companies, insurance companies, and other providers of financial advice. 

887  Of the approximately 13,300 SEC-registered investment advisers, 8,410 (63.24%) report in Item 5.G.(2) of 
Form ADV that they provide portfolio management services for individuals and/or small businesses. In 
addition, there are approximately 17,300 state-registered investment advisers, of which 125 are also 

 



 

271 

 

Of all SEC-registered investment advisers, 359 identify themselves as dually registered 

broker-dealers.888  Further, 2,421 investment advisers (18%) report an affiliate that is a broker-

dealer, including 1,878 investment advisers (14%) that report an SEC-registered broker-dealer 

affiliate.889  As shown in Panel A of Table 4 below, in aggregate, investment advisers have over 

$84 trillion in assets under management (“AUM”).  A substantial percentage of AUM at 

investment advisers is held by institutional clients, such as investment companies, pooled 

investment vehicles, and pension or profit sharing plans; therefore, the total number of accounts 

for investment advisers is only 29% of the number of customer accounts for broker-dealers.  

Based on staff analysis of Form ADV data as of December 2018, approximately 62% of 

registered investment advisers (8,235) have some portion of their business dedicated to retail 

investors, including both high net worth and non-high net worth individual clients,890 as shown 

in Panel B of Table 4.891  In total, these firms have approximately $41.4 trillion of assets under 

management.892  Approximately 8,200 registered investment advisers (61%) serve over 32 

                                                                                                                                                             

registered with the Commission. Approximately 13,900 state-registered investment advisers are retail 
facing (see Item 5.D. of Form ADV). 

888  See supra footnote 861 and accompanying text.  

889  Item 7.A.1. of Form ADV. 

890  Data on individual clients obtained from Form ADV may not necessarily correspond to data on “retail 
customers” as defined in this rule because the data in Form ADV regarding individual clients does not 
involve any test of use for personal, family, or household purposes. 

891  We use the responses to Items 5.D.(a)(1), 5.D.(a)(3), 5.D.(b)(1), and 5.D.(b)(3) of Part 1A of Form ADV. If 
at least one of these responses was filled out as greater than 0, the firm is considered as providing business 
to retail investors. Part 1A of Form ADV.   

892  The aggregate AUM reported for these investment advisers that have retail investors includes both retail 
AUM as well as any institutional AUM also held at these advisers. 



 

272 

 

million non-high net worth individual clients and have approximately $4.8 trillion in assets under 

management, while approximately 8,000 registered investment advisers (60%) serve 

approximately 4.8 million high net worth individual clients with $6.15 trillion in assets under 

management.893  

Table 4, Panel A: Registered Investment Advisers (RIAs) as of December 2018 

Cumulative RIA Assets under Management (AUM) and Accounts  

 

Size of Investment Adviser 

(AUM) 

Number 

of RIAs 

Number of Dually 

Registered RIAs 
Cumulative AUM 

Cumulative 

Number of 

Accounts 

> $50 billion  270 15 $59,264 bil. 20,655,756 

$1 billion to $50 billion  3,453 121 $22,749 bil. 13,304,154 

$500 million to $1 billion  1,635 47 $1,151 bil. 1,413,099 

$100 million to $500 million 5,927 119 $1,397 bil. 5,135,070 

$10 million to $100 million  1,070 24 $59 bil. 310,031 

$1 million to $10 million  162 3 $0.8 bil. 69,664 

< $1 million 782 30 $0.02 bil. 13,976 

Total 13,299 359 $84,621 bil. 41,081,750 

 

                                                                                                                                                             

893  Estimates are based on IARD system data as of December 31, 2018. The AUM reported here is specifically 
that of those non-high net worth clients.  Of the 8,235 investment advisers serving retail investors, 318 are 
also dually registered as broker-dealers.  



 

273 

 

Table 4, Panel B: Retail Registered Investment Advisers (RIAs) as of December 2018 

Cumulative RIA Assets under Management (AUM) and Accounts  

 

Size of Investment Adviser 

(AUM) 

Num. of 

RIAs 

Num. of Dually 

registered RIAs 
Cumulative AUM 

Cumulative Number 

of Accounts 

> $50 billion  119  14 $30,291 bil. 20,592,326 

$1 billion to $50 billion  1,614  111 $9,570 bil. 13,224,188 

$500 million to $1 billion  1,007  44 $700 bil. 1,392,842 

$100 million to $500 million 4,548  113 $1,026 bil. 5,287,584 

$10 million to $100 million  706  23 $40 bil. 308,285 

$1 million to $10 million  102  3 $0.5 bil. 69,534 

< $1 million 169  10 $0.02 bil. 13,946 

Total RIAs894  8,235 318 $41,434 bil. 40,887,325 

 

In addition to SEC-registered investment advisers, other investment advisers are 

registered with state regulators.895  As of December 2018, there are 17,268 state-registered 

                                                                                                                                                             

894  Total RIAs (1) includes all retail-facing investment advisers, including those dual registrants that have 
retail-facing investment advisers and retail-facing broker-dealers. 

895  Item 2.A. of Part 1A of Form ADV and the Advisers Act rules 203A-1 and 203A-2 require an investment 
adviser to register with the SEC if it: (i) is a large adviser that has $100 million or more of regulatory assets 
under management (or $90 million or more if an adviser is filing its most recent annual updating 
amendment and is already registered with the SEC); (ii) is a mid-sized adviser that does not meet the 
criteria for state registration or is not subject to examination;  (iii) meets the requirements for one or more 
of the revised exemptive rules under section 203A; (iv) is an adviser (or subadviser) to a registered 
investment company; (v) is an adviser to a business development company and has at least $25 million of 
regulatory assets under management; or (vi) receives an order permitting the adviser to register with the 

 



 

274 

 

investment advisers,896 of which 125 are also registered with the Commission.  Of the state-

registered investment advisers, 204 are dually registered as broker-dealers, while approximately 

4.6% (786) report a broker-dealer affiliate.  In aggregate, state-registered investment advisers 

have approximately $334 billion in AUM. Eighty-two percent of state-registered investment 

advisers report that they provide portfolio management services for individuals and small 

businesses, compared to just 63% for Commission-registered investment advisers. 

Approximately 81% of state-registered investment advisers (13,927) have some portion 

of their business dedicated to retail investors,897 and in aggregate, these firms have 

approximately $324 billion in AUM.898 Approximately 13,910 (81%) state-registered advisers 

serve 14 million non-high net worth retail clients and have approximately $137 billion in AUM, 

while 11,497 (67%) state-registered advisers serve approximately 170,000 high net worth retail 

clients with approximately $169 billion in AUM.899 

                                                                                                                                                             

Commission. Although the statutory threshold is $100 million, the SEC raised the threshold to $110 million 
to provide a buffer for mid-sized advisers with assets under management close to $100 million to determine 
whether and when to switch between state and Commission registration. Advisers Act rule 203A-1(a). 

896  There are 70 investment advisers with latest reported regulatory assets under management in excess of 
$110 million but that are not listed as registered with the SEC. None of these 70 investment advisers has 
exempted status with the Commission. For the purposes of this rulemaking, these are considered potentially 
erroneous submissions 

897  We use the responses to Items 5.D.(a)(1), 5.D.(a)(3), 5.D.(b)(1), and 5.D.(b)(3) of Part 1A. If at least one of 
these responses was filled out as greater than 0, the firm is considered as providing business to retail 
investors. Part 1A of Form ADV.   

898  The aggregate AUM reported for these investment advisers that have retail investors includes both retail 
AUM as well as any institutional AUM also held at these advisers. 

899  Estimates are based on IARD system data as of February 10, 2018. The AUM reported here is specifically 
that of those non-high net worth investors. Of the 13,927 state-registered investment advisers serving retail 
investors, 134 may also be dually registered as broker-dealers.  



 

275 

 

Table 5 details the compensation structures employed by approximately 13,000 SEC-

registered investment advisers. Approximately 96% are compensated through a fee-based 

arrangement, where a percentage of assets under management are remitted to the investment 

adviser from the investor for advisory services.  As shown in the table below, most investment 

advisers rely on a combination of different compensation types, in addition to fee-based 

compensation, including fixed fees, hourly charges, and performance based fees.  Less than 4% 

of investment advisers charge commissions900 to their investors.  

Table 5: Registered Investment Advisers Compensation by Type 

 Compensation Type Yes No 

A Percentage of Assets Under Management  12,678   614  

Hourly Charges  3,914   9,378  

Subscription Fees (For a Newsletter or Periodical)  122   13,170  

Fixed Fees (Other Than Subscription Fees)  5,800   7,492  

Commissions  454   12,838  

Performance-Based Fees  4,938   8,354  

Other  1,899  11,393  

 

                                                                                                                                                             

900  Some investment advisers report on Item 5.E. of Form ADV that they receive “commissions.”  As a form 
of deferred sales load, all payments of ongoing sales charges to intermediaries would constitute transaction-
related compensation. Intermediaries receiving those payments should consider whether they need to 
register as broker-dealers under section 15 of the Exchange Act.  



 

276 

 

As discussed above, many investment advisers participate in wrap fee programs. As of 

December 31, 2018, more than 8.5% of the SEC-registered investment advisers sponsor a wrap 

fee program and more than 13.1% act as a portfolio manager for one or more wrap fee 

programs.901 From the data available, we are unable to determine how many advisers provide 

advice about investing in wrap fee programs, because advisers providing such advice may be 

neither sponsors nor portfolio managers. 

(1) Disclosures for Investment Advisers  

As discussed more fully in the Fiduciary Release, investment advisers have a duty to 

provide full and fair disclosure of all material facts about the advisory relationship to their clients 

as well as to obtain informed consent from their clients. 902 SEC- and state-registered investment 

advisers are also subject to express disclosure requirements in Form ADV. Consistent with this 

duty and those requirements, investment advisers file Form ADV to register with the 

Commission or state securities authorities, as applicable, and provide an annual update to the 

form.903 Part 1 of Form ADV provides information to regulators about the registrants’ ownership, 

investors, and business, and it is made available to clients, prospective clients, and the public. 

Advisers also prepare a Form ADV Part 2A narrative brochure that contains information about 

                                                                                                                                                             

901  A wrap fee program sponsor is as a firm that sponsors, organizes, or administers the program or selects, or 
provides advice to clients regarding the selection of, other investment advisers in the program. See General 
Instructions to Form ADV. 

902  See Fiduciary Release supra footnote 47.     

903 See Advisers Act rules 203-1 and 204-1. Part 1 of Form ADV is the registration application for the 
Commission (and state securities authorities). Part 2 of Form ADV consists of a narrative “brochure” about 
the adviser and “brochure supplements” about certain advisory personnel on whom clients may rely for 
investment advice. See Brochure Adopting Release, supra footnote 576.   



 

277 

 

the investment adviser’s business practices, fees, conflicts of interest, and disciplinary 

information,904 in addition to a Part 2B brochure supplement that includes information about the 

specific individuals, acting on behalf of the investment adviser, who actually provide investment 

advice and interact with the client.905 The Part 2A brochure is the primary client-facing 

disclosure document,906 however, Parts 1 and 2A are both made publicly available by the 

Commission through IAPD,907 and advisers are generally required to deliver Part 2A and Part 2B 

to their clients.   

c. Trends in the Relative Numbers of Providers of Financial 
Services 

Over time, the relative number of broker-dealers and investment advisers has changed. 

Figure 1 presented below shows the time series trend of growth in broker-dealers and SEC-

registered investment advisers between 2005 and 2018.  Over the last 14 years, the number of 

broker-dealers has declined from over 6,000 in 2005 to less than 4,000 in 2018, while the 

                                                                                                                                                             

904  Part 2A of Form ADV contains 18 mandatory disclosure items about the advisory firm, including 
information about an adviser’s: (i) range of fees; (ii) methods of analysis; (iii) investment strategies and 
risk of loss; (iv) brokerage, including trade aggregation polices and directed brokerage practices, as well as 
the use of soft dollars; (v) review of accounts; (vi) client referrals and other compensation; (vii) disciplinary 
history; and (viii) financial information, among other things. Much of the disclosure in Part 2A addresses 
an investment adviser’s conflicts of interest with its investors, and is disclosure that the adviser, as a 
fiduciary, must make to investors in some manner regardless of the form requirements. See Brochure 
Adopting Release, supra footnote 576.   

905  Part 2B, or the “brochure supplement,” includes information about certain advisory personnel that provide 
retail client investment advice, and contains educational background, disciplinary history, and the adviser’s 
supervision of the advisory activities of its personnel. See General Instruction 5 to Form ADV. Registrants 
are not required to file Part 2B (brochure supplement) electronically, but must preserve a copy of the 
supplement(s) and make the copy available upon request. 

906  See Brochure Adopting Release, supra footnote 576.   

907  See Investment Adviser Public Disclosure, available at https://adviserinfo.sec.gov/.    



 

278 

 

number of investment advisers has increased from approximately 9,000 in 2005 to over 13,000 in 

2018. This change in the relative numbers of broker-dealers and investment advisers over time 

likely affects the competition for advice, and potentially alters the choices available to retail 

investors regarding how to receive or pay for such advice, the nature of the advice, and the 

attendant conflicts of interest.   

Figure 1: Time Series of the Number of SEC-Registered Investment Advisers  

and Broker-Dealers (2005–2018) 

 

An increase in the number of investment advisers and a decrease in the number of broker-

dealers could have occurred for a number of reasons, including anticipation of possible 

regulatory changes to the industry, other regulatory restrictions,908 technological innovation (i.e., 

                                                                                                                                                             

908  See Hester Peirce, Dwindling Numbers in the Financial Industry, Brookings Center on Markets and 
Regulation Report (May 15, 2017), at 5, available at https://www.brookings.edu/research/dwindling-

 

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Investment Advisers Broker-Dealers



 

279 

 

robo-advisers and online trading platforms), product proliferation (e.g., index mutual funds and 

exchange-traded products), and industry consolidation driven by economic and market 

conditions, particularly among broker-dealers. Commission staff has observed the transition by 

broker-dealers from traditional brokerage services to also providing investment advisory services 

(often under an investment adviser registration, whether federal or state), and many firms have 

been more focused on offering fee-based accounts that provide a steady source of revenue rather 

than accounts that charge commissions and are dependent on transactions.909  Broker-dealers 

have indicated that the following factors have contributed to this migration: provision of revenue 

stability or increase in profitability,910 perceived lower regulatory burden, and provisions of more 

services to retail customers.911   

                                                                                                                                                             

numbers-in-the-financial-industry (“Brookings Report”) which notes that “SEC restrictions have increased 
by almost thirty percent [since 2000],” and that regulations post-2010 were driven in large part by the 
Dodd-Frank Act.  Further, the Brookings Report observation of increased regulatory restrictions on broker-
dealers only reflects CFTC or SEC regulatory actions, but does not include regulation by FINRA, SROs, 
National Futures Association, or the MSRB. 

909  See id. at 7. Beyond Commission observations, the Brookings Report also discusses the shift from broker-
dealer to investment advisory business models for retail investors. Declining transaction-based revenue due 
to declining commission rates and competition from discount brokerage firms has made fee-based products 
and services more attractive to providers of such products and services. Although discount brokerage firms 
generally provide execution-only services and do not compete directly in the advice market with full 
service broker-dealers and investment advisers, entry by discount brokers has contributed to lower 
commission rates throughout the broker-dealer industry. Further, fee-based activity generates a steady 
stream of revenue regardless of the customer trading activity, unlike commission-based accounts; see also 
Angela A. Hung, et al., Investor and Industry Perspectives on Investment Advisers and Broker-Dealers, 
RAND Institute for Civil Justice Technical Report (2008), available at 
https://www.rand.org/content/dam/rand/pubs/technical_reports/2008/RAND_TR556.pdf (“RAND 2008”), 
which discusses a shift from transaction-based to fee-based brokerage accounts prior to recent regulatory 
changes.   

910  Commission staff examined a sample of recent Form 10-K or Form 10-Q filings of large broker-dealers, 
many of which are dually registered as investment advisers, that have a large fraction of retail customer 
accounts to identify relevant broker-dealers.  See, e.g., The Jones Financial Companies, L.L.L.P., Form 10-
K (Mar. 14, 2019), available at 
https://www.sec.gov/Archives/edgar/data/815917/000156459019007788/ck0000815917-

 



 

280 

 

Further, there has been a substantial increase in the number of retail clients of investment 

advisers, both high net worth clients and non-high net worth clients as shown in Figure 2.  

Although the number of non-high net worth retail customers of investment advisers dipped 

between 2010 and 2012, since 2012, more than 12 million new non-high net worth retail clients 

have been added. With respect to assets under management, we observe a similar, albeit more 

pronounced pattern for non-high net worth retail clients as shown in Figure 3. For high net worth 

retail clients, there has been a pronounced increase in AUM since 2012, although AUM has 

leveled off since 2015. 

Figure 2: Time Series of the Number of Retail Clients of  

Investment Advisers (2010 – 2018) 

                                                                                                                                                             

10k_20181231.htm; Raymond James Financial, Inc., Form 10-K (Nov. 21, 2018), available at 
https://www.sec.gov/Archives/edgar/data/720005/000072000518000083/rjf-20180930x10k.htm;  Stifle 
Financial Corp., Form 10-K (Feb. 20, 2019), available at 
https://www.sec.gov/Archives/edgar/data/720672/000156459019003474/sf-10k_20181231.htm; Wells 
Fargo & Co., 10-K (Feb. 27, 2019) available at 
https://www.sec.gov/Archives/edgar/data/72971/000007297119000227/wfc-12312018x10k.htm; and 
Ameriprise Financial Inc., Form 10-K (Feb. 23, 2018), available at 
https://www.sec.gov/Archives/edgar/data/820027/000082002718000008/amp12312017.htm.  Discussions 
in Form 10-K and 10-Q filings of this sample of broker-dealers here may not be representative of other 
large broker-dealers or of small to mid-size broker-dealers.  Some firms have reported record profits as a 
result of moving clients into fee-based accounts, and cite that it provides “stability and high returns.” See 
Hugh Son, Morgan Stanley Wealth Management fees climb to all-time high, Bloomberg (Jan. 18, 2018), 
available at https://www.bloomberg.com/news/articles/2018-01-18/morgan-stanley-wealth-management-
fees-hit-record-on-stock-rally. Morgan Stanley increased the percentage of client assets in fee-based 
accounts from 37% in 2013 to 44% in 2017, while decreasing the dependence on transaction-based 
revenues from 30% to 19% over the same time period (Morgan Stanley, Strategic Update (Jan. 18, 2018), 
available at https://www.morganstanley.com/about-us-ir/shareholder/4q2017-strategic-update.pdf); see 
also Lisa Beilfuss & Brian Hershberg, WSJ Wealth Adviser Briefing: The Reinvention of Morgan and 
Merrill, Adviser Profile, The Wall Street Journal (Jan. 25, 2018), available at 
https://blogs.wsj.com/moneybeat/2018/01/25/wsj-wealth-adviser-briefing-the-reinvention-of-morgan-and-
merrill-adviser-profile/.    

911  See Regulation Best Interest Release, supra footnote 47, at Section III.B.2.e.ii, which discusses industry 
trends.281 

 

 

 

 -

 5,000,000

 10,000,000

 15,000,000

 20,000,000

 25,000,000

 30,000,000

 35,000,000

2010-09 2011-09 2012-09 2013-09 2014-09 2015-09 2016-09 2017-09 2018-09

Estimated Non-HNW Clients Estimated HNW Clients



 

282 

 

Figure 3: Time Series of the Retail Clients of  

Investment Advisers Assets under Management (2010 – 2018) 

 

 

d. Registered Representatives of Broker-Dealers, Investment 
Advisers and Dually Registered Firms   

We estimate the number of associated natural persons of broker-dealers through data 

obtained from Form U4, which generally is filed for individuals who are engaged in the 

securities or investment banking business of a broker-dealer that is a member of a SRO 

(“registered representatives”).912  Similarly, we approximate the number of supervised persons of 

                                                                                                                                                             

912  The number of associated natural persons of broker-dealers may be different from the number of registered 
representatives of broker-dealers because clerical/ministerial employees of broker-dealers are associated 
persons but are not required to register with the firm.  Therefore, the registered representative number does 
not include such persons.  However, we do not have data on the number of associated natural persons and 

 

 -

 1,000,000,000,000

 2,000,000,000,000

 3,000,000,000,000

 4,000,000,000,000

 5,000,000,000,000

 6,000,000,000,000

 7,000,000,000,000

 8,000,000,000,000

2010-09 2011-09 2012-09 2013-09 2014-09 2015-09 2016-09 2017-09 2018-09

Estimated Non-HNW Client RAUM Estimated HNW Client RAUM



 

283 

 

registered investment advisers through the number of registered investment adviser 

representatives (or “registered IAR”s), who are supervised persons of investment advisers who 

meet the definition of investment adviser representatives in Advisers Act rule 203A-3 and are 

registered with one or more state securities authorities to solicit or communicate with clients.913 

We estimate the number of registered representatives and registered IARs, including 

dually registered financial professionals, (together “registered financial professionals”) at broker-

dealers, investment advisers, and dual registrants by considering only the employees of those 

firms that have Series 6 or Series 7 licenses or are registered with a state as a broker-dealer agent 

or investment adviser representative.914  We only consider employees at firms who have retail-

facing business, as defined previously.915  We observe in Table 6 that approximately 60% of 

registered financial professionals are employed by dually registered entities.  The percentage 

                                                                                                                                                             

therefore are not able to provide an estimate of the number of associated natural persons.  We believe that 
the number of registered representatives is an appropriate approximation because they are the individuals at 
broker-dealers that provide advice and services to customers.  

913  See 17 CFR §275.203A-3.  However, the data on numbers of registered IARs may undercount the number 
of supervised persons of investment advisers who provide investment advice to retail investors because not 
all supervised persons who provide investment advice to retail investors are required to register as IARs.  
For example, Commission rules exempt from IAR registration supervised persons who provide advice only 
to non-individual clients or to individuals that meet the definition of “qualified client.” In addition, state 
securities authorities may impose different criteria for requiring registration as an investment adviser 
representative.  

914  We calculate these numbers based on Form U4 filings. Representatives of broker-dealers, investment 
advisers, and issuers of securities must file this form when applying to become registered in appropriate 
jurisdictions and with SROs. Firms and representatives have an obligation to amend and update information 
as changes occur. Using the examination information contained in the form, we consider an employee a 
financial professional if he has an approved, pending, or temporary registration status for either Series 6 or 
7 (RR) or is registered as an investment adviser representative in any state or U.S. territory (IAR).  We 
limit the firms to only those that do business with retail investors, and only to licenses specifically required 
for an RR or IAR. 

915  See supra footnotes 864 and 893. 



 

284 

 

varies by the size of the firm.  For example, in firms with total assets between $1 billion and $50 

billion, 67% of all registered financial professionals are employed by dually registered firms.  

Focusing on dually registered firms only, approximately 62.7% of total licensed representatives 

at these firms are dually registered financial professionals, approximately 36.9% are only 

registered representatives; and less than one percent are only registered investment adviser 

representatives.  

 

Table 6: Total Registered Representatives at Broker-Dealers, Investment Advisers, and 

Dually Registered Firms with Retail Investors  

Size of Firm 
(Total Assets for 
Standalone BDs 
and Dually 
Registered 
Firms; AUM for 
Standalone IAs) 

Total 
Number of 

Reps 

% of Reps in 
Dually 

Registered 
Firms 

% of Reps in 
Standalone 

BD w/ an IA 
Affiliate 

% of Reps in 
Standalone 

BD w/o an IA 
Affiliate 

% of Reps in 
Standalone 
IA w/ a BD 

Affiliate 

% Reps in 
Standalone 
IA w/o a BD 

Affiliate 

>$50 billion 84,461 73% 7% 0% 19% 1% 

$1 billion to $50 

billion 
170,256 67% 11% 0% 15% 7% 

$500 million to 

$1 billion 
29,874 71% 5% 1% 7% 16% 

$100 million to 

$500 million 
66,924 51% 27% 0% 4% 18% 

$10 million to 

$100 million 
106,178 55% 42% 1% 1% 1% 

$1 million to $10 

million  
33,790 35% 54% 11% 0% 0% 

< $1 million 12,522 8% 52% 36% 3% 1% 



 

285 

 

Total Licensed 

Representatives 
504,005 60% 23% 2% 9% 6% 

916 
In Table 7 below, we estimate the number of employees who are registered 

representatives, registered investment adviser representatives, or both (“dually registered 

representatives”).917  Similar to Table 6, we calculate these numbers using Form U4 filings. Here, 

we also limit the sample to employees at firms that have retail-facing businesses as discussed 

previously.918  

In Table 7, approximately 25% of registered employees at registered broker-dealers or 

investment advisers are dually registered representatives. However, this proportion varies 

significantly across size categories. For example, for firms with total assets between $1 billion 

and $50 billion,919 approximately 35% of all registered employees are both registered 

                                                                                                                                                             

916  The classification of firms as dually registered, standalone broker-dealers, and standalone investment 
advisers comes from Forms BD, FOCUS, and ADV as described earlier. The number of representatives at 
each firm is obtained from Form U4 filings. Note that all percentages in the table have been rounded to the 
nearest whole percentage point.  

917  We calculate these numbers based on Form U4 filings.  

918  See supra footnotes 864 and 893. 

919  Firm size is defined as total assets from the balance sheet for broker-dealers and dually registered firms 
(source: FOCUS reports) and as assets under management for investment advisers (source: Form ADV). 
We are unable to obtain customer assets for broker-dealers, and for investment advisers. We can only 
obtain information from Form ADV as to whether the firm assets exceed $1 billion. We recognize that our 
approach of using firm assets for broker-dealers and customer assets for investment advisers does not allow 
for direct comparison; however, our objective is to provide measures of firm size and not to make 
comparisons between broker-dealers and investment advisers based on firm size. Across both broker-
dealers and investment advisers, larger firms, regardless of whether we stratify on firm total assets or assets 
under management, have more customer accounts, are more likely to be dually registered, and have more 
representatives or employees per firm, than smaller broker-dealers or investment advisers. 



 

286 

 

representatives and investment adviser representatives.  In contrast, for firms with total assets 

below $1 million, 13% of all employees are dually registered representatives.  

 

Table 7: Number of Employees at Retail Facing Firms who are Registered Representatives, 

Investment Adviser Representatives, or Both  

 

Size of Firm (Total Assets for 

Standalone BDs and Dually 

Registered Firms; AUM for 

Standalone IAs) 

Total Number 

of Employees 

Percentage of 

DuallyRegistered 

representatives 

Percentage of 

Registered 

Representatives 

Only 

Percentages of 

IARs Only 

>$50 billion 218,539 19% 16% 1% 

$1 billion to $50 billion 328,842 35% 12% 4% 

$500 million to $1 billion 43,211 18% 40% 10% 

$100 million to $500 million 119,214 23% 24% 9% 

$10 million to $100 million 176,559 20% 39% 1% 

$1 million to $10 million 56,230 17% 39% 1% 

< $1 million 18,334 13% 46% 3% 

Total Employees at Retail 

Facing Firms 
960,929 25% 23% 4% 

920 

                                                                                                                                                             

920  See supra footnotes 918 and 919. Note that all percentages in the table have been rounded to the nearest 
whole percentage point.  



 

287 

 

Approximately 87% of investment adviser representatives are dual-hatted as registered 

representatives. This percentage is relatively unchanged from 2010.  According to information 

provided in a FINRA comment letter in connection with the 913 Study,921 87.6% of registered 

investment adviser representatives were dually registered as registered representatives as of mid-

October 2010.922  In contrast, approximately 52% of registered representatives were dually 

registered as investment adviser representatives at the end of 2018.923  

Broker-dealers and investment advisers must report certain criminal, regulatory, and civil 

actions and complaint information and information about certain financial matters in Forms 

U4924 and U5925 for their representatives. SROs, regulators and jurisdictions report disclosure 

events on Form U6.926  FINRA’s BrokerCheck system and IAPD discloses to the public certain 

information on registered representatives and investment adviser representatives, respectively, 

                                                                                                                                                             

921  See Staff of the Securities and Exchange Commission, Study on Investment Advisers and Broker-Dealers as 
Required by Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Jan. 2011), 
available at www.sec.gov/news/studies/2011/913studyfinal.pdf (“913 Study”).   

922  Comment Letter of FINRA to File Number 4-606; Obligations of Brokers, Dealers and Investment 
Advisers (Nov. 3, 2010), at 1, available at https://www.sec.gov/comments/4-606/4606-2836.pdf.  

923  In order to obtain the percentage of IARs that are dually registered as registered representatives of broker-
dealers, we sum the representatives at dually registered firms and those at investment advisers across size 
categories to obtain the aggregate number of representatives in each of the two categories.  We then divide 
the aggregate dually registered representatives by the sum of the dually registered representatives and the 
IARs at investment adviser-only firms.  We perform a similar calculation to obtain the percentage of 
registered representatives of broker-dealers that are dually registered as IARs. 

924  Form U4 requires disclosure of registered representatives’ and investment adviser representatives’ criminal, 
regulatory, and civil actions similar to those reported on Form BD or Form ADV as well as certain 
customer-initiated complaints, arbitration, and civil litigation cases. See generally Form U4. 

925  Form U5 requires information about representatives’ termination from their employers.   

926  See FINRA, Current Uniform Registration Forms for Electronic Filing in Web CRD®, available at 
http://www.finra.org/industry/web-crd/current-uniform-registration-forms-electronic-filing-web-crd.  



 

288 

 

such as principal place of business, business activities, owners, and criminal prosecutions, 

regulatory actions, and civil actions in connection with any investment-related activity.  

e. Investor Account Statistics  

Investors seek financial advice and services to achieve a number of different goals, such 

as saving for retirement or children’s college education.  The OIAD/RAND survey estimates that 

approximately 73% of adults live in a household that invests.927 The survey indicates that non-

investors are more likely to be female, to have lower family income and educational attainment, 

and to be younger than investors.928 Approximately 35% of households that do invest do so 

through accounts such as broker-dealer or advisory accounts.929   

As shown above in Figures 2 and 3, the number of retail investors and their assets under 

management associated with investment advisers has increased significantly, particularly since 

2012.  According to the Investment Company Institute (“ICI”), as of December 2016, nearly 

$24.2 trillion is invested in retirement accounts, of which $7.5 trillion is in IRAs.930 A total of 

43.3 million U.S. households have either an IRA or a brokerage account, of which an estimated 

20.2 million U.S. households have a brokerage account and 37.7 million households have an IRA 

                                                                                                                                                             

927  See OIAD/RAND, supra footnote 3 (defining “investors” as persons “owning at least one type of 
investment account, (e.g., an employer-sponsored retirement account, a non-employer sponsored retirement 
account such as an IRA, a college savings investment account, or some other type of investment account 
such as a brokerage or advisory account), or owning at least one type of investment asset (e.g., mutual 
funds, exchange-traded funds or other funds, individual stocks, individual bonds, derivatives, and 
annuities)”). 

928  OIAD/RAND, supra footnote 3. 

929  Id.. 

930  See Sarah Holden & Daniel Schrass, The Role of IRAs in US Households’ Saving for Retirement, 2016, 23 
ICI RES. PERSP. 23-1 (Jan. 2017), available at https://www.ici.org/pdf/per23-01.pdf. 



 

289 

 

(including 72% of households that also hold a brokerage account).931  With respect to IRA 

accounts, one commenter, the ICI, documents that 43 million U.S. households own either 

traditional or Roth IRAs and that approximately 70% are held with financial professionals, with 

the remainder being direct market.932  Further, ICI finds that approximately 64% of households 

have aggregate IRA (traditional and Roth) balances of less than $100,000, and approximately 

36% of investors have balances below $25,000. As noted in one study, the growth of assets in 

traditional IRAs comes from rollovers from workplace retirement plans; for example, 58% of 

traditional IRAs consist of rollover assets, and contributions due to rollovers exceeded $460 

billion in 2015 (the most recently available data).933   

While the number of retail investors obtaining services from investment advisers and the 

aggregate value of associated assets under management has increased, the OIAD/RAND study 

also suggests that the general willingness of investors to use planning or to take financial advice 

regarding strategies, products, or accounts is relatively fixed over time.934  With respect to the 

account assets associated with retail investors, the OIAD/RAND survey also estimates that 

                                                                                                                                                             

931  The data is obtained from the Federal Reserve System’s 2016 Survey of Consumer Finances (“SCF”), a 
triennial survey of approximately 6,200 U.S. households and imputes weights to extrapolate the results to 
the entire U.S. population. As noted, some survey respondent households have both a brokerage and an 
IRA account. See Board of Governors of the Federal Reserve System, Survey of Consumer Finances 
(2016), available at https://www.federalreserve.gov/econres/scfindex.htm. The SCF data does not directly 
examine the incidence of households that could use advisory accounts instead of brokerage accounts; 
however, some fraction of IRA accounts reported in the survey could be those held at investment advisers. 

932  See Sarah Holden & Daniel Schrass, The Role of IRAs in US Households’ Saving for Retirement, 2018, ICI 
RES. PERSP. 24-10 (Dec. 2018), available at https://www.ici.org/pdf/per24-10.pdf.  

933  See id. 

934  OIAD/RAND, supra footnote 3 (noting that this conclusion was limited by the methodology of comparing 
participants in a 2007 survey with those surveyed in 2018). 



 

290 

 

approximately 10% of investors who have broker-dealer or advisory accounts hold more than 

$500,000 in assets, while approximately 47% hold $50,000 in assets or less. Altogether, many 

investors who have brokerage or advisory accounts trade infrequently, with approximately 31% 

reporting no annual transactions and an additional approximately 30% reporting three or fewer 

transactions per year.935 

With respect to particular products, commenters have provided us with additional 

information about ownership of mutual funds and IRA account statistics.  For example, ICI 

stated that 56 million U.S. households and nearly 100 million individual investors own mutual 

funds, of which 80% are held through 401(k) and other workplace retirement plans, while 63% 

of investors hold mutual funds outside of those plans.936  Of those investors that own mutual 

funds outside of workplace retirement plans, approximately 50% rely on financial professionals, 

while nearly one-third purchase direct-sold funds either directly from the fund company or 

through a discount broker.937   

Table 8 below provides an overview of account ownership segmented by account type 

(e.g., IRA, brokerage, or both) and investor income category based on the SCF.938  

Table 8: Ownership by Account Type in the U.S. by Income Group 
                                                                                                                                                             

935  OIAD/RAND, supra footnote 3. 

936  See ICI Letter; see also Sarah Holden, Daniel Schrass & Michael Bogdan, Ownership of Mutual Funds, 
Shareholder Sentiment, and Use of the Internet, 2018, ICI RES. PERSP. 24-8 (Nov. 2018), available at 
https://www.ici.org/pdf/per24-08.pdf. 

937  See id. 

938  Id.  To the extent that investors have IRA accounts at banks that are not also registered as broker-dealers, 
our data may overestimate the numbers of IRA accounts held by retail investors that could be subject to this 
rulemaking. 



 

291 

 

(as reported by the 2016 SCF) 

 

Income Category % Brokerage Only % IRA Only % Both Brokerage and IRA 

Bottom 25% 1.2% 7.6% 2.4% 

25% - 50% 3.2% 14.5% 5.4% 

50% - 75% 4.1% 21.4% 11.4% 

75% - 90% 7.5% 33.4% 16.5% 

Top 10% 12.0% 24.7% 43.9% 

Average 4.4% 18.3% 11.6% 

 

With respect to the nature of the accounts held by investors and whether they are 

managed by financial professionals, the OIAD/RAND survey finds that 36% of its sample of 

participants report that they currently use a financial professional and approximately 33% receive 

some kind of recommendation service.939  Of the subset of those investors who report holding a 

brokerage, advisory, or similar account, approximately 33% self-direct their own account, 25% 

have their account managed by a financial professional, and 10% have their account advised by a 

professional.940  For those investors who take financial advice, the OIAD/RAND study suggests 

                                                                                                                                                             

939  OIAD/RAND, supra footnote 3. In a focus group preceding the survey, focus group participants provided a 
number of reasons for not using a financial professional in making investments, including being unable or 
unwilling to pay the fees, doing their own financial research, being unsure of how to work with a 
professional, and being concerned about professionals selling products without attending to investors’ plans 
and goals. 

940  Id. 



 

292 

 

that they may differ in characteristics from other investors.  Investors who take financial advice 

are generally older, retired, and have a higher income than other investors, but also may have 

lower educational attainment (e.g., high school or less) than other investors.941 

Similarly, one question in the SCF asks what sources of information households’ 

financial decision-makers use when making decisions about savings and investments. 

Respondents can list up to fifteen possible sources from a preset list that includes “Broker” or 

“Financial Planner” as well as “Banker,” “Lawyer,” “Accountant,” and a list of non-professional 

sources.942  Panel A of Table 8 below presents the breakdown of where households who have 

brokerage accounts seek advice about savings and investments.   The table shows that of those 

respondents with brokerage accounts, 23% (4.7 million households) use advice services of 

broker-dealers for savings and investment decisions, while 49% (7.8 million households) take 

advice from a “financial planner.”  Approximately 36% (7.2 million households) seek advice 

from other sources such as bankers, accountants, and lawyers.  Almost 25% (5.0 million 

households) do not use advice from the above sources. 

 Panel B of Table 9 below presents the breakdown of advice received for households who 

have an IRA. 15% (5.7 million households) rely on advice services of their broker-dealers and 

                                                                                                                                                             

941  Id. 

942  The SCF, supra footnote 931, specifically asks participants “Do you get advice from a friend, relative, 
lawyer, accountant, banker, broker, or financial planner? Or do you do something else?” (see Federal 
Reserve, Codebook for 2016 Survey of Consumer Finances (2016), available at 
https://www.federalreserve.gov/econres/files/codebk2016.txt).  Other response choices presented by the 
survey include “Calling Around,” “Magazines,” “Self,” “Past Experience,” “Telemarketer,” and “Insurance 
Agent,” as well as other choices.  Respondents could also choose “Do Not Save/Invest.” The SCF allows 
for multiple responses, so these categories are not mutually exclusive.  However, we would note that the 
list of terms in the question does not specifically include “investment adviser.” 



 

293 

 

48% (18.3 million households) obtain advice from financial planners. Approximately 41% (15.5 

million households) seek advice from bankers, accountants, or lawyers, while the 25% (9.5 

million households) use no advice or seek advice from other sources. 

 

Table 9, Panel A: Sources of Advice for Households who have a Brokerage Account in the 

U.S. by Income Group  

 

Income Category 
% Taking Advice 

from Brokers 

% Taking Advice 

from Financial 

Planners  

% Taking Advice 

from Lawyers, 

Bankers, or 

Accountants 

% Taking no 

Advice or from 

Other Sources 

Bottom 25% 20.55% 53.89% 35.64% 24.30% 

25% - 50% 22.98% 38.03% 43.92% 32.36% 

50% - 75% 20.75% 52.00% 31.42% 23.61% 

75% - 90% 22.56% 48.94% 32.25% 28.10% 

Top 10% 25.29% 50.53% 38.47% 21.06% 

Average 23.02% 49.02% 35.99% 24.94% 

943 
Table 9, Panel B: Sources of Advice for Households who have an IRA in the U.S. by 

Income Group  

 

                                                                                                                                                             

943  Id. 



 

294 

 

Income Category 
% Taking Advice 

from Brokers 

% Taking Advice 

from Financial 

Planners  

% Taking Advice 

from Bankers,  

Accountants, or 

Lawyers 

% Taking no 

Advice or from 

Other Sources 

Bottom 25% 12.14% 38.30% 43.69% 31.85% 

25% - 50% 9.79% 43.82% 40.67% 32.74% 

50% - 75% 14.93% 45.20% 41.23% 25.23% 

75% - 90% 14.68% 52.14% 41.65% 24.26% 

Top 10% 21.40% 55.40% 40.03% 18.56% 

Average 15.25% 48.45% 41.17% 25.28% 

944 
The OIAD/RAND survey notes that for survey participants who reported working with a 

specific individual for investment advice, 70% work with a dually registered firm, 5.4% with a 

broker-dealer, and 5.1% with an investment adviser.945 

2. Investor Perceptions about the Marketplace for Financial Services 
and Disclosures 

Our proposal discussed a number of studies providing information on investors' 

perceptions of the market for financial services and advice, including those conducted by Siegel 

& Gale946 in 2005, RAND947 in 2008 and CFA in 2010.948  Commenters to the proposal provided 

                                                                                                                                                             

944  Id.  

945  OIAD/RAND, supra footnote 3.  As documented by OIAD/RAND, retail investors surveyed had difficulty 
in accurately identifying the type of relationship that they have with their financial professional. 

946  Proposing Release, supra footnote 5, at n.555. 

947  Id., at n.556. 



 

295 

 

their own studies or survey evidence conducted by third party research firms, which we have 

discussed throughout the release.949  In addition, the Commission’s Office of the Investor 

Advocate collaborated with RAND to prepare the OIAD/RAND study,950 which included focus 

groups and a survey about the retail market for investor advice. The Commission’s Office of the 

Investor Advocate also engaged RAND to conduct investor testing of the proposed relationship 

summary using the dual registrant sample in the proposal.  The report, RAND 2018,951 discusses 

both larger sample survey results and smaller sample in-depth interview results.  Finally, the 

proposal solicited public feedback from individual investors on a feedback form issued with the 

Proposing Release.952  Responses and data from these sources inform our understanding of how 

investors approach the marketplace for financial services and how investors respond to 

disclosures about financial services generally.  

                                                                                                                                                             

948          Id., at n.557.  

949  See supra footnotes 17-21.  

950  OIAD/RAND consisted of focus group discussions with 35 participants in total.  OIAD/RAND caveats in 
its report that the participants in its focus groups were neither nationally representative nor randomly 
selected and that their results are anecdotal. OIAD/RAND also included a nationally representative 
probability based survey to allow researchers to reliably construct population estimates. OIAD/RAND, 
supra footnote 3.  

951  For RAND 2018, a sample of 1,816 individuals from the ALP Survey Panel were invited to complete the 
survey, and 1,460 (80.4%) actually completed the survey. 26% of respondents are categorized as non-
investor. Median time spent going through the initial five screens of the relationship summary text was 4 
minutes. RAND 2018, supra footnote 13.  

952  Proposing Release, supra footnote 5; see also Feedback Forms Comment Summary, supra footnote 13. 
More than 90 individuals answered with a response or comment relevant to at least one of the questions on 
the form, using an online version of the feedback form or by submitting a copy of the feedback form to the 
comment file in PDF format. 



 

296 

 

a. How investors select financial firms or professionals 

A number of surveys show that retail investors predominantly find their current financial 

firm or financial professional from personal referrals by family, friends, or colleagues.953  For 

instance, the RAND 2008 study reported that 46% of survey respondents indicated that they 

located a financial professional from personal referral, although this percentage varied depending 

on the type of service provided (e.g., only 35% of survey participants used personal referrals for 

brokerage services).  After personal referrals, RAND 2008 survey participants ranked 

professional referrals (31%), print advertisements (4%), direct mailings (3%), online 

advertisements (2%), and television advertisements (1%), as their source of locating individual 

professionals.  The RAND 2008 study separately inquired about locating a financial firm,954 in 

which respondents reported selecting a financial firm (of any type) based on: referral from family 

or friends (29%), professional referral (18%), print advertisement (11%), online advertisements 

(8%), television advertisements (6%), direct mailings (2%), with a general “other” category 

(36%). 

The 917 Financial Literacy Study provides similar responses, although it allowed survey 

respondents to identify multiple sources from which they obtained information that facilitated the 

selection of the current financial firm or financial professional.955 In the 917 Financial Literacy 

                                                                                                                                                             

953  See RAND 2008, supra footnote 912; 917 Financial Literacy Study, supra footnote 589. 

954  The Commission notes that only one-third of the survey respondents that responded to “method to locate 
individual professionals” also provided information regarding locating the financial firm. 

 
955  See 917 Financial Literacy Study, supra footnote 589.   



 

297 

 

Study,956 51% of survey participants received a referral from family, friends, or colleagues.  

Other sources of information or referrals came from: referral from another financial professional 

(23%), online search (14%), attendance at a financial professional-hosted investment seminar 

(13%), advertisement (e.g., television or newspaper) (11.5%), other (8%), while approximately 

4% did not know or could not remember how they selected their financial firm or financial 

professional. Twenty-five percent of survey respondents indicated that the “name or reputation 

of the financial firm or financial professional” affected the selection decision. 

The OIAD/RAND focus group study notes that among the factors that group participants 

report for not working with a financial professional was participants being unsure how they 

would go about working with a professional.957 

b.  Investor confusion 

As discussed in the Proposing Release and by commenters to the proposal, many sources 

indicate that retail investors do not understand or find confusing the distinctions between broker-

dealers and investment advisers, particularly in terms of services provided and applicable 

standards of conduct. 958    

                                                                                                                                                             

956  The data used in the 917 Financial Literacy Study comes from the Siegel & Gale, Investor Research Report 
(Jul. 26, 2012), available at https://www.sec.gov/news/studies/2012/917-financial-literacy-study-part3.pdf.   

957 OIAD/RAND, supra footnote 3. 

958  See generally supra Section II.B.2 (discussing benefits of including disclosure on individualized firm 
services); Section II.B.6 (discussing removal of generalized comparisons between advisers and broker-
dealers); see also Proposing Release, supra footnote 5 (discussing commenters in response to Chairman 
Clayton's 2017 request for comment and commenters to the 913 Study). 



 

298 

 

Studies such as those conducted by Siegel & Gale959 in 2005, RAND960 in 2008, and 

CFA in 2010,961 discussed in the Proposing Release, support findings that retail investors are 

confused about the roles and titles of financial professionals. The OIAD/RAND study assessed 

survey and focus group participants’ understanding of the types of financial services and 

financial professionals they used.962  Specifically, the authors of the OIAD/RAND study asked 

survey participants who were investors to identify which type of financial professional they 

worked with (investment adviser, broker-dealer, or dually-registered firm). The authors 

compared the types of financial professionals reported by the survey participants with the actual 

status of those financial professionals as verified on the IAPD database, and found that the 

                                                                                                                                                             

959  Proposing Release, supra footnote 5, at Section IV.A.3.h. (stating that the Siegel & Gale Study found that 
focus group participants did not understand that the roles and legal obligations of broker-dealers differed 
from investment advisers’ roles and legal obligations, and were further confused by different labels or titles 
used by advice providers (e.g., financial planner, financial advisor, financial consultant, broker-dealer, or 
investment adviser).  More specifically, participants in the Siegel & Gale Study focus groups believed that 
brokers executed trades and were focused on “near-term” advice, while financial advisors and consultants 
provided many of the same services as brokers, but also provided a greater scope of long-term planning 
advice (e.g., portfolio allocation).  “Investment adviser,” on the other hand, was a term unfamiliar to many 
participants, but financial professionals using this label were perceived to provide similar services to 
financial advisors and financial consultants.  Financial planners were viewed to provide services related to 
insurance and estate planning in addition to investment advice, and encompassed long-term financial 
planning including college, retirement, and other long-term savings and investment goals. The Siegel & 
Gale Study focus group participants assumed that financial advisors/consultants, investment advisers, and 
financial planners provided planning services, while brokers, financial advisors/consultants, and investment 
advisers provided trade execution services); see also id., at n.5.  

960  Similarly, the RAND 2008 study generally concluded that investors did not understand the differences 
between broker-dealers and investment advisers and that common job titles contributed to investor 
confusion. RAND 2008, supra footnote 909. 

961  Infogroup/ORC, U.S. Investors & The Fiduciary Standard, National Opinion Survey (Sept. 15, 2010), 
available at https://www.cfp.net/docs/public-policy/us_investors_opinion_survey_2010-09-16.pdf (“CFA 
Survey”). The CFA Survey suggested that respondents were confused about differences between broker-
dealers and investment advisers as described by the study's authors to the respondents. 

962  OIAD/RAND, supra footnote 3. 



 

299 

 

verified types of financial professionals in many cases did not match the types of financial 

professionals that were reported by the survey participants.963  For example, when financial 

professionals were verified to be dually registered, only 34% were reported by survey 

participants to be dually registered (and 56% were reported to be only investment advisers).  In 

addition to the survey, the OIAD/RAND authors also asked a small focus group of participants 

that used financial professionals to identify which type of professional they were using, which 

was then verified by IAPD. Only one of the twelve participants was able to identify the correct 

type of financial professional unambiguously (although it was not clear if clients of verified 

dually-registered firms were only utilizing one type of that professional’s services). The study 

authors concluded that this showed low awareness of the classification of investment advisers 

and broker-dealers. 

Further, the OIAD/RAND survey asked all survey recipients whether they could identify 

the type of financial professional that would typically exhibit certain business practices (such as 

executing transactions or being paid by commission), and concluded that at least a significant 

minority of participants could not do so for any of the typical practices.  Between 13% and 21% 

of survey participants incorrectly answered “none of the above” for each of the business 

practices offered by the survey, although those practices were aligned with either investment 

advisers or broker-dealers in the marketplace. Moreover, only 36% of participants were able to 

identify that investment advisers were typically paid by a percentage of assets, whereas 43% of 

                                                                                                                                                             

963  OIAD/RAND, supra footnote 3.  Note that the authors caveated that it was unclear if survey participants 
who were customers of verified dually registered firms had misidentified the type of financial professional 
because they only received one type of service (brokerage or advisory) from the dually registered firm. 



 

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participants thought that practice was typical of broker-dealers. Twenty-six percent of 

participants incorrectly indicated that investment advisers execute transactions for clients.964 In 

all, the study authors concluded that the survey participants’ knowledge of the marketplace for 

financial professionals appeared to be incomplete. 

The OIAD/RAND study authors draw further conclusions from their focus group study, 

where after being offered explanations of the differences between investment advisers and 

broker-dealers, some focus group participants continued not to be able to understand the 

distinctions between the two types of professionals.  For the OIAD/RAND study authors, the 

focus group exercise underscored the difficulty of the topic for some investors. 

Investors are also confused about financial professionals’ standards of conduct and legal 

obligations. As discussed in the Proposing Release, the Siegel & Gale and RAND 2008 studies 

found that focus group participants generally did not understand legal terms, such as “fiduciary” 

or “best interest.”965  In addition, the RAND 2008 study noted that the confusion about titles, 

services, legal obligations, and compensation persisted even after a fact sheet on broker-dealers 

and investment advisers was provided to participants.966  

Similarly, many survey respondents in the OIAD/RAND study had difficulty 

understanding the basic relational aspects of financial advice and the responsibility for taking 

                                                                                                                                                             

964  OIAD/RAND, supra footnote 3.  The study authors also concluded that “an investor who works with an 
investment adviser because he or she is unaware that broker-dealers can execute transactions, and who 
seeks a professional solely to execute transactions on their behalf, might not necessarily be matched with 
the most appropriate professional.” 

965  Proposing Release, supra footnote 5. 

966  RAND 2008, supra footnote 909.301 

 

risk in any form.967  Thirty percent of survey respondents believed that financial professionals 

would get paid only if an investor made money on an investment, and another quarter of 

respondents indicated that they did not know if financial professionals would get paid only if an 

investor made money on an investment.968  A majority of survey respondents expected that a 

financial professional acting in the client’s best interest would monitor the account, help the 

client choose the lowest cost products, disclose payments they receive, and avoid taking higher 

compensation for selling one product over another when a similar but less costly product is 

available.969  OIAD/RAND focus group discussions about the distinctions between investment 

advisers and broker-dealers also suggested that some focus group participants were not able to 

distinguish investment advisers from broker-dealers.  The study’s authors concluded that 

comments of those focus group participants also suggest that some individuals might value 

having a clear distinction between professionals who do act in the client’s best interest and 

professionals who do not act in the client's best interest.970  Similarly, in RAND 2018 and in 

interview-based studies submitted by a group of commenters that test the proposed sample dual-

registrant relationship summary, it was observed that investors could have difficulty 

understanding distinctions between the standard of conduct applicable to broker-dealers and 

investment advisers.971 

                                                                                                                                                             

967  OIAD/RAND, supra footnote 3.   

968  OIAD/RAND, supra footnote 3. 
969  OIAD/RAND, supra footnote 3. 

970  OIAD/RAND, supra footnote 3. 

971  See supra Section II.B.3.b at footnotes 470-479 and accompanying text.  



 

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With respect to investor perceptions of financial advisers’ fees and potential conflicts of 

interest, the OIAD/RAND study revealed that “some participants seemed unconcerned with 

conflicts or took it as a good sign if their professional had not disclosed a conflict to them … In 

all three groups that had experience using a financial professional… participants reported that 

their professional had not disclosed any conflicts.”972  The OIAD/RAND study also found that 

almost a half of the investors who received investment advice in the study believed that their 

investment professional receives commissions.  About a third believed the provider received 

payments from product companies (e.g., mutual funds); another 20% of participants believed the 

provider received a bonus.  Altogether, more than half of the participants believed the provider 

received some sort of compensation whether through commission, bonus or product payment.973  

The study concluded that “awareness of the nature of provider payments could help investors to 

recognize conflicts of interest…” and thus it could potentially improve investors’ decision 

making.  Potential investor recognition of the importance of the conflicts of interest is reflected 

in that 51% of the OIAD/RAND study respondents said that it was important or extremely 

important that the financial professional receive all compensation from the customer, and only 

15% reported that it was not important at all.974   

With respect to investor trust, one commenter discussed the results of an online survey it 

had initiated that found that 96% of survey respondents mostly or completely trusted their 

                                                                                                                                                             

972  OIAD/RAND, supra footnote 3. 
973  OIAD/RAND, supra footnote 3. 
974  OIAD/RAND, supra footnote 3. 



 

303 

 

financial professional.975  The vast majority of survey respondents (97%) also believed that their 

financial professional always or mostly has their investors' best interest in mind.976 

3. Investor Responses to Disclosures about Financial Professionals and 
Firms 

a. Retail investors and financial disclosures generally 

Commenters provided conclusions based on studies of potential limitations to the 

efficacy of financial disclosures, as discussed below.977  With respect to the particular areas of 

disclosure that retail investors find helpful, commenters provided us with information about the 

usefulness of such disclosures to retail investors from surveys or assessments.  We generally note 

that the RAND 2018 survey and other surveys that were provided by commenters gathered 

participants’ subjective views and were not designed to objectively assess whether any sample 

disclosures improved participant comprehension.978 However, the RAND 2018 qualitative 

interviews included some general questions to participants about comprehension and helpfulness 

of the sample proposed relationship summary, which provided some insight into participants' 

understanding of concepts introduced, as did another survey and two interview-based studies 

with respect to sample relationship summaries.979  Further, the RAND 2018 report and surveys 

and studies submitted by commenters reported that their participants subjectively thought that 

they were informed from the sample disclosures that they were provided.  The RAND 2018 

                                                                                                                                                             

975  CCMC Letter (investor polling), supra footnote 21. 
976  Id. 
977 See infra Section IV.C for a discussion of this research.   

978  See generally supra footnote 14. 
979  See supra footnotes 14 and 20 and accompanying text. 



 

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study authors found that nearly 90% of respondents stated that the sample proposed relationship 

summary that they reviewed would help them make informed decisions about investment 

accounts and services.980 Likewise, the RAND 2018 study authors also observed that interview 

participants demonstrated that they learned new information from the proposed relationship 

summary that they were provided.  However, there was variation in understanding among 

participants and the interviews also revealed areas of confusion.981  Similarly, the Woelfel survey 

authors noted that after survey respondents were given time to read a sample proposed dual 

registrant relationship summary, the majority, regardless of their current investments or 

relationship with an investment adviser or broker-dealer, believed that they knew a “little more” 

about investment advisers and broker-dealers.982 

Several commenters suggest that generally not all investors fully read or are able to digest 

information from disclosures about financial professionals.  One commenter reports that almost 

half of its survey participants said they selectively skim the disclosures and eight percent said 

they rarely or do not ever read them.983  Along similar lines, commenters pointed to observations 

that investors may be overconfident in their ability to read and understand disclosures and that 

investors are unable to understand disclosures relating to compensation arrangements and 

conflicts of interest. 984 Similarly, the RAND 2008 study highlighted that participants’ confusion 

about titles, services, legal obligations, and compensation persisted even after a fact sheet on 
                                                                                                                                                             

980  See RAND 2018, supra footnote 13. 
981  Id. 
982  See Cetera Letter II (Woelfel) supra footnote 17. 
983  Schwab Letter I (Koski), supra footnote 21. 
984  See, e.g., AARP Letter.  See also Better Markets Letter, CFA Letter I; Consumers Union Letter. 



 

305 

 

broker-dealers and investment advisers was provided to participants.985  

With respect to what type of disclosures from firms or financial professionals retail 

investors find helpful, commenters provided two surveys of retail investors’ general views of 

disclosures about financial professionals in response to the Proposing Release.986 One 

commenter reported results from an online survey that provides support for the idea that retail 

investors value at least some disclosures from financial professionals.  From the a survey of 801 

individuals, a majority of the survey participants (62%) said they would be interested in reading 

a hypothetical standardized document provided to all new clients that explained the relationship 

between a financial professional and clients and thought that such a document would “boost 

transparency and help build stronger relationships between me and my financial professional” 

(72%).987 Separately, with respect to what aspects of financial disclosures retail investors might 

find most helpful, Koski Research conducted an investor survey on behalf of another commenter 

and reported that the “majority of retail investors want communications that are relevant to them 

(91%), short and to the point (85%), and visually appealing (79%).”988 The survey also reported 

that the top four things retail investors wanted communicated were the costs for advice, 

                                                                                                                                                             

985  See RAND 2008, supra footnote 909. The fact sheet provided to RAND 2008 study participants included 
information on the definition of broker and investment adviser, including a description of common job 
titles, legal duties and typical compensation.  Participants in the focus groups indicated that they were 
confused over common job titles of broker-dealers and investment advisers, thought that because brokers 
are required to be licensed, investment advisers were not as qualified as brokers, deemed the term 
“suitable” too vague, and concluded that it would be difficult to prove whether or not an investment adviser 
was not acting in the client’s best interest. 

986   See Schwab Letter I (Koski), supra footnote 21 and CCMC Letter (investor polling), supra footnote 21.  

987  See CCMC Letter (investor polling), supra footnote 21. 

988 See Schwab Letter I (Koski), supra footnote 21.  



 

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description of advice services, the obligations of the firm and its representatives, and the 

conflicts of interest.989  Additionally, approximately 70% of the participants in the 917 Financial 

Literacy Study indicated that they would read disclosures on conflicts of interest if made 

available.990 

b. Investor perceptions about specific disclosures concerning 
financial professionals 

(1) Conflicts of Interest 

As discussed in the Proposing Release, previous studies have found that investors 

consider conflicts of interest to be an important factor in disclosures from firms and financial 

professionals.991  For example, in the 917 Financial Literacy Study, approximately 52.1% of 

survey participants indicated that an essential component of any disclosure would be their 

financial intermediary’s conflicts of interest, while 30.7% considered information about conflicts 

of interest to be important, but not essential.992  Investors also were asked to rate their level of 

concern about potential conflicts of interest that their adviser might have.   Approximately 36% of 

the investors expressed concerns that their adviser might recommend investments in products for 

which its affiliate receives a fee or other compensation, while 57% were concerned that their 

adviser would recommend investments in products for which it gets paid by other sources.  In 

addition to conflicts directly related to compensation practices of financial professionals, some 

                                                                                                                                                             

989  Id.  For similar evidence, see also CCMC Letter (investor polling), supra footnote 21 (reporting that issues 
that “matter most” to investors include: “explaining fees and costs,” explaining conflicts of interest” and 
“explaining own compensation”). 

990  917 Financial Literacy Study, supra footnote 588 
991  See Proposing Release, supra footnote 5, at Section IV.A.3.c. 

992  917 Financial Literacy Study, supra footnote 588. 



 

307 

 

investors were concerned about conflicts related to the trading activity of these firms.  For 

example, more than 26% of participants were concerned that an adviser might buy and sell from 

its own account at the same time it is recommending securities to investors; and more than 55% 

of investors were also concerned about their adviser’s engaging in principal trading.  

Among those participants in the 917 Financial Literacy Study who indicated that they 

would read disclosures on conflicts of interest if made available, 48% would request additional 

information from their adviser, 41% would increase the monitoring of their adviser, and 33% 

would propose to limit their exposure of specific conflicts.  The majority of participants (70%) 

also wanted to see specific examples of conflicts and how those related to the investment advice 

provided.  

(2) Fees 

With respect to disclosures about fees, the Proposing Release also discussed the 917 

Financial Literacy Study as well as the FINRA Investor Study993 regarding the importance that 

investors place on disclosures about fees and compensation of financial professionals, and how 

those disclosures should be presented.994  Similar to the findings regarding conflicts of interest, 

the 917 Financial Literacy Study found that a majority participants indicated that disclosure of 

the fees and compensation of investment advisers was an essential element to any disclosure.995  

                                                                                                                                                             

993   FINRA Investor Education Foundation, Investors in the United States 2016 (Dec. 2016), available at 
http://www.usfinancialcapability.org/downloads/NFCS_2015_Inv_Survey_Full_Report.pdf (“FINRA 
Investor Study”).   

994  See Proposing Release, supra footnote 5, at Section IV.A.3.c. 
995   917 Financial Literacy Study, supra footnote 588. 



 

308 

 

(3) Disciplinary History  

As discussed in the Proposing Release, survey evidence in the 917 Financial Literacy 

Study indicate that knowledge of a firm’s and financial professional’s disciplinary history is 

among the most important items for retail investors deciding whether to receive financial 

services from a particular firm.996  Despite this, most investors do not actively seek disciplinary 

information for their advisers and broker-dealers.  For example, a FINRA survey in 2009, found 

that only 15% of survey respondents checked their financial professional’s background, although 

the Commission notes that the study encompasses a wide group of advisers, such as debt 

counselors and tax professionals.997  The FINRA Investor Study found that only 7% of survey 

respondents use FINRA’s BrokerCheck and approximately 14% of survey respondents are aware 

of the Investment Adviser Public Disclosure (IAPD) website.998  

C. Broad Economic Considerations 

We are adopting a requirement for broker-dealers and investment advisers and firms that are 

dually registered to deliver a relationship summary to retail investors because, as discussed in the 

baseline,999 many retail investors can be confused about their choices in the market for brokerage 

                                                                                                                                                             

996  See 917 Financial Literacy Study, supra footnote 588, at nn.311 and 498 and accompanying text 
(Approximately 67.5% of the online survey respondents considered information about an adviser’s 
disciplinary history to be absolutely essential, and about 20.0% deemed it important, but not essential, and 
“When asked how important certain factors would be to them if they were to search for comparative 
information on investment advisers, the majority of online survey respondents identified the fees charged 
and the adviser’s disciplinary history as the most important factors.”). 

997    FINRA Investor Education Foundation, Financial Capability in the United States: Initial Report of 
Research Findings from the 2009 National Survey (Dec. 1, 2009), available at 
http://www.usfinancialcapability.org/downloads/NFCS_2009_Natl_Full_Report.pdf   

998     See FINRA Investor Survey, supra footnote 993  
999  See supra Section IV.B. 



 

309 

 

and investment advisory services.  To that end, the relationship summary is meant to assist retail 

investors with both the process of deciding whether to engage or remain with a particular firm or 

financial professional and whether to establish or maintain an investment advisory or brokerage 

relationship.  Specifically, low financial literacy, lack of knowledge about the market for 

financial advice, and lack of information about important aspects of the relationship between 

particular firms and their customers or clients,1000 may harm retail investors by deterring them 

from seeking brokerage or investment advisory services even if they could potentially benefit 

from it,1001 or by increasing the risk of a mismatch between the investors’ preferences and 

expectations and the actual brokerage or advisory services they receive from a firm or 

professional.1002  To ameliorate this potential harm, the relationship summary is intended to 

reduce investor confusion and search costs in the process of (i) deciding whether to engage a 

particular firm or financial professional, (ii) whether to establish an investment advisory or 

brokerage relationship, and (iii) whether to terminate or switch the relationship or specific 

service provided.  The relationship summary is expected to provide significant benefit to retail 

                                                                                                                                                             

1000  Examples of such aspects of the relationship include the services and fees of particular firms, and conflicts 
of interest that may arise between particular firms and customers or clients.   

1001  The potential loss to investors with low financial literacy from not seeking advice is illustrated by, e.g., the 
study by Hans-Martin von Gaudecker, How Does Household Portfolio Diversification Vary with Financial 
Literacy and Financial Advice?, 70 J. FIN. 489 (2015), which showed that investors with low financial 
literacy that do not seek financial advice on average incur significantly larger losses (by more than 50 basis 
points) from underdiversification compared to investors who seek financial advice (irrespective of financial 
literacy) and investors with higher financial literacy who do not seek advice.   

1002  Studies provide results of investor misunderstanding that is consistent with some investors being at risk of 
entering into a mismatched relationship. For example, survey results in OIAD/RAND, supra footnote 3 
suggest that a non-trivial subset of retail investors may misunderstand the type of their financial 
professional, the type of services the professional offers, and how the professional is compensated.   



 

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investors by focusing their attention on salient features of their potential relationship with a 

particular broker-dealer or investment adviser and highlighting the most important elements of 

this relationship in a single, succinct, and easy-to-understand document. The relationship 

summary also allows for comparability among broker-dealers and investment advisers by 

requiring disclosures on the same topics under standardized headings in a prescribed order to 

retail investors.1003  As we discuss above in Section I, we do not believe that existing disclosures 

provide this level of transparency and comparability across investment advisers, broker-dealers, 

and dual registrants.   

Below, we discuss in more detail the nature of the potential harm faced by retail investors 

from confusion about the market for brokerage and investment advisory services.  We also 

discuss considerations involved in creating disclosures for retail investors that may reduce the 

potential for investor harm by increasing their knowledge about the market for brokerage and 

investment advisory services and facilitating their search for a firm or financial professional.1004 

                                                                                                                                                             

1003  See supra discussion in Section II.A.2.  

1004   We are extending our discussion on broad economic considerations from the Proposing Release in response 
to concerns about the economic analysis in the Proposing Releases  by commenters; see, e.g.,  Letter from 
Charles Cox, Former SEC Chief Economist, et al. (Feb. 6, 2019), available at 
https://www.sec.gov/comments/s7-07-18/s70718-4895197-177769.pdf. (“Former SEC Senior Economists 
Letter”).  The Former SEC Senior Economists Letter raised three main concerns about the economic 
analysis in the proposed Regulation Best Interest and the Proposing Release: 1) the discussion of the 
potential problems in the customer-advisor relationship was incomplete and identified other features of the 
market for ongoing retail investment advice that might be problematic; 2) there was inadequate discussion 
and analysis of the existing economic literature on financial advice; and 3) there were questions of whether 
the disclosure requirements in the proposing release would provide meaningful information for customers.  
These concerns more directly focused on the economic analysis of the proposed Regulation Best Interest.  
However, concerns 1) and 3) appear to also apply to the economic analysis of the Proposing Release to 
some extent, and we address those concerns in this economic analysis.  For instance, with respect to 1), this 
section provides a more in depth discussion compared to the Proposing Release of the harm that may arise 
when retail investors lack knowledge or are confused about the market for investment advisory and 
brokerage services, including a discussion of why additional disclosure may be useful to investors.  With 

 



 

311 

 

Academic studies have documented a multitude of potential benefits that accrue to retail 

investors as a result of seeking investment advice, including, but not limited to:  higher 

household savings rates, setting long-term goals and calculating retirement needs, more efficient 

portfolio diversification and asset allocation, increased confidence and peace of mind, facilitation 

of small investor participation, improvement in financial situations, and improved tax 

efficiency.1005  Further, financial professionals may also explain to retail investors the 

informational asymmetries between product providers and their customers.  Retail investors 

might not be able to disentangle such information asymmetries on their own.   Studies also find 

that low financial literacy is negatively associated with the propensity to seek financial 

                                                                                                                                                             

respect to 3), the discussion in this section expands on the discussion already provided in the Proposing 
Release on the potential limits to the effectiveness of disclosure to address the identified investor harm, but 
also discusses how disclosure should be designed to be effective, including how appropriately designed 
disclosures can help overcome some of the identified potential limitations of disclosure.  The latter 
discussion provides a framework that informs our analysis in Section IV.D of the anticipated economic 
impacts of the relationship summary.  In addition, the Former SEC Senior Economists Letter stated that 
“[w]e feel (preliminarily) that the new CRS forms would provide some helpful information. But we would 
far prefer for there to be evidence that the intended targets of these disclosures feel the same.”  Our 
discussion takes into account the various investor surveys and studies that were conducted after the 
Proposing Release that reported that large majorities of investors believed the relationship summary would 
help them make more informed decisions about types of accounts and services.  See, e.g., RAND 2018. 

1005  See, e.g., Mitchell Marsden, Catherine Zick, & Robert Mayer, The Value of Seeking Financial Advice, 32 J. 
FAM. & ECON. ISSUES 625 (2011); Jinhee Kim, Jasook Kwon, & Elaine A. Anderson, Factors Related to 
Retirement Confidence: Retirement Preparation and Workplace Financial Education, 16 J. FIN. 
COUNSELING & PLAN. (2005); Daniel Bergstresser, John Chalmers & Peter Tufano, Assessing the Costs 
and Benefits of Brokers in the Mutual Fund Industry, 22 REV. FIN. STUD. 4129 (2009); Ralph Bluethgen, 
Steffen Meyer, & Andreas Hackethal, High-Quality Financial Advice Wanted!, EURO. BUS. SCH., Working 
Paper, (Feb. 2008), available at 
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.596.2310&rep=rep1&type=pdf; Neal M. 
Stoughton, Youchang Wu, & Josef Zechner, Intermediated Investment Management, 66 J. FIN. 947 (2011).  
Francis M. Kinniry, et al., Putting a value on your value: Quantifying Vanguard Advisor's Alpha, 
Vanguard Research (Sept. 2016) estimates the value to investors associated with obtaining financial advice 
of approximately 3% in net returns to investors, associated with suitable asset allocation, managing expense 
ratios, behavioral coaching, alleviating home bias, among others.    



 

312 

 

advice.1006  These findings collectively suggest that retail investors of low level financial literacy 

might be harmed because they might be less likely to seek financial advice in spite of the 

potential benefit from it. 

For a retail investor who decides to enter a relationship with a financial services provider, 

a low level of knowledge about the market for financial services might reduce the investor’s 

ability to accurately identify whether any given firm or financial professional offers a type of 

relationship that matches his or her preferences and expectations.  This, in turn, increases the risk 

that the firm or financial professional is a poor match for the retail investor when compared to an 

alternative financial services provider.  A relationship that represents a poor match between an 

investor and a firm or financial professional can leave an investor worse-off, relative to a better 

match, or no match at all, because the relationship could result in a cost of services that is higher 

than the investor expects or a level or type of service that is different than the investor expects, 

such as episodic recommendations versus continuing advice.  

A retail investor might search across a set of financial service providers to find a financial 

professional that best meets his or her needs.1007  For an investor who is able to acquire 

information from the financial service providers the investor chooses to evaluate, the more 

extensive a search the investor engages in, the more likely the investor will locate a good match. 
                                                                                                                                                             

1006  For a discussion of the academic research on the role of financial literacy in seeking financial advice see, 
e.g., OIAD/RAND, supra footnote 3 at 8. 

1007  The evidence discussed in supra Section IV.B.2.a on how investors select a financial professional or firm 
suggests that a large majority of retail investors rely on personal or professional referrals, which may 
indicate that they evaluate very few, if any alternative providers. One potential reason for this reliance on 
referrals could be that investors currently perceive their search costs to be high. Another possible reason, 
among others, could be that investors value the information derived from other people’s experiences more 
than other sources of information.   



 

313 

 

However, conducting such a search is costly and requires time, effort, and access to resources.  

Investors likely balance the benefits of evaluating each additional provider against the 

incremental cost of doing so, ending their search when the expected marginal cost of the search 

is greater than the expected marginal benefit from the search.1008   Moreover, some investors 

may experience higher-level of uncertainty about the benefits or costs of a search.  For example, 

investors who are less knowledgeable about the general differences between different types of 

financial professionals, the services these professionals provide, and the factors they should 

consider in their choice, may not fully appreciate the benefits of searching for a provider that 

best meets their needs.  To the extent such investors perceive a search as burdensome because 

they underestimate the benefits of searching, they might refrain from conducting a search or 

conduct a less extensive search to learn about potential alternatives, thereby increasing their risk 

of entering a relationship with a firm or financial professional that is a poor match with their 

expectations and preferences or not engaging in a relationship even if one might be 

beneficial.1009 

                                                                                                                                                             

1008   This assumes a sequential search process, but an analogous argument can be made if an investor instead 
searches by deciding ex ante on a fixed number of alternatives to evaluate, in which case the marginal 
decisions then relates to what this number will be. See, e.g., Babur De los Santos, et al., Testing Models of 
Consumer Search Using Data on Web Browsing and Purchasing Behavior, 102 AM. ECON. REV. 2955 
(2012).  We have expanded our discussion on search costs in response to main concern 1) of the Former 
SEC Senior Economists Letter; see supra footnote 1004.   

1009    This argument assumes that less knowledgeable investors can learn at least some information from 
engaging in an initial search or a continued search that could be used to evaluate fit (albeit imperfectly so).  
If less knowledgeable investors cannot learn from a search at all, the choice of a firm or financial 
professional becomes similar to a random draw and a search, no matter how extensive, will not decrease the 
risk of a mismatch.   



 

314 

 

General trust (in the sense of confidence) in financial markets can help alleviate certain 

behavioral biases and encourage participation in, for example, the stock market.1010  Trust at an 

interpersonal level may be less beneficial in certain circumstances.  Research suggests that lower 

financial literacy among investors is positively associated with higher personal trust in their 

financial professionals.1011  However, to the extent retail investors substitute trust for knowledge 

in their relationship with a financial professional, overreliance on trust may induce some 

investors to maintain a mismatched relationship longer than they otherwise would if they had 

higher financial literacy and a better understanding of the costs and benefits of the financial 

advice they receive from the professional, as well as awareness of alternative services or 

providers.1012  That is, particularly for less-knowledgeable investors, a high level of trust in a 

particular financial professional or firm may exacerbate the potential harm of a mismatched 

relationship.  Similarly, some retail investors that select a firm or financial professional based on 

                                                                                                                                                             

1010  See, e.g., the literature review in discussion in OIAD/RAND, supra footnote 3, at 11. 

1011  See, e.g., Thomas Pauls, Oscar Stolper, & Adreas Walter, Broad-Scope Trust and Financial Advice, 
Working Paper (Nov. 2016), available at https://www.researchgate.net/publication/314235638_Broad-
scope_trust_and_financial_advice.  

1012  We acknowledge commenters’ concerns that higher financial literacy and more disclosures alone may not 
fully address the risk that retail investors would rely on trust in their financial services providers over other 
factors, such as knowledge about financial services industry participants, practices and products. See CFA 
Letter I (“We’ve seen anecdotal evidence in our own personal encounters with investors of their tendency 
to trust their “financial adviser” without actually verifying how or how much they are paying or how their 
investments are performing.  Even investors who would be considered sophisticated by any reasonable 
measure can exhibit a level of trust and confidence in their financial professional that isn’t based on data.  
Any disclosures about their financial professional’s services, duties, costs, and conflicts are unlikely to 
change those views”); AARP Letter (“Recent behavioral science studies have shown that disclosures are 
largely ineffective because they tend to increase conflict in advisers and make the investor more likely to 
trust the adviser and thus follow biased advice”); see also Regulation Best Interest Release, supra footnote 
47, (discussing how that rulemaking addresses the limitations of disclosure for customers of broker-
dealers). 



 

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referrals from friends and family may do so solely on the basis of a high level of trust in these 

referring parties.1013 This can exacerbate the potential harm of a mismatched relationship in 

particular for less sophisticated investors and/or for investors who relied on referrals from less 

financially sophisticated parties.1014 

Further, investors may endure a mismatched relationship for a longer period of time than 

they would absent switching costs, including the cost of a new search and any transaction costs 

involved in moving assets from one firm to another.  These costs lower a retail investor’s 

incentive to look for a new firm or financial professional even if the current relationship turns out 

to be a poor match.  Both overreliance on trust and the presence of switching costs increase the 

ex-ante value of avoiding a mismatched relationship in the first place. 

Retail investors could increase their knowledge about the market for brokerage and 

investment advisory services, and thereby engage in a more efficient search, by accessing 

information and disclosures currently provided directly by firms or available in a number of 

existing regulatory forms and platforms.  Current sources of information include, among others, 

Form ADV (and IAPD) and BrokerCheck.1015  However, because existing disclosures are made 

on multiple and sometimes lengthy forms, and are obtained in different ways, it can be difficult 

                                                                                                                                                             

1013  We recognize that trust is not the only reason to rely on referrals; for example, there is informational value 
in other people’s personal experiences. 

1014        See supra Section IV.B.2.a for survey evidence on the role of personal referrals in retail investors’ choice of 
financial professionals. 

1015  See Proposing Release, supra footnote 5, at n.280.  Investment advisers and broker-dealers may also 
provide additional information to retail investors through the firm’s website and the retail investor’s 
account agreement.  Additionally, investment advisers and broker-dealers may provide information to retail 
investors through marketing materials (e.g., brochures) and other customer communications (e.g., fee 
schedules). 



 

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for investors to grasp the most important features of the financial services from reading these 

materials.1016   In addition, the information available to retail investors about broker-dealers on 

BrokerCheck does not include the same information that investment advisers provide in the 

Form ADV brochure and brochure supplement, which makes direct comparisons between 

broker-dealers and investment advisers more difficult.   

Voluntary disclosures and educational efforts made by financial services providers such 

as broker-dealers and investment advisers can potentially inform investors about the specific 

relationships they can have with providers and the types of services providers offer, but also 

about the overall market for financial advice and the different types of service providers and 

relationships available in the market.  And such voluntary disclosure could, in principle, facilitate 

investor search.  However, financial services providers may lack incentives to voluntarily 

disclose salient information or make the effort needed to educate investors about the various 

alternatives available to them because it is costly to do so.  In addition to the costs of producing 

disclosures and training employees to deliver disclosures, providers may also perceive a risk that 

competitors would take advantage of disclosed information.  Furthermore, disclosures that are 

not tailored to the provider and have more general educational value to retail investors have the 

features of a public good.  If providers rely on their competitors to educate potential clients 

generally about the market for financial advice, there is an inefficiently low level of general 

educational material available to investors.  Underprovision might occur even if such disclosures, 
                                                                                                                                                             

1016  There is some evidence suggesting investors are not reading current disclosures. For example, RAND 2018 
reports that 13% of surveyed investors said that they had viewed Form ADV (11% said they viewed both 
an ADV and broker account opening document, 2% had only reviewed Form ADV). RAND 2018, supra 
footnote 13. 



 

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were they to be provided, would increase the overall efficiency of the market for financial advice 

and thus benefit financial services providers as a group in the long run, for example, by 

sufficiently reducing confusion among the general investing public that more investors are 

willing to search for a financial services provider.  

Additionally, some broker-dealers and investment advisers may even privately gain from 

a lack of knowledge among retail investors to the extent they profit from attracting and retaining 

customers and clients who would be a better match with another provider.1017  For example, a 

customer of a broker-dealer who has a preference for active investing may actually be better off 

being a client of an investment adviser and paying a fixed percentage of assets per year as a fee 

for the advice instead of broker commissions each time she receives a recommendation that 

results in a transaction.  However, this investor is likely a profitable customer for the broker-

dealer.  Similarly, a client of an investment adviser who prefers buy-and-hold investments in a 

few index funds could potentially be better off in a relationship with a broker-dealer, by only 

paying a few one-time sales charges and commissions instead of a recurring percentage fee on 

the assets, which is likely more profitable to the investment adviser.  In both of these cases, the 

firm has little incentive to provide the investor with information about available advice 

relationships that could persuade the investor to seek advice elsewhere or to switch to a different 

business line. 

                                                                                                                                                             

1017         See, e.g., CFA Letter I (stating that “[t]he problem is that investors are being misled into relying on biased 
sales recommendations as if they were objective, best interest advice and that they are suffering significant 
financial harm as a result. Investor confusion is relevant only because it limits the tools the Commission 
has available to address that harm…”).  



 

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In the presence of the frictions described above, requiring firms and financial 

professionals to furnish a short summary disclosure like Form CRS can benefit retail investors by 

reducing information asymmetry between investors and firms and financial professionals and 

turning investor attention to more salient aspects of a firm and its services.  In addition, as 

discussed above, no current required disclosure allows for comparability among broker-dealers 

and investment advisers by requiring disclosures on the same topics under standardized headings 

in a prescribed order to retail investors.  A reduction in information asymmetry and improved 

comparability may reduce search costs for investors and increase their understanding about 

differences in offered relationships across firms and financial professionals, thereby reducing the  

risk of investors’ hiring a provider that is a poor match for their needs.  However, for the 

relationship summary to be effective for retail investors it must be understandable.  Studies have 

found that the format and structure of disclosure may improve (or decrease) investor 

understanding of the disclosures being made.1018  We discuss these studies below. 

Some commenters questioned the general efficacy of disclosure in the context of 

investment advice to retail investors.1019  We do not share this view.  As we discussed above, we 

                                                                                                                                                             

1018     See, Justine S. Hastings & Lydia Tejeda-Ashton, Financial Literacy, Information, and Demand Elasticity: 
Survey and Experimental Evidence from Mexico, NBER Working Paper 14538 (Dec. 2008) (finding that 
providing fee disclosures to Mexican investors in peso rather than percentage terms caused financially 
inexperienced investors to focus on fees); see Richard G. Newell & Juha Siikamaki, Nudging Energy 
Efficiency Behavior, Resources for the Future Discussion Paper 13-17 (Jul. 10, 2013) (finds that providing 
dollar operating costs in simplified energy efficiency labeling significantly encouraged consumers to 
choose higher energy efficiency appliances, while another related study presents similar evidence from 
payday loans).  

1019  See, e.g., AARP Letter (stating that “[r]ecent behavioral science studies have shown that disclosures are 
largely ineffective because they tend to increase conflict in advisers and make the investor more likely to 
trust the adviser and thus follow biased advice”); Comment Letter of Economic Policy Institute (Aug. 7, 
2018) (“EPI Letter”) (stating that “Disclosure requirements can be onerous, and disclosure may not only be 

 



 

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believe a short summary disclosure like Form CRS can provide benefits to retail investors. 

However, as we also discussed in the Proposing Release,1020 we recognize that there may be 

limits to the efficacy of disclosure in some circumstances.  For example, the documented low 

level of financial sophistication of many retail investors can make it harder for them to process 

the implications of disclosure.1021  Another limitation of the efficacy of disclosure documented in 

research is that investors may have various behavioral biases, such as anchoring1022 and over-

confidence,1023 which could affect how the disclosed information is interpreted.1024  This could in 

turn lead investors to misinterpret, under-weight, or over-weight the implications of disclosures.  

                                                                                                                                                             

ineffective, but counterproductive. For example, detailed disclosures can serve to bury important 
information, or disclosure of conflicts can be interpreted by consumers as evidence of honesty. Disclosure 
can make sellers more comfortable recommending products and services that are not in buyers’ best 
interests, and it can make clients less comfortable rejecting these recommendations at the risk of giving 
offense”).  

1020  See Proposing Release, supra footnote 5, at Section IV.B.1. 

1021 See, e.g., L.E. Willis, Decision making and the limits of disclosure: The problem of predatory lending: 
Price, 65 MD. L. REV. 707 (2006) (“Willis Study”). Commenters discussed similar issues, see, e.g., 
Comment Letter of Charles Ryan (Aug. 7, 2018); CFA Letter I; American Investment Council Letter. 

1022      Anchoring bias implies undue reliance on a particular information signal at the expense of other signals. 
See, e.g., Robert A. Prentice, Moral Equilibrium: Stock Brokers and the Limits of Disclosure, 2011 WIS. L. 
REV. 1059, at 1083 (2011) (explaining “people tend to anchor on the first information they receive, and 
then revise their judgments in the face of new information, but to an insufficient degree”).   

1023  Over-confidence bias implies over-estimation of probabilities of certain outcomes over objective 
probabilities. Id., at 1072, explains that “studies indicate that people tend, in mathematically impossible 
percentages, to believe that they are above average in driving, auditing, and teaching.”  

1024    See, e.g., Jorgen Vitting Anderson, Detecting Anchoring in Financial Markets, 11 J. BEHAV. FIN. 129 
(2010).  



 

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Limited attention problems can also impede investors’ ability to effectively process the 

implications of some disclosures.1025 

In addition, academic studies find that sometimes certain disclosures may result in 

unintended consequences.  In particular, existing research has found that conflict of interest 

disclosures can increase the likelihood that the disclosing party would act on the conflict of 

interest.1026  This bias can be caused by “moral licensing,” a belief that the disclosing party has 

already fulfilled its moral obligations in the relationship and therefore can act in any way 

(including to the customer’s detriment), or it can be caused by “strategic exaggeration,” aimed at 

compensating the disclosing party for the anticipated loss of profit due to the disclosure.  

Experimental evidence also suggests that disclosure could turn some clients or customers into 

“reluctant altruists.”1027  For example, if financial professionals disclose that they earn a referral 

fee if a customer enrolls in a program, the customer may implicitly feel that they are being asked 

to help their financial professional receive the fee.  One study also found evidence that disclosure 

of a professional's financial interests (particularly in face-to-face interactions) can induce a 

“panhandler effect,” whereby customers may face an implicit social pressure to meet the 

                                                                                                                                                             

1025  See, e.g., David Hirshleifer & Siew Hong Teoh, Limited Attention, Information Disclosure, and Financial 
Reporting, 36 J. ACCT. & ECON. 337 (2003) (“Hirshleifer and Teoh Study”). 

1026     See, Daylian M. Cain, George Loewenstein, & Don A. Moore, The Dirt on Coming Clean: Perverse Effects 
of Disclosing Conflicts of Interest, 34 J. LEGAL STUD. 1 (2005) (“Cain 2005 Article”); Daylian M. Cain, 
George Loewenstein & Don A. Moore, When Sunlight Fails to Disinfect: Understanding the Perverse 
Effects of Disclosing Conflicts of Interests, 37 J. CONSUMER RES. 836 (2011); Bryan K. Church & Xi 
(Jason) Kuang, Conflicts of Disclosure and (Costly) Sanctions: Experimental Evidence, 38 J. LEGAL STUD. 
505 (2009); Christopher Tarver Robertson, Biased Advice, 60 EMORY L.J. 653 (2011).  These papers study 
conflicts of interest in general, experimental settings, not specialized to the provision of financial advice.   

1027     See Jason Dana, Daylian M. Cain, & Robyn M. Dawes, What You Don’t Know Won’t Hurt Me: Costly (but 
Quiet) Exit in Dictator Games, 100 ORGANIZATIONAL BEHAV. & HUM. DECISION PROCESSES 193 (2006).321 

 

professional's financial interests.1028  The above literature indicates that conflicts of interest 

disclosures may interact with psychological biases to produce unintended effects that undermine 

the intended benefits of the disclosures.  However, these studies also suggest certain factors that 

may mitigate the unintended consequences.  For example, in the case of the “panhandler effect,” 

researchers have found that distancing the client or customer from the financial professional 

either in the decision or disclosure phase can dampen this effect.1029   

Academic research has identified a set of characteristics that may increase the 

effectiveness of a disclosure document to consumers.  These characteristics, discussed below, 

frame our analysis of the economic impacts of the proposed rule.1030 

Studies have found that the structure or format of disclosure may improve (or decrease) 

investor understanding of the disclosures being made.1031  Every disclosure document not only 

presents new information to retail investors but also provides a particular structure or format for 

this information that affects investors’ evaluation of the disclosure.1032  This “framing effect” 

could lead investors to draw different conclusions depending on how information is presented.  

                                                                                                                                                             

1028  Sunita Sah, George Loewenstein, & Daylian M. Cain, The Burden of Disclosure: Increased Compliance 
With Distrusted Advice, 104(2) J. PERSONALITY & SOC. PSYCHOL. 289-304 (2013).  

1029     See id. 

1030      See George Loewenstein, Cass R. Sunstein, & Russell Golman, Disclosure: Psychology Changes 
Everything, 6 ANN. REV. ECON. 391 (2014). The paper provides a comprehensive survey of the literature 
relevant to disclosure regulation.    

1031  To that end, in order to facilitate more effective processing of disclosures by investors, some commenters 
emphasized the need to incorporate “design thinking” into the structure of the relationship summary. See, 
e.g., Fidelity Letter.  See also supra footnotes 58–59. 

1032  See Amos Tversky & Daniel Kahneman, The Framing of Decisions and the Psychology of Choice, 211 SCI. 
453 (1981).  



 

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For example, if the disciplinary history information is presented first, it could affect the way 

investors perceive all subsequent disclosures in the relationship summary and, possibly, discount 

more heavily the information provided by firms with disciplinary history relative to firms with 

no disciplinary history.  If, instead, disciplinary history information were provided at the end of 

the relationship summary, the effect of the information could be moderated because it would no 

longer frame the other information provided to investors.  Because of such framing effects, it is 

important that the structure of a disclosure document supports the intended purpose of the 

disclosure. 

Because individuals can exhibit limited ability to absorb and understand the implications 

of the disclosed information, for example due to limited attention or low level of 

sophistication,1033 more targeted and simpler disclosures may be more effective in 

communicating information to investors than more complex disclosures.  Academic studies 

suggest that costs, such as increased investor confusion or reduced understanding of the key 

elements of the disclosure, are likely to increase as disclosure documents become longer, more 

convoluted, or more reliant on narrative text.1034  Consistent with such findings, other empirical 

evidence suggests that disclosure simplification may benefit consumers of disclosed 

information.1035  In general, academic research appears to support the notion that shorter and 

                                                                                                                                                             

1033  See, e.g., Hirshleifer and Teoh Study, supra footnote 1025; and Willis Study, supra footnote 1021.  

1034  See, e.g., Samuel B. Bonsall & Brian P. Miller, The Impact of Narrative Disclosure Readability on Bond 
Ratings and the Cost of Debt, 22 REV. ACCT. STUD. 608 (2017) and Alistair Lawrence, Individual Investors 
and Financial Disclosure, 56 J. ACCT. & ECON. 130 (2013); see also CCMC Comment Letter. 

1035    See, e.g., Sumit Agarwal, et al., Regulating Consumer Financial Products: Evidence from Credit Cards, 
NBER Working Paper No. 19484 (Jun. 2014), available at https://www.nber.org/papers/w19484 (finding 

 



 

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more focused disclosures could be more effective at increasing investors understanding than 

longer, more complex disclosures.  

Another characteristic of effective disclosures documented in academic research is 

disclosure salience.1036  Salience detection is a key feature of human cognition allowing 

individuals to focus their limited mental resources on a subset of the available information and 

causing them to over-weight this information in their decision making processes.1037  Within the 

context of disclosures, information disclosed to promote greater salience, such as information 

presented in bold text, or at the top a page, would be more effective in attracting attention than 

less saliently disclosed information, such as information presented in a footnote.     Limited 

attention among individuals also increases the importance of focusing on salient disclosure 

signals.  Some research finds that more visible disclosure signals are associated with stronger 

stakeholder response to these signals.1038  Moreover, research suggests that increasing signal 

salience is particularly helpful in reducing limited attention of consumers with lower education 

                                                                                                                                                             

that a series of requirements in the Credit Card Accountability Responsibility and Disclosure Act (CARD 
Act), including several provisions designed to promote simplified disclosure, has produced substantial 
decreases in both over-limit fees and late fees, thus saving U.S. credit card users $12.6 billion annually).  

1036   This is a view also supported by commenters. See, e.g., AARP Letter (“A good disclosure statement will 
highlight the information most important to the consumer.”). 

1037      Daniel Kahneman, THINKING, FAST AND SLOW (2013).  Susan Fiske & Shelley E. Taylor, SOCIAL 
COGNITION: FROM BRAINS TO CULTURE (3rd ed. 2017).  

1038 See Hirshleifer and Teoh Study, supra footnote 1025. Commenters also addressed the benefit of visible 
disclosure signals. For example, the Fidelity Letter refers to Stanford Law School Design Principles stating 
“[u]se visual design and interactive experiences, to transform how you present legal info to lay people.”  
Also, Kleimann II states that “[f]or good design, we want to build upon this tendency by identifying the key 
questions investors should or are likely to ask and featuring them prominently in the text, thus easing the 
cognitive task for readers….” Kleimann II, supra footnote 19.    



 

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levels and financial literacy.1039  There is also empirical evidence that visualization improves 

individual perception of information.1040  For example, one experimental study shows that 

tabular reports lead to better decision making and graphical reports lead to faster decision 

making (when people are subject to time constraints).1041  Overall these findings suggest that 

problems such as limited attention may be alleviated if key information in Form CRS is 

emphasized, is reported closer to the beginning of the document, and is visualized in some 

manner.  This is also consistent with the recommendation of several commenters.1042  However, 

it is also important to note that given a choice, registrants may opt to emphasize elements of the 

disclosure that are most beneficial to themselves rather than investors, while deemphasizing 

elements of the disclosure that are least beneficial to them.  As discussed further in the economic 

analysis below and discussions above, the final instructions of the relationship summary include 

requirements that are designed to mitigate this risk.  For example, the final instructions require 

standardized headers in a prescribed order, certain other prescribed language (including for the 

required conversation starters), page limits, and certain text features, which mitigate providers’ 

incentives to behave opportunistically. 

                                                                                                                                                             

1039  See, e.g., Victor Stango & Jonathan Zinman, Limited and Varying Consumer Attention: Evidence from 
Shocks to the Salience of Bank Overdraft Fees, 27 REV. OF FIN. STUD. 990 (2014). 

1040  See John Hattie, VISIBLE LEARNING. A SYNTHESIS OF OVER 800 META-ANALYSES RELATING 
TO ACHIEVEMENT (2008). 

1041  See Izak Benbasat & Albert Dexter, An Investigation of the Effectiveness of Color and Graphical 
Information Presentation Under Varying Time Constraints, 10-1 MIS Q. 59 (1986).  However, one 
commenter noted that participants in the RAND 2018 qualitative interviews did not appear to process side-
by-side tabular disclosures effectively.  See Schwab Letter II.  

1042  See, e.g., CFA Letter I; Morgan Stanley Letter.  



 

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There is also a trade-off between allowing more disclosure flexibility and ensuring 

disclosure comparability (e.g., through standardization).1043  Greater disclosure flexibility 

potentially allows the disclosure to reflect more relevant information, as disclosure providers can 

tailor the information to firms’ own specific circumstances.1044  Although disclosure flexibility 

allows for disclosure of more decision-relevant information, it also allows registrants to 

emphasize information that is most beneficial to themselves rather than investors, while 

deemphasizing information that is least beneficial to the registrants.  Economic incentives to 

present one’s services in better light may drive investment advisers and broker-dealers to 

deemphasize information that may be relevant to retail investors.1045   Moreover, although 

standardization makes it harder to tailor disclosed information to a firm’s specific circumstances, 

it also comes with some benefits.  For example, people are generally able to make more coherent 

and rational decisions when they have comparative information that allows them to assess 

relevant trade-offs.1046  The final rules are intended to strike a balance between the relative 

                                                                                                                                                             

1043  See CFA Institute Letter I.  

1044 See, e.g., Cambridge Letter; FSI Letter I; Mutual of America Letter; Northwestern Mutual Letter; SIFMA 
Letter; Vanguard Letter; Primerica Letter; TIAA Letter. 

1045  Commenters had similar concerns, see, e.g., EPI Letter; Regulatory Impact Analysis, supra footnote 853; 
CFA Letter I. 

1046      See, e.g., JR Kling, et al., Comparison Friction: Experimental Evidence from Medicare Drug Plans, 127 Q. 
J. ECON. 199 (2012) (finding that in a randomized field experiment, in which some senior citizens choosing 
between Medicare drug plans that were randomly selected to receive a letter with personalized, 
standardized, comparative cost information (“the intervention group”) while another group (“the 
comparison group”) received a general letter referring them to the Medicare website; plan switching was 
28% in the intervention group, but only 17% in the comparison group, and the intervention caused an 
average decline in predicted consumer cost of about $100 a year among letter recipients); CK Hsee, et al., 
Preference Reversals Between Joint and Separate Evaluations of Options: A Review and Theoretical 
Analysis, 125 PSYCHOL. BULL. 576 (1999).  



 

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benefits and costs of disclosure standardization versus disclosure flexibility; for example, by 

requiring standardized headings and a prescribed order of topics but allowing some flexibility in 

the firm’s own wording and the order of presentation within each topic. 

D. Economic Effects of the Relationship Summary  

1.  Retail Investors 

a. Overall Anticipated Economic Effects of Form CRS 

Overall, we expect that these final rules requiring firms to deliver a relationship summary 

will benefit retail investors in several ways, including by reducing information asymmetry 

between investors and firms (and their financial professionals), reducing search costs and 

facilitating easier comparisons between and among brokerage and investment advisory firms, 

and increasing understanding of, and confidence in, the market for financial services more 

generally.   

First, in the specific context of a retail investor considering a firm or financial 

professional, the relationship summary will reduce the information asymmetry between the 

investor and the firm or professional by increasing transparency to that investor about a firm’s 

services, fees, conflicts of interest, standard of conduct, and disciplinary history.1047  Some—

though not all—of this information is currently available in the marketplace.  The relationship 

summary, however, will require all firms to provide information on these topics in one summary 

disclosure, which will be available on firms’ websites, if they have one, at BrokerCheck and 

                                                                                                                                                             

1047  These aspects of the relationship summary are consistent with, for example, the disclosure items identified 
in the 917 Financial Literacy Study as essential for retail investors: adviser’s fees (76%), disciplinary 
history (67%), adviser’s conflicts of interest (53%), and adviser’s methodology in providing advice (51%); 
see 917 Financial Literacy Study, supra footnote 588. 



 

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IAPD, and through Investor.gov.  Current disclosure requirements do not provide this level of 

transparency and comparability for both broker-dealers and investment advisers.  In addition, 

through the use of layered disclosure, the relationship summary will facilitate investors’ access to 

additional, more detailed, information.  The relationship summary is also the first narrative 

disclosure for broker-dealers’ retail customers that will be filed with the Commission and widely 

available to the public.  We believe providing this overview of information in one place will 

enhance the accessibility of this information for the retail investor reviewing it relative to the 

baseline.  Moreover, some information, such as the payments to financial professionals, is not 

currently required to be publicly disclosed, making that information available for the first time. 

The relationship summary may also benefit investors by helping them separate “hard” 

information about services and fees from marketing communications.  To the extent the 

relationship summary will be effective at informing retail investors,1048 it should improve their 

ability to assess whether a relationship offered by a particular firm is a good match with their 

preferences and expectations.  Moreover, a reduction in information asymmetry may also help 

retail investors increase the value from any given relationship they enter with a firm or financial 

professional by potentially increasing their ability to monitor the relationship and to make more 

informed decisions related to the relationship during its duration, including whether to terminate 

the relationship.  

                                                                                                                                                             

1048   As discussed supra, in Sections I and II, we commissioned the RAND 2018 report and received several 
surveys and studies provided by commenters.  See supra footnotes 13-21 and accompanying text. Results 
of the RAND 2018 survey and other surveys or studies submitted to the comment file indicate that survey 
and study participants indicated their subjective view that a relationship summary would be useful for retail 
investors; see supra Section I and IV.B.3.b. 



 

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Second, Form CRS will provide benefits to those retail investors that want to compare 

more than one provider or service, including those that want to compare brokerage and advisory 

services, relative to the baseline.  Form CRS is distinct from other required disclosures as it is a 

standardized disclosure to retail investors that is broadly uniform between investment advisers 

and broker-dealers, or that requires dual registrants to describe both brokerage and advisory 

services.  In facilitating this comparability, the relationship summary may promote competition 

between financial service providers along dimensions such as fees, costs, and conflicts, in ways 

that improve retail investor welfare.  The comparative benefits discussed above could increase 

further should third-party data aggregators enter the market and use the information disclosed in 

relationship summaries to provide consolidated data on firms, as search and processing costs 

could be reduced even further for retail investors.1049   

Third, we also believe that requiring all broker-dealers and investment advisers that serve 

retail investors to provide a relationship summary, along with the other initiatives we are 

adopting, will increase understanding of, and confidence in, the market for financial advice more 

generally.  Specifically, because of confusion about the market for brokerage and advisory 

services or a general lack of confidence in the market, some retail investors are potentially 

discouraged from seeking a relationship with a financial provider and do not participate in the 

market for financial services.1050  The relationship summary may help spread awareness and 

understanding about the market for financial services by increasing transparency about the 
                                                                                                                                                             

1049  The requirement that the headings should be machine-readable may facilitate such entry by third-party data 
aggregators.  

1050   See, e.g., OIAD/RAND, supra footnote 3, for a review of the academic evidence on such effects. 



 

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services, fees, conflicts and standard of conduct of financial professionals; reducing confusion 

among investors generally; and increasing the general level of confidence.  This general increase 

in understanding and confidence should, in turn, make it more likely that investors participate in 

the market for financial services when participation is likely to benefit them.  

Some commenters suggested the general benefits to investors of the proposed 

relationship summary would be limited.1051  More specifically, several commenters were 

concerned that retail investors may be subject to information overload from reading the 

relationship summary, reducing the potential benefits to investors because of the cognitive costs 

of digesting the information.1052
  We acknowledge that there are limits to investor cognition with 

respect to lengthy and detailed disclosures,1053 however the relationship summary is shorter and 

more concise than disclosures currently available to investors, which should reduce the 

likelihood of information overload.  Moreover, we have modified the relationship summary from 

the proposal to further streamline and shorten it, and minimize the use of legal or technical 

jargon, thereby further reducing the potential that the relationship summary poses a cognitive 

burden for retail investors that undermines the overall benefit of the disclosure.  

                                                                                                                                                             

1051  See, e.g., CFA Letter I and EPI Letter. 

1052  Such concerns are raised in, e.g., AARP Letter; ACLI Letter; Rhoades Letter. Relatedly, some commenters 
argued that the relationship summary is duplicative of other disclosures and is unnecessary.  See, e.g., supra 
footnote 33. 

1053  See supra footnote 1034 and accompanying text.  



 

330 

 

We also recognize that the relationship summary, as with other required disclosures, has 

costs.1054  For example, as discussed above, there is a risk that disclosure of conflicts of interest 

can actually increase costs to investors by, for example, providing a perceived “moral license” to 

financial professionals to act on disclosed conflicts and encourage them to provide more 

conflicted advice at the expense of investors.1055  In addition, some commenters expressed a 

belief that the disclosures in the proposed relationship summary, particularly due to the 

prescribed wording, may increase investor confusion1056 or may “create misimpressions, and 

may even constitute outright misstatements, inaccuracies, or misrepresentations” in certain 

contexts.1057  In consideration of these comments, the final requirements for Form CRS permit 

firms, within the parameters of the instructions, largely to describe their services, investment 

offerings, fees, and conflicts of interest using their own wording.  The final requirements also 

incorporate many other changes in response to commenters’ concerns and suggestions and 

insights from investor surveys and roundtables, which are intended to increase the benefits and 

reduce the costs to investors relative to the proposed disclosure.  Additionally, as with required 

disclosures generally, we recognize that the relationship summary alone likely would not fully 

alleviate investor confusion or risk of mismatched relationships in the marketplace.   

                                                                                                                                                             

1054  See the discussion on the limits and potential costs of disclosures to retail investors in supra Section IV.C.  

1055        Some commenters raised similar concerns.  See, e.g., CFA Letter I. 

1056  See, e.g., Financial Planning Coalition Letter (expressing concern that Form CRS may exacerbate investor 
confusion).  See supra footnotes 77 and 80 and accompanying text. 

1057  Committee of Annuity Insurers Letter.  See supra footnotes 76–81 and accompanying text. 



 

331 

 

Moreover, firms may attempt to pass through some of the direct compliance costs we 

discuss further below to retail investors, for example, by charging higher commissions, asset-

based management fees, or other fees.  However, we believe such pass through of costs is likely 

to be limited because we expect these direct expenses to be relatively small in the context of the 

overall size of the brokerage and investment advisory industries.1058  Additionally, to the extent 

the relationship summary may promote competition between financial service providers, as 

discussed above, any increase in competition both among and between broker-dealers and 

investment advisers could reduce the pricing power of firms, and thereby reduce the ability to 

pass through the compliance costs associated with the relationship summary. 

The magnitude of the anticipated economic effects discussed above will depend on a 

number of factors, including the extent to which the relationship summary will increase investors’ 

understanding about their potential or current relationships with firms and financial professionals, 

and in what ways such an increase in understanding would affect their behavior.  Given the 

number and complexity of assumptions that would be required to be able to estimate how the 

relationship summary will affect investors’ understanding and their decision-making, and the 

lack of data on relevant characteristics of individual firms and their prospective and existing 

retail investors, the Commission is not able to meaningfully quantify the magnitude of these 

anticipated economic effects. 

We discuss the benefits and costs to retail investors of certain elements of the relationship 

summary requirements below, including requirements regarding length and presentation, 

                                                                                                                                                             

1058  See infra Section IV. D.2.b.(4) for a summary of estimates of certain compliance costs developed for the 
purpose of the Paperwork Reduction Act analysis.     



 

332 

 

standardization, content (including layered content), delivery, and filing.  As part of these 

discussions, we also discuss certain changes from the proposal and how we anticipate those 

changes affect the benefits and costs of the final relationship summary relative to the proposed 

requirements. 

b. Presentation and Format    

The presentation and format of the relationship summary are designed to facilitate retail 

investors’ processing of the provided information to help them compare information about firms’ 

relationships and services, fees and costs, specified conflicts of interest and standards of conduct, 

and disciplinary history, among other things.  The relationship summary is also designed to 

promote effective communication between firms and their retail investors.  Several features of 

the relationship summary should reduce some of the limitations discussed above that may 

undermine the efficacy of disclosures, such as cognitive limitations and disclosure overload, as 

discussed further below.   

The magnitude of the anticipated benefits and costs to retail investors discussed below 

will depend on a number of factors, including the extent to which the presentation and formatting 

requirements for the relationship summaries will help increase investors’ understanding about 

the content of the relationship summaries, and in what ways such an increase in understanding 

would affect their behavior. 

(1) Length and Amount of Information 

Unlike many other required disclosures by financial firms, the relationship summary has 

a page limit.  We believe that limiting the disclosure length and prescribing certain elements of 

the relationship summary’s content could benefit investors relative to the baseline by forcing 

firms to provide concise and clear investor-relevant information, thereby reducing information 



 

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overload and increasing the likelihood that investors will focus their attention on the relationship 

summary.  The optimal length of the relationship summary for investors may vary from investor 

to investor based on  individual limits to attention and ability to process a lengthier document, 

though investor and commenter feedback indicated many investors preferred a relationship 

summary no longer than, and in some cases shorter than, what was proposed.1059  We have also 

reduced the page limit for standalone broker-dealers’ and standalone investment advisers’ 

relationship summaries from four to two, thereby potentially increasing the benefits of a shorter 

document relative to the proposal. 

However, we recognize that there are potential costs to requiring a page limit.1060  For 

example, as pointed out by commenters, a prescribed page limit may make it more difficult for 

some firms to effectively describe the nature or range of the relationships and may prompt them 

to exclude details that investors might find important.1061  To the extent the provided disclosure 

becomes too abbreviated it may confuse investors rather than inform them about the relationship, 

which could increase search costs and increase the risk of a mismatched relationship relative to 

the baseline.  The relationship summary includes several elements to mitigate the potential costs 

of providing less comprehensive information by utilizing layered disclosure, which includes 

encouraging, and in some cases requiring, hyperlinks to additional information and other textual 
                                                                                                                                                             

1059  For example, 57% of RAND 2018 survey respondents indicated that the relationship summary was too 
long, 41% said it was about right, and roughly 2% said it was too short.  RAND 2018, supra footnote 13.  
See also supra footnotes 129–139. 

1060  Just as reducing the maximum page length from four to two for standalone broker-dealers and investment 
advisers could increase the benefits relative to the proposal; this change could also increase these costs 
relative to the proposal. 

1061  See supra Section II.A.2 for examples of commenters raising this concern.  



 

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features, such as hovers, to provide descriptions or definitions of terms.1062  The relationship 

summary also includes conversation starters that are designed to elicit more substantial 

conversations on certain topics.  Such conversations could further mitigate the costs of less 

comprehensive information by encouraging the providers to elaborate on topics that investor may 

find confusing.  

Finally, we believe that allowing only the required and permitted information will 

promote standardization of the information presented to retail investors, minimize information 

overload, and allow retail investors to focus on information that we believe is particularly helpful 

in deciding among firms.  However, we acknowledge that the potential cost of this level of 

standardization is that firms will not be able to include other information that might also be 

helpful to investors. 

(2) Organization of Information and Text Features 

As discussed above, academic research has documented how individual perceptions of 

information can change depending on the framing of the information.1063  The relationship 

summary’s requirement to use standardized questions as headings should help retail investors 

frame the information that follows the question by establishing sufficient context and increasing 

salience of the information presented.1064  

                                                                                                                                                             

1062  See generally supra Section II.A.4 for examples of graphical features encouraged by the Relationship 
Summary instructions.   

1063  See supra footnote 1032 and accompanying text.  

1064  The proposal had required headings to frame the information, but did not require they be in the form of 
questions.  See supra Section II.A.2 for a discussion of comments related to the question-and-answer 
format, including its potential utility to investors’ understanding, and our decision to require this format. 



 

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The final instructions include an instruction encouraging the use of electronic and 

graphical features in the relationship summary.1065  Additionally, the relationship summary 

requires the use of text features for certain information, such as the conversation starters, which 

should increase the salience of this particular information and increase the likelihood that 

investors will review it.  Based on academic research on disclosure readability,1066 we believe the 

use of text features, whether voluntary or required, will facilitate retail investors’ absorption of 

the provided information.  Additionally, certain electronic features, such as embedded hyperlinks 

and hovers, should facilitate retail investors’ access to additional information if they are 

interested, thereby reducing their costs in locating the information.    

We recognize that because we are encouraging, but not requiring, firms to use graphical 

and electronic features, some firms might not use text features beyond what is required, 

potentially reducing their use and the attendant benefits.  We believe, however, that providing 

some flexibility in design to firms may provide a benefit to retail investors, because firms 

competing for retail investors likely have incentives to use graphical and electronic features to 

enhance the retail investor’s experience.  Moreover, flexibility also allows firms to continuously 

improve their use of graphical and electronic features as they learn over time what features are 

the most effective.  We recognize, however, that one potential cost of allowing this flexibility is 

that firms may also have incentives to use certain text features to increase the salience of the 

                                                                                                                                                             

1065  For a non-exclusive list of features the instructions encourage firms to use, see supra Section II.A.3  Some 
features are exclusive to electronic versions of the disclosure, such as hovers, while others could be used as 
part of a paper disclosure, such as comparison boxes.  The benefits and attendant costs of any electronic 
features will generally be limited to those retail investors that access the document electronically. 

1066  See, e.g., supra footnote 1034  and accompanying text. 



 

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portions of the disclosed information that they prefer to highlight, rather than the information 

that may be the most useful to investors to highlight.  

The final instructions do not include certain presentation requirements that we had 

proposed.  For example, we proposed requiring that dual registrants present their information in a 

single relationship summary, using a two-column format.  The final instructions permit dual 

registrants (or affiliated broker-dealers and investment advisers) to prepare either a single 

relationship summary describing both brokerage and investment advisory services, or two 

separate relationship summaries describing each service.1067  Additionally, we are requiring such 

firms to use standardized headings in a prescribed order, and to design their relationship 

summary in a manner that facilitates comparison, but the final instructions do not specifically 

require a two-column format.  We believe this modification could increase the benefits relative 

to the proposal to investors of the relationship summary by permitting firms to choose design 

elements that might facilitate comparison more effectively than a two column format.  We 

recognize, however, that absent a specific design requirement, some firms might present this 

information in a manner that is less effective at facilitating investors’ understanding than the 

proposed two-column format.  We believe, however, that the potential benefits of allowing firms 

with differing business models to determine the design methods most effective at facilitating 

comparability justifies the change from a single, prescribed design element.  Additionally, the 

final rule does not adopt the proposed restrictions on paper size, font size, or margin width, and 

instead requires them to be “reasonable.”  We believe that these modifications from the proposal 

                                                                                                                                                             

1067  See generally Section II.A.5 for a discussion of specific instructions, as well as comments received. 



 

337 

 

will incentivize firms to design relationship summaries that most effectively and accurately 

communicate their disclosed information to the benefit of investors, as well as encourage firms 

to make interactive, electronic disclosures available. 

c. Standardization 

(1) Standard Question-and-Answer Format and Standard Order 
of Information 

The final rules require that firms present information under standardized headings and 

respond to all the items in the final instructions in a prescribed order.1068 We expect that 

requiring the same set of headings in a prescribed order for each relationship summary will 

facilitate retail investors’ ability to compare relationship summaries across firms.  In addition, 

the prescribed wording of the headings reduces the risk that firms would use the headings to 

“frame” each topic in ways that would be less useful for retail investors’ understanding of the 

disclosed information.  As discussed above, academic research has documented how individuals’ 

perceptions of information can change depending on the framing of the context of the 

information.1069  

We expect retail investors to benefit from this standardization to the extent they review 

relationship summaries from more than one firm, as the standardized headings in the prescribed 

                                                                                                                                                             

1068  See generally infra Section II.A.2 for discussion of the specific instructions, as well as comments received. 
In terms of specifically adopting a question-and-answer format for the standardized headings, we believe 
that adopting this format is likely to increase the salience of the information under each heading and 
improve investors’ cognitive engagement with the document, which should facilitate their understanding of 
the disclosed information. 

1069  See supra footnote 1032 and accompanying text.  



 

338 

 

order will allow them to compare firms’ responses.1070  Additionally, the requirement that firms 

structure the headings in machine-readable format could reduce the cost of third party data 

aggregators to analyze relationship summaries across many firms and display comparisons of 

responses, ultimately reducing search costs for investors.1071  

Because firms will be given very limited flexibility in terms of language for headings and 

the order of the sections,1072 some firms may find it more difficult to effectively present the 

information specific to their business and circumstances they believe should be made salient to 

retail investors.  To the extent that the headings and the specified order do not specifically 

promote such information for a particular firm, and this information is relevant to investment 

decisions, investors may potentially find the relationship summary less useful in evaluating the 

specific firm.  To mitigate this potential cost and provide some flexibility to firms, the final rules 

allow firms to discuss the required sub-topics within each item in an order that firms believe best 

promotes accurate and readable descriptions of their business.1073  The final rules also allow 

firms to omit or modify a disclosure or conversation starter that is inapplicable to their business 

or specific required wording that is inaccurate.  The benefit of such flexibility is that it allows 

                                                                                                                                                             

1070  See Morningstar Letter (commenting on the importance of standardized disclosure, that “[f]urther, it is 
extremely important for conflict-mitigation disclosures to be standardized… The Commission could require 
a table, as we discuss below, for the Client Relationship Summary that standardizes how all broker/dealers 
list their relevant fees, making the costs of opening and maintaining an account transparent and 
comparable”).  

1071  Two commenters argued for machine-readability to allow for third party development of comparison tools.  
See supra footnotes 663 and 664. 

1072  See supra footnote 91. 

1073    The proposed instructions prescribed the order of information within each item.  See supra footnote 121.  



 

339 

 

firms to increase saliency of and direct investor attention to the more relevant disclosures.  We 

believe the mix of requiring standardized headings and a prescribed order of topics but allowing 

some flexibility in the order of presentation within each topic strikes an appropriate balance in 

the inevitable trade-off, discussed further below, between the relative benefits and costs of 

disclosure standardization versus disclosure flexibility.   

The magnitude of the anticipated benefits and costs to retail investors discussed above 

will depend on a number of factors, including the extent to which the standardized headings and 

prescribed order of information will help increase investors’ understanding about the content of 

the relationship summaries, and in what ways such an increase in understanding would affect 

their behavior. 

(2) Prescribed wording 

The final instructions include a mixture of limited prescribed wording that firms must 

include and requirements for firms to draft their own descriptions that comply with instructions 

about topics they must address.1074  As with any disclosure document, there are inevitable trade-

offs between prescribing specific wording for firms to use (when applicable) and providing 

discretion to firms to use their own wording.  We describe those trade-offs, as they relate to the 

final instructions, below.   

The proposed instructions would have required prescribed wording in several items of the 

relationship summary, including fees and costs and a comparison section for standalone broker-

dealers and investment advisers.  We explained in the Proposing Release that prescribed wording 
                                                                                                                                                             

1074  See generally supra Section II.A.1 for a discussion of these instructions, comments received on the 
proposal, and changes made regarding the amount of prescribed wording. 



 

340 

 

for these items could benefit investors through standardization and by improving comparability 

across relationship summaries, while at the same time could impose costs on investors if 

prescribed wording does not accurately represent a firm’s services.1075  We are adopting final 

instructions that largely eliminate prescribed wording for most of these items and instead permit 

firms, within the parameters of the instructions, to respond to the relationship summary items 

using their own wording.1076  We continue to prescribe wording for headings, conversation 

starters, and the standard of conduct, as well as a factual disclosure concerning the impact of fees 

and costs on investments over time.1077  However, firms may omit or modify required disclosures 

or conversation starters that are inapplicable to their business or specific wording required by the 

final instructions that is inaccurate.1078  Based on feedback from commenters and observations 

reported by investor studies and surveys, this change will increase the benefits of the relationship 

summary to investors relative to the proposal.  Specifically, several commenters suggested that 

some of the prescribed wording would not only reduce the accuracy of the information provided 

by firms but could also confuse investors about a firm’s offerings, and we have made changes in 

light of those comments.  We believe the final rules strike an appropriate balance between 

comparability between firms and the accuracy and relevance of information contained in 

relationship summaries, increasing potential benefits to investors relative to the proposal. 

                                                                                                                                                             

1075  See Proposing Release, supra footnote 5, at Section IV.B.2.a. 

1076  See generally Section II.A.1. 

1077  See generally Section II.A.1.  We discuss the benefit and costs of these items, including related to the 
prescribed wording, below, in Section IV.A.c. 

1078  See supra footnote 91.341 

 

We nevertheless recognize reductions in benefits relative to the proposal stemming from 

this approach.  It decreases the degree of standardization of the information which could impact 

comparability across relationship summaries, as suggested by some academic research.1079  

However, to the extent some of the prescribed language in the proposed rules would be 

considered “boilerplate” by investors or would not be applicable to a particular firm’s services or 

business, the reduction of such prescribed wording in the final rules is not likely to come at a 

cost to investors (and in fact is likely to benefit investors).  The risk of lower standardization and 

comparability also is mitigated because, while not prescribing specific wording, the final 

instructions require prescribed topics that all firms must include in each item.  For example, in 

their description of services, all firms must address monitoring, investment authority, limited 

investment offerings, and account minimums.1080  Moreover, increased flexibility for firms to 

describe their services and offerings relative to the proposal could impose costs on retail 

investors if it increases the potential ability of some firms to provide information in a less useful 

or clear way in their own words than when required to use prescribed wording.1081 

One section proposed for standalone broker-dealers and investment advisers, which we 

referred to as the Comparisons section, had entirely prescribed wording.1082  We are not adopting 

                                                                                                                                                             

1079  See generally supra Section IV.C. 

1080  See generally supra Section II.A.3. 

1081  We also acknowledge there is a risk that some firms could use the flexibility to strategically omit or 
obscure information.  Such action, however, would risk liability under Form CRS or the antifraud 
provisions of the Advisers Act.  See, e.g., General Instruction 2.B. to Form CRS.  

1082  See generally supra Section VI for a discussion of the proposed requirements as well as comments 
received. 



 

342 

 

this proposed section.  Additionally, we removed prescribed wording from the proposed 

introduction, which would have noted that brokerage and advisory services were distinct.1083  On 

one hand, omission of the Comparisons section potentially could reduce the risk of information 

overload for investors.  On the other hand, omitting this section might reduce benefits relative to 

the proposal by reducing the salience of potentially valuable comparative information available 

to retail investors at the point of forming a relationship, particularly if a retail investor does not 

review relationship summaries of multiple firms.  We have taken specific measures to maintain 

some of the benefits we had intended to achieve in the proposed Comparisons section by using 

other methods to enable retail investors to continue to view comparative information and access 

more general educational information.  For example, all firms must provide at the beginning of 

the document a link to Investor.gov/CRS, which offers educational information about investment 

advisers, broker-dealers, financial professionals and other information about investing in 

securities.  In addition, dual registrants and affiliated firms that offer their brokerage and 

investment advisory services together are required to provide information about both types of 

services with equal prominence and in a manner that clearly distinguishes and facilitates 

comparison.  This instruction applies regardless if they prepare a single relationship summary or 

two separate relationship summaries describing each type of service.  If dual registrants prepare 

two separate relationship summaries, they must cross-reference or link to the other and deliver 

both with equal prominence and at the same time.  Affiliates offering brokerage and investment 

advisory services together have similar presentation and delivery requirements.  

                                                                                                                                                             

1083  See supra Section I. 



 

343 

 

The magnitude of the anticipated benefits and costs to retail investors discussed above 

will depend on a number of factors, including the extent to which the specific requirements 

regarding wording will help increase investors understanding about the content of the 

relationship summaries, and in what ways such an increase in understanding would affect their 

behavior. 

d. Content 

The final instructions require firms to include specific items in the relationship summary.  

Below we discuss the anticipated benefits and costs to retail investors from these items.1084  The 

magnitude of these anticipated benefits and costs to retail investors will depend on a number of 

factors, including the extent to which the specific items of disclosure will help increase investors 

understanding about their potential or current relationships with firms and financial professionals, 

and in what ways such an increase in understanding would affect their behavior. 

(1) Relationship and Services 

The relationship summary requires an overview of the services that the firm provides to 

retail investors.1085  The topics that the firm must discuss include principal brokerage and 

advisory services, monitoring, investment authority, limited investment offerings, as proposed, 

and, new to the adopting release, account minimums and other requirements.  The services firms 

provide to retail investors vary widely.  These differences exist not only between broker-dealers 

and investment advisers, but also within different types of broker-dealers and investment 

                                                                                                                                                             

1084  See supra Section II.B.  
1085  See supra Section II for a discussion of the requirements and comments received on the proposal. 



 

344 

 

advisers.  We believe that this section will increase the transparency, saliency, and comparability 

of information about the types of services, accounts, and investments provided by firms, which 

should likewise improve matching between firms and retail investors.  

 We have made some changes from the proposal intended to increase the potential 

matching benefit.  In particular, instead of using prescribed wording, firms will describe their 

services using their own wording.  Firms must also describe account minimums, which could 

improve matching with the provider and may reduce investor search costs, especially for 

investors that fall short of required minimums so that retail investors can be aware of potential 

limitations on their initial or continued eligibility for services.1086  Because all firms must 

describe particular topics, we believe investors can also use this information to compare firm 

services if they review multiple relationship summaries.  We believe the approach of firms using 

their own wording to describe their services will increase the benefit to investors relative to the 

proposal by allowing firms to provide descriptions that are a better match for their particular 

services.  This approach also avoids the cost of firms being required to make inaccurate or 

confusing disclosures given their specific business models, as raised by commenters.1087  This 

potential increase in benefit, however, comes with attendant potential increases in costs to the 

extent that firms do not present the most relevant aspects of their services or their descriptions 

are unclear, as discussed in the considerations regarding prescribed wording above.  On balance, 

                                                                                                                                                             

1086  Disclosures of account minimums could also help make retail investors more focused on their future 
planning needs, for example, by incentivizing them to target minimal future investment levels to reach an 
asset value level that will make lower fees or additional services available from a particular provider.  

1087  See, e.g., supra footnote 269. 



 

345 

 

we believe that allowing for a description that is accurate and better matched to a firm’s services 

likely would be more beneficial and less confusing to investors.  

(2) Fees and Costs, Standard of Conduct, and Conflicts of 
Interest 

The relationship summary requires several prescribed questions and required responses 

about fees, conflicts of interest, and the standard of conduct.1088  Some of this information will 

be required to be provided to investors for the first time, such as an articulation of the standard of 

conduct.  Other information, while currently available in various sources, will be presented 

centrally in the relationship summary, with links to more detailed, layered information about fees 

and conflicts.  Additionally, providing retail investors with context for the more detailed 

information could potentially pique their interest and lead retail investors to seek more 

information about fees and conflicts through the required links.  We believe both the information 

not previously required and the consolidated summary of information already available 

elsewhere will benefit investors by increasing salience, transparency, and comparability, and 

reducing information asymmetry compared to the baseline.  More specifically, including these 

disclosures prominently, in one place, in a digestible manner, at or before the start of a retail 

investor’s relationship with a firm or financial professional could facilitate meaningful disclosure 

in the relationship summary, as well as conversations between the retail investor and his or her 

financial professional, and help the retail investor decide on the types of services that are right 

for him or her.  In addition, to the extent that the specified conflicts of interest disclosures could 

                                                                                                                                                             

1088  See supra Section III for a discussion of the requirements and comments received on the proposal. 



 

346 

 

draw retail investors’ attention to conflicts, they may improve retail investors’ ability to select 

and monitor firms and financial professionals.  

The fees, costs, and conflicts disclosure also potentially has costs for investors.  In 

particular, and as discussed above,1089 the perception that an investor has been warned (via the 

disclosure) of a firm’s and financial professional’s potential bias may lead some financial 

professionals to believe that they are less obligated to provide unbiased advice.  Further, the 

standard of conduct and conflict disclosures could make firms and financial professionals appear 

more trustworthy and as a result reduce the incentives for retail investors to examine additional 

information more carefully.  Conversely, a potential cost for investors of such disclosures is that 

some investors may mistakenly leave the market for financial services or choose to not engage 

with a financial professional because they infer from the discussion of conflicts of interest and 

fees that a financial professional could provide bad advice or recommend products that will 

reduce their financial well-being.  However, the placement of the prescribed standard of conduct 

disclosure immediately preceding the conflicts disclosure may alleviate the risk that investors 

will overreact to the conflicts of interest disclosure in this manner, because the standard of 

conducts disclosure clarifies that the firm or financial professional must act in the investor’s best 

interest.     

We received significant comments about the potential efficacy of the proposed 

disclosures related to fees and costs, conflicts, and the standard of conduct, and the ultimate 

benefit of such disclosures to investors.  Likewise, feedback from investors through surveys and 

                                                                                                                                                             

1089  See supra footnote 1026 and accompanying text. 



 

347 

 

studies and in Feedback Forms revealed confusion about the proposed standard of conduct 

section in particular.1090  Results reported in investor surveys and studies also showed that the 

proposed conflicts section was rated one of the least useful sections, which may suggest that 

some investors did not understand the role of conflicts based on the disclosure as presented by 

the sample proposed dual registrant relationship summary.1091  We have made several changes 

from the proposed relationship summary designed to increase the clarity and salience of the 

disclosures, thereby increasing the potential benefit and reducing the potential costs discussed 

above relative both to the baseline and the proposal.  We also believe the changes will reduce the 

risk that investors will not read the section or will misinterpret it, increasing the effectiveness of 

these disclosures and therefore the potential benefit.   

 First, by integrating the section covering fees, costs, conflicts of interests, standard of 

conduct, and how representatives are paid, 1092 we believe retail investors may be more primed to 

process implications of these disclosures in a more integrated fashion due to their proximity. In 

particular, providing these disclosures in the same section could increase the salience of this 

information for investors,1093 both relative to the proposal and the baseline, and may potentially 

improve investor cognitive processing of how conflicts of interest can have an impact on the 

services and advice provided and costs paid by investors. 

                                                                                                                                                             

1090   See supra footnotes 475–478 and accompanying text.  

1091  See supra footnotes 522–524 and accompanying text.   

1092  See supra discussion in Section II.A.4. 

1093  This is also consistent with some commenters’ suggestions and the organization of several sample 
relationship summaries submitted by commenters.  See supra footnote 373 and accompanying text.  



 

348 

 

 Second, with respect to fees, the relationship summary requires firms to discuss under 

separate question headers (i) the principal fee and the incentive that it creates and (ii) other fees 

and costs that the investor will pay.  We are requiring firms to summarize, in their own words, 

the principal fees and costs that retail investors will incur, including how frequently they are 

assessed and the conflicts of interest that they create.  We think investors will be better able to 

process the implications of the principal fee disclosure through this requirement. Additionally, 

requiring firms to describe other fees and costs investors will pay, distinct from the principal fee, 

will clarify for investors that they pay not only a principal fee for advice, but also additional fees 

and costs.  This may potentially prompt investors to use the required link to learn more 

information, ask follow-up questions, or monitor for such fees and costs. 

 Third, the instructions require that the standard of conduct disclosure be placed under the 

same header as the summary of firm-level conflicts. The expected benefit of placing these 

conflicts of interest and standard of conduct disclosures together is to improve investor 

processing of the implications of conflicts of interest disclosure and legal obligations underlying 

the particular standard of conduct (i.e., best interest for broker-dealers and fiduciary duty for 

investment advisers) as well as to prevent investor misinterpretation of these disclosures. We 

continue to prescribe wording for the standard of conduct, which we believe will have greater 

benefits than giving firms flexibility to describe the standard of conduct.  Unlike other areas 

where we are allowing firms to use their own words, the standard of conduct, whether a fiduciary 

duty for an investment adviser or Regulation Best Interest for a broker-dealer, applies during the 

course of the adviser’s relationship or where a broker-dealer makes recommendations. We also 

changed from the proposal the specific wording in an effort to simplify the disclosure relating to 

the standard of conduct and thereby increase understanding by investors.  We believe reducing 



 

349 

 

the length and the complexity of the prescribed wording for the standard of conduct will increase 

the salience and comprehension of the required standard of conduct disclosure, because a more 

readable and shorter disclosure is less likely to be ignored by investors due to information 

overload and limited attention.   

While retail investors may benefit from understanding the standard of conduct that firms 

and financial professionals are subject to when providing investment advice or recommendations, 

discussing the standard of conduct in connection with conflicts of interest may benefit investors 

by making it clear that the standard of conduct does not mean that advice is conflict-free. 

 Regarding the conflicts disclosure itself, we have added a new requirement that if none of 

the enumerated conflicts required to be disclosed by the instructions is applicable to a firm, the 

firm must select at least one of its material conflicts to describe.  This was designed to eliminate 

the potential that firms would not have to disclose any conflicts, which would have been costly 

to investors if it caused them to believe that the firm had no conflicts.  The relationship summary 

does not require disclosure of all conflicts but does require firms to include a link to additional 

information about their conflicts.  We believe this will benefit investors relative to the baseline 

by providing sufficient information about certain conflicts to increase their understanding of 

incentives generally and potentially inducing them to review the linked information, which also 

minimizes the potential for information overload.  

 Finally, in addition to requiring firm-level conflicts, the relationship summary includes a 

separate question and required response about how financial professionals are compensated and 

the conflicts of interest those payments create.  This disclosure will distinguish firm-level from 

financial professional-level conflicts, which we believe will benefit retail investors by helping 



 

350 

 

them better understand the role of conflicts and how these conflicts might impact a financial 

professional’s motivation when providing investment advice.   

Despite the changes to presentation of fees, costs, conflicts, and standard of conduct 

relative to the proposal to increase clarity, we recognize the complexity of these issues.  

Accordingly, we recognize benefits to investors could be limited by investors’ potential lack of 

ability to comprehend the disclosure.1094  In the extreme, standards of conduct disclosure may 

also have a reverse effect of unduly enhancing investor trust in providers because investors may 

misperceive providers as holding themselves to a standard higher than legally required, and 

making investors discount the severity of the disclosed conflicts.1095  Because firms have some 

flexibility to decide what additional fees and costs to describe and, in the case of a firm with 

none of the enumerated conflicts, which conflict to use as an example, benefits could be reduced 

to the extent that they choose examples that are not informative to the retail investor. 

Additionally, there could be a cost to investors to the extent they believe the enumerated fees and 

conflicts in the relationship summary are the only fees and conflicts the firm has, although we 

believe that the required wording that explains the summarized conflicts are examples, as well as 

the required links to more information about fees and conflicts, mitigate the risk of this 

misperception.   

                                                                                                                                                             

1094  See supra footnotes, 378–382, 475–478, 522–524, and accompanying text, for a discussion of comments 
and investor survey results on the comparative difficulty for investors to comprehend these disclosures.  

1095  See, e.g., Betterment Letter I (Hotspex), supra footnote 18 (reporting that only 26% of participants 
correctly identified as false a statement that broker-dealers are held to a fiduciary standard). 



 

351 

 

In addition, referencing academic research on the potential negative effects of conflicts of 

interest disclosure, several commenters expressed concerns that the proposed required disclosure 

of conflicts of interest in the relationship summary could lead to a “moral license” for financial 

professionals to provide even more biased advice and thus take unfair advantage of investors, or 

lead investors to fail to discount biased advice, trust their providers even more or make them feel 

pressured to remain in a potentially disadvantageous relationship, i.e., the panhandler effect.1096 

Despite the changes we have made from the proposal to the required conflicts of interest 

disclosure in the final instructions, we acknowledge that there is still some risk for such negative 

unintended consequences.  

(3) Disciplinary History 

As proposed, the relationship summary will contain a section where firms must state in 

binary fashion whether or not they have disciplinary history, as well as include a reference to 

Investor.gov/CRS, where investors can conduct further search for additional information on 

those events.1097  We have made a change to increase the salience of this information relative to 

the proposal by making a separate Disciplinary History section, including its own question and 

required response, rather than—as proposed—including it with other content in an Additional 

Information section, which should increase any benefits or costs relative to the proposal.   

The primary benefit of the disciplinary history disclosure relative to the baseline is that 

investors will be alerted to a potential need to search and review their provider’s disciplinary 

                                                                                                                                                             

1096  See, e.g., Better Markets Letter; AARP Letter; Warren Letter; CFA Letter I; see also supra Section IV.C 
for a discussion of moral license. 

1097  See supra Section II.B.4 for a discussion of the requirements and comments received on the proposal. 



 

352 

 

information and will have a mechanism to find more information about any disciplinary history.  

Although this information already exists publicly, clearly linking to Investor.gov/CRS for further 

information about disciplinary history at the time investors are selecting a firm or financial 

professional will help retail investors know where to find additional information about those 

events, which should reduce search costs and is an improvement relative to the baseline.1098  The 

conversation starters also will provide investors with a cue to the importance of understanding 

the disciplinary history and could trigger more information gathering and ultimately more 

effective cognitive processing of this disclosure.  As a result, an investor may choose to not 

engage a firm or financial professional if the disciplinary history is considered to be too 

problematic, or, if an investor chooses to proceed with a provider that has some concerning 

disciplinary history, awareness of those events could provide incentives to the investor to 

monitor his or her account more carefully than if she were not aware.   

The potential cost is that investors may overreact to the “yes” or “no” response reported 

in the Disciplinary History section.  Investors may attribute the disciplinary history of one or few 

financial professionals at a firm to the entire firm, and thus choose not to select a provider that 

could be a good match for them (for example, a larger firm with more employees and thus a 

greater likelihood of disclosable events)1099 or avoid hiring a financial professional altogether.  

Retail investors may also misinterpret a higher baseline rate of disciplinary history for broker-

                                                                                                                                                             

1098  See, e.g., RAND 2018, supra footnote 13 (when investors were asked why they would not look up 
disciplinary history, 37% of all respondents indicated that they did not know where to get the information, 
whereas 19% of all respondents indicated that it would take too much time or effort). 

1099  See supra Section II.B.4. 



 

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dealers than for investment advisers, given that the scope of events that trigger a disclosure event 

is arguably broader for broker-dealers than for investment advisers.1100  As a result, retail 

investors may avoid choosing a broker-dealer, even when such a relationship would be a better 

match for the investors.  Relatedly, investors may over-rely on lack of disclosure of disciplinary 

history as evidence of more ethical conduct; however, lack of such disclosures may be due to 

unrelated factors such as a comparatively short history of a particular firm or fewer employees 

(and thus less likelihood of having employees with disclosable events).  However, the risk of 

some investors misinterpreting, or over-relying on, the disciplinary history should be mitigated to 

the extent firms or financial professionals provide more information about and encourage retail 

investors to ask follow-up questions regarding the nature, scope, or severity of any disciplinary 

history.  On balance, we believe the benefits to investors from including the disclosure on 

disciplinary history, as discussed above, justify any potential negative effects.1101  

(4) Additional Information 

The relationship summary will conclude with a section where registrants will let investors 

know where investors can find additional information about their services and request a copy of 

the relationship summary, which should benefit investors relative to the baseline by providing 

this general resource, in addition to the links or references provided throughout the document.1102  

In a change from the proposal, the Additional Information section eliminates the proposed 

                                                                                                                                                             

1100  See id. 
1101  This view is supported by survey evidence that suggests that investors consider disciplinary history to be an 

important factor when searching for a provider of investment advice. See supra footnote 996; see also 
supra footnotes 566 and 567. 

1102  See supra Section II.B.5 for a discussion of the requirements and comments received on the proposal. 



 

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requirement to provide information on how investors should report complaints about their 

investments, accounts, or financial professionals.  Instead, we are requiring a conversation starter 

on whom investors should contact about their concerns.  The benefit of this approach is that it 

improves readability of the form by reducing prescribed wording and potentially facilitates a 

conversation between investors and their financial professionals; the cost of this approach is that 

some investors will not have access to direct instructions on how to report their complaints.  

Finally, investors with limited or no access to internet (e.g., due to costs of internet access or due 

to a disability) will also benefit from a requirement that firms provide a number through which 

retail investors can request up-to-date information or a copy of the relationship summary.  

(5) Conversation Starters 

Disclosures currently required by investment advisers and broker-dealers generally do not 

have suggested questions for investors to ask their financial professional.  The relationship 

summary will require firms to incorporate suggested follow-up questions for the investor to ask, 

which the instructions refer to as “conversation starters.”1103 

Conversation starters should benefit investors relative to the baseline by improving the 

potential to match investors with providers that provide services more suitable to the investors’ 

preferences and needs. We believe that this is accomplished through enabling the investor to be 

more engaged, potentially assisting the investor with comprehension of relevant disclosures, and 

assisting the investor in receiving more personalized information than the firm-level disclosure 

documents, such as Form ADV or documents issued by broker-dealers.  That is, to the extent that 

                                                                                                                                                             

1103  See supra Section II.B.2.c for a discussion of the requirements and comments received on the proposal. 



 

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these conversation starters promote more transparency and better communication between 

investors and financial professionals, retail investors are more likely to understand the 

information and select the right firm or financial professional to meet their preferences and 

expectations.  In addition, to the extent the conversation starters help increase investors’ 

engagement in a selected relationship it may also increase their monitoring of their relationship 

and more critically evaluate any advice or recommendations they receive.  However, a closer 

personal engagement between retail investors and financial professionals may cause some 

investors to feel social pressure to act on the advice or recommendations of the professional due 

to a panhandler effect,1104 which may attenuate some of the benefits of the conversation starters.   

A potential cost associated with the conversation starters is that the particular required 

questions may anchor the attention of retail investors to those prescribed questions and reduce 

the likelihood that they would explore other potential questions that could be important to them 

based on their individualized circumstances.  In response, we have reframed the proposed 

questions, which were at the end of the proposed relationship summary as “Key Questions,” and 

instead have integrated them within the relevant information item throughout the relationship 

summary to reduce the risk that investors only focus on this set of questions in their 

discussions.1105  Moreover, many of the conversation starter questions are broad and open-ended, 

which could further mitigate the risk of investors’ anchoring on the content of these questions at 

the expense of the other disclosures in the relationship summary.   

                                                                                                                                                             

1104  See supra footnote 1028 and accompanying text. 

1105  See supra Section II.A.4. for discussion on conversation starters.   



 

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As pointed out by one commenter, unless the “Key Questions” in the relationship 

summary are provided to investors in advance, some retail investors may entirely ignore these 

questions.1106  As discussed above, the final rules incorporate the questions as “conversation 

starters” directly in the different sections of the relationship summary, which should increase 

their salience and reduce the risk of them being ignored by investors compared to the proposal. 

In addition, because the relationship summaries will be available to investors online on firms’ 

websites or through Investor.gov/CRS, the relationship summaries may be downloaded and 

accessed by some investors prior to meeting a financial professional, which would give such 

investors the opportunity to review the conversation starters before meeting a financial 

professional.    

e. Filing, Delivery, and Updating Requirements 

(1) Filing Requirements 

The final instructions require firms to file their relationship summaries with the 

Commission (using IARD, Web CRD®, or both, as applicable), and make their relationship 

summaries available on their websites.  In addition to firms’ websites, firms’ most recent 

relationship summaries will be accessible to the public through IAPD and BrokerCheck, public 

interfaces of IARD and Web CRD®, respectively.  Investors also will be able to use the 

Commission’s website Investor.gov, which has a search tool on its main landing page and at 

Investor.gov/CRS that links to BrokerCheck and IAPD.  If investors prefer, they may request 

copies of firms’ relationship summaries by calling the numbers that firms must include in their 

                                                                                                                                                             

1106  See CFA Institute Letter I. 



 

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relationship summaries.  We expect that making firms’ relationship summaries accessible in 

these ways should reduce investor search costs in connection with selecting investment firms or 

financial professionals.  We also believe that retail investors could benefit from their ability to 

access the relationship summaries independently through the companies’ websites, BrokerCheck, 

IAPD, or Investor.gov prior to any contact with a financial professional.  Such access could 

increase retail investors’ understanding about differences between firms and financial 

professionals even before approaching a particular firm or financial professional, which could 

reduce search costs for investors early on in the search process and further reduce the risk of a 

mismatched relationship.  The online availability of the relationship summaries will also enable 

investors who are currently not participating in the market to become better informed about the 

market for financial advice and the particular relationships provided without the need to incur the 

cost of actively contacting a firm or financial professional, which may ultimately encourage them 

to seek out a relationship with a provider. 

In addition, the online availability of the relationship summaries in central locations and 

the machine-readable headers of the summaries will allow third-party data aggregators to more 

easily collect relationship summaries and facilitate the development of comparison tools for the 

investing public.  To the extent such tools and metrics are developed, it could facilitate investors’ 

searches by helping them narrow the set of available financial service providers to those that are 

most likely to provide a good match.  However, the benefits to investors from the development 

of such tools will be mitigated by any fees charged by third-party aggregators for access to the 

tools. 



 

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(2) Delivery and Updating Requirements 

Firms will deliver a relationship summary to each new or prospective retail investor 

based on the initial delivery triggers specific to investment advisers, broker-dealers, and dual 

registrants.1107  Firms also must deliver the relationship summary to existing clients and 

customers who are retail investors in certain circumstances.1108  For these existing clients and 

customers, the final rules require that firms deliver the relationship summary (including updates) 

in a manner consistent with the Commission’s electronic delivery guidance and the firm’s 

existing arrangement with that client or customer.1109  

Because retail investors may face substantial switching costs when they move from one 

financial professional to another, the benefits associated with finding a good match may be 

particularly significant.  Accordingly, investors’ benefits should increase in accordance with 

their ability to understand and compare relationship summaries, which may take time.  We 

recognize that, as some commenters noted, if a financial professional delivers the relationship 

summary at the time of service, retail investors may not have sufficient time to thoroughly 

evaluate the financial professional or may have already made a preliminary decision to engage 

the particular financial professional by the time they receive the relationship summary.  As 

discussed above, however, there are compliance uncertainties and other costs associated with 

requiring a relationship summary be delivered at first contact or requiring a waiting period, as 

                                                                                                                                                             

1107  See supra Section II.C.3.b. 

1108  See supra Section II.C.3.c. 

1109  See supra Section II.C.3.a. 



 

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suggested by some commenters.1110  First contact between an investor and a financial 

professional may include circumstances that are not limited to the seeking of investment advice, 

such as business interactions for other purposes or social interactions.  In addition, as noted by 

commenters, a waiting period may prevent investors from meeting certain deadlines.1111  As we 

discuss above, the availability of relationship summaries online may mitigate the concern that 

retail investors will not have enough time to review them, to the extent that it provides retail 

investors an opportunity to compare firms before contacting them to obtain services. 

We expect that the rules regarding form of delivery—electronic or paper—generally will 

be beneficial for retail investors relative to the baseline by enabling a form of delivery that is a 

good match for the particular retail investor.  For retail investors who prefer electronic delivery, 

electronic forms of delivery should facilitate both the engagement with and the processing of the 

disclosed information, particularly the required and optional hyperlinks and other features.  For 

the investors who prefer paper documents, paper delivery should result in greater likelihood of 

the investor paying attention to the relationship summary disclosures.  We believe that 

maintaining the mode of delivery consistent with the way information was requested for new 

customers and consistent with existing arrangements for existing customers will help to further 

ensure that the investors will not miss and will process the information contained in the 

relationship summaries.  Customers requesting the relationship summary in paper format may be 

less likely to access the additional information available through the electronic means of access 

                                                                                                                                                             

1110  See supra footnotes 720–724 and accompanying text. 

1111  See supra footnote 719 and accompanying text. 



 

360 

 

discussed above, which could result in their inability to process potentially important additional 

information.  

We also believe that existing clients and customers of broker-dealers and investment 

advisers that are retail investors will benefit from the requirement that firms deliver the 

relationship summary again if they:  (i) open a new account that is different from the retail 

investor’s existing account(s); (ii) recommend that the retail investor roll over assets from a 

retirement account into a new or existing account or investment; or (iii) recommend or provide a 

new brokerage or investment advisory service or investment that does not necessarily involve the 

opening of a new account and would not be held in an existing account, for example, the first 

time purchase of a direct-sold mutual fund or insurance product that is a security through a 

“check and application” process, i.e., not held directly within an account.   

This requirement should have the benefit of increasing retail investors’ attention to 

disclosures provided in the relationship summary and the implications of new services or account 

options at the time of that decision.  Additionally, the instructions require firms to update their 

relationship summaries to existing retail clients or customers if the existing relationship summary 

becomes materially inaccurate, which would include information that is materially outdated or 

materially incomplete.  Firms must communicate the changes by delivering the amended 

relationship summary or by communicating the information through another disclosure that is 

delivered to the retail investor.  Firms delivering the amended relationship summary must 

highlight the most recent changes by, for example, marking the revised text or including a 

summary of material changes and attaching the changes as an exhibit to the unmarked amended 

relationship summary.  Investors should benefit from receiving updated relationship summaries 

under these circumstances because this information is relevant to the decision of whether to enter361 

 

into new services or continue existing services, based upon whether the new or existing services 

match or continue to match their preferences and expectations.  The requirement to attach 

revised text or a summary of material changes to the amended relationship summary should 

benefit retail investors by helping them to process the new information quickly.  However, we 

recognize that to the extent that retail investors with established financial professional 

relationships tend to remain in such relationships, it may attenuate the benefits of receiving the 

relationship summary again.    

 

2. Broker-Dealers and Investment Advisers (Registrants) 

a. Benefits to Registrants 

Beyond benefits to retail investors, we also expect broker-dealers and investment advisers 

potentially to benefit from the relationship summary.  Some retail investors, who could benefit 

from obtaining advice and other services from financial professionals, currently may choose to 

stay out of the market for financial services because they do not understand what type of firm or 

financial professional they require.  The relationship summary may provide a clear and concise 

document that may draw new investors to the market.  If the relationship summary draws new 

retail investors to the market for financial services, both broker-dealers and investment advisers 

may gain new customers and clients, respectively.  An increase in new retail investors could 

enhance revenues for firms and financial professionals, although firms and financial 

professionals could also bear additional costs, which are discussed below.   

Moreover, the relationship summary could provide additional benefits to firms and 

financial professionals by improving the efficiency of the search process in the market for 

financial advice.  For example, retail investors will be able to access and obtain relationship 



 

362 

 

summaries for any number of firms online, including both broker-dealers and investment 

advisers.  To the extent investors use this feature at the start of their search for a firm, they are 

more likely to opt to approach only firms that ex ante meet their preferences and expectations.  

Thus, broker-dealers and investment advisers may be less likely to expend time and effort 

meeting and discussing their business model and services with prospective customers and clients, 

who are seeking a different kind of relationship and that would ultimately not engage in a 

relationship with the firm or financial professional.  Instead, firms and financial professionals 

can devote their efforts to acquiring customers and clients that are more likely to contract for 

their services. In addition, to the extent the relationship summary leads to fewer retail investors 

entering or remaining in a mismatched relationship that does not meet their expectations, it may 

benefit firms by reducing costly customer complaints and arbitrations. 

While some commenters suggested that brokers have incentives to provide ineffective 

disclosures,1112 academic studies show that sellers can benefit from better disclosure of product 

quality information to the buyers, and competitive sellers thus have incentives to disclose better 

information.1113  While some disclosure documents may contain topics of material that investors 

may not understand or prioritize, the relationship summary has been designed to focus on issues 

already identified by retail investors to be of first-order importance with respect to their 

                                                                                                                                                             

1112  See, e.g., CFA Letter; Warren Letter. 

1113  Steven Tadelis & Florian Zettelmeyer, Information Disclosure as a Matching Mechanism: Theory and 
Evidence from a Field Experiment, 105 AM. ECON. REV. 886 (2015); see also Tao Zhang, et al., 
Information disclosure strategies for the intermediary and competitive sellers, 271 EUR. J. OPERATIONAL 
RES. 1156 (2018). 



 

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relationship with their financial professional,1114 such as fees and costs, conflicts of interest, and 

disciplinary history of firms and financial professionals, among other items.1115  Further, the 

relationship summary is intended to be clear, concise, and readable, while permitting firms the 

flexibility to provide information pertinent to their business model and services offered.  Finally, 

firms may benefit from providing more clear and understandable disclosures to the extent it will 

facilitate a more efficient matching process with prospective investors.  Firms could also bear 

potential legal liability1116 and reputational costs as a result of providing potentially less 

transparent disclosures.  For these reasons we believe registrants will generally have incentives 

to use the discretion permitted in the final instructions to design a relationship summary that is 

effective at informing retail investors about the nature of their business and offerings.  

The magnitude of the anticipated benefits discussed above will depend on a number of 

factors, including the extent to which investors’ will change their behavior as a result of 

receiving the relationship summary and how firms and financial professionals will react to such a 

change.  Given the number and complexity of assumptions that would be required to be able to 

estimate how the relationship summary will affect investors’ understanding and their decision-

making, and the lack of data on relevant characteristics of individual firms and their prospective 

and existing retail investors, the Commission is not able to meaningfully quantify the magnitude 

of these anticipated benefits. 
                                                                                                                                                             

1114  RAND 2018, supra footnote 13 (survey results re: importance of each topic to respondents).   

1115  See supra Section IV.B.3.b. 

1116  See supra footnotes 92–105 and accompanying text (discussing the parameters for the scope of information 
expected within the relationship summary and the antifraud standard as applied to the relationship 
summary). 



 

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b. Costs to Registrants 

The final rule will also impose costs on affected broker-dealers and investment advisers, 

including: costs associated with preparation, filing, delivery, and firm-wide implementation of 

the relationship summary; costs of the associated recordkeeping rules; and as well as training, 

monitoring, and supervision for compliance. We expect that these costs may differ across firms 

depending on their type (broker-dealer or investment adviser), size, and complexity of business.  

We discuss these costs in more detail below.  The Commission has, where possible, quantified 

the costs expected to result from the final rules in the analysis below.  However, we are unable to 

quantify some of the potential costs discussed below, because of the number and complexity of 

assumptions that would be required to be able to estimate how the relationship summary will 

affect investors’ understanding and choice of financial services provider and the lack of data on 

relevant characteristics of individual firms and their prospective and existing retail investors.    

(1) Preparation, Implementation, and Content  

Registrants will incur costs in connection with preparing and implementing the 

relationship summary.  With respect to aggregate compliance costs, as discussed in more detail 

below, some commenters suggest these costs could be high.1117  One commenter provided a 

survey of financial professionals that indicate that 79% of survey participants agree that 

implementation costs may be higher at first but will likely lessen over time, and 40% of firms in 

                                                                                                                                                             

1117  See infra Sections V.A.1 and V.D.1 for examples of commenters discussing the costs. 



 

365 

 

the same survey anticipate moderate or substantial time to implement the requirements of Form 

CRS (and Regulation Best Interest).1118  

Broker-dealers currently are not required to prepare a consolidated disclosure document 

for their customers similar to the Form ADV, Part 2A brochure and may incur comparatively 

greater costs in preparing the relationship summary than investment advisers, given that 

investment advisers can draw on their experience with preparing and distributing Form ADV 

Part 2A.  The Commission believes that costs of preparation would also fall differently across 

firms with relatively smaller or larger numbers of retail investors as customers or clients.  For 

example, to the extent that developing the relationship summary entails a fixed cost, firms with a 

relatively smaller number of retail investors as customers or clients may be at a disadvantage 

relative to firms with a larger number of such customers or clients since the former would 

amortize these costs over a smaller retail investor base.   

The relationship summary requires the use of standardized headings in a prescribed order, 

while permitting some flexibility in other aspects of the relationship summary’s wording and 

design within the parameters of the instructions.  There is a trade-off in terms of preparation 

costs to registrants between requirements that prescribe specific wording and formats for 

disclosures and requirements that do not provide any prescribed language and format.  For 

example, we would expect that the more extensively the relationship summary would rely on 

prescribed format and wording, the lower the preparation costs for providers, because there 

                                                                                                                                                             

1118  See CCMC Letter (Survey conducted by FTI Consulting of 30 individuals at 15 broker-dealers and dually-
registered firms representing $23.1 trillion in assets under management and administration (AUM/AUA), 
and 78.54 million investment accounts). 



 

366 

 

would be less need for them to devote resources to construct their own format and wording.  On 

the other hand, the more extensively the relationship summary would rely on prescribed format 

and wording, the more likely it would  turn into a “one-size-fits-all” document with largely 

boilerplate language, and firms would lose the benefit of being able to more precisely and 

accurately describe their own business and offerings to investors.  We believe the final 

instructions strike an appropriate balance in this trade-off, with some higher-level prescribed 

format and language, such as the standardized language and order of headings, while firms 

generally will be able to (and have to) choose their own wording and organization of the required 

information under each heading. 

The final instructions provide for more flexibility than the proposed instructions.  We 

acknowledge that this change could increase certain compliance costs relative to the proposal, as 

firms will have to develop more of their own wording and organization of the information that is 

required to be included.  However, the flexibility permitted by the final instructions is mainly in 

terms of the wording while the topics and sub-topics of information that are required to be 

discussed are largely proscribed.  This narrows the field of subjects that firms could choose to 

discuss and potentially mitigates the cost increase from additional flexibility.  Moreover, we 

believe that the expected benefits of this additional flexibility justify this cost increase.  In 

particular, we expect this change from the proposal to benefit firms by allowing them to more 

accurately describe their services and offerings to retail investors.1119  We also expect the 

                                                                                                                                                             

1119  See, e.g., SIFMA Letter requesting greater flexibility for this reason (stating that “greater flexibility is 
needed to accommodate various business models, given that different firms offer different products and 
services”).   



 

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additional flexibility to benefit both firms and retail investors to the extent it results in 

disclosures that are more engaging and useful to investors and mitigates the possibility of a 

mismatch.  In addition, several commenters requested greater flexibility to provide accurate 

descriptions of their business models and services, noting the potential for liability for prescribed 

disclosures in the proposal that might not be accurate for a particular registrant’s business.1120  

Some topics, however, will require firms to use prescribed wording, such as the headings, 

conversation starters, statement of their legal standard of conduct, and two statements related to 

fees and costs, for the reasons generally discussed in Section II.A.1.1121   

In a change from the proposed instructions, the final instructions encourage rather than 

require dual registrants and affiliates to prepare one single relationship summary, but also allow 

them to instead prepare two separate relationship summaries.1122  In addition, if firms prepare 

one combined relationship summary, the final instructions required them to employ design 

elements of their own choosing to promote comparability, rather than the two-column format, as 

prescribed in the proposed instructions.  This increased flexibility in presentation relative to the 

proposal can benefit dual registrants and affiliates because it allows them to design disclosures 

more suitable to their business models.  For example, a firm which generally is marketing both 

sides of its business to retail investors may find it less costly and/or more beneficial to provide a 

combined summary.  However, dual registrants for which either the brokerage or investment 

                                                                                                                                                             

1120  See generally footnotes 76–83 and accompanying text. 

1121  See supra footnotes 85–90 and accompanying text. 

1122  See supra Section II.A.5. 



 

368 

 

advisory side of their business is not generally marketed to most customers or clients may find it 

more beneficial to provide two separate relationship summaries.  If a firm chooses to prepare two 

distinct relationship summaries, it may incur an extra cost of preparing the second summary, but 

we expect firms will only elect to prepare two separate summaries if they believe the benefits of 

separate summaries justify such additional preparation costs.  

Beyond the more general costs discussed above from the prescribed formatting and 

wording requirements, some specific requirements may be costly for certain firms.  For example, 

because the relationship summary requires information to be organized by standardized headings 

in a prescribed order, some firms may find it difficult to effectively present the most salient 

information specific to their business and services.  As such, certain firms may incur costs 

associated with trying to fit their business model and other relevant information into the 

standardized headings.  This is mitigated by the fact they have flexibility to present the required 

sub-topics of information in the order of their choosing within each subtopic and by firms’ 

ability to omit irrelevant information.  Firms and financial professionals also may bear costs in 

providing additional information to potential or existing investors to clarify any information that 

is salient to their business but does not fit into the standardized headings of the relationship 

summary.  These costs are mitigated by firms’ ability to supplement their relationship summaries 

with cross-references or hyperlinks to additional information. 

The page limit for the relationship summary also has potential costs, particularly for firms 

with complex business models, even under the increased flexibility provided by the final 

instructions, because they would have to distill the complexity of their business into the same 

space as less complex firms.  The use of layered disclosure, through mediums such as hyperlinks, 



 

369 

 

will permit firms to provide more detailed information that may ameliorate this cost to some 

extent, while still adhering to the formatting requirements of the relationship summary.    

Firms will also incur costs associated with the production and verification of information 

in the relationship summary. Although some of the information that will be summarized in the 

relationship summary is contained in other disclosures that firms already provide, firms will bear 

the cost of editing this information for the relationship summary and cross-referencing or 

hyperlinking to additional information.  For example, to the extent that some firms do not 

already have in place a concise description of how fees, costs, conflicts, and standards of conduct 

are potentially connected, that also will allow for meeting the relationship summary’s space 

constraints, firms will have to expend time and effort to develop an accurate, clear, and concise 

description of these items, written in plain English, for insertion into the relationship summary, 

and cross-referencing or hyperlinking to additional information about these items.  These costs 

may be larger for broker-dealers than for investment advisers, who can directly draw on the  

disclosures of fees, costs, and conflicts they have to provide to retail investors  in Part 2 of Form 

ADV.  Also, to the extent the costs of developing this section have a fixed component, the 

relative burden of developing this section may be higher for smaller firms. On the other hand, 

smaller firms are likely to have fewer types of fees, costs, and conflicts to report compared to 

larger firms, potentially making it less burdensome for them to summarize the required 

information.          

In addition, the relationship summary requires “conversation starters” as part of each 

section, and the conversation starters must be highlighted through text features to improve their 

prominence relative to other discussion text.  Firms will incur costs associated with the 

conversation starters, particularly with respect to preparation and training on how financial 



 

370 

 

professionals provide accurate and complete responses to the “conversation starters” when asked.  

We do not have access to data and information that would allow us to estimate these costs to 

firms, but we expect them to be comparatively greater for firms with more complex business, a 

wider range of offered services and products, because training and supervision costs for such 

firms could be more extensive.  For firms that provide automated investment advisory or 

brokerage services, those firms will incur burdens to prepare answers to each conversation starter 

question and make those available on the firm’s website (while providing in the relationship 

summary a means of facilitating access, e.g., by providing a hyperlink, to that section or 

page).1123  

We also anticipate that firms will bear some costs in the production of the electronic 

format as well as other graphical elements, such as charts and tables, which may make important 

information more salient to investors.  Smaller firms may disproportionately incur costs 

associated with electronic and graphical formatting, particularly if they do not have an existing 

web presence or currently produce brochures or other disclosures that make use of graphical 

formatting.  However, because the final instructions encourage, but do not require electronic 

formatting and graphical, text, and online features, firms would only bear these costs if they 

expected these features to provide benefits that justify these costs.  

Finally, there could also be some indirect costs to firms from some of the required 

content in the relationship summary.  In particular, to the extent that including disciplinary 

history information in the relationship summary increases the propensity of retail investors to 

                                                                                                                                                             

1123  See supra footnote 184  



 

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consider this information when selecting firms and financial professionals, firms that affirm they 

have one or more reportable disciplinary events may face a loss in competitiveness compared to 

firms that have no event to report.  This can in particular be costly for firms that have few or less 

serious disciplinary events that may be overlooked by investors that do not research the nature of 

the disciplinary history in more detail.1124  We also recognize larger firms might be more likely 

to incur such competitive costs, because larger firms are more likely to have at least one 

reportable disciplinary event than smaller firms.  Similarly, holding size constant, older firms, by 

virtue of having a longer business history, are more likely to have one or more reportable events 

than younger firms.  Although we acknowledge the potential for firms to incur competitive costs 

from having to affirm they have reportable disciplinary history, those costs are justified by the 

potential benefits to investors from this disclosure, as discussed above. 

(2) Filing, Delivery, and Updating Requirements 

As proposed, the final instructions require firms to file their relationship summaries with 

the Commission and make them available on firms’ publicly available websites, if they have one. 

The relationship summary must be filed in a text-searchable format with machine-readable 

headings.  Further, the final instructions will require investment advisers to file their relationship 

summaries using IARD, as proposed; however, the final instructions—in a change from the 

proposal—will require broker-dealers to file through Web CRD® instead of EDGAR.  This 

should reduce overall burdens relative to the proposal as broker-dealers already have extensive 

experience filing on Web CRD®, which is more accessible for broker-dealers.  As proposed, dual 

                                                                                                                                                             

1124  Commenters raised similar concerns. See supra footnote 586 and accompanying text.  



 

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registrants will be required to file on two systems.  Instead of filing on EDGAR and IARD, as 

proposed, dual registrants will be required to file using both Web CRD® and IARD.  We 

recognize that requiring dual registrants to file using both Web CRD® and IARD may be more 

costly than filing through just one system; however, we believe that any such cost is justified to 

ensure a complete and consistent filing record for each firm and to facilitate the Commission’s 

data analysis, examinations, and other regulatory efforts.   

As discussed above, the firms that deliver relationship summaries electronically must do 

so within the framework of the existing Commission guidance regarding electronic delivery.1125  

With respect to initial delivery of the relationship summary to new or prospective investors, firm 

are required to deliver the relationship summary in a manner consistent with how the retail 

investor requested information, consistent with the Commission’s electronic delivery 

guidance.1126  Flexibility in the method of delivery, consistent with Commission guidance, could 

promote efficiency by allowing firms to communicate with retail investors in the same medium 

by which they typically communicate other information.1127  Regardless of the method of 

delivery (e.g., paper or electronic delivery), firms will incur costs associated with delivering the 

relationship summary to retail investors.   

Moreover, requiring firms to make a copy of the relationship summary available upon 

request without charge will require firms to incur costs.  For example, firms that provide a paper 

                                                                                                                                                             

1125  See supra Section II.B.3 and footnote 678. 

1126  See supra footnotes 679–681 and accompanying text.  

1127  See supra Section II.B.3 and footnote 680. 



 

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version of the relationship summary to retail customers that request it will incur printing and 

mailing costs when such requests are made.  Further, firms may incur additional costs associated 

with systems for tracking customer delivery preferences. 

Firms will also incur costs for updating and filing the relationship summary within 30 

days of whenever any information becomes materially inaccurate.1128  Firms could communicate 

this information by delivering the amended relationship summary or by communicating the 

information another way to the retail investor.  For example, if an investment adviser 

communicated a material change to information contained in its relationship summary to a retail 

investor by delivering an amended Form ADV brochure or Form ADV summary of material 

changes containing the updated information, the ability to disclose material changes by 

delivering another required disclosure containing the updated information should mitigate the 

cost of the requirement to communicate updated information in the relationship summary to 

investors.  Firms could also incur costs to keep records of when the initial or updated relationship 

summary was delivered; however, we believe that firms will be able to leverage their current 

compliance infrastructures in maintaining such information.  

The Commission anticipates that the costs associated with delivery for an average broker-

dealer or average dual registrant will be higher than the costs for the average investment adviser.  

As Table 1 and Table 3 in Section IV.A.1 indicate, broker-dealers maintain a larger number of 

accounts than investment advisers; therefore, delivery costs for broker-dealers could exceed 

those of investment advisers, if the number of accounts is a good indicator of the number of retail 
                                                                                                                                                             

1128  Along this line, firms could also incur some costs in modifying certain referenced disclosures per the 
parameters of General Instruction 3.B to Form CRS.  



 

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investors.1129  Similarly, given that the average dual registrant has more customer accounts than 

the average investment adviser, and that the preparation of relationship summaries and any 

updates for dual registrants may require more effort than for standalone broker-dealers or 

investment advisers, the compliance costs could be larger for those firms.  

Firms will be required to deliver the relationship summary to retail investors.  The final 

instructions have adopted a definition of retail investor that is similar to the definition of retail 

customer in Regulation Best Interest, but differs to reflect the differences between the 

relationship summary delivery requirement and the obligations of broker-dealers under 

Regulation Best Interest, including that the retail investor definition covers prospective as well as 

existing clients and customers and natural persons who seek services from investment advisers as 

well as broker-dealers.  This definition of retail investor relative to the proposal may reduce 

uncertainty for broker-dealers and investment advisers about which customers should obtain 

relationship summaries.  We do not believe this changes the scope of retail investors that will 

benefit collectively from the final rules.    

(3) Recordkeeping Amendments 

As adopted and discussed above, firms will be required to make and preserve records of 

each version of their relationship summary and each amendment filed with the Commission. 

Firms will also be required to make and preserve a record of the dates that each relationship 

summary was given to any client, customer, or prospective client or customer who subsequently 

                                                                                                                                                             

1129  The Commission is unable to obtain from Form BD or FOCUS data information on broker-dealer numbers 
of customers, and instead, is only provided with the number of customer accounts. The number of customer 
accounts will exceed the number of customers as a customer could have multiple accounts at the same 
broker-dealer.  



 

375 

 

becomes a client or customer and such records will be maintained in the same manner, and for 

the same period of time, as other books and records under the applicable recordkeeping rules. As 

previously discussed, commenters stated that they believe the requirement to maintain records of 

the dates that the relationship summary was given to prospective clients or customers may 

impose significant and unnecessary costs and burdens.1130  Commenters stated that firms do not 

have compliance and recordkeeping systems in place that could, without substantial and costly 

modification, maintain records of related to prospective clients or customers who might not 

become actual clients or customers of the firms for weeks, months or years after firms begin 

communicating with such individuals.  As an alternative, commenters suggested that firms only 

be required to maintain a record of the most recent date they delivered the relationship summary 

to a prospective client that becomes an actual client preceding the opening of an account.  

Commenters suggested only requiring a record that the relationship summary was delivered at 

account opening or when a retail investor becomes an investment advisory client.  

The inclusion of the recordkeeping requirements in the amended rules will impose costs on firms 

in the form of revised recordkeeping policies and procedures and possible modifications to their 

recordkeeping systems.  The record requirements, however, may be less burdensome if their 

recordkeeping and compliance systems are already capable of creating and maintaining records 

related to communications with prospective clients.  For example, investment advisers are 

required to keep similar records for the delivery of the Form ADV Part 2 brochure and broker-

dealers are subject to comparable recordkeeping requirements with respect to communications 

                                                                                                                                                             

1130  See, e.g., Edward Jones Letter. 



 

376 

 

and correspondence with prospective retail investors.1131  Further, these recordkeeping 

requirements may benefit firms by assisting them in monitoring their compliance with the 

relationship summary delivery requirements.  Finally, these records will facilitate the 

Commission’s ability to inspect for and enforce compliance with the relationship summary 

requirements. 

(4) Estimates of certain compliance costs  

Although we are unable to quantify all costs discussed above, we quantify certain direct 

compliance costs based on the estimates developed for the purpose of the Paperwork Reduction 

Act analysis in Section V.  These costs, which we discuss below, are estimated separately for 

investment advisers and broker-dealers that are required to prepare and file a relationship 

summary.  We note that all aggregate cost estimates for either category of firms include the 318 

dually registered firms.1132  In addition, the costs estimates are calculated for the average 

investment adviser or average broker- dealer.  We recognize that the actual compliance costs 

burdens for some firms will exceed our estimates and the burden for others will be less because 

firms vary in the size and complexity of their business models.   

First, we quantify certain one-time costs associated with the initial preparation and filing 

of the relationship summary.  The cost burden for an average investment adviser to initially 

prepare and file the proposed Form CRS for the first time is estimated to range between 

                                                                                                                                                             

1131  See supra footnote 810. 
1132  See supra footnote 863 and accompanying text. 



 

377 

 

approximately $5,460 and $9,165, depending on the extent to which external help is used.1133  

The estimated aggregate non-amortized combined internal and external costs for all current 

investment advisers of initially preparing and filing the relationship summary will be 

approximately $65.3 million. 1134  In addition, based on IARD system data, the Commission 

estimates that each year approximately 656 newly investment advisers will be required to 

prepare and file the relationship summary with us.1135  The aggregate non-amortized initial 

preparation and filing costs of the relationship summary for these new investment advisers is 

estimated to be approximately $5.2 million.1136  Similarly, for broker-dealers, the cost to an 

average broker-dealer for preparing Form CRS for the first time is estimated to range between 

approximately $10,920 and $14,625.1137  We estimate the aggregate non-amortized aggregate 

                                                                                                                                                             

1133  The lower end estimate is based on the assessment that, without additional external help, it will take an 
average investment adviser 20 hours to prepare the relationship summary for the first time, see infra 
Section V.A.2.a. We assume that performance of this function will be equally allocated between a senior 
compliance examiner and a compliance manager at a cost of $237 and $309 per hour, (see infra footnote 
1232 for how we arrived at these costs). Thus, the cost for one investment adviser to produce the 
relationship summary for the first time is estimated at $5,460 (10 hours x $237 + 10 hours x $309 = $5,460) 
if no external help is needed. In addition, we estimate that if the investment adviser needs external help, the 
average cost to an investment adviser for the most expensive type of such help (i.e., compliance consulting 
services) would be $3,705, see infra footnote 1239, which brings the total cost to $9,165.     

1134  We estimate that the aggregate internal cost of initial preparation and filing of the relationship summary for 
existing investment advisers is $44,963,100 (= $5,460 per investment adviser x 8,235 existing investment 
advisers). The aggregate external cost for existing investment advisers is estimated to be $20,371,331. See 
infra Sections V.A.2.a and V.A.2.b for more detailed descriptions of how we arrived at these estimates. 

1135  See infra footnote 1227 and accompanying text. 
1136   We estimate that the aggregate internal cost of initial preparation and filing of the relationship summary for 

expected newly registered investment advisers is $3,3,581,760 (= $5,460 per investment adviser x 656 
expected new investment advisers). The aggregate external cost for expected new investment advisers is 
estimated to be $1,622,780. See infra Sections V.A.2.a and V.A.2.b for more detailed descriptions of how 
we arrived at these estimates.  

1137  The lower end estimate is based on the assessment that, without additional external help, it will take an 
average broker-dealer 40 hours to prepare the relationship summary for the first time, see infra Section 
V.D.2.a. We assume that performance of this function will be equally allocated between a senior 

 



 

378 

 

combined internal and external costs to all current broker-dealers of initially preparing and filing 

the relationship summary will be approximately $38.8 million.1138  We do not expect any new 

broker-dealer firms based on the secular decline in broker-dealer firms we have seen in recent 

years.1139    

Firms will also incur one-time costs of the initial delivery of relationship summaries to 

their existing retail investors.  We expect the non-amortized initial delivery costs to be 

approximately $4,941 for the average investment adviser. 1140 In total, we estimate that the 

aggregate non-amortized initial delivery costs to existing retail investors will be approximately 

$40.7 million for all current investment advisers,1141 and $3.2 million for newly registered 

investment advisers.1142  For the average broker dealer, we expect costs for the initial delivery to 

                                                                                                                                                             

compliance examiner and compliance manager at a cost of $237 and $309 per hour, respectively (see infra 
footnote 1365 for how we arrived at these costs). Thus, the cost for one broker-dealer to produce the 
relationship summary for the first time is estimated at $10,920 (20 hours x $237 + 20 hours x $309   = 
$10,920) if no external help is needed. In addition, we estimate that if the broker-dealer needs external help, 
the average cost to a broker-dealer for the most expensive type of such help (i.e., compliance consulting 
services) would be $3,705, see infra footnote 1378, which brings the total cost to $14,625.    

1138  We estimate that the aggregate internal cost of initial preparation and filing of the relationship summary for 
existing broker-dealers is $30,204,720 (= $10,920 per broker-dealer x 2,766 existing broker-dealers). The 
aggregate external cost for existing broker-dealers is estimated to be $8,560,770. See infra Sections V.D.2.a 
and V.D.2.b for more detailed descriptions of how we arrived at these estimates. 

1139  See infra Section IV.B.c for a discussion of this decline. 
1140  See supra Section V.C.2.b.(1) for a description of how this is estimated.   
1141  Calculated as $4,941 per firm x 8,235 current firms= $40,689,135. 
1142  Calculated as $4,941 per firm x 656 expected new firms = $3,241,296. 



 

379 

 

existing retail investors to be approximately $45,801.1143  The aggregate non-amortized initial 

delivery cost for all current broker-dealers is estimated to be approximately $126.7 million.1144    

Moreover, firms are required to post a current version of their relationship summary 

prominently on their public website (if they have one). We estimate that the initial posting will 

cost approximately $93 per firm (whether an investment adviser or a broker-dealer).1145  In 

aggregate we expect the initial cost of posting the relationship summary to firms’ websites to be 

approximately $686,437 for existing investment advisers,1146 $54,682 for newly registered 

investment advisers,1147 and $257,238 for broker-dealers.1148  

In addition to the estimates of one-time costs discussed above, for the purposes of the 

Paperwork Reduction Act analysis, we have also developed estimates of certain expected 

ongoing compliance costs of the final rules.  For example, firms will incur costs each year due to 

the requirement to re-deliver the relationship summary to existing retail investors in certain 

situations.  We estimate that the annual average cost to re-deliver the relationship summary will 

be approximately $992 for an average investment adviser and in aggregate approximately $8.8 

                                                                                                                                                             

1143  Calculated as $126,684,600 (the estimated aggregate costs)/ 2,766 (number of broker-dealers with retail 
customers).  See infra Section V.D.2.d. (1) for how the aggregate cost is estimated.  

1144  Id.  
1145  See infra sections V.C.2.a (for investment advisers) and V.D.2.a (for broker-dealers) for how the average 

cost per firm is estimated.  
1146  Based on IARD system data, 91.6% of investment advisers with individual clients report having at least 

one public website; see infra Section IV.B.2.a. Therefore the aggregate cost for existing investment 
advisers is estimated as: 91.6% x $91(average cost per firm) x 8,235 (number of existing investment 
advisers) = $686,437.  

1147  Assuming that the fraction of firms with at least one public website is the same for newly registered 
investment advisers as it is for existing investment advisers (see id), we estimate the aggregate costs as: 
91.6% x $91(average cost per firm) x 8,235 (excepted number of new investment advisers ) = $54,682.    

1148  See infra footnote 1370 and accompanying text.  



 

380 

 

million annually for all investment advisers.1149  For broker-dealers, we estimate that the annual 

average cost to re-deliver the relationship summary will be approximately $9,222 for the average 

firm, and in aggregate approximately $25.5 million annually for all broker-dealers.1150   Firms 

will also be required to deliver relationship summaries to new and prospective retail investors.  

Based on the Commission’s projections of future client and customer account growth, we 

estimate that the annual costs to current firms of delivery to new and prospective retail investors 

would be between approximately $223 for an average investment adviser and $5,072 for an 

average broker-dealer, or approximately $1.8 million annually in aggregate for investment 

advisers and approximately $14.0 million annually in aggregate for broker-dealers.1151 The 

difference in cost estimates between investment advisers and broker-dealers is mainly due to the 

fact that investment advisers serving retail investors generally have fewer clients than broker-

dealers serving retail investors have customer accounts, but also because we project a lower 

growth rate for retail clients for investment advisers (4.5%)1152 than for retail customer accounts 

for broker-dealers (11.0%).1153  In addition, firms will also incur costs associated with making 

paper copies of the relationship summary available upon request.  We estimate that such annual 

costs would be approximately $31 for the average firm (whether investment adviser or broker-

                                                                                                                                                             

1149  See infra Section V.C.2.b.(2). 
1150  See infra Section V.D.2.d.(2).  
1151  See infra section V.C.2.c for how we estimate the costs to investment advisers, and see infra Section 

V.D.2.e for how we estimate the costs for broker-dealers.     
1152  See infra footnote 1341 and accompanying text. 
1153  See infra footnote 1415 and accompanying text.381 

 

dealer), and the aggregate annual costs for investment advisers and broker-dealers combined 

would be approximately $338,272.1154 

In Section V, for the purposes of the Paperwork Reduction Act analysis, we also estimate 

the quantifiable expected ongoing costs associated with updating the relationship summary.  

These costs would be associated with preparing updated relationship summaries when 

information becomes materially inaccurate, re-posting updated relationship summaries to a 

public website, and communicating changes to the relationship summary through re-delivery to 

existing retail investors.  We estimate that the annual costs for firms to update and file amended 

relationship summaries will be approximately $467 for the average investment adviser, or 

approximately $3.8 million in aggregate for all investment advisers.1155  For investment advisers 

with a public website, we estimate the average annual costs of re-posting amended relationship 

summaries to be approximately $53.32 per adviser, or $402,207 in aggregate for all investment 

advisers with public websites.1156  Finally, we expect investment advisers will incur quantifiable 

costs of communicating changes to amended relationship summaries, if they choose to do so by 

delivery.  We estimate the average annual costs of communicating changes to amended 

relationship summaries by delivery will be $8,450 per adviser that to choose to do so, and in 

aggregate approximately $34.8 million for all investment advisers that  we expect to choose 

delivery to communicate updated information.1157  For broker-dealers, we estimate the annual 

                                                                                                                                                             

1154  See infra footnote 1339 and accompanying text for how we estimate the costs for investment advisers, and 
see infra footnote 1413 and accompanying text for how we estimate the costs for broker-dealers.  

1155  See infra Section V.A.2.c for how we estimate these costs.  
1156  See infra Section V.C.2.b.(3) for how we estimate these costs. 
1157  Id.   



 

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costs to update, file, and post amended relationship summaries will be approximately $608 for 

the average firm and approximately $1.7 million in aggregate for all broker-dealers.1158  We 

estimate annual delivery costs will be approximately $ 91,602 for the average broker-dealer that 

will choose delivery to communicate updated information, and in aggregate approximately 

$126.7 million annually for all broker-dealers that we expect to choose delivery.1159 

Finally, for the purposes of the Paperwork Reduction Act analysis, we also developed 

estimates of certain compliance costs associated with the recordkeeping requirements in the final 

rules. We estimate that the annual costs to firms related to these recordkeeping requirements will 

be $12.67 for an average investment adviser and approximately $104,354 in aggregate for all 

investment advisers. 1160  For broker-dealers, we estimate annual recordkeeping and record 

retention costs to be approximately $39 for an average broker-dealer, and $107,017 in aggregate 

for all broker-dealers.1161 

3. Impact on Efficiency, Competition, and Capital Formation  

In addition to the specific benefits and costs discussed in the previous section, we expect 

that the relationship summary could produce a number of broader long-term effects on the 

                                                                                                                                                             

1158  See infra Section V.D.2.c for how we estimate these costs. 
1159   See infra Section V.D.2.d.(3) for how we estimate these costs. 
1160  For investment advisers we estimate 0.2 additional burden hours related to the recordkeeping requirements 

in the final rule; see infra footnote 1280 and accompanying text.  We expect that this incremental burden 
will most likely be allocated between compliance clerks and general clerks, with compliance clerks 
performing 17% of the function at a total cost of $70 per hours, and general clerks performing 83% of the 
function at total cost of $62 per hour; see infra footnote 1282. The average costs per investment adviser is 
then estimated as (17% x 0.2 hours x $70) + (83% x 0.2 hours x $62) = $12.672. The aggregate cost is then 
$12.672 x 8,235 (number of investment advisers) = $104,354. 

1161  See infra Section V.E for the estimation of recordkeeping costs (estimated at $32 annually per broker-
dealer, or $87,627 in aggregate), and see infra section V.F.1  for the estimation of record retention costs 
(estimated at $7 annually per broker-dealer, or $19,390 in aggregate). 



 

383 

 

market for financial advice.  Below, we elaborate on these potential effects, in particular as they 

pertain to their impact on efficiency, competition, and capital formation. 

a. Efficiency 

The final rule requiring broker-dealers, investment advisers, and dually registered firms 

to produce a relationship summary could result in increased informational or allocative 

efficiency for retail investors by reducing the risk of matching with a firm or financial 

professional that is different from the investor’s expectations and preferences.  As discussed 

above, the risk of mismatch potentially imposes costs on investors, financial professionals, and 

firms.  Investors may inadvertently, in the absence of information provided by the relationship 

summary, select the wrong type of financial professional or account, leading to increased costs 

(direct and indirect) and potentially suboptimal outcomes as it pertains to meeting the investor’s 

financial goals.  For firms and financial professionals, cultivating relationships with potential 

investors requires resources in terms of time and effort.  If an investor and financial professional 

or firm is mismatched, then both sides of the relationship can incur costs.  For example, the 

financial professional may devote time and resources to develop a relationship with a retail 

investor that is comparatively costly to maintain because of a mismatch between the investor’s 

expectations and the services offered by the professional,1162 and the investor incurs costs 

associated with obtaining services that do not fit his or her needs.  As such, the relationship 

summary may reduce the costs associated with mismatch for investors, firms, and financial 

                                                                                                                                                             

1162   However, as discussed previously in, e.g., supra Section IV.B, a mismatch from the retail investors’ 
perspective may be advantageous for firms in certain circumstances, in which case firms may not overall 
benefit from a decrease in the number of mismatched investors.    



 

384 

 

professionals and increase the efficiency of the market for financial advice.  We expect these 

efficiency gains particularly in the initial matching between investors and firms and financial 

professionals.  For some retail investors, receipt of the relationship summary from their existing 

firm or financial professional could highlight that they are mismatched in their current 

relationship.  Those investors may benefit from terminating the mismatched relationship and 

looking for a more appropriate match, but such gains are likely to only be realized to the extent 

investors anticipate the long-term benefits from a better match will be greater that the short-run 

switching and search costs.  Moreover, these efficiency benefits may be attenuated to the extent 

that investors tend to stay in relationships with financial professionals once investors are 

committed to the relationship, even if the relationship is mismatched. 

Informational efficiencies could also be enhanced with the relationship summary because 

key information is focused on information that has been previously identified as important to 

retail investors, salient and consistently disclosed across broker-dealers and investment advisers.  

The relationship summary will provide concise, user-friendly information which will allow retail 

investors to better understand the relationship that they will have with their financial 

professionals and will allow them to seek services commensurate with their expectations.  In 

addition, to the extent the information asymmetry between investors and financial professionals 

is reduced, investors may make more informed investment decisions, or become more able to 

critically evaluate any investment advice they receive.  Further, the use of layered disclosure and 

conversation starters will allow retail investors to access additional information that may be 

relevant to them when selecting their firm or financial professional, further reducing the risk of 

mismatch. 



 

385 

 

The firm-specific nature of the relationship summary required by the final rules about a 

particular firm will enhance retail investors’ information set about each firm, providing them 

with a more concise and simple document, which should alleviate potential investor confusion 

about the key elements of the relationship that the investor could expect to have with that firm.   

However, such improved efficiency could be lower than that expected under the proposal 

because, unlike the proposed relationship summary, the adopted relationship summary will 

include less prescribed language and greater flexibility.  For example, the relationship summary 

will not include a comparison between general broker-dealer and investment adviser standards 

and services.1163  The elimination of this proposed requirement will likely reduce (relative to the 

proposal) the usefulness to retail investors from obtaining this general information from a single 

source (e.g., any firm’s relationship summary) and instead will require effort from investors in 

the form of search costs to provide an adequate comparison across firms within a given type of 

firm (e.g., investment advisers).  Moreover, for investors that may not know which type of firm 

is likely to best meet their preferences and expectations with respect to financial services, a less 

general relationship summary requires that investors that expend search costs also select the 

correct types of firms in order to make such a comparison.  This may be difficult for some retail 

investors, and could increase the costs of search and the risk of mismatch.  Also, allowing dual 

registrants the flexibility to prepare two separate relationship summaries rather than one 

combined document may result in some efficiency loss in terms of less direct comparability. 

Nonetheless, we believe that investors having access to  specific and tailored information about 
                                                                                                                                                             

1163  See supra Section II.B.6 for why the generalized comparison discussion was not included in the 
relationship summary. 



 

386 

 

the firms, as provided in the final rules, is more important for reducing  investors search costs 

and risk of mismatch, thereby justifying the potential efficiency losses (relative to the proposal) 

discussed above.  

Beyond informational efficiencies that could arise, the relationship summary also may 

lead to more efficient investor allocation of assets within their portfolios relative to the baseline.  

Some retail investors that previously avoided the market for financial services because they did 

not understand the material characteristics of either broker-dealers or investment advisers may be 

more likely to hire a financial professional if the costs associated with the acquisition of this 

information are reduced relative to the baseline.  The relationship summary is a simple, concise 

document providing investors information about key elements of the investor-provider 

relationship that could incent some investors to seek the services of a financial professional.  As 

such, for some investors that previously abstained from hiring a financial professional, portfolio 

efficiency could be improved, for example, through increased portfolio diversification.1164  

Furthermore, because of being provided the relationship summary, some current investors may 

realize that other services provided by their financial professional could be more appropriate for 

them.  For example, an advisory client of a dual registrant may learn more about the broker-

dealer services offered by the firm and realize that those services better match his or her 

preferences and make a switch, which may ultimately improve portfolio efficiency for the client. 

                                                                                                                                                             

1164  As discussed above, academic studies have identified several potential benefits to retail investors from 
seeking investment advice, including increased diversification; see supra footnote 1005 and accompanying 
text.  



 

387 

 

 However, as noted in Regulation Best Interest, certain studies suggest that for some 

financial professionals, the improvements to portfolio efficiency could be limited if the financial 

professionals are subject to the same behavioral biases, such as limited attention or anchoring, as 

retail investors in their portfolio allocation decisions.1165  Further, to the extent the relationship 

summary makes the conflicts of interest of financial professionals more salient to retail investors 

relative to the baseline, there is a risk that some professionals would feel they have a “moral 

license” to act on their conflicts,1166  which could harm the efficiency of retail investors’ 

portfolio allocations.  Despite such potential negative effects related to conflicts of interest 

disclosure, we believe that, on balance, retail investors will benefit from the inclusion of this 

disclosure in the relationship summary.  In particular, the conflicts of interest disclosure should 

enhance investors’ ability to evaluate which relationship is best for them and also help them 

more critically evaluate the recommendations or investment advice they receive, which should 

ultimately improve the efficiency of their portfolio allocations. 

In addition, and in a modification from the Proposing Release, the headings on the 

relationship summary will be machine readable, which will facilitate third-party data 

aggregators’, as well as the Commission’s, analysis and comparison of certain elements of the 

relationship summary across firms to the benefit of retail investors.  Comparability will lead to 

greater informational efficiency because retail investors will be better able to choose the right 

type of firm or financial professional and the right type of account and services, thereby 

                                                                                                                                                             

1165  See Regulation Best Interest, Section III.B.3.b. 

1166     See supra footnote 1027 and accompanying text.  



 

388 

 

increasing the likelihood that they choose what best meets their needs and reduces the likelihood 

of mismatch.  Providers may likewise benefit from higher information acquisition efficiency 

because firms may be more likely to initially attract retail investors who prefer their services, 

thereby potentially reducing customer acquisition costs, such as time and effort spent on initial 

engagement with prospective customers who ultimately do not contract for their services.   

b. Competition 

Beyond increased efficiency for retail investors, the relationship summary may also 

increase competition among broker-dealers and investment advisers.  Provision of the 

relationship summary by firms could enhance the competitiveness of broker-dealers and 

investment advisers by allowing retail investors to better evaluate and compare firms and 

financial professionals through increased transparency, and more generally increase retail 

investors’  understanding of the market for brokerage and investment advisory services.  In 

particular, increased transparency may allow investors to better assess the types of services 

available and the types of fees and costs associated with such services.  Moreover, and as 

discussed above, the relationship summary may facilitate comparisons across firms and lead to 

reduced search costs for retail investors, allowing investors to match their preferences and 

expectations for certain financial services, possibly at lower costs relative to the baseline, and 

may increase competitiveness between firms to lower prices for some services.  We believe the  

changes made to the relationship summary in the final rules have potentially strengthened such 

competitive effects, for example, by using less prescribed general language and instead requiring 

disclosure of firm-specific information about services, fees, costs, and conflicts, and by making 

the headings machine readable, which may encourage the development of search tools by third 

party providers.  An increase in competition may apply only between like firms (i.e., broker-



 

389 

 

dealers only or investment advisers only) or may have intra-industry effects across broker-

dealers and investment advisers. 

As discussed above, increased competition both among and between broker-dealers and 

investment advisers could reduce the pricing power of firms, benefitting investors through lower 

fees.  Lower fees could draw more retail investors that are not currently seeking investment 

advice to the market, although some retail investors may be willing to pay higher prices for other 

reasons, including enhanced services and firm reputation.  Combined with improved 

informational efficiency, increased competition for retail investors resulting from information 

provided by the relationship summary may drive prices at the margin to competitive levels across 

all types of firms, depending on how price sensitive retail investors are.  Alternatively, and 

similar to what we have today, a separating equilibrium may result where investors’ demand for 

particular services is relatively price insensitive and they cannot be persuaded to move to a 

different level of service simply because of lower prices (e.g., investors seeking ongoing advice 

may be more likely to pay higher prices for advisory services provided by investment advisers, 

even though a potentially lower cost option could be available through broker-dealers). 

Further, lower costs of information acquisition and processing due to the content, format, 

and structure of the relationship summary may lead to more people entering the market for 

brokerage and investment advisory services and may increase overall retail investor participation.  

Such an increase in the number of retail investors in the market for financial services could raise 

demand for brokerage and investments advisory services and mitigate the potential increase in 

competition discussed above.  However, increased levels of retail investor participation could 

also encourage new broker-dealer and investment adviser entrants to meet the needs of the new 

pool of investors, and may increase competition for investor capital through lower fees and costs. 



 

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How the competitive landscape will shift as a result of the relationship summary is 

difficult to determine and the effect on aggregate level of competition among and between 

broker-dealers and investment advisers could be limited.  For example, the relationship summary 

may not necessarily increase the number of new broker-dealer or investment adviser entrants to 

the market, but could lead to shifts of investors between broker-dealers and investment advisers 

to the extent that some currently engaged retail investors are mismatched, and that search and 

switching costs associated with correcting the mismatch do not justify the costs associated with 

the potential mismatch.  Moreover, the incidence of mismatched relationships with retail 

investors could be likely for both broker-dealers and investment advisers, so competition could 

be relatively unaffected in the aggregate; therefore, any mismatch corrected as a result of the 

relationship summary may not result in a significant net loss of investors for either broker-

dealers or investment advisers.  In addition, to the extent currently mismatched investors are 

customers of dual registrants, any switch in account type (brokerage or investment advisory), as 

a result of the relationship summary, may take place within a dual registrant rather than between 

different firms, further attenuating any competitive impact.  

By reporting legal or disciplinary history, the relationship summary may provide benefits 

to retail investors by prompting them to seek out additional information (e.g., from Investor.gov 

or BrokerCheck) on their current or prospective firms and financial professionals and take that 

information into account when considering whom to engage for financial services.  Competition 

between firms may be enhanced if firms and financial professionals with better disciplinary 

records drive out those with worse records.  We note, however, that legal and disciplinary history 

reported in the relationship summary may bias firms towards hiring financial professionals with 

fewer years of experience (i.e., fewer opportunities for customer complaints) and against hiring 



 

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experienced financial professional with some (minor) complaints.  Further, investors may also 

bias their choice of firm or financial professional in the same manner.  One commenter stated 

that reporting of legal and disciplinary history “imposes an inappropriate competitive imbalance 

and inaccurate picture concerning the relative number of disciplinary actions in sales 

organizations with large number of financial professionals.”1167  The expected economic impact 

of disciplinary reporting on competition across large and small firms, however, is generally 

unclear because small firms may suffer disproportional reputational penalties from more salient 

disciplinary history disclosure.  In general, reportable disciplinary history is less common for 

smaller firms than for larger firms.1168  Thus, small firms may appear to have better disciplinary 

history reputation than large firms solely because of their size of operations, rather than their 

actual legal and regulatory compliance or the professional ethics or integrity of their employees.  

At the same time, investors may over-react to generally more frequent disciplinary history 

disclosure by larger firms and forego potentially well-matched relationship with the larger firms 

as a result.  

Disclosing reportable legal and disciplinary history in the relationship summary may 

confer a small competitive advantage for investment advisers over broker-dealers because 

broker-dealers are more likely to have to report that they have a disciplinary history due to 

                                                                                                                                                             

1167  See ACLI Letter.  

1168  For example, while only 36% of registered investment advisers with less than $1 million of AUM disclose 
at least one disciplinary action as of January 1, 2019, 71% of registered investment advisers with more than 
$50 billion of AUM disclosed at least one disciplinary action that year.  Form ADV.  Similarly, while 42% 
of broker-dealers with less than $1 million in total assets disclose at least one disciplinary action as of 
January 1, 2019, 100% of broker-dealers with more than $50 billion total assets disclosed at least one 
disciplinary action that year. Form BD. 



 

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broader broker-dealer disclosure obligations.  Reporting from Form BD with respect to broker-

dealer disclosures of disciplinary actions taken by any regulatory agency or SRO show than 308 

(86%) out of 318 retail-facing dual-registered broker-dealers disclosed a disciplinary action. In 

contrast, 1,330 (54%) out of 2,448 retail-facing standalone broker-dealers disclosed a 

disciplinary action.  For investment advisers, Form ADV requires disclosure of any disciplinary 

actions taken in the past 10 years, and 284 (79%) of 318 retail-facing dual-registered investment 

advisers disclosed a disciplinary action.  However, for standalone investment advisers, only 

1,176 (15%) of 7,917 retail-facing investment advisers disclosed a disciplinary action.1169  As 

broker-dealers have relatively more reportable legal and disciplinary history than investment 

advisers, retail investors may engage investment advisers with greater frequency than broker-

dealers as a result of the disciplinary history reporting on the relationship summary, potentially 

creating a competitive advantage for some investment advisers. 

Although the relationship summary applies to SEC-registered broker-dealers and SEC-

registered investment advisers, it could exhibit some spillover effects for other categories of 

firms not affected by the rule changes such as investment advisers not registered with the SEC 

(e.g., state registered investment advisers), bank trust departments, insurance companies, and 

others.  In particular, the relationship summary could change the size of the broker-dealer and 

                                                                                                                                                             

1169  Source: Items 11C, 11D, and 11E of Form BD and Items 11.C., 11.D. and 11.E. of Form ADV.  Form BD 
asks if the SEC, CFTC, other federal, state, or foreign regulatory agency, or a self-regulatory organization 
have ever found the applicant broker-dealer or control affiliate to have 1) made a false statement or 
omission, 2) been involved in a violation of its regulations or statues, 3) been a cause of an investment 
related business having its authorization to do business denied, suspended, revoked, or restricted, or 4) have 
imposed upon it a civil money penalty or cease and desist order against the applicant or control affiliate. 
Likewise, Form ADV asks similar questions of registered investment advisers and advisory affiliates. 



 

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investment adviser markets—relative to each other, as well as relative to other markets.  To the 

extent the relationship summary reduces retail investors’ confusion and makes it easier for them 

to choose a relationship in line with their preferences and expectations, this could attract new 

retail investors to the broker-dealer and investment adviser markets from firms in other markets.  

At the same time, it is possible that, as a result of conflicts of interest and the existence of 

disciplinary history being saliently disclosed in the relationship summary, some investors may be 

deterred from seeking services of registered investment advisers or broker-dealers and instead 

seek the services provided by a state registered advisor or another professional not regulated by 

the Commission, or forego seeking financial services altogether.  

Firms’ current retail investors also may consider switching to a different type of firm if 

the relationship summary makes the different services provided and the types of fees and costs of 

investment advisory and brokerage services more prominent.  Such a switch could be within the 

market for investment advisory and brokerage services, or to a financial services provider outside 

this market (such as a bank or insurance company).  The information disclosed in the relationship 

summary may also lead some investors to realize a relationship with any financial services 

provider may not be in their best interest, and therefore withdraw altogether from the market.  

The exact extent and direction of substitution among different types of providers’ services is hard 

to predict and depends on the nature of the current mismatch between retail investor preferences 

and expectations and the type of services for which they have contracted, and the extent to which 

investors will digest and use the provided information in firms’ relationship summaries.  

To the extent the relationship summary increases competition between broker-dealers and 

investment advisers, and between these firms and other financial services providers, it may result 

in development of new products and services, and general innovation by the industry at large.  



 

394 

 

Competition among firms could provide incentives for firms to seek alternative ways to attract 

retail investors and generate profits.  In the process, firms could develop new and better ways of 

providing services to retail investors, for example, by utilizing information technology to deliver 

information to retail investors at lower costs.  In this way, innovation could improve retail 

investors’ welfare as well as the profitability of financial service providers.   

Another possible long-term effect of the relationship summary is that it could decrease 

the prevalence of third-party selling concessions in the market by requiring broker-dealers and 

dual registrants to include disclosure about indirect fees associated with investments that 

compensate the broker-dealer, including mutual fund loads.  Currently, selling concessions 

constitute a significant part of the compensation of broker-dealers selling mutual fund 

products.1170  For example, a mutual fund may provide a selling concession, in the form of a 

sales charge, some portion of which could be remitted to the broker-dealer that recommended the 

product.  To the extent the relationship summary increases the transparency and salience of such 

selling concessions and related conflicts of interest, investors may start to avoid investing in 

products that provide selling concessions, encouraging broker-dealers to avoid such 

arrangements.  To compensate for the potential loss of concession-based revenue, dually 

registered firms could try to switch customers from their brokerage account to their advisory 

accounts.  As noted above, however, if the relationship summary also increases the 

competitiveness in the broker-dealer and investment adviser markets, the increased 

competitiveness would create some general downward price pressure in the market which may 

                                                                                                                                                             

1170  See supra Table 2, Section IV.B.1.a.   



 

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spillover to selling concessions.  

c. Capital Formation 

As discussed above, the relationship summary may improve retail investors’ 

understanding about, and confidence in, the market for brokerage and investment advisory 

services, which may increase participation in this market by investors that previously avoided it. 

Such additional entry by new investors could increase the level of total capital across markets 

and increase the demand for new investment products and securities, which could precipitate 

capital formation in aggregate across the economy.  Depending on the magnitude of these effects, 

the increased availability of funds could result in lower cost of capital for companies, which 

could facilitate economic growth. 

However, to the extent the disclosure of certain information such as conflicts of interest 

or disciplinary history decreases some retail investors’ level of confidence in market for 

brokerage and investment advisory services, or the information provided makes some investors 

believe that they do not benefit from a relationship with a firm or financial professional, such 

investors could exit this market, which could attenuate any effects on capital formation.  In 

addition, to the extent that the market for financial services is already saturated, there may only 

be a redistribution between broker-dealers, investment advisers, and other financial service 

providers (such as state-registered investment advisers, banks, and insurance companies) as a 

result of retail investors becoming more informed, and any effects on capital formation would be 

attenuated.  

4. Alternatives to the Relationship Summary 

To reduce retail investor search costs and costs of potential mismatch between retail 

investors and professionals in brokerage and investment advisory services, we considered 



 

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various alternative approaches to the relationship summary, including whether to adopt 

additional disclosure requirements.  We have previously learned through public comments, 

investor testing, and a staff financial literacy study that industry commenters and survey 

participants generally supported a short disclosure document to retail investors that would 

address firms’ nature and scope of services, fees, and material conflicts of interest.1171  

Accordingly, we proposed rules and rule amendments to require firms to provide retail investors 

with disclosures designed for those purposes.  In our proposal, we solicited comment on 

alternatives to various elements of the relationship summary.  As discussed in Section I above, 

we also conducted extensive public outreach, including investor roundtables, specific solicitation 

of investor comments through the Feedback Forms, and investor testing.1172  We considered the 

suggestions and recommendations received through these processes as alternative approaches in 

our rulemaking, many of which we discussed in greater detail in Sections I and II above.  In 

determining the required scope and level of detail of information in the relationship summary, 

we balanced the need for robust disclosures with the risk of investor information overload and 

failure to properly process these disclosures, a recurring theme in both comment letters and 

investor feedback received through surveys and studies, roundtables and on Feedback Forms. 

                                                                                                                                                             

1171  See Proposing Release, supra footnote 5, at nn.13–21 and accompanying text. 

1172  See supra footnotes 11–21 and accompanying text. 



 

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a. Amending Existing Disclosures 
 

The relationship summary will be a new, separate disclosure, in addition to other 

disclosures that firms already must provide.1173  As noted in Section I above, some commenters 

argued that the relationship summary is duplicative of other disclosures, for example in Form 

ADV or in Form BD, and is thus unnecessary.1174  The Commission considered amending Part 

2A of Form ADV to require a brief summary at the beginning of the brochure in addition to the 

existing narrative elements, or changing certain existing Part 2A requirements to reduce or 

eliminate redundancy with parts of the relationship summary.  Similarly, the Commission 

considered whether to amend and require delivery to retail investors of a revised Form BD to 

include the same information as in the relationship summary, and make that information publicly 

available.1175   

After careful consideration and for the reasons discussed in Section I above, we believe 

that a separate summary disclosure will be more effective to help retail investors to choose from 

among firms and investment services than modifying existing disclosures.1176  We believe that a 

short, standalone relationship summary that facilitates comparisons across different providers 

                                                                                                                                                             

1173  Broker-dealers and investment advisers have disclosure and reporting obligations under state and federal 
laws, including, but not limited to, obligations under the Exchange Act, the Advisers Act, and the 
respective rules thereunder.  Broker-dealers are also subject to disclosure obligations under the rules of 
SROs.  

1174  See supra footnote 33 and accompanying text. 

1175  For example, the instructions to Form BD contain a section on the explanation of terms which could be 
extended to include basic (registrant-specific) information on the business practices of the registrant. 

1176  See supra footnotes 42–44 and accompanying text. 



 

398 

 

and types of services is necessary to highlight information that is relevant to a retail investor 

before or at the time she is deciding to select a firm, financial professional, account type, or 

services.  To that end, the short and succinct relationship summary includes topics that retail 

investors indicated would be important to them in selecting a provider.  Specifically, because the 

relationship summary is a shorter document and designed to be more of an overview than the 

existing investor-facing disclosures, such as Form ADV, and is specifically targeted to help retail 

investors obtain certain information before deciding to enter into a relationship with a financial 

professional, retail investors facing that decision can process its information content more 

efficiently.  The relationship summary facilitates layered disclosures and highlights where 

investors can access more detailed information, including existing documents that investors 

receive, which could facilitate review of those documents, such as Form ADV Part 2.  The 

relationship summary also promotes the investor receiving more detailed information about the 

provider and its services, as necessary, through conversation starters.  Furthermore, when 

compared to other disclosures that financial professionals may make on, for example, Form 

ADV and Form BD, the relationship summary seeks to enhance comparability across both 

adviser and broker-dealer provider types for retail investors.  

Thus, despite some content duplication with other existing disclosure requirements and 

firms having to bear the cost of creating additional disclosures, we believe that retail investors 

will benefit from having information relevant to deciding on a firm, financial professional, 

and/or accounts and services in one place in a more succinct, salient and standardized fashion.  

Overall, we believe that the relationship summary will enable better-informed decision-making, 

reduce risk of mismatch, and reduced search costs by retail investors. 



 

399 

 

b. Form and Format of the Relationship Summary 

Under the final instructions, firms will be required to describe, largely in their own 

wording, different topics related to their offerings in a question-and-answer format.  In 

comparison, we proposed instructions providing for standardized, declarative headings for each 

section of the relationship summary and a mix of prescribed and firm-specific language within 

each section.  As discussed in Section I above, nearly all commenters and investors providing 

feedback at roundtables and on Feedback Forms suggested modifications to the sample 

relationship summary and proposed instructions, and numerous commenters submitted 

alternative sample relationship summaries.1177   

Delivery of SEC-authored form.  Commenters suggested that the SEC author a standard 

industry-wide disclosure to deliver to retail investors, which could then be supplemented by 

firm-specific documents.1178  For example, one commenter suggested using as a potential 

framework the Buyers Guides developed by the National Association of Insurance 

Commissioners that insurance companies must deliver under certain circumstances.1179  

Commenters supporting an SEC-authored educational layer believed that the SEC was better 

placed than firms to discuss areas viewed to be educational in nature, such as comparisons, 

standard of conduct, and key questions to ask. 

                                                                                                                                                             

1177  See supra footnotes 36–40 and accompanying text. 

1178  Primerica Letter. 

1179  ACLI Letter 



 

400 

 

We have incorporated an element of these commenters’ suggestion by removing the 

comparisons section, which many commenters viewed as educational, and adding a link at the 

beginning of the relationship summary to Investor.gov/CRS where investors can obtain 

educational materials. However, we believe that investors are better served by keeping certain 

disclosures that may be viewed as more educational in nature, such as the standard of conduct 

and some of the “conversation starters” (replacing the “Key Questions to Ask”),  in the 

relationship summary.  We believe investors are more likely to understand how such content will 

affect them when presented in the context of the particular firm.  

Level of Flexibility in the Disclosure.   

As discussed in more detail above, we considered the appropriate level of prescribed 

wording and topics in the disclosure.  Several commenters suggested that, as an alternative to the 

prescriptive wording in the proposed relationship summary, we provide firms with more 

flexibility to craft their responses to items, with or without an SEC standardized disclosure to 

accompany the relationship summary or available on Investor.gov.  We considered the relative 

merits of prescribed wording and formatting versus allowing firms to use their own, as well as a 

mix of prescribed requirements and discretionary choices.  We considered this for different 

topics and sub-topics in the relationship summary, as well as for the relationship summary 

overall.   In some instances, we determined that prescribed wording would provide targeted 

benefits that discretionary wording could not, for example, through the use of standardized 

headings and a prescribed order of topics in order to maintain the benefits of comparability and401 

 

utility for retail investors.1180  For the reasons discussed in Section II, above, we also determined 

to prescribe wording for conversation starters, the standard of conduct, and a factual statement 

regarding the effect of fees over time.  In the event that prescribed wording is inapplicable to a 

firm’s business or inaccurate, the firm may omit or modify that wording.  We believe that this 

approach will allow firms greater flexibility to tailor their relationship summary disclosures to 

reflect their offerings more closely and accurately. However, greater flexibility in terms of 

wording could also allow firms to present disclosures in a more advantageous manner to them, 

rather than in a manner that would maximize the benefits to investors from the disclosures. 

Nonetheless, we believe retail investors will benefit under this adopted approach by receiving 

disclosures that may be more understandable, and also more informative about a particular firms’ 

offerings that they are considering.   

c. Summary of Fees, Costs, Conflicts, and Standard of Conduct   

In response to comments and investor feedback through surveys and studies, roundtable 

and the Feedback Forms, we are adopting changes from the proposal to the relationship 

summary’s required discussion of fees, costs, conflicts of interest, and standard of conduct, as 

described above.1181   

In connection with fee disclosure, the Commission considered many alternative 

approaches relating to the scope and types of fees firms must include in their relationship 

                                                                                                                                                             

1180  See supra Section II.A.1. 

1181   See supra Section II.B.3.   



 

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summaries, as well as the presentation of the fee disclosure.1182  As discussed in Section II.A.4 

above, commenters’ views varied on the scope and types of fees that should be disclosed and 

their level of detail.1183  In addition to what we had proposed and what we have adopted, the 

Commission considered other alternatives, such as whether to require firms to list all fees that 

retail investors may incur, to allow firms the flexibility to determine what fees to highlight, and 

variations or combinations of these approaches.  The final approach is designed to balance the 

need to provide a comprehensive view of what fees retail investors will pay with the need to 

produce relevant, succinct and understandable disclosures.  The final instructions do not require 

firms to disclose every single fee and instead permit firms to highlight examples of the categories 

of the most common fees that their retail investors will pay directly or indirectly.1184  We believe 

this approach benefits retail investors because they will be able to compare fee information that 

is more closely tailored to firms’ particular business practices, but also reflective of common fees 

that retail investors are likely to incur. 

The Commission also considered alternative ways in which firms should present their 

fees, such as whether to require firms to link to or include a fee schedule directly in the 

relationship summary,1185 or to require firms to include a hypothetical fee example.1186  Under 

                                                                                                                                                             

1182  See supra Section II.A.4.  In addition, the Commission considered alternative approaches with respect to 
the disclosure regarding a firm’s conflicts of interest and standard of conduct.  A discussion of the 
Commission’s consideration may be found in Section II.A.4. 

1183  See supra footnotes 420–423 and accompanying text. 

1184  See Item 3.A. of Form CRS. 

1185   See supra footnotes 426–435 and accompanying text. 

1186  See supra footnotes 438–435 and accompanying text. 



 

403 

 

the final instructions, firms must summarize their principal fees and costs and other fees and also 

include specific cross-references to more detailed information about their fees available in other 

sources.1187  The Proposing Release discussed the option of including an example of the impact 

of fees in the relationship summary.1188 While some commenters supported the inclusion of 

various forms of additional examples of fees calculations,1189 after careful consideration of the 

comment file and investor feedback received through studies and surveys, roundtables and 

Feedback Forms, we are declining to include a hypothetical fee example in the relationship 

summary.  We do so in light of commenters who suggested that such an example could be 

operationally difficult to implement, and that it could be perceived as confusing.1190  

Specifically, we believe the assumptions required to make a fee example relevant for investors 

vary for individual investors to the extent that a standardized example risks increasing investor 

confusion.   

 Instead, to help stimulate this discussion, a firm must include in the relationship summary 

the following conversation starter: “Help me understand how these fees and costs might affect 

my investments.  If I give you $10,000 to invest, how much will go to fees and costs, and how 

                                                                                                                                                             

1187  See Item 3.A.(ii) of Form CRS. 

1188  Proposing Release, supra footnote 5. 

1189        See, e.g., Wahl Letter; AARP Letter; Betterment Letter I.  

1190  NSCP Letter; Edward Jones Letter (noting that given the range of services available, it would be very 
difficult for financial professionals to fully address this question at the outset of the relationship, 
particularly for investors selecting transaction-based services); TIAA Letter; LPL Financial Letter; 
Primerica Letter; ICI Letter; SIFMA Letter (noting most firms do not currently have systems in place to 
allow financial professionals to answer customer-specific questions). 



 

404 

 

much will be invested for me?”1191  As discussed above,1192 this represents a different wording 

from the corresponding “Do the Math for Me” Key Question in the proposal, but we expect it to 

similarly encourage the retail investor to ask about the amount they would typically pay per year 

for the account and what is included in those fees, while being easier and less costly to answer 

for firms at the outset of the relationship.  

d. Filing and Delivery 

In connection with filing and delivery, Commission considered alternatives relating to 

filing formats, filing systems, and timeframes for firms’ initial relationship summary and 

subsequent updates.  As discussed in Section II.C. above, firms will file copies of their 

relationship summaries with the Commission. The proposed instructions provided that firms 

must file their relationship summaries in a text-searchable format but did not specify one. We 

solicited comment on whether the relationship summary should be filed as a text-searchable PDF, 

similar to how Form ADV is currently filed, or other enumerated formats. We also asked about 

what type of format would facilitate greater comparability across forms. Two commenters 

advocated that the relationship summary should be filed not only in a text-searchable, but also 

machine-readable format, in order to facilitate development of data aggregation tools allowing 

for comparability of forms across providers.1193  The Commission believes that although a PDF 

                                                                                                                                                             

1191  Item 3.A.(iv) of Form CRS. 

1192  See supra Sections II.A.4 and II.B.3.a. 

1193  CFA Letter I (“past experience regarding investors’ limited use of existing databases, such as IARD and 
BrokerCheck, cautions against placing too much reliance on investors’ accessing the documents directly.  
We therefore urge the Commission to require that the documents be filed, not just in a text-searchable 
format, but in a machine-readable format.”); Schnase Letter (“the data contained in the Relationship 

 



 

405 

 

submission format would not be the most ideal for comparing or aggregating data across 

relationship summary filings, it would likely be the easiest and least costly. A fillable form 

allowing the firm to enter text, similar to Form ADV Part 1, also would not be costly, but would 

not easily accept formatted tables or other graphical information. The final instructions, as with 

the proposed instructions, do not specify a particular format, but the current filing systems 

default firms to PDF format.  In a change from the proposal, we are requiring firms to implement 

machine-readable headings for their filings. We agree with the commenters that suggested this 

change that this approach facilitates some degree of data aggregation, while imposing limited 

costs on registrants.  

Furthermore, we requested comments on alternative filing systems for the relationship 

summary.  In response to comment and upon further consideration, as discussed in Section II.C.2 

above,1194 we are requiring broker-dealers to file their relationship summaries through Web 

CRD®, instead of EDGAR, as proposed. 

As discussed in Section II.C.3.a above, we also considered whether to allow more 

permissive use of electronic delivery. As proposed, we are affirming that the relationship 

summary must be delivered in accordance with the Commission’s electronic delivery guidance.  

We are adopting an additional instruction, however, that a firm may deliver the relationship 

summary to new or prospective clients or customers in a manner that is consistent with how the 

retail investor requested information about the firm or financial professional, and that this 

                                                                                                                                                             

Summary should be required to be filed in a structured data format, so the document can be utilized as a 
stand-alone human-readable document and serve as the source for a machine-readable data set”). 

1194  See supra footnotes 666 – 669 and accompanying text. 



 

406 

 

method of initial delivery for the relationship summary would be consistent with the 

Commission’s electronic delivery guidance.1195  Commenters suggested different approaches to 

electronic delivery, such as the “notice plus access” model, and a more comprehensive updating 

of the Commission’s electronic delivery guidance, which we considered as alternative 

approaches in this rulemaking.  While we recognize the potential cost savings to firms of 

allowing greater use of electronic delivery, we place great importance on how investors prefer to 

receive information.  Some commenters said that investors prefer to receive electronic 

disclosures because they are delivered faster and can be in more engaging formats, including 

video and audio.  On the other hand, investor surveys and investor testing show that some 

investors still prefer to receive paper disclosures, including in a hybrid approach of electronic 

disclosure with the option for paper.1196  As discussed in greater detail in Section II.C.3.a, the 

adopted approach of encouraging electronic presentations that are engaging to retail investors, 

while preserving the option for paper, within the framework of the Commission’s electronic 

delivery guidance and in accordance with retail investors’ preferences, is appropriate for the 

relationship summary. 

e. Transition Provisions  

As discussed above, we are adopting an initial date of June 30, 2020 for all firms that are 

registered, or investment advisers who have an application for registration pending with, the 

                                                                                                                                                             

1195  See Proposing Release, supra footnote 5, at nn.344–45 and accompanying text; see also 2000 Guidance, 
supra footnote 678, at 65 FR 25845–46; 96 Guidance, supra footnote 678, at 61 FR 24647; and 95 
Guidance, supra footnote 678, at 60 FR 53461.  

1196  See supra footnotes 682-689and accompanying text. 



 

407 

 

Commission prior to June 30, 2020, to file their initial relationship summaries with the 

Commission.  We considered tiered compliance dates for firms of different sizes.  We believe 

that the compliance dates, as adopted, balance the time and resources needed by different firms, 

as well as the assets under management and the number of firms that would be covered within 

the different compliance periods.   

V. PAPERWORK REDUCTION ACT ANALYSIS  

The amendments that we are adopting here contain “collection of information” 

requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).1197  In the 

Proposing Release, we solicited comment on the proposed collection of information 

requirements.  We also submitted the proposed collection of information to the Office of 

Management and Budget (“OMB”) for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 

1320.11.  The titles for the collections of information we are amending are (i) “Form ADV” 

(OMB control number 3235-0049); (ii) “Rule 204-2 under the Investment Advisers Act of 1940” 

(OMB control number 3235-0278); (iii) “Rule 17a-3; Records to be Made by Certain Exchange 

Members, Brokers and Dealers” (OMB control number 3235-0033) and (iv) “Rule 17a-4; 

Records to be Preserved by Certain Exchange Members, Brokers and Dealers” (OMB control 

number 3235-0279).  The new collections of information we are adopting1198 relate to (i) “Rule 

                                                                                                                                                             

1197  44 U.S.C. 3501 et seq. 

1198  The Commission is not adopting two other rules in the Proposing Release that would have contained 
collections of information.  Proposed rule 211h-1 under the Advisers Act and proposed rule 15l-3 under the 
Exchange Act relate to the disclosure of Commission registration status and financial professional 
association.  As discussed in Section I above, we have concluded that the combination of the disclosure 
requirements in Form CRS and Regulation Best Interest should adequately address the objectives of the 
proposed Affirmative Disclosures.   

 



 

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204-5 under the Investment Advisers Act of 1940” (OMB control number 3235-0767); and (ii) 

“Form CRS and rule 17a-14 under the Exchange Act” (OMB control number 3235-0766).  We 

are also amending 17 CFR 200.800 to display the control number assigned to information 

collection requirements for “Form CRS and rule 17a-14 under the Exchange Act” by OMB 

pursuant to the PRA.  An agency may not conduct or sponsor, and a person is not required to 

respond to, a collection of information unless it displays a currently valid control OMB number.  

A. Form ADV 

Form ADV (OMB Control No. 3235-0049) is currently a two-part investment adviser 

registration form.  Part 1 of Form ADV contains information used primarily by Commission staff, 

and Part 2A is the client brochure.  We use the information to determine eligibility for 

registration with us and to manage our regulatory and examination programs.  Clients use certain 

of the information to determine whether to hire or retain an investment adviser.  The collection 

of information is necessary to provide advisory clients, prospective clients, and the Commission 

with information about the investment adviser and its business, conflicts of interest and 

personnel.  Rule 203-1 under the Advisers Act requires every person applying for investment 

adviser registration with the Commission to file Form ADV.  Rule 204-4 under the Advisers Act 

requires certain investment advisers exempt from registration with the Commission (“exempt 

reporting advisers”) to file reports with the Commission by completing a limited number of items 

on Form ADV.  Rule 204-1 under the Advisers Act requires each registered and exempt 

reporting adviser to file amendments to Form ADV at least annually, and requires advisers to 

                                                                                                                                                             

 



 

409 

 

submit electronic filings through IARD.  The paperwork burdens associated with rules 203-1, 

204-1, and 204-4 are included in the approved annual burden associated with Form ADV and 

thus do not entail separate collections of information.  These collections of information are found 

at 17 CFR 275.203-1, 275.204-1, 275.204-4 and 279.1 (Form ADV itself) and are mandatory.  

Responses are not kept confidential.   

We are adopting amendments to Form ADV to add a new Part 3, requiring registered 

investment advisers that offer services to retail investors to prepare and file with the Commission, 

post to the adviser’s website (if it has one), and deliver to retail investors a relationship summary, 

as discussed in greater detail in Section II above.  Advisers will deliver the relationship summary 

to both existing clients and new or prospective clients who are retail investors.  As with Form 

ADV Parts 1 and 2, we will use the information to determine eligibility for registration with us 

and to manage our regulatory and examination programs.  Similarly, clients can use the 

information required in Part 3 to determine whether to hire or retain an investment adviser as 

well as what types of accounts and services are appropriate for their needs.   

The collection of information is necessary to provide advisory clients, prospective clients, 

and the Commission with information about the relationships and services the firm offers to 

retail investors, fees and costs that the retail investor will pay, specific conflicts of interest and 

standards of conduct, legal or disciplinary history, and how to obtain additional information 

about the firm.  The amendment requiring investment advisers to deliver the relationship 

summary is contained in a new collection of information under new rule 204-5 under the 



 

410 

 

Advisers Act, for which estimates are discussed below.  We did not propose amendments to Part 

1 or 2 of Form ADV.1199  

As discussed in Sections I and II of this release, we received comments that addressed 

whether the relationship summary is duplicative of other disclosures and necessary for 

investment advisers, and whether we could further minimize the burden of the proposed 

collections of information.  One commenter specifically addressed the accuracy of our burden 

estimates for the proposed collection of information, suggesting that our estimates were too low 

because compliance professionals estimated it would take 80-500 hours to prepare, deliver, and 

file the relationship summary, depending on the firm’s size and business model.1200  Another 

commenter said the current Form ADV requirements are a burden to smaller firms and that the 

currently approved burdens of 23.77 hours and $6,051 are too low.1201  Others commented more 

broadly that certain costs to prepare and file the relationship summary would be higher than we 

estimated in the proposal.1202  We have considered these comments and are increasing our PRA 

burden estimates from 5 hours to 20 hours for investment advisers to prepare and file the 

relationship summary.  We also modified several substantive requirements to mitigate some of 

these estimated increased costs relative to the proposal. 

                                                                                                                                                             

1199  We are adopting technical amendments to the General Instructions of Form ADV to add references to the 
Part 3, but these amendments would not affect the burden of Part 1 or Part 2.  See amended General 
Instructions to Form ADV.   

1200  See NSCP Letter.     

1201  See Marotta Letter.     

1202  See, e.g., MarketCounsel Letter.  Others argued that the cost of Form CRS and Regulation Best Interest 
would be high.  See, e.g., Raymond James Letter; CCMC Letter (investor polling results); SIFMA Letter. 



 

411 

 

1. Respondents:  Investment Advisers and Exempt Reporting Advisers 

The respondents to current Form ADV are investment advisers registered with the 

Commission or applying for registration with the Commission and exempt reporting advisers.1203  

Based on the IARD system data as of December 31, 2018, approximately 13,299 investment 

advisers were registered with the Commission, and 4,280 exempt reporting advisers file reports 

with the Commission.  

As discussed above, we are adopting amendments to Form ADV that will add a new Part 

3, requiring certain registered investment advisers to prepare and file a short and accessible 

relationship summary for retail investors.  Based on IARD system data as of December 31, 2018, 

the Commission estimates that 8,235 investment advisers have some portion of their business 

dedicated to retail investors, including either individual high net worth clients or individual non-

high net worth clients,1204 which is higher relative to the estimate in the Proposing Release.1205    

                                                                                                                                                             

1203  An exempt reporting adviser is an investment adviser that relies on the exemption from investment adviser 
registration provided in either section 203(l) of the Advisers Act because it is an adviser solely to one or 
more venture capital funds or 203(m) of the Advisers Act because it is an adviser solely to private funds 
and has assets under management in the United States of less than $150 million.  An exempt reporting 
adviser is not a registered investment adviser and therefore would not be subject to the relationship 
summary requirements. 

1204  Proposing Release, supra footnote 5, at Section V.A.1. Based on responses to Item 5.D. of Form ADV, 
these advisers indicated that they advise either high net worth individuals or individuals (other than high 
net worth individuals), which includes trusts, estates, and 401(k) plans and IRAs of individuals and their 
family members, but does not include businesses organized as sole proprietorships in Item 5.D.(a)(1) of 
Form ADV or have regulatory assets attributable to either high net worth individuals or individuals other 
than high net worth individuals in Item 5.D.(a)(3) of Form ADV.  The definition of retail investor will 
include the legal representatives of natural persons who seek to receive or receive services primarily for 
personal, family, or household purposes.  As discussed in Section II.C.1 above, a legal representative of a 
natural person will cover only non-professional legal representatives (e.g., a non-professional trustee that 
represents the assets of a natural person and similar representatives such as executors, conservators, and 
persons holding a power of attorney for a natural person).  We are not able to determine, based on 
responses to Form ADV, exactly how many advisers provide investment advice to these types of legal 
representatives or trustees; however, we believe that these advisers most likely also advise individuals and 
are therefore included in our estimate. 



 

412 

 

This will leave 5,064 registered investment advisers that do not provide advice to retail 

investors1206 and 4,280 exempt reporting advisers that will not be subject to Form ADV Part 3 

requirements, but are included in the PRA analysis for purposes of updating the overall Form 

ADV information collection.1207  We also note that these figures include the burdens for 318 

registered broker-dealers that are dually registered as investment advisers as of December 31, 

2018.1208  We did not receive comments related to the methodology used for estimating the 

number of investment advisers that will be subject to Form ADV Part 3 requirements.  We are 

maintaining the methodology we used in the Proposing Release and are updating our estimates to 

reflect the increased number of investment advisers and exempt reporting advisers since the last 

burden estimate.  

2. Changes in Average Burden Estimates and New Burden Estimates 

Based on the prior revision of Form ADV,1209 the currently approved total aggregate 

annual hour burden estimate for all advisers of completing, amending, and filing Form ADV 

(Part 1 and Part 2) with the Commission is 363,082 hours, or a blended average of 23.77 hours 

                                                                                                                                                             

1205  We estimated in the Proposing Release that approximately 7,625 registered investment advisers of the 
12,721 registered investment advisers would be subject to the relationship summary requirements, based on 
IARD system data as of December 31, 2017.  See Proposing Release, supra footnote 5 at Section V.A.  

1206  13,299 registered investment advisers – 8,235 = 5,064 registered investment advisers not providing advice 
to retail investors. 

1207  Based on IARD system data. 

1208  See supra footnote 863. 

1209  See Form ADV and Investment Advisers Act Rules, Final Rule, Investment Advisers Act Release No. 4509 
(Aug. 25, 2016) [81 FR 60418 (Sept. 1, 2016)] (“2016 Form ADV Paperwork Reduction Analysis”). 



 

413 

 

per adviser,1210 with a monetized total of $92,404,369, or $6,051 per adviser.1211  The currently 

approved annual cost burden is $13,683,500.  This burden estimate is based on: (i) the total 

annual collection of information burden for SEC-registered advisers to file and complete Form 

ADV (Part 1 and Part 2); and (ii) the total annual collection of information burden for exempt 

reporting advisers to file and complete the required items of Part 1A of Form ADV.  Broken 

down by adviser type, the current approved total annual hour burden is 29.22 hours per SEC-

registered adviser and 3.60 hours per exempt reporting adviser.1212  The amendments will 

increase the current burden estimate due in part to the amendments to Form ADV to add Form 

ADV Part 3:  Form CRS (the relationship summary) and the increased number of investment 

advisers and exempt reporting advisers since the last burden estimate.  We did not propose 

amendments to Part 1 or Part 2 of Form ADV.   

The amendments to Form ADV to add Part 3 will increase the information collection 

burden for registered investment advisers with retail investors.  As discussed above in Sections I 

and II of this release, registered investment advisers providing services to retail investors will be 

required to prepare and file a relationship summary with the Commission electronically through 

IARD in the same manner as they currently file Form ADV Parts 1 and 2.  We are also requiring 

that all relationship summaries be filed in a text-searchable format with machine-readable 

                                                                                                                                                             

1210  363,082 hours / (12,024 registered advisers + 3,248 exempt reporting advisers) = 23.77 hours.  

1211  $92,404,369 hours / (12,024 registered advisers + 3,248 exempt reporting advisers) = $6,051.  

1212  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR 60454. 



 

414 

 

headings.  These investment advisers also will be required to amend and file an updated 

relationship summary within 30 days whenever any information becomes materially inaccurate.   

As noted above, not all investment advisers will be required to prepare and file the 

relationship summary.  For those investment advisers, the per adviser annual hour burden for 

meeting their Form ADV requirements will remain the same, in particular, 29.22 hours per 

registered investment adviser without relationship summary obligations.  Similarly, because 

exempt reporting advisers also will not have relationship summary obligations, the annual hour 

burden for exempt reporting advisers to meet their Form ADV obligations will remain the same, 

at 3.60 hours per exempt reporting adviser.  However, although we did not propose amendments 

to Form ADV Part 1 and Part 2, and the per adviser information collection burden will not 

increase for those without the obligation to prepare and file the relationship summary, the 

information collection burden attributable to Parts 1 and 2 of Form ADV will increase due to an 

increase in the number of registered investment advisers and exempt reporting advisers since the 

last information collection burden estimate.  We discuss below the increase in burden for Form 

ADV overall attributable to the adopted amendments, i.e., new Form ADV Part 3: Form CRS, 

and the increase due to the updated number of respondents that will not be subject to the adopted 

amendments. 

a. Initial Preparation and Filing of Relationship Summary  

As discussed above in Section II, investment advisers will be required to prepare and 

file a relationship summary summarizing specific aspects of their investment advisory 

services that they offer to retail investors.  Much of the required information overlaps with 

that required by Form ADV Part 2A and therefore should be readily available to registered 

investment advisers because of their existing disclosure obligations.  Investment advisers also 



 

415 

 

already file the Form ADV Part 2A brochure on IARD, and we have considered this factor in 

determining our estimate of the additional burden to prepare and file the relationship 

summary.   

In the Proposing Release, we estimated that the initial first year burden for preparing 

and filing the relationship summary, for investment advisers that provide advice to retail 

investors, would be 5 hours per registered adviser.1213  Some commenters said that these 

estimated burdens were too low,1214 and one argued that the current burden estimates for 

Form ADV are too low.1215  One commenter specifically argued that preparing, delivering, 

and filing the relationship summary would take from 80 to 500 hours, based on input from 

compliance professionals, and noted there would be additional costs that are hard to quantify, 

including human resources and information technology programming.1216  Commenters also 

said more broadly that the relationship summary would be burdensome for investment 

advisers1217 and would result in additional compliance burdens including training.1218       

                                                                                                                                                             

1213  See Proposing Release, supra footnote 5, at nn.356 –367 and accompanying text.  

1214  See, e.g., NSCP Letter; see also CCMC Letter (costs to implement the proposal were underestimated and 
greater than 40% of firms surveyed anticipate having to spend a moderate or substantial amount to 
implement Regulation Best Interest and Form CRS); SIFMA Letter (stating that implementation costs of 
Regulation Best Interest and Form CRS would be significant).   

1215  See Marotta Letter. 

1216 See NSCP Letter.  

1217  See MarketCounsel Letter. 

1218  See NSCP Letter (stating that a minimum of two hours of firm level training or two hours of training per 
independent registered representative will be required prior to implementation and delivery of the 
relationship summary).   



 

416 

 

We are revising our estimate of the time that it would take each adviser to prepare and 

file the relationship summary in the first year from 5 hours in the proposal to 20 hours in light 

of these comments and the changes we are making to the proposed relationship summary.1219  

For example, as discussed in the Proposing Release, we estimated that it would take firms a 

shorter amount of time to prepare the relationship summary than to prepare more narrative 

disclosures due to the standardized nature and prescribed language of the relationship 

summary.  As discussed above, the final instructions require less prescribed wording relative 

to the proposal and require firms to draft their own summaries for most of the sections.  In 

addition and in a change from the proposal, we are now requiring that all relationship 

summaries be filed with machine-readable headings, as well as in a text-searchable format as 

proposed.  We acknowledge that these changes will increase cost burdens because advisers 

will have to develop their own wording and design, as well as implement machine-readable 

headings, to comply with these requirements.     

The relationship summary will also require more layered disclosures relative to the 

proposal and will encourage the use of electronic formatting and graphical, text, online 

features to facilitate access to other disclosures that provide additional detail.  Although much 

of the information that will be summarized in the relationship summary is contained in other 

disclosures that firms already provide, firms will bear the cost of preparing a new relationship 

summary and cross-referencing or hyperlinking to additional information.  The higher 

estimated burden estimate also reflects our acknowledgement that it will take firms longer to 

                                                                                                                                                             

1219  See infra footnote 1221.   



 

417 

 

draft certain disclosures than we estimated in the Proposing Release, such as answers to 

“conversation starters” that advisers providing automated investment advisory without a 

particular individual with whom a retail investor can discuss these questions must include on 

their website.  We believe these factors and the other changes we made to the proposal will 

increase the burden to prepare a relationship summary relative to the proposal.    

We are estimating the same hourly burden for investment advisers and investment 

advisers that are dually registered as broker-dealers because we are counting dually registered 

firms in the burden calculation for Form ADV and the Exchange Act rule that requires the 

relationship summary for broker-dealers.1220  We recognize that the burden for some advisers 

will exceed our estimate, and the burden for others will be less due to the nature of their 

business, but we do not believe that the range could be as high as some commenters 

suggested.1221  After consideration of comments and changes we made to the requirements 

                                                                                                                                                             

1220  The burden estimates for dual registrants to prepare and file the relationship summary are accounted for in 
the burden estimates for Form ADV and under Exchange Act rule 17a-14.  For example, a dual registrant 
that prepares an initial relationship summary that covers both its advisory business and broker-dealer 
business has an estimated burden of 60 hours amortized (20 hours to prepare and file relationship summary 
related to the advisory business + 40 hours to prepare and file relationship summary related to the broker-
dealer business).  

1221  See NSCP Letter (estimating that the time required to prepare, deliver and file the relationship summary 
would be anywhere from 80 to 500 hours).  In estimating the cost for the initial preparation of Form ADV 
Part 2, we estimated that small, medium, and large advisers would require 15, 97.5, and 1989 hours 
respectively to prepare Form ADV Parts 1 and 2, for investment advisers overall, and the per adviser 
annual hour burden for meeting their Form ADV Parts 1 and 2 requirements is 36.24 hours.  See Brochure 
Adopting Release, supra footnote 576, at 75 FR at 49257.  In comparison, as discussed above, the 
relationship summary is limited to two pages in length for standalone investment advisers and four pages in 
length for dual registrants in paper format (or equivalent in electronic format).  While we recognize that 
different firms may require different numbers of hours to prepare and file the relationship summary, we 
believe that a first year average of 20 hours for investment advisers with relationship summary obligations 
is an appropriate estimate for purposes of calculating an aggregate burden for the industry, for purposes of 
the PRA analysis, particularly given our experience with the burdens for Form ADV Parts 1 and 2. 



 

418 

 

relative to the proposal and in light of the current approved burden for Part 2 of Form ADV, 

which requires more disclosures than the relationship summary, we are increasing the 

estimated burden relative to the proposal to 20 hours in the first year.1222  We therefore 

estimate that the total burden of preparing and filing the relationship summary will be 164,700 

hours.1223   

As with the Commission’s prior Paperwork Reduction Act estimates for Form ADV, 

we believe that most of the paperwork burden will be incurred in advisers’ initial preparation 

and filing of the relationship summary, and that over time this burden will decrease 

substantially because the paperwork burden will be limited to updating information.1224  The 

estimated initial burden associated with preparing and filing the relationship summary will be 

amortized over the estimated period that advisers will use the relationship summary, i.e., over a 

three-year period.1225  The annual hour burden of preparing and filing the relationship 

summary will therefore be 54,900.1226  In addition, based on IARD system data, the 

Commission estimates that 1,227 new investment advisers will file Form ADV with us 
                                                                                                                                                             

1222  We believe that much of the information required in the relationship summary overlaps with that required 
by Form ADV Part 2 and therefore should be readily available to investment advisers because of their 
existing disclosure obligations.  Accordingly, although these new requirements will cause an increase in the 
information collected, the increased burden should largely be attributable to data entry and not data 
collection.   

1223  20.0 hours x 8,235 investment advisers = 164,700 total aggregate initial hours. 

1224  We discuss the burden for advisers making annual updating amendments to Form ADV in Section V.A.2.c 
below.   

1225  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209.  Amortizing the 20 hour burden 
imposed by the relationship summary over a three-year period will result in an average annual burden of 
6.67 hours per year for each of the 8,235 investment advisers with relationship summary obligations. 

1226  20.0 hours x 8,235 investment advisers / 3 = 54,900 total annual aggregate hours. 



 

419 

 

annually; of these, 656 will be required to prepare and file the relationship summary.1227  

Therefore, the aggregate initial burden for newly registered advisers to prepare and file the 

relationship summary will be 13,1201228 and, amortized over three years, 4,373 on an annual 

basis.1229  In sum, the annual hour burden for existing and newly registered investment advisers 

to prepare and file a relationship summary will be 59,273 hours,1230 or approximately 6.67 

hours per adviser,1231 for an annual monetized cost of $16,181,529, or $1,965 per adviser.1232 

b. Estimated External Costs for Investment Advisers Preparing 
the Relationship Summary 

The currently approved total annual collection of information burden estimate for Form 

ADV anticipates that there will be external costs, including (i) a one-time initial cost for outside 

                                                                                                                                                             

1227  The number of new investment advisers is calculated by looking at the number of new advisers in 2017 and 
2018 and then determining the number each year that serviced retail investors.  (644 for 2017 + 668 for 
2018) / 2 = 656.  

1228  656 new RIAs required to prepare relationship summary x 20.0 hours = 13,120 hours for new RIAs to 
prepare relationship summary. 

1229  656 x 20.0 hours / 3 = 4,373. 

1230  (164,700 + 13,120) / 3 years = 59,273 annual hour burden for existing and new advisers to prepare and file 
relationship summary.  

1231  59,273 hours / (8,235 existing advisers + 656 new advisers) = 6.67 hours per year.  

1232  59,273 is the total aggregate initial hour burden for preparing and filing a relationship summary. We 
believe that performance of this function will most likely be equally allocated between a senior compliance 
examiner and a compliance manager. Data from the Securities Industry Financial Markets Association’s 
Management & Professional Earnings in the Securities Industry 2013 (“SIFMA Management and 
Professional Earnings Report”), modified by Commission staff to account for an 1,800-hour work-year and 
inflation, and multiplied by 5.35 (professionals) or 2.93 (office) to account for bonuses, firm size, employee 
benefits, and overhead, suggest that costs for these positions are $237 and $309 per hour, respectively. 
(59,273 hours x 50% x $237) + (59,273 hours x 50% x $309 = $16,181,529). $16,181,529 / 8,235 
investment advisers = $1,965 per investment adviser.  The SIFMA Management and Professional Earnings 
Report was updated in 2019 to reflect inflation.  The numbers in the report are higher than the numbers we 
used in the Proposing Release and, along with the higher hourly burden, result in higher cost estimates in 
this release, relative to the proposal.   



 

420 

 

legal and compliance consulting fees in connection with the initial preparation of Part 2 of Form 

ADV, and (ii) the cost for investment advisers to private funds to report the fair value of their 

private fund assets.1233  We do not anticipate that the amendments to add a new Part 3 will affect 

the per adviser cost burden for those existing requirements but anticipate that some advisers may 

incur a one-time initial cost for outside legal and consulting fees in connection with the initial 

preparation of the relationship summary.  We do not anticipate external costs to investment 

advisers in the form of website set-up, maintenance, or licensing fees because they will not be 

required to establish a website for the sole purpose of posting their relationship summary if they 

do not already have a website.  We also do not expect other ongoing external costs for the 

relationship summary.   

In the Proposing Release, we estimated that an external service provider would spend 3 

hours helping an adviser prepare an initial relationship summary.  While we received no specific 

comments on our estimate regarding external costs in the Proposing release, one commenter 

suggested that there would be additional implementation costs such as legal advice, but that these 

costs are difficult to quantify.1234  Another argued that that the current burden estimates for Form 

ADV did not take into consideration the time spent on learning about the complexities of what is 

needed to comply with similar requirements.1235  Based on the concerns expressed by these 

                                                                                                                                                             

1233  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR 60452.  The estimated 
external costs of outside legal and consulting services for the relationship summary are in addition to the 
estimated hour burden discussed above.   

1234  See NSCP Letter.   

1235  See Marotta Letter.421 

 

commenters and the changes we are making to the relationship summary, we are increasing the 

estimate relative to the proposal from 3 to 5 hours. While we recognize that different firms may 

require different amounts of external assistance in preparing the relationship summary, we 

believe that this is an appropriate average number for estimating an aggregate amount for the 

industry purposes of the PRA analysis, particularly given our experience with the burdens for 

Form ADV.1236   

Although advisers that will be subject to the relationship summary requirement may vary 

widely in terms of the size, complexity, and nature of their advisory business, we believe that the 

strict page limits will make it unlikely that the amount of time, and thus cost, required for outside 

legal and compliance review will vary substantially among those advisers who elect to obtain 

outside assistance.  

Most of the information required in the relationship summary is readily available to 

investment advisers from Form ADV Part 2A, and the narrative descriptions are concise, brief, 

and at a summary level.  As a result, we continue to anticipate, as discussed in the proposal, that 

only 25% of investment advisers will seek the help of outside legal services and 50% of 

investment advisers will seek the help of compliance consulting services in connection with the 

initial preparation of the relationship summary.1237  We estimate that the initial per existing 

                                                                                                                                                             

1236  In estimating the external cost for the initial preparation of Form ADV Part 2, we estimated that small, 
medium, and large advisers would require 8, 11, and 26 hours of outside assistance, respectively, to prepare 
Form ADV Part 2. See Brochure Adopting Release, supra footnote 576, at 75 FR at 49257.  In comparison, 
as discussed above, the relationship summary is limited to two pages in length for standalone investment 
advisers and four pages in length for dual registrants in paper format (or equivalent in electronic format).   

1237  See Proposing Release, supra footnote 5 at Section V.A.  We did not receive comments on these estimates.  
While we recognize that the instructions have changed, we continue to believe that only 25% of advisers 
will seek help of outside legal services and 50% of advisers will seek compliance consulting services, and 

 



 

422 

 

adviser cost for legal services related to the preparation of the relationship summary will be 

$2,485.1238  We estimate that the initial per existing adviser cost for compliance consulting 

services related to the preparation of the relationship summary will be $3,705.1239  Thus, the 

incremental external cost burden for existing investment advisers is estimated to be $20,371,331, 

or $6,790,444 annually when amortized over a three-year period.1240  In addition, we estimate 

that 1,227 new advisers will register with us annually, 656 of which will be required to prepare a 

relationship summary.  For these 656 new advisers, we estimate that they will require $1,622,780 

in external costs to prepare the relationship summary, or $540,927 amortized over three 

years.1241  In summary, the annual external legal and compliance consulting cost for existing and 

                                                                                                                                                             

that these estimates are appropriate for purposes of the PRA analysis, particularly given our experience 
with the external burdens for Form ADV Parts 1 and 2.  

1238  External legal fees are in addition to the projected hour per adviser burden discussed above.  Data from the 
SIFMA Management and Professional Earnings Report suggest that outside legal services cost 
approximately $497 per hour.  $497 per hour for legal services x 5 hours per adviser = $2,485.  The hourly 
cost estimate of $497 is based on an inflation-adjusted figure and our consultation with advisers and law 
firms who regularly assist them in compliance matters.  

1239  External compliance consulting fees are in addition to the projected hour per adviser burden discussed 
above.  Data from the SIFMA Management and Professional Earnings Report, modified to account for an 
1,800-hour work year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and 
overhead, and adjusted for inflation, suggest that outside management consulting services cost 
approximately $741 per hour.  $741 per hour for outside consulting services x 5 hours per adviser = $3,705. 

1240  25% x 8,235 existing advisers x $2,485 for legal services = $5,115,994 for legal services.  50% x 8,235 
existing advisers x $3,705 for compliance consulting services = $15,255,338.  $5,115,994 + $15,255,338 = 
$20,371,331 in external legal and compliance consulting costs for existing advisers.  $20,371,333 / 3 = 
$6,790,444 annually. 

1241  25% x 656 new advisers x $2,485 for legal services = $407,540.  50% x 656 new advisers x $3,705 for 
compliance consulting services = $1,215,240.  $407,540 + $1,215,240 = $1,622,780 in external legal and 
compliance consulting costs for new advisers. $1,622,780 / 3 = $540,927.annually in external legal and 
compliance consulting costs for newly registered advisers. 



 

423 

 

new advisers relating to obligations to prepare the relationship summary is estimated to total 

$7,331,370, or $825 per adviser.1242     

c. Amendments to the Relationship Summary and Filing of 
Amendments 

The current approved information collection burden for Form ADV also includes the 

hour burden associated with annual and other amendments to Form ADV, among other 

requirements.  In the Proposing Release, we estimated that the relationship summary would 

increase the annual burden associated with Form ADV by 0.5 hours1243 due to amendments to 

the relationship summary, for those advisers required to prepare and file a relationship summary.  

We did not receive comments regarding hour burdens associated with preparing and filing 

amendments to the relationship summary.  As discussed in section II.C.4 above, in a change 

from the proposal, we are adding a requirement that firms preparing updated relationship 

summaries to existing clients also highlight the most recent changes by, for example, marking 

the revised text or including a summary of material changes.1244  To account for this change, we 

are increasing the annual burden to 1 hour per year to amend and file a relationship summary.1245  

                                                                                                                                                             

1242  $6,790,444 in annual external legal and compliance consulting costs for existing advisers + $540,927 
annually for new advisers = $7,331,370 annually for existing and new advisers.  $7,331,370 / (8,235 
existing advisers + 656 new advisers) = $825 per adviser.     

1243  We have previously estimated that investment advisers would incur 0.5 hours to prepare an interim (other-
than-annual) amendment to Form ADV.  See 2016 Form ADV Paperwork Reduction Analysis, supra 
footnote 1209, at 81 FR at 60452.   

1244  Additionally, we are requiring that the additional disclosure showing the revised text or summarizing the 
material changes be attached as an exhibit to the unmarked relationship summary.   

1245  We believe that the time estimated to prepare and file an amendment to the relationship summary is closer 
to the amount of time to prepare an interim-other-than-annual amendment to Form ADV.  See, e.g., 
Brochure Adopting Release, supra footnote 576, at 75 FR at 49257. 



 

424 

 

 We do not expect amendments to be frequent, but based on the historical frequency of 

amendments made on Form ADV Parts 1 and 2, we estimate that on average, each adviser 

preparing a relationship summary will likely amend and file the disclosure an average of 1.71 

times per year.1246  We therefore estimate that for making and filing amendments to their 

relationship summaries, advisers will incur an estimated total paperwork burden of 14,082 hours 

per year,1247 or approximately 1.58 hours per adviser,1248 for an annual monetized cost of 

$3,844,386, or $467 per adviser.1249 

Although advisers will be required to amend the relationship summary within 30 days 

whenever any information becomes materially inaccurate, we expect that amendments will 

require relatively minimal wording changes, given the relationship summary’s page limitation 

and summary nature.  We believe that investment advisers will be more knowledgeable about the 

information to include in the amended relationship summaries than outside legal or compliance 

consultants and will be able to make these revisions in-house.  Therefore, we do not estimate that 

                                                                                                                                                             

1246  Based on IARD data as of December 31, 2018, 8,235 investment advisers with retail clients filed 14,118 
other-than-annual amendments to Form ADV.  14,118 other-than-annual amendments / 8,235 investment 
advisers = 1.71 amendments per investment adviser.  We estimated in the Proposing Release that advisers 
with relationship summary obligations will amend and file disclosures on average of 1.8 times per year, 
based on IARD system data as of December 31, 2017.  See Proposing Release, supra footnote 5 at Section 
V.A.  

1247  8,235 investment advisers amending relationship summaries x 1.71 amendments per year x 1 hour = 14,082 
hours. 

1248  14,082 hours / (8,235 existing advisers + 656 new advisers) = 1.58 hours per year.  

1249  14,082 is the total aggregate initial hour burden for amending relationship summaries. We believe that 
performance of this function will most likely be equally allocated between a senior compliance examiner 
and a compliance manager. Data from the SIFMA Management and Professional Earnings Report suggest 
that costs for these positions are $237 and $309 per hour, respectively. (14,082 hours x 50% x $237 + 
14,082 hours x 50% x $309 = $3,844,386.  $3,844,386 / 8,235 investment advisers = $467 per investment 
adviser. 



 

425 

 

investment advisers will need to incur ongoing external costs for the preparation and review of 

relationship summary amendments.   

d. Incremental Increase to Form ADV Hourly and External Cost 
Burdens Attributable to Form ADV Part 3 Amendments  

For existing and newly-registered advisers with relationship summary obligations, the 

additional burden attributable to amendments to Form ADV to add Part 3:  Form CRS, 

(including the initial preparation and filing of the relationship summary and amendments thereto) 

totals 73,355 hours,1250 or 8.25 hours per adviser,1251 and a monetized cost of $20,025,915, or 

$2,252 per adviser.1252  The incremental external legal and compliance cost is estimated to be 

$7,331,370.1253 

3. Total Revised Burden Estimates for Form ADV 

a. Revised Hourly and Monetized Value of Hourly Burdens 

As discussed above, the currently approved total aggregate annual hour burden for all 

registered advisers completing, amending, and filing Form ADV (Part 1 and Part 2) with the 

Commission is 363,082 hours, or a blended average per adviser burden of 23.77 hours, with a 

                                                                                                                                                             

1250  59,273 hours for initial preparation and filing of the relationship summary + 14,082 hours for amendments 
to the relationship summary = 73,355 total aggregate annual hour burden attributable to the Form ADV 
amendments to add Part 3: Form CRS. 

1251  73,355 hours / (8,235 existing advisers + 656 newly registered advisers) = 8.25 hours per adviser. 

1252  73,355 total aggregate annual hour burden for preparing, filing, and amending a relationship summary.  We 
believe that performance of this function will most likely be equally allocated between a senior compliance 
examiner and a compliance manager.  Data from the SIFMA Management and Professional Earnings 
Report suggest that costs for these positions are $237 and $309 per hour, respectively.  73,355 hours x 50% 
x $237 = $8,692,568.  73,355 hours x 50% x $309 = $11,333,348.  $8,692,568 + $11,333,348 = 
$20,025,915.  $20,025,915 / (8,235 existing registered advisers + 656 newly registered advisers) = $2,252 
per adviser. 

1253  See supra footnote 1242.  



 

426 

 

monetized cost of $92,404,369, or $6,051 per adviser.  This includes the total annual hour burden 

for registered advisers of 351,386 hours, or 29.22 hours per registered adviser, and 11,696 hours 

for exempt reporting advisers, or 3.60 hours per exempt reporting adviser.  For purposes of 

updating the total information collection based on the amendments to Form ADV, we consider 

three categories of respondents, as noted above:  (i) existing and newly-registered advisers 

preparing and filing a relationship summary, (ii) registered advisers with no obligation to prepare 

and file a relationship summary, and (iii) exempt reporting advisers.  One commenter said that 

the current Form ADV requirements are a burden to smaller firms and that the currently 

approved burdens for Form ADV Parts 1 and 2 are too low.1254  We disagree.  We recognize that 

the burden for some advisers will exceed our estimate and the burden for others will be less due 

to the nature of their business, but we continue to believe that on average our estimates are 

appropriate for purposes of the PRA analysis.  For example, the current burden estimates for 

Form ADV Parts 1 and 2 range from 15 hours for smaller advisers to 1989 hours for larger 

advisers.1255   

For existing and newly-registered advisers preparing and filing a relationship summary, 

including amendments to the disclosure, the total annual collection of information burden for 

preparing all of Form ADV, updated to reflect the amendments to Form ADV, equals 37.47 

hours per adviser, with 8.25 hours attributable to the adopted amendments.1256  On an aggregate 

                                                                                                                                                             

1254  See Marotta Letter.    
1255  See supra footnote 1221.  
1256  29.22 hours + 8.25 hours for increase in burden attributable to initial preparation and filing of, and 

amendments to, relationship summary = 37.47 hours total. 



 

427 

 

basis, this totals 333,146 hours for existing and newly registered advisers, with a monetized 

value of $90,978,858.1257 

As noted above, we estimate 5,064 of existing registered advisers will not have retail 

investors; therefore, they will not be obligated to prepare and file relationship summaries, so 

their annual per adviser hour burden will remain unchanged.1258  To that end, using the currently 

approved total annual hour estimate of 29.22 hours per registered investment adviser to prepare 

and amend Form ADV, we estimate that the updated annual hourly burden for all existing and 

newly-registered investment advisers not required to prepare a relationship summary will be 

164,655,1259 with a monetized value of $44,950,816.1260  The revised total annual collection of 

information burden for exempt reporting advisers, using the currently approved estimate of 3.60 

                                                                                                                                                             

1257  37.47 hours x (8,235 existing RIAs required to prepare a relationship summary + 656 newly registered 
RIAs required to prepare a relationship summary) = 333,146 total aggregate annual hour burden for 
preparing, filing and amending a relationship summary.  We believe that performance of this function will 
most likely be equally allocated between a senior compliance examiner and a compliance manager.  Data 
from the SIFMA Management and Professional Earnings Report suggest that costs for these positions are 
$237 and $309 per hour, respectively. 333,146 hours x 0.5 x $237 = $39,477,801.  333,146 hours x 0.5 x 
$309 = $51,471,057.  $39,477,801 + $51,471,057 = $90,948,858. 

1258  13,299 registered investment advisers – 8,235 registered investment advisers with retail investors = 5,064 
registered investment advisers without retail investors. 

1259  29.22 hours x (5,064 existing and 571 newly-registered investment advisers without retail investors) = 
approximately 164,655 total annual hour burden for RIAs not preparing a relationship summary.    

1260  We believe that performance of this function for registered advisers will most likely be equally allocated 
between a senior compliance examiner and a compliance manager. Data from the SIFMA Management and 
Professional Earnings Report suggest that costs for these positions are $237 and $309 per hour, 
respectively. 164,655 hours x 50% x $237 = $19,511,618.  164,655 hours x 50% x $309 = $25,439,198. 
$19,511,618 + $25,439,198 = $44,950,816. 



 

428 

 

hours per exempt reporting adviser, will be 16,996 hours,1261 for a monetized cost of $4,639,908, 

or $983 per exempt reporting adviser.1262   

In summary, factoring in the amendments to Form ADV to add Part 3, the revised annual 

aggregate burden for Form ADV for all registered advisers and exempt reporting advisers will be 

514,797,1263 for a monetized cost of  $140,569,582.1264  This results in an annual blended average 

per adviser burden for Form ADV of 29.28 hours1265 and $7,996 per adviser.1266  This is an 

increase of 151,715 hours, 1267 or $48,165,213 1268 in the monetized value of the hour burden, 

from the currently approved annual aggregate burden estimates, increases which are attributable 

                                                                                                                                                             

1261  3.60 hours x 4,280 exempt reporting advisers currently + 441 new exempt reporting advisers = 16,996 
hours.   

1262  As with preparation of the Form ADV for registered advisers, we believe that performance of this function 
for exempt reporting advisers will most likely be equally allocated between a senior compliance examiner 
and a compliance manager. Data from the SIFMA Management and Professional Earnings Report suggest 
that costs for these positions are $237 and $309 per hour, respectively. 16,996 hours x 0.5 x $237 = 
$2,014,026.  16,996 hours x 0.5 x $309 = $2,625,882.  $2,014,026 + $2,625,882 = $4,639,908.  $4,639,908 
/ (4,280 exempt reporting advisers currently + 441 new exempt reporting advisers) = $983 per exempt 
reporting adviser. 

1263   333,146 annual hour burden for RIAs preparing relationship summary + 164,655 annual hour burden for 
RIAs not preparing relationship summary + 16,996 annual hour burden for exempt reporting advisers = 
514,797 total updated Form ADV annual hour burden.   

1264  $90,948,858 for RIAs preparing relationship summary + $44,950,816 for RIAs not preparing relationship 
summary + $4,639,908 for exempt reporting advisers = $140,539,582 total updated Form ADV annual 
monetized hourly burden. 

1265  514,797 / (13,299 registered investment advisers + 4,280 exempt reporting advisers) = 29.28 hours per 
adviser. 

1266  $140,569,582 / 13,299 registered investment advisers + 4,280 exempt reporting advisers) = $7,995 per 
adviser. 

1267  514,797 hours estimated – 363,082 hours currently approved = 151,715 hour increase in aggregate annual 
hourly burden. 

1268  $140,569,582 monetized hourly burden – $92,404,369 = $48,135,213 increase in aggregate annual 
monetized hourly burden. 



 

429 

 

primarily to the larger registered investment adviser and exempt reporting adviser population 

since the most recent approval, adjustments for inflation, and the amendments to Form ADV to 

add Part 3. 

b. Revised Estimated External Costs for Form ADV 

The currently approved total annual collection of information burden estimate for Form 

ADV anticipates that there will be external costs, including (i) a one-time initial cost for outside 

legal and compliance consulting fees in connection with the initial preparation of Part 2 of Form 

ADV, and (ii) the cost for investment advisers to private funds to report the fair value of their 

private fund assets.1269  The currently approved annual cost burden for Form ADV is 

$13,683,500, $3,600,000 of which is attributable to external costs incurred by new advisers to 

prepare Form ADV Part 2, and $10,083,500 of which is attributable to obtaining the fair value of 

certain private fund assets.1270  We do not expect any change in the annual external costs relating 

to new advisers preparing Form ADV Part 2.  Due to the slightly higher number of registered 

advisers with private funds, however, the aggregate cost of obtaining the fair value of private 

fund assets is likely to be higher.  We estimate that 6% of registered advisers have at least one 

private fund client that may not be audited.  Based on IARD system data as of December 31, 

2018, 4,806 registered advisers advise private funds.  We therefore estimate that approximately 

                                                                                                                                                             

1269  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR 60452.  We do not 
anticipate that the amendments we are adopting to add Form ADV Part 3 will affect those per adviser cost 
burden estimates for outside legal and compliance consulting fees.  The estimated external costs of outside 
legal and compliance consulting services for the relationship summary are in addition to the estimated hour 
burden discussed above.   

1270  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR at 60452-53.  The 
$10,083,500 is based on 4,469 registered advisers reporting private fund activity as of May 16, 2016.   



 

430 

 

288 registered advisers may incur costs of $37,625 each on an annual basis, for an aggregate 

annual total cost of $10,836,000.1271   

In summary, taking into account (i) a one-time initial cost for outside legal and 

compliance consulting fees in connection with the initial preparation of Part 2 of Form ADV, (ii) 

the cost for investment advisers to private funds to report the fair value of their private fund 

assets, and (iii) the incremental external legal or compliance costs for the preparation of the  

relationship summary, we estimate the annual aggregate external cost burden of the Form ADV 

information collection will be $21,767,370, or $1,637 per registered adviser.1272  This represents 

an $8,083,870 increase from the current external costs estimate for the information collection.1273 

B. Rule 204-2 under the Advisers Act  

Under section 204 of the Advisers Act, investment advisers registered or required to 

register with the Commission under section 203 of the Advisers Act must make and keep for 

prescribed periods such records (as defined in section 3(a)(37) of the Exchange Act), furnish 

copies thereof, and make and disseminate such reports as the Commission, by rule, may 

prescribe as necessary or appropriate in the public interest or for the protection of investors.  

Rule 204-2 sets forth the requirements for maintaining and preserving specified books and 

records.   
                                                                                                                                                             

1271  6% x 4,806 = 288 advisers needing to obtain the fair value of certain private fund assets.  288 advisers x 
$37,625 = $10,836,000.   

1272  $3,600,000 for preparation of Form ADV Part 2 + $10,836,000 for registered investment advisers to fair 
value their private fund assets + $7,331,370 (see supra footnote 1242) to prepare relationship summary = 
$21,767,370 in total external costs for Form ADV.  $21,767,370 / 13,299 total registered advisers as of 
December 31, 2018 = $1,637 per registered adviser. 

1273  $21,767,370 - $13,683,500 = $8,083,870. 



 

431 

 

The amendments to rule 204-2 will require registered advisers to retain copies of each 

relationship summary.  Investment advisers will also be required to maintain each amendment to 

the relationship summary as well as to make and preserve a record of dates that each relationship 

summary and each amendment was delivered to any client or to any prospective client who 

subsequently becomes a client.  These records will be required to be maintained in the same 

manner, and for the same period of time, as other books and records required to be maintained 

for the Form ADV Part 2A brochure under the Advisers Act rule 204-2(a)(14)(i), to allow 

regulators to access the relationship summary during an examination.1274 

As discussed above in Section II.E several commenters suggested that our estimated 

burdens for the relationship summary recordkeeping obligations were too low.1275  Some 

commenters argued that keeping records of when a relationship summary was given to 

prospective retail clients would be unnecessarily burdensome or not feasible, and was not 

adequately considered in the Commission’s burden estimates.1276  One of these commenters said 

                                                                                                                                                             

1274  Specifically, investment advisers will be required to maintain and preserve records of the relationship 
summary in an easily accessible place for not less than five years from the end of the fiscal year during 
which the last entry was made on such record, the first two years in an appropriate office of the investment 
adviser.  See Advisers Act rule 204-2(e)(1). 

1275  See, e.g., CCMC Letter; SIFMA Letter.  See also NSCP Letter (estimating 80–500 hours to prepare, 
deliver, and file the relationship summary, including recordkeeping policies and procedures). 

1276  See, e.g., CCMC Letter; SIFMA Letter; Committee of Annuity Insurers Letter; Edward Jones Letter.  A 
few others stated that creating recordkeeping policies and procedures relating to how professionals respond 
to “key questions” would be burdensome and extremely difficult.  See, e.g., LPL Financial Letter.  
Although the final instructions require “conversation starter” questions that are similar to the proposed “key 
questions,” we are not increasing the burden as urged by commenters.  As discussed in Section V.A.2.a. 
above, we increased the burden estimates for the initial preparation of the relationship summary, 
acknowledging, among other things, that certain advisers that provide automated investment advisory 
services will incur additional burdens to develop written answers to the conversation starters and make 
those available on their websites with a hyperlink to the appropriate page in the relationship summary for 
these documents (i.e., robo-advisers).  However, we do not expect these advisers to incur additional 

 



 

432 

 

that it would be difficult for firms to integrate pre-relationship delivery dates into their 

operational systems and procedures, and that there is no way to track when a disclosure is 

accessed on a website.1277   

Based on our experience with similar requirements for Form ADV Part 2A brochures, we 

disagree with commenters that retaining records of when a relationship summary was given to 

prospective retail clients would be significantly more burdensome for investment advisers than 

our proposed estimate of 0.2 hours.  While we recognize that this recordkeeping requirement will 

impose some additional burden on investment advisers that must prepare and deliver relationship 

summaries, advisers are already required to keep similar records for the delivery of the Form 

ADV Part 2A brochures and the currently approved burden for that requirement is 1.5 hours.  

Accordingly, based on our experience, advisers already maintain this information with respect to 

their brochures and should be able to update their systems to also include the relationship 

summary.  We also do not expect that investment advisers will incur additional external costs to 

make and keep these records because we believe that advisers will create and retain them in a 

manner similar to their current recordkeeping practices for the Form ADV Part 2A brochure.   

This collection of information is found at 17 CFR 275.204-2 and is mandatory.  The 

Commission staff uses the collection of information in its examination and oversight program.  

Requiring maintenance of these disclosures as part of the firm’s books and records will facilitate 

                                                                                                                                                             

recordkeeping burdens under amendments to rule 204-2 because we are not establishing new or separate 
recordkeeping obligations related to the conversation starters or the answers provided by firms in response 
to the conversation starters.  See supra footnotes 814 - 816.    

1277  See SIFMA Letter.  



 

433 

 

the Commission’s ability to inspect for and enforce compliance with firms’ obligations with 

respect to the relationship summary. The information generally is kept confidential.1278 

The likely respondents to this collection of information are all of the approximately 

13,299 advisers currently registered with the Commission.  We estimate that based on updated 

IARD data as of December 31, 2018, 8,235 existing advisers will be subject to the amended 

provisions of rule 204-2 to preserve the relationship summary as a result of the adopted 

amendments.   

1. Changes in Burden Estimates and New Burden Estimates 

The currently approved annual aggregate burden for rule 204-2 is 2,199,791 hours, with a 

total annual aggregate monetized cost burden of approximately $130,316,112, based on an 

estimate of 12,024 registered advisers, or 183 hours per registered adviser.1279  We estimate that 

the requirements to make and keep copies of each relationship summary under the amendments 

to rule 204-2 will result in an increase in the collection of information burden estimate by 0.2 

hours1280 for each of the estimated 8,235 registered advisers with relationship summary 

obligations, resulting in a total of 183.2 hours per adviser.  This will yield an annual estimated 

aggregate burden of 1,508,652 hours under amended rule 204-2 for all registered advisers with 

                                                                                                                                                             

1278  See section 210(b) of the Advisers Act. 

1279  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR at 60454–55. 

1280  In the Paperwork Reduction Act analysis for amendments to Form ADV adopted in 2016, we estimated that 
1.5 hours would be required for each adviser to make and keep records relating to (i) the calculation of 
performance the adviser distributes to any person and (ii) all written communications received or sent 
relating to the adviser’s performance.  Because the burden of preparing the relationship summary is already 
included in the collection of information estimates for Form ADV, we estimate that recordkeeping burden 
for the relationship summary will be considerably less than 1.5 hours and estimate that 0.2 hours is 
appropriate.  



 

434 

 

relationship summary obligations,1281 for a monetized cost of $95,588,191, or $11,607 per 

adviser.1282  In addition, the 5,064 advisers not subject to the amendments will continue to be 

subject to an unchanged burden of 183 hours under rule 204-2, or a total aggregate annual hour 

burden of 926,712,1283 for a monetized cost of $58,716,472, or $11,595 per adviser.1284  The 

increase in the collection of information burden estimate by 0.2 hours as a result of the 

amendments to rule 204-2 will therefore result in an annual monetized cost of $12 per 

adviser.1285  In summary, taking into account the estimated annual burden of registered advisers 

that will be required to maintain records of the relationship summary, as well as the estimated 

annual burden of registered advisers that do not have relationship summary obligations and 

whose information collection burden is unchanged, the revised annual aggregate burden for all 

                                                                                                                                                             

1281  8,235 registered investment advisers required to prepare relationship summary x 183.2 hours = 1,508,652 
hours.  

1282  As with our estimates relating to the previous amendments to Advisers Act rule 204-2 (see 2016 Form 
ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR at 60454-55), we expect that 
performance of this function will most likely be allocated between compliance clerks and general clerks, 
with compliance clerks performing 17% of the function and general clerks performing 83% of the function.  
Data from the SIFMA Office Salaries in the Securities Industry Report, modified to account for an 1,800-
hour work year and multiplied by 2.93 to account for bonuses, firm size, employee benefits, and overhead, 
suggest that costs for these position are $70 and $62, respectively. (17% x 1,508,652 hours x $70) + (83% x 
1,508,652 hours x $62) = $95,588,191.  $95,588,191 / 8,235 advisers = $11,607 per adviser.  

1283  5,064 registered investment advisers not required to prepare the relationship summary x 183 hours = 
926,712.   

1284  As with our estimates relating to the previous amendments to Advisers Act rule 204-2 (see 2016 Form 
ADV Paperwork Reduction Analysis, supra footnote 1209, at 81 FR at 60454–55, we expect that 
performance of this function will most likely be allocated between compliance clerks and general clerks, 
with compliance clerks performing 17% of the function and general clerks performing 83% of the function.  
Data from the SIFMA Office Salaries Report suggest that costs for these positions are $70 and $62, 
respectively. (17% x 926,712 hours x $70) + (83% x 926,712 hours x $62) = $58,716,473.  $58,716,473 / 
5,064 = $11,595 per adviser.  

1285  $11607 aggregate burden per adviser subject to relationship summary - $11,595 aggregate burden per 
adviser not subject to the relationship summary = $12.  



 

435 

 

respondents to rule 204-2, under the amendments, is estimated to be 2,435,364 total hours,1286 

for a monetized cost of $154,304,663.1287  

2. Revised Annual Burden Estimates 

As noted above, the approved annual aggregate burden for rule 204-2 is currently 

2,199,791 hours based on an estimate of 12,024 registered advisers, or 183 hours per registered 

adviser.1288  The revised annual aggregate hourly burden for rule 204-2 will be 2,435,3641289 

hours, represented by a monetized cost of $154,304,664,1290 based on an estimate of 8,235 

registered advisers with the relationship summary obligation and 5,064 registered advisers 

without, as noted above.  This represents an increase of 235,5731291 annual aggregate hours in 

the hour burden and an annual increase of $23,988,552 from the currently approved total aggregate 

monetized cost for rule 204-2.1292
  These increases are attributable to a larger registered investment 

adviser population since the most recent approval and adjustments for inflation, as well as the rule 

204-2 amendments relating to the relationship summary as discussed in this release. 

                                                                                                                                                             

1286  8,235 registered investment advisers required to prepare relationship summary x 183.2 hours = 1,508,652 
hours.  5,064 registered investment advisers not required to prepare the relationship summary x 183 hours = 
926,712 hours. 1,508,652 hours + 26,712 hours = 2,435,364 hours. 

1287  $95,588,191 + $58,716,473 = $154,304,664. 

1288  2,199,791 hours / 12,024 registered advisers = 183 hours per adviser. 

1289  See supra footnote 1286. 

1290  See supra footnote 1287. 

1291  2,435,364 hours – 2,199,791 hours = 235,573 hours. 

1292  $154,304,664 – $130,316,112 = $23,988,552. 



 

436 

 

C. Rule 204-5 under the Advisers Act 

New rule 204-5 will require an investment adviser to deliver an electronic or paper 

version of the relationship summary to each retail investor before or at the time the adviser enters 

into an investment advisory contract with the retail investor.  The adviser also will make a one-

time initial delivery of the relationship summary to all existing clients within a specified time 

period after the effective date of the rule.  Also with respect to existing clients, the adviser will 

deliver the most recent relationship summary before or at the time of (i) opening any new 

account that is different from the retail investor’s existing account(s); (ii) recommending that the 

retail investor roll over assets from a retirement account into a new or existing account or 

investment; or (iii) recommending or providing a new brokerage or investment advisory service 

or investment that does not necessarily involve the opening of a new account and would not be 

held in the existing account.1293  The adviser will be required to post a current version of its 

relationship summary prominently on its public website (if it has one), and will be required to 

communicate any changes in an amended relationship summary to retail investors who are 

existing clients within 60 days, instead of 30 days as proposed, after the amendments are 

required to be made and without charge.1294  The investment adviser also must deliver a current 

relationship summary to each retail investor within 30 days upon request.  In a change from the 

                                                                                                                                                             

1293  We are adopting these requirements instead of the proposed requirements that advisers deliver the 
relationship summary to existing retail investor clients before or at the time of opening a new account that 
is different from the retail investor’s existing account or changes are made to the retail investor’s existing 
account(s) that would “materially change” the nature or scope of the firm’s relationship with the retail 
investor.  See Proposing Release, supra footnote 5 at Section II.C.2.  

1294  The communication can be made by delivering the relationship summary or by communicating the 
information through another disclosure that is delivered to the retail investor.   



 

437 

 

proposal, an adviser must make a copy of the relationship summary available upon request 

without charge, and where a relationship summary is delivered in paper format, the adviser may 

link to additional information by including URL addresses, QR codes, or other means of 

facilitating access to such information.1295  The adviser must also include a telephone number 

where retail investors can request up-to-date information and a copy of the relationship 

summary.1296   

As discussed further below, we received comments that our estimated burdens for 

delivery of the relationship summary were too low.  Some of these comments focused on the 

administrative and operational burdens related to monitoring for changes that would “materially 

change” the nature and scope of the relationship and thereby require delivery to existing clients 

and customers.1297  One commenter also argued that imposing different delivery requirements for 

the Form ADV, Part 2 brochure and the relationship summary would create substantial 

administrative burdens specifically for investment advisers.1298  Other comments focused on the 

recordkeeping burdens related to the requirement to deliver the relationship summary to a new or 

prospective retail investor.1299  As discussed further below, we made changes to the proposal to 

require more specific triggers for initial delivery and additional delivery to existing customers in 
                                                                                                                                                             

1295  Additionally, we are adopting the instruction that if a relationship summary is delivered in paper format as 
part of a package of documents, the firm must ensure that the relationship summary is the first among any 
documents that are delivered at that time, substantially as proposed. See supra footnote 701.   

1296  This differs from the proposal, which required only firms that do not have a public website to include a toll-
free number that retail investors may call to request documents.  See supra footnote 609.   

1297  See, e.g., Cambridge Letter; SIFMA Letter; LPL Financial Letter. 

1298  Pickard Djinis and Pisarri Letter. 

1299  See supra footnotes 803 - 808.   



 

438 

 

order to replace the requirements in response to comments.  We discuss below the specific 

separate delivery requirements and modifications.  

New rule 204-5 contains a collection of information requirement.  The collection of 

information is necessary to provide advisory clients, prospective clients and the Commission 

with information about the investment adviser and its business, conflicts of interest, and 

personnel.  Clients will use the information contained in the relationship summary to determine 

whether to hire or retain an investment adviser and what type of accounts and services are 

appropriate for their needs.  The Commission will use the information to determine eligibility for 

registration with us and to manage our regulatory and examination programs.  This collection of 

information will be found at 17 CFR 275.204-5 and will be mandatory.  Responses will not be 

kept confidential.   

1. Respondents:  Investment Advisers 

The likely respondents to this information collection will be the approximately 8,235 

investment advisers registered with the Commission that will be required to deliver a relationship 

summary per new rule 204-5.  We also note that these figures include the 318 registered broker-

dealers that are dually registered as investment advisers.1300 

2. Initial and Annual Burdens 

a. Posting of the Relationship Summary to Website 

Under new rule 204-5, advisers will be required to post a current version of their 

relationship summary prominently on their public website (if they have one).  In the Proposing 

                                                                                                                                                             

1300  See supra footnote 863 and accompanying text. 



 

439 

 

Release, we estimated that each adviser will incur 0.5 hours to prepare the posted relationship 

summary, such as to ensure proper electronic formatting and to post the disclosure to the 

adviser’s website, if the adviser has one.1301  Although we did not receive any comments 

regarding burdens associated with posting of the relationship summary to a public website, we 

are increasing our estimate of the time from 0.5 to 1.5 hours based on the staff’s experience.1302  

We do not anticipate that investment advisers will incur additional external costs to post the 

relationship summary to the adviser’s website because advisers without a public website will not 

be required to establish or maintain one, and advisers with a public website have already incurred 

external costs to create and maintain their websites.  Additionally, external costs for the 

preparation of the relationship summary are already included for the collection of information 

estimates for Form ADV, in Section A.2.b, above.   

Based on IARD system data, 91.6% of investment advisers with individual clients report 

having at least one public website.1303  Therefore, we estimate that 91.6% of the 8,235 existing 

and 656 newly registered investment advisers with relationship summary obligations will incur a 

                                                                                                                                                             

1301  Proposing Release, supra footnote, 5 at section V.C.2.a.  

1302  See e.g., Optional Internet Availability of Investment Company Shareholder Reports, Investment Company 
Act Release No. 33115 (June 5, 2018) [83 FR 29158 (Jun. 22, 2018)] (estimating that funds that already 
post shareholder reports on their websites will require a half hour burden per fund to comply with the 
annual compliance and posting requirements of rule 30e-3, and funds that do not already post shareholder 
reports to their websites will require one and half hours to post the required documents online). Posting of 
the relationship summary under rule 204-5 pertains to one document, which is similar to the shareholder 
report posting to which rule 30e-3 applies. 

1303  We estimated in the Proposing Release that 91.1 of investment advisers with individual clients report at 
least one public website, based on IARD system data as of December 31, 2017.  See Proposing Release, 
supra footnote 5 at Section V.C.1.   



 

440 

 

total of 12,216 aggregate burden hours to post relationship summaries to their websites,1304 with 

a monetized cost of $757,407.1305  As with the initial preparation of the relationship summary, 

we amortize the estimated initial burden associated with posting the relationship summary over a 

three-year period.1306  Therefore, the total annual aggregate hourly burden related to the initial 

posting of the relationship summary is estimated to be 4,072 hours, with a monetized cost of 

$252,469.1307  We did not receive comments regarding burdens associated with posting of the 

relationship summary to a public website.  

b. Delivery to Existing Clients 

(1) One-Time Initial Delivery to Existing Clients 

The burden for this new rule is based on each adviser with retail investors having, on 

average, an estimated 3,985 clients who are retail investors.1308  Although advisers may either 

deliver the relationship summary separately, in a “bulk delivery” to clients, or as part of the 

delivery of information that advisers already provide, such as the annual Form ADV update, 

account statements or other periodic reports, we base our estimates here on a “bulk delivery” to 

                                                                                                                                                             

1304  1.5 hours to prepare and post the relationship summary x 91.6% x (8,235 existing advisers + 656 newly-
registered advisers with relationship summary obligations) = 12,216 hours. 

1305  Based on data from the SIFMA Office Salaries Report, we expect that requirement for investment advisers 
to post their relationship summaries to their websites will most likely be performed by a general clerk at an 
estimated cost of $62 per hour.  1.5 hours per adviser x $62 = $93 in monetized costs per adviser.  $93 per 
adviser x 91.6% x (8,235 existing advisers + 656 newly registered advisers) = $757,407 total aggregate 
monetized cost. 

1306  See 2016 Form ADV Paperwork Reduction Analysis, supra footnote 1209. 

1307  12,216 hours / 3 years = 4,072 hours annually.  $757,407/ 3 years = $252,469 in annualized monetized 
costs. 

1308  This estimate is based on IARD system data as of December 31, 2018.441 

 

existing clients.  This is similar to the approach we took in estimating the delivery costs for 

amendments to rule 204-3 under the Advisers Act, which requires investment advisers to deliver 

their Form ADV Part 2A brochures and brochure supplements to their clients.1309  As with the 

estimates for rule 204-3, we estimate that advisers will require approximately 0.02 hours to 

deliver the relationship summary to each client.1310  We did not receive comments on the burdens 

specific to delivering the relationship summary to existing clients under new Rule 204-5.  We 

estimate the total burden hours for 8,235 advisers for initial delivery of the relationship summary 

to existing clients to be 79.7 hours per adviser, or 708,613 total aggregate hours, for the first year 

after the rule is in effect,1311 with a monetized cost of $4,9411312 per adviser or $43,930,431 in 

aggregate.1313  Amortized over three years, the total annual hourly burden is estimated to be 

26.57 hours per adviser, or 236,204 annual hours in aggregate,1314 with annual monetized costs 

                                                                                                                                                             

1309  See Brochure Adopting Release, supra footnote 576, at 75 FR at 49259. 

1310  This is the same estimate we made in the Form ADV Part 2 proposal and for which we received no 
comment.  Brochure Adopting Release, supra footnote 576, at 75 FR at 49259  The burden for preparing 
relationship summaries is already incorporated into the burden estimate for Form ADV discussed above. 

1311  (0.02 hours per client x 3,985 retail clients per adviser) = 79.7 hours per adviser.  79.7 hours per adviser x 
(8,235 existing advisers + 656 newly registered advisers) = 708,613 total aggregate hours.   

1312  Based on data from the SIFMA Office Salaries Report, we expect that initial delivery requirement to 
existing clients of rule 204-5 will most likely be performed by a general clerk at an estimated cost of $62 
per hour.  79.7 hours per adviser x $62 = $4,941 in monetized costs per adviser.  We estimate that advisers 
will not incur any incremental postage costs because we estimate that they will make such deliveries with 
another mailing the adviser was already delivering to clients, such as interim or annual updates to the Form 
ADV, or will deliver the relationship summary electronically. 

1313  $4,941 in monetized costs per adviser x (8,235 existing advisers + 656 newly registered advisers) = 
$43,930,431 in total aggregate costs. 

1314  79.7 initial hours per adviser / 3 = 26.57 total annual hours per adviser.  708,613 initial aggregate hours / 3 
= 236,204 total annual aggregate hours. 



 

442 

 

of $1,647 per adviser, or $14,643,477 in aggregate.1315  We do not expect that investment 

advisers will incur external costs for the initial delivery of the relationship summary to existing 

clients because we estimate that advisers will make such deliveries along with another required 

delivery, such as an interim or annual update to the Form ADV Part 2A.   

(2) Additional Delivery to Existing Clients  

As discussed in Section II.C.3.c above, the proposed instructions would have required 

investment advisers to deliver the relationship summary to existing retail investor clients before 

or at the time firms open a new account that is different from the retail investor’s existing 

account or changes are made to the retail investor’s existing account(s) that would “materially 

change” the nature or scope of the firm’s relationship with the retail investor.  In response to 

comments seeking additional clarity on when the “materially change” requirement would apply, 

and expressing concerns that there will be additional supervisory, administrative, and operational 

processes required, and burdens imposed, we replaced the “materially change” requirement with 

more concrete delivery triggers that firms could more easily implement based on their existing 

systems and processes.1316 

Investment advisers will be required to deliver the relationship summary to existing 

clients before or at the time they open a new account that is different from the retail investor’s 

existing account(s), as proposed.  In addition, in a change from the proposal, delivery will be 

required before or at the time the adviser (i) recommends that the retail investor roll over assets 

                                                                                                                                                             

1315  $4,941 in monetized costs per adviser / 3 = $1,647 annualized monetized cost per adviser.  $43,930,431 
initial aggregate monetized cost / 3 = $14,643,477 in total annual aggregate monetized cost. 

1316  See supra footnotes 758 – 763 and accompanying text. 



 

443 

 

from a retirement account into a new or existing account or investment, or (ii) recommends or 

provides a new brokerage or investment advisory service or investment that does not necessarily 

involve the opening of a new account and would not be held in the existing account.  We are 

adopting these two triggers instead of the proposed requirement to deliver the relationship 

summary before or at the time changes are made to the existing account that would “materially 

change” the nature and scope of the relationship to address commenters’ requests for additional 

guidance or examples of what would constitute a “material change.”1317  Commenters also 

described administrative and operational burdens arising from this requirement and argued that 

our estimated burdens were too low.1318  One commenter asserted that firms would be required to 

build entirely new operational and supervisory processes to identify asset movements that could 

trigger a delivery requirement.1319  Another commenter noted the challenges of designing a 

system that distinguishes non-ordinary course events from routine account changes.1320   

As discussed above, we replaced the “materially change” requirement with more specific 

triggers to be clearer about when a relationship summary must be delivered.1321  While these 

specific triggers will still impose operational and supervisory burdens on firms, we believe that 

they are more easily identified and monitored, such that firms will not incur significant burdens 

                                                                                                                                                             

1317  See Prudential Letter; TIAA Letter; Cambridge Letter; SIFMA Letter; LPL Financial Letter; Institute for 
Portfolio Alternatives Letter.  

1318  See, e.g., SIFMA Letter; LPL Financial Letter.  

1319  See SIFMA Letter. 

1320  See LPL Letter.  

1321  These more specific triggers are intended to address circumstances that the proposed “materially change” 
sought to address.  See supra footnote 761 and accompanying text.   



 

444 

 

as described by commenters to implement entirely new supervisory, administrative, and 

operational processes needed to monitor events that cause a material change.  However, 

recognizing that some additional processes will be necessary to implement these delivery triggers, 

we are increasing our burden estimate from 0.02 to 0.04 hours.  We now estimate that each 

adviser will incur 16 hours per year to deliver the relationship summary in these types of 

situations, and that delivery under these circumstances will take place among 10% of an 

adviser’s retail investors annually.1322  We will therefore estimate a total annual aggregate hours 

of 142,256,1323 with a monetized cost of $992 per adviser1324 and $8,818,872 in aggregate.1325  

(3) Posting of Amended Relationship Summaries to Websites 
and Communicating Changes to Amended Relationship 
Summaries, Including by Delivery 

Investment advisers will be required to amend their relationship summaries within 30 

days when any of the information becomes materially inaccurate.  Investment advisers also will 

be required to communicate any changes in an amended relationship summary to existing clients 

who are retail investors within 60 days, instead of 30 days as proposed, after the updates are 

required to be made and without charge.  We do not expect this change to increase the PRA 

                                                                                                                                                             

1322  10% of 3,985 retail clients per adviser x .04 hours to deliver the relationship summary = 16 hours per 
adviser. 

1323  16 hours x (8,235 existing advisers + 656 new advisers) = 142,256 total aggregate hours. 

1324  Based on data from the SIFMA Office Salaries Report, we expect that delivery requirements of rule 204-5 
will most likely be performed by a general clerk at an estimated cost of $62 per hour.  16 hours per adviser 
x $62 = $992 per adviser.  We estimate that advisers will not incur any incremental postage costs in the 
delivery of the relationship summary to existing clients for changes in accounts, because we estimate that 
advisers will make such deliveries with another mailing the adviser was already delivering to clients, such 
as new account agreements and other documentation normally required in such circumstances.   

1325  $992 in monetized costs per adviser x (8,235 existing advisers + 656 newly registered advisers) = 
$8,819,872 in total aggregate costs. 



 

445 

 

estimates.1326  The communication can be made by delivering the relationship summary or 

through another disclosure that is delivered to the retail investor.  This requirement is a change 

from the proposed requirement but is substantively similar.1327 Commenters did not comment on 

the estimated burden.  We have determined not to change the burden relative to the proposal.   

Based on the historical frequency of amendments made on Form ADV Parts 1 and 2, we 

estimate that on average, each adviser preparing a relationship summary will likely amend the 

disclosure an average of 1.71 times per year.1328  We are not changing the 0.5 hours estimates to 

post the amendments to a public website, consistent with our estimates at proposal.  Using the 

same percentage of investment advisers reporting public websites, 91.6% of 8,235 advisers will 

incur a total annual burden of 0.86 hours per adviser, or 6,487 hours in aggregate,1329 to post the 

amended relationship summaries to their website.  This translates into an annual monetized cost 

                                                                                                                                                             

1326  As discussed in Section V.A.2.c., we have increased the burden estimates for preparing amendments to the 
relationship summary, acknowledging, among other things, that firms will incur additional burdens to 
prepare and file amendments as a result of the instructions that firms preparing amendments highlight the 
most recent changes, and that additional disclosure showing the revised text be attached as an exhibit to the 
unmarked relationship summary.    

1327  The proposed instructions would have required firms to communicate updated information by delivering 
the amended relationship summary or by communicating the information another way.  The revised 
instruction will eliminate the wording “another way” and will clarify that the communication can be made 
through another disclosure that is delivered to the retail investor.  See supra footnote 767.  

1328  We estimated in the Proposing Release that each adviser preparing a relationship summary will likely 
amend the disclosure an average 1.81 times based on IARD system data as of December 31, 2017.  See 
Proposing Release, supra footnote 5 at section V.C.2.b.iii.  We are updating the average number to 1.71 
times per year based on IARD system data as of December 31, 2018.  

1329  0.5 hours to post the amendment x 1.71 amendments annually = 0.86 hours per adviser annually to post 
amendments to the website.  0.86 x 8,235 existing advisers amending the relationship summary x 91.6% of 
advisers with public websites = 6,487 aggregate annual hours to post amendments of the relationship 
summary. 



 

446 

 

of $53.32 per adviser, or $402,207 in the aggregate for existing registered advisers with 

relationship summary obligations.1330   

For this requirement, we estimate that 50% of advisers will choose to deliver the 

relationship summary to communicate the updated information, and that the delivery will be 

made along with other disclosures already required to be delivered.  We did not receive 

comments on this estimate.  We believe that it is likely that the other 50% of advisers will 

incorporate all of the updated information in their Form ADV Part 2, like the summary of 

material changes or other disclosures, which they are already obligated to deliver in order to 

avoid having to deliver two documents.  We estimate a burden of 561,162 hours,1331 or 136.29 

hours per adviser,1332 at a monetized cost of $34,792,044 in aggregate,1333 or $8,450 per 

                                                                                                                                                             

1330  Based on data from the SIFMA Office Salaries Report, we expect that the posting requirements of rule 204-
5 will most likely be performed by a general clerk at an estimated cost of $62 per hour.  0.86 hours per 
adviser x $62 = $53.32 per adviser.  $53.32 per adviser x 91.6% x 8,235 existing advisers = $402,207 in 
annual monetized costs.     

1331  8,235 advisers amending the relationship summary x 3,985 retail clients per adviser x 50% delivering the 
amended relationship summary to communicate updated information x 0.02 hours per delivery x 1.71 
amendments annually = 561,162 hours to deliver amended relationship summaries. 

1332  3,985 retail clients per adviser x 0.02 hours per delivery x 1.71 amendments annually = 136.29 hours per 
adviser. 

1333  Based on data from the SIFMA Office Salaries Report, we expect that delivery requirements of rule 204-5 
will most likely be performed by a general clerk at an estimated cost of $62 per hour.  561,162 hours x $62 
= $34,792,044.  We estimate that advisers will not incur any incremental postage costs to deliver the 
relationship summary for communicating updated information by delivering the relationship summary, 
because we estimate that advisers will make the delivery along with other documents already required to be 
delivered, such as an interim or annual update to Form ADV, or will deliver the relationship summary 
electronically.   



 

447 

 

adviser,1334 for the 50% of advisers that choose to deliver amended relationship summaries in 

order to communicate updated information.1335   

In a change from the proposal,1336 we are also adopting two requirements not included in 

the proposal.  First, all firms will be required to make available a copy of the relationship 

summary upon request without charge.  Second, in a relationship summary that is delivered in 

paper format, firms may link to additional information by including URL addresses, QR codes, 

or other means of facilitating access to such information.1337  We believe that these new 

requirements will increase the burden relative to the proposal for some firms that do not 

currently fulfill these types of disclosure requests, including, for example, additional costs 

associated with tracking delivery preferences related to making copies of the relationship 

summary available upon request, and printing and mailing costs for copies that are delivered in 

paper. We estimate that the 8,235 advisers with relationship summary obligations, on average, 

will require 0.5 hours each annually to comply with this requirement.  Therefore, we estimate 

that the 8,235 advisers will incur a total of 4,118 aggregate burden hours to make copies of the 

                                                                                                                                                             

1334  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
delivery requirements of rule 204-5 will most likely be performed by a general clerk at an estimated cost of 
$62 per hour.  136.29 hours per adviser x $62 per hour = $8,450 per adviser. 

1335  For the other 50% of advisers that may choose to communicate updated information in another disclosure, 
we estimate no added burden because these advisers will be communicating the information in other 
disclosures they are already delivering like the Form ADV Part 2 brochure or summary of material 
changes. 

1336  See supra footnotes 699 - 701 and accompanying text.   
1337  We are adopting the instruction that if a relationship summary is delivered in paper format as part of a 

package of documents, it should be the first among any documents that are delivered at the same time, as 
proposed.  See supra footnote 701.  



 

448 

 

relationship summary available upon request,1338 with a monetized cost per adviser of $31, or 

$255,285 in aggregate monetized cost.1339  We acknowledge that the burden may be more or less 

than 0.5 hours for some advisers, but we believe that, on average, 0.5 hours is an appropriate 

estimate for calculating an aggregate burden for the industry for this collection of information.   

We do not expect investment advisers to incur external costs in delivering amended 

relationship summaries or communicating the information in another way because we estimate 

that they will make this delivery with, or as part of, other disclosures required to be delivered, 

such as an interim or annual update to Form ADV.  We did not receive comments on this 

assumption in the proposal. 

c.  Delivery to New Clients or Prospective New Clients 

Data from the IARD system indicate that of the 13,299 advisers registered with the 

Commission, 8,235 have retail investors, and on average, each has 3,985 clients who are retail 

investors.1340  As proposed, we estimate that the client base for investment advisers will grow by 

approximately 4.5% annually.1341  Based on our experience with Form ADV Part 2, we estimate 

the annual hour burden for initial delivery of a relationship summary will be the same by paper 
                                                                                                                                                             

1338  0.5 hours to make paper copies of the relationship summary available upon request x 8,235 advisers with 
relationship summary obligations = 4,118 hours.  

1339  Based on data from the SIFMA Office Salaries Report, we expect that the requirement for advisers to make 
paper copies of the relationship summary available upon request will most likely be performed by a general 
clerk at an estimated cost of $62 per hour.  0.5 hours per adviser x $62 = $31 in monetized costs per 
adviser.  $31 per adviser x 8,235 advisers with relationship summary obligations = $255,285 total 
aggregate monetized cost.   

1340  This average is based on advisers’ responses to Item 5 of Part 1A of Form ADV as of December 31, 2018. 

1341  In the Proposing Release, we determined this estimate based on IARD system data.  See Proposing Release, 
supra footnote 5 at section V.C.c.  The number of retail clients reported by RIAs changed by 6.7% between 
December 2015 and 2016, and by 2.3% between December 2016 and 2017.  (6.7% + 2.3%) / 2 = 4.5% 
average annual rate of change over the past two years.  We did not receive comments on this estimate.   



 

449 

 

or electronic format, at 0.02 hours for each relationship summary,1342 or 3.6 annual hours per 

adviser.1343  Therefore, we estimate that the aggregate annual hour burden for initial delivery of 

the relationship summary to new clients will be 29,646 hours,1344 at a monetized cost of 

$1,838,052, or $223 per adviser.1345   

As in the Proposing Release, we continue to estimate that investment advisers will not 

incur external costs to deliver the relationship summary to new or prospective clients because 

they will make the delivery along with other documentation normally provided in such 

circumstances, such as Form ADV Part 2, or will deliver the relationship summary electronically.  

We did not receive comments regarding the burdens for delivering the relationship summary to 

prospective clients that eventually become clients. 

                                                                                                                                                             

1342  This is the same as the estimate for the burden to deliver the brochure required by Form ADV Part 2. See 
Brochure Adopting Release, supra footnote 576.   

1343  3,985 clients per adviser with retail clients x 4.5% = 179 new clients per adviser.  179 new clients per 
adviser x 0.02 hours per delivery = 3.6 hours per adviser for delivery of a relationship summary to new or 
prospective new clients. 

1344  3.6 hours per adviser for delivery obligation to new or prospective clients x 8,235 advisers = 29,646 hours. 

1345  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
delivery requirements of rule 204-5 will most likely be performed by a general clerk at an estimated cost of 
$62 per hour.  29,646 hours x $62 = $1,838,052.  We estimate that advisers will not incur any incremental 
postage costs to deliver the relationship summary to new or prospective clients because we estimate that 
advisers will make the delivery along with other documentation normally provided in such circumstances, 
such as Form ADV Part 2.  $1,838,052 / 8,235 investment advisers = $223 per adviser. 



 

450 

 

d. Total New Initial and Annual Burdens 

All together, we estimate the total collection of information burden for new rule 204-5 to 

be 983,945 annual aggregate hours per year,1346 or 120 hours per respondent,1347 for a total 

annual aggregate monetized cost of $61,003,406,1348 or $7,4081349 per adviser.   

D. Form CRS and Rule 17a-14 under the Exchange Act 

New rule 17a-14 under the Exchange Act [17 CFR 240.17a-14] and Form CRS  [17 CFR 

249.640] will require a broker-dealer that offers services to retail investors to prepare and file 

with the Commission, post to the broker-dealer’s website (if it has one), and deliver to retail 

investors a relationship summary, as discussed in greater detail in Section II above.  Broker-

dealers will deliver the relationship summary to both existing customers and new or prospective 

customers who are retail investors.  In a change from the proposal, broker-dealers will file the 

relationship summary through Web CRD® instead of EDGAR.  We are also requiring that all 

                                                                                                                                                             

1346  4,072 annual hours for posting initial relationship summaries to adviser websites + 236,204 annual hours 
for initial delivery to existing clients + 142,256 hours for delivery to existing clients based on material 
changes to accounts or scope of relationship + 6,487 annual hours to post amended relationship summary to 
website + 561,162 hours for delivery to existing clients to communicate updated information in amended 
relationship summaries + 29,646 hours for delivery to new or prospective clients + 4,118 hours to make 
paper copies of the relationship summary available upon demand = 983,945 annual total hours for 
investment advisers to post and deliver the relationship summary under proposed rule 204-5. 

1347  983,945 hours (initial and other deliveries) / 8,235 advisers = 120 hours per adviser. 

1348  $252,469 for posting initial relationship summaries to adviser websites + $14,643,477 for initial delivery to 
existing clients + $8,819,872 for delivery to existing clients based on material changes to accounts or scope 
of relationship + $402,207 to post amended relationship summary to website + $34,792,044 for delivery to 
existing clients to communicate updated information in amended relationship summaries + $1,838,052 for 
delivery to new or prospective clients + $255,285 for making paper copies of the relationship summary 
available upon demand = $61,003,406 in total annual aggregate monetized cost for investment advisers to 
post and deliver the relationship summary under proposed rule 204-5. 

1349  $61,003,406 / 8,235 advisers = $7,408 per adviser. 



 

451 

 

relationship summaries be filed with machine-readable headings, in a change from the proposal, 

as well as in a text-searchable format as proposed.   

New rule 17a-14 under the Exchange Act [17 CFR 240.17a-14] and Form CRS [17 

CFR 249.640] contain a collection of information requirement.  We will use the information 

to manage our regulatory and examination programs.  Clients can use the information required 

in the relationship summary to determine whether to hire or retain a broker-dealer, as well as 

what types of accounts and services are appropriate for their needs.  The collection of 

information is necessary to provide broker-dealer customers, prospective customers, and the 

Commission with information about the broker-dealer and its business, conflicts of interest 

and personnel.  This collection of information will be found at 17 CFR 249.640 and will be 

mandatory.  Responses will not be kept confidential.     

As discussed in Sections I and II of this release, we received comments that addressed 

whether the relationship summary is necessary for broker-dealers, and whether we could further 

minimize the burden of the proposed collections of information.  One commenter specifically 

addressed the accuracy of our burden estimates for the proposed collections of information, 

suggesting that our estimates were too low because compliance professionals estimated it would 

take 80-500 hours to prepare, deliver, and file the relationship summary, depending on the firm’s 

size and business model.1350  Others commented more broadly that the implementation costs of 

                                                                                                                                                             

1350  See NSCP Letter.     



 

452 

 

the relationship summary would be higher than we estimated in the Proposing Release.1351  We 

have considered these comments and are increasing our PRA burden estimates from 15 hours to 

40 hours for broker-dealers to prepare and file the relationship summary.  We also modified 

several substantive requirements to mitigate some of these estimated increased costs relative to 

the proposal.   

1. Respondents:  Broker-Dealers  

The respondents to this information collection will be the broker-dealers registered with 

the Commission that will be required to prepare, file, and deliver a relationship summary in 

accordance with new rule 17a-14 under the Exchange Act [17 CFR 240.17a-14].  As of 

December 31, 2018, there were 2,766 broker-dealers registered with the Commission that 

reported sales to retail customer investors,1352 and therefore likely will be required to prepare and 

deliver the relationship summary.1353  We also note that these include 318 broker-dealers that are 

dually registered as investment advisers.1354  We did not receive comments related to the 

methodology used for estimating the number of broker-dealers that will be subject to these 

                                                                                                                                                             

1351  Some commenters argued that the cost to implement Form CRS and Regulation Best Interest would be 
high.  See, e.g., Raymond James Letter; CCMC Letter (investor polling results); SIFMA Letter.  

1352  See supra footnote 867 and accompanying text.  Retail sales activity is identified from Form BR (see supra 
footnote 861, which categorizes retail activity broadly (by marking the “sales” box) or narrowly (by 
marking the “retail” or “institutional” boxes as types of sales activity).  We use the broad definition of sales 
as we believe that many firms will just mark “sales” if they have both retail and institutional activity.  
However, this may capture some broker-dealers that do not have retail activity, although we are unable to 
estimate that frequency. 

1353  For purposes of Form CRS, a “retail investor” will be defined as: a natural person, or the legal 
representative of such natural person, who seeks to receive or receives services primarily for personal, 
family or household purposes.     

1354  See supra footnote 863 and accompanying text. 



 

453 

 

requirements.  We are maintaining the methodology we used in the Proposing Release and are 

updating our estimates to reflect the number of broker-dealers since the last burden estimate.   

Some of the burden for dual registrants to prepare and deliver the relationship summary 

and post it to a website is already accounted for in the estimated burdens for investment advisers 

under the amendments to Form ADV and new rule 204-5, discussed in Sections V.A.2.a and V. 

C.2 above.  However, dually registered broker-dealers will incur burdens related to their business 

as an investment adviser that standalone broker-dealers will not incur, such as the requirement to 

file the relationship summary using both IARD and Web CRD®, and to deliver to both 

investment advisory clients and brokerage customers, to the extent those groups of retail 

investors do not overlap.  In addition, dual registrants may provide different services, charge 

different fees, and have different conflicts on the advisory and broker-dealer sides such that the 

burden of preparing the relationship summary on the broker-dealer side may not be substantially 

reflected in the burden for preparing the relationship summary on the advisory side.  Therefore, 

although treating dually registered broker-dealers in this way may be over-inclusive, we base our 

burden estimates for rule 17a-14 and the relationship summary on 2,766 broker-dealers with 

relationship summary obligations, including those dually registered as broker-dealers. 1355     

                                                                                                                                                             

1355  The burden estimates for dual registrants to prepare and file the relationship summary is accounted for in 
the burden estimates for Form ADV and under Exchange Act rule 17a-14.  For example, a dual registrant 
that prepares an initial relationship summary that covers both its advisory business and broker-dealer 
business has an estimated burden of 60 hours amortized (20 hours to prepare and file relationship summary 
related to the advisory business + 40 hours to prepare and file relationship summary related to the broker-
dealer business). 



 

454 

 

2. Initial and Annual Burdens  

a. Initial Preparation, Filing, and Posting of Relationship 
Summary    

As discussed above in Section II, firms will be required to prepare and file a relationship 

summary summarizing specific aspects of their brokerage services that they offer to retail 

investors.  Unlike investment advisers, which already prepare Form ADV Part 2A brochures and 

have information readily available to prepare the relationship summary, broker-dealers will be 

required for the first time to prepare a disclosure that contains all the information required by the 

relationship summary.     

In the Proposing Release, we estimated that the initial first year burden for preparing and 

filing the relationship summary for broker-dealers would be 15 hours per registered broker-

dealer and an additional 0.5 hours to prepare the relationship summary for posting on its website, 

if it has one.  Several commenters said that our estimated burdens were too low.1356  One 

commenter specifically argued that preparing, delivering, and filing the relationship summary 

would take from 80 to 500 hours, based on input from compliance professionals, and noted there 

would be additional costs that are hard to quantify, including human relations and information 

                                                                                                                                                             

1356  See, e.g., NSCP Letter; see also CCMC Letter (costs to implement the proposal were underestimated and 
greater than 40% of firms surveyed anticipate having to spend a moderate or substantial amount to 
implement Regulation Best Interest and Form CRS); Raymond James Letter (noting the significant 
implementation costs of Regulation Best Interest and Form CRS for the industry); SIFMA Letter (stating 
that implementation costs of Regulation Best Interest and Form CRS would be significant).   



 

455 

 

technology programming.1357  Commenters also said the relationship summary would result in 

additional compliance burdens, including training.1358 

We are revising our estimate of the time that it would take each broker-dealer to prepare 

and file the relationship summary in the first year from 15 to 40 hours in light of these comments 

and the changes we are making to the proposed relationship summary.  For example, in the 

Proposing Release, we estimated that it would take firms a shorter amount of time to prepare the 

relationship summary than a more narrative disclosure due to the standardized nature and 

prescribed language of the relationship summary.  As discussed above, the final instructions 

require less prescribed wording relative to the proposal and require broker-dealers to draft their 

own summaries for most of the sections.  In addition and in a change from the proposal, we now 

are requiring that all relationship summaries be filed with machine-readable headings, as well as 

text-searchable format as proposed.  We acknowledge that these changes will increase cost 

burdens relative to the proposal because broker-dealers have to develop their own wording and 

design, as well as implement machine-readable headings to comply with these requirements.   

The relationship summary will also require more layered disclosures relative to the 

proposal and will encourage the use of electronic formatting and graphical, text, online features 

to facilitate access to other disclosures that provide additional detail.  Although broker-dealers 

are currently required to disclose certain information about their services and accounts to their 

                                                                                                                                                             

1357 See NSCP Letter.  

1358  See NSCP Letter (stating that a minimum of two hours of firm level training or two hours of training per 
independent registered representative or adviser will be required prior to Form CRS implementation).  



 

456 

 

retail investors,1359 broker-dealers are not currently required to disclose in one place all of the 

information required by the relationship summary or to file a narrative disclosure document with 

the Commission comparable to investment advisers’ Form ADV Part 2A.  Broker-dealers will 

bear the cost of drafting a new relationship summary and cross-referencing or hyperlinking to 

additional information.  The higher estimated burden estimate also reflects our acknowledgement 

that it will take firms longer to draft certain disclosures than we estimated in the Proposing 

Release, such as answers to “conversation starters” that broker-dealers providing services only 

online without a particular individual with whom a retail investor can discuss these questions 

must include on their website.  We believe these factors and the changes we made to the proposal 

will increase the burden to prepare a relationship summary relative to the proposal. 

We are also changing the filing system for broker-dealers as compared to the proposal. 

Broker-dealers will file Form CRS through Web CRD® instead of EDGAR as proposed, but we 

believe that this change will reduce the estimated burden for filing with the Commission, relative 

to the proposal.  Broker-dealers already submit registration filings on Web CRD® so they will 

not incur additional costs to access the system.1360      

We are estimating the same hourly burden for standalone broker-dealers and broker-

dealers that are dually registered as investment advisers because we are counting dually 

registered firms in the burden calculation for the Advisers Act rule that requires the relationship 
                                                                                                                                                             

1359  See, e.g., Exchange Act rule 10b-10 (requiring a broker-dealer effecting transactions in securities to provide 
written notice to the customer of certain information specific to the transaction at or before completion of 
the transaction, including the capacity in which the broker-dealer is acting (i.e., agent or principal) and any 
third-party remuneration it has received or will receive).   

1360  This reduction in the filing burden is offset by the increased burden to prepare the relationship summary, 
resulting in a higher total burden.   



 

457 

 

summary for investment advisers.1361  We recognize that the burden for some broker-dealers will 

exceed our estimate and the burden for others will be less because broker-dealers vary in the size 

and complexity of their business models, but we do not believe that the range could be as high as 

suggested by some commenters.1362  Unlike investment advisers, which already prepare Form 

ADV Part 2A brochures and have information readily available to prepare the relationship 

summary, broker-dealers will be required for the first time to prepare disclosure that contains all 

the information required by the relationship summary. 

  We recognize that the burden on some broker-dealers might be significant, especially in 

the initial preparation and filing of the relationship summary and thus will require additional 

burdens than what we estimated in the Proposing Release.  Accordingly, we are increasing the 

estimate from 15 to 40 hours in the first year for a broker-dealer’s initial preparation and filing of 

the relationship summary, which is higher than the estimated burden for investment advisers.1363  

We estimate that the total burden for broker-dealers to prepare and file the relationship summary 

will be 110,640 hours,1364 for a monetized value of $30,204,720.1365  The initial burden will be 

                                                                                                                                                             

1361  See supra footnote 1220.   
1362  See NSCP Letter (estimating that the time required to prepare, deliver, and file Form CRS would be 

anywhere from 80 to 500 hours).  

1363  See infra footnote 1366.  Amortizing the 40 hour burden imposed by the relationship summary over a 
three-year period will result in an average annual burden of 13.33 hours per year for each of the 2,766 
broker-dealers with relationship summary obligations.     

1364  2,766 x 40.0 hours / 3 = 36,880 total hours.  

1365  We expect that performance of this function will most likely be equally allocated between a senior 
compliance examiner and a compliance manager. Data from the SIFMA Management and Professional 
Earnings Report suggest that costs for these positions are $237 and $309 per hour, respectively.  (0.5 x 
110,640 hours x $237) + (0.5 x 110,640 hours x $309) = $30,204,720. 



 

458 

 

amortized over three years to arrive at an annual burden for broker-dealers to prepare and file the 

relationship summary.  Therefore, the total annual aggregate hour burden for registered broker-

dealers to prepare and file the relationship summary will be 36,880 hours, or 13.33 hours per 

broker-dealer,1366 for an annual monetized cost of $10,068,240, or $3,640 per broker-dealer.1367  

As proposed, broker-dealers will be required to post a current version of their relationship 

summary prominently on their public website (if they have one).  In the Proposing Release, we 

estimated that each broker-dealer will incur 0.5 hours to prepare the posted relationship summary, 

such as to ensure proper electronic formatting and to post a current version of the relationship 

summary on the broker-dealer’s website, if it has one.  Although we did not receive any 

comments regarding burdens associated with posting of the relationship summary to a public 

website, we are increasing our estimate of the time from 0.5 to 1.5 hours based upon the staff’s 

experience.1368  We believe that the amount of time needed to prepare the relationship summary 

for posting, including ensuring proper formatting and posting it on the website, will not vary 

significantly from the time needed by investment advisers.  We do not anticipate that broker-

dealers will incur additional external costs to post the relationship summary to the broker-

dealer’s website because broker-dealers without a public website will not be required to establish 

or maintain one, and broker-dealers with a public website have already incurred external costs to 

                                                                                                                                                             

1366  110,640 hours for preparing and filing / 3 years = 36,880 total aggregate annual hour burden to prepare and 
file relationship summary.  36,880 hours / 2,766 broker-dealers with retail accounts = 13.33 hours annually 
per broker-dealer. 

1367  $30,204,720 total initial aggregate monetized cost for preparation and filing / 3 = $10,068,240 total annual 
monetized cost for preparation and filing the relationship summary.  $10,068,240 / 2,766 broker-dealers 
subject to relationship summary obligations = $3,640 per broker-dealer. 

1368  See supra footnote 1302. 



 

459 

 

create and maintain their websites.  As with investment advisers, we estimate that each broker-

dealer will incur 1.5 hours to prepare the relationship summary for posting to its website.  We 

estimate that the initial burden of posting the relationship summary to their websites, if they have 

one, will be 4,149 hours,1369 for a monetized value of $257,238.1370  The initial burden will be 

amortized over three years to arrive at an annual burden for broker-dealers to post the 

relationship summary to a public website.  Therefore, the total annual aggregate hour burden for 

broker-dealers to post the relationship summary will be 1,383 hours, or 0.5 hours per broker-

dealer,1371 for an annual monetized cost of $87,746, or $31 per broker-dealer.1372 

To arrive at an annual burden for preparing, filing, and posting the relationship summary, 

as for investment advisers, the initial burden will be amortized over a three-year period for 

broker-dealers.  Therefore, the total annual aggregate hour burden for registered broker-dealers 

to prepare, file, and post a relationship summary to their website, if they have one, will be 38,263 

                                                                                                                                                             

1369  1.5 hours x 2,766 broker-dealers = 4,149 hours to prepare and post relationship summary to the website. 

1370  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
performance of this function will most likely be performed by a general clerk at an estimated cost of $62 
per hour.  4,149 hours x $62 = $257,238 total aggregate monetized cost. 

1371  4,149 hours for posting to website / 3 years = 1,383 total aggregate annual burden to prepare and file 
relationship summary.  1,383 hours / 2,766 broker-dealers with retail account = 0.5 hours annually per 
broker-dealer. 

1372  $257,238 total initial aggregate monetized cost for posting to website / 3 = $85,746 total annual monetized 
cost for posting the relationship summary.  $87,746 / 2,766 broker-dealers with retail accounts = $31 per 
broker-dealer.  



 

460 

 

hours, or 13.83 hours per broker-dealer,1373 for an annual monetized cost of $10,153,986, or 

$3,671 per broker-dealer.1374  

b. Estimated External Costs for Initial Preparation of 
Relationship Summary  

Under new rule 17a-14, broker-dealers will be required to prepare and file a relationship 

summary, as well as post it to their website if they have one.  We do not anticipate external costs 

to broker-dealers in the form of website set-up, maintenance, or licensing fees because they will 

not be required to establish a website for the sole purpose of posting their relationship summary 

if they do not already have a website.  We do anticipate that most broker-dealers will incur a 

one-time initial cost for outside legal and consulting fees in connection with the initial 

preparation of the relationship summary.   

We estimated in the Proposing Release that an external service provider would spend 3 

hours helping a broker-dealer prepare an initial relationship summary.  While we received no 

specific comments on our estimate regarding external costs in the Proposing Release, one 

commenter suggested that there would be additional implementation costs such as legal advice, 

but that these costs are difficult to quantify.1375  Based on the concerns expressed by this 

commenter and the changes we are making to the relationship summary, for example, requiring 

                                                                                                                                                             

1373  110,640 hours for preparing and filing + 4,149 hours for posting = 114,789 hours. 114,789 / 3 years = 
38,263 total aggregate annual hour burden to prepare and file relationship summary.  38,263 hours / 2,766 
broker-dealers with retail accounts = 13.83 hours annually per broker-dealer. 

1374  $30,204,720 total initial aggregate monetized cost for preparation and filing + $257,238 for posting to the 
website / 3 = $10,153,986 total annual monetized cost for preparation, filing and posting the relationship 
summary.  $10,153,968 / 2,766 broker-dealers subject to relationship summary obligations = $3,671 per 
broker-dealer. 

1375  See NSCP Letter.461 

 

less prescribed wording, we are increasing the estimate relative to the proposal from 3 to 5 hours.  

While we recognize that different firms may require different amounts of external assistance in 

preparing the relationship summary, we believe that this is an appropriate average number for 

estimating an aggregate amount for the industry purposes of the PRA analysis, particularly given 

our experience with the burdens for Form ADV.1376    

Although broker-dealers that will be subject to the relationship summary requirement 

may vary widely in terms of the size, complexity, and nature of their business, we believe that 

the strict page limits will make it unlikely that the amount of time, and thus cost, required for 

outside legal and compliance review will vary substantially among those broker-dealers who 

elect to obtain outside assistance.  

Most of the information required in the relationship summary is readily available to 

broker-dealers because the information required pertains largely to the broker-dealer’s own 

business practices, and thus the information is likely more readily available to the broker-dealer 

than to an external legal or compliance consultant.  However, because broker-dealers are drafting 

a narrative disclosure for the first time, we anticipate that 50% of broker-dealers will seek the 

help of outside legal services and 50% of broker-dealers will seek the help of compliance 

consulting services in connection with the initial preparation of the relationship summary.  We 

estimate that the initial per broker-dealer cost for legal services related to the preparation of the 

relationship summary will be $2,485.1377  We estimate that the initial per broker-dealer cost for 

                                                                                                                                                             

1376  See supra footnote 1221.  
1377  External legal fees are in addition to the projected hour per broker-dealer burden discussed above.  Data 

from the SIFMA Management and Professional Earnings Report suggest that outside legal services cost 
 



 

462 

 

compliance consulting services related to the preparation of the relationship summary will be 

$3,705.1378  Accordingly, we estimate that 1,383 broker-dealers will use outside legal services, 

for a total initial aggregate cost burden of $3,436,755,1379 and 1,383 broker-dealers will use 

outside compliance consulting services, for a total initial aggregate cost burden of 

$5,124,015,1380 resulting in a total initial aggregate cost burden among all respondents of 

$8,560,770, or $3,095 per broker-dealer, for outside legal and compliance consulting fees related 

to preparation of the relationship summary.1381  Annually, this represents $2,853,590, or $1,032 

per broker-dealer, when amortized over a three-year period.1382  

c. Amendments to the Relationship Summary and Filing and 
Posting of Amendments 

As with our estimates above for investment advisers, we do not expect broker-dealers to 

amend their relationship summaries frequently.  In the Proposing Release, we estimated that 

broker-dealers required to prepare and file a relationship summary would require 0.5 hours to 

                                                                                                                                                             

approximately $497 per hour.  $497 per hour for legal services x 5 hours per broker-dealer = $2,485.  The 
hourly cost estimate of $497 is adjusted for inflation and based on our consultation with broker-dealers and 
law firms who regularly assist them in compliance matters. 

1378  External compliance consulting fees are in addition to the projected hour per broker-dealer burden 
discussed above.  Data from the SIFMA Management and Professional Earnings Report suggest that 
outside management consulting services cost approximately $741 per hour.  $741 per hour for outside 
consulting services x 5 hours per broker-dealer = $3,705. 

1379  50% x 2,766 SEC registered broker-dealers = 1,383 broker-dealers.  $2,485 for legal services x 1,383 
broker-dealers = $3,436,755.   

1380  50% x 2,766 SEC registered broker-dealers = 1,383 broker-dealers.  $3,705 for compliance consulting 
services x 1,383 broker-dealers = $5,124,015. 

1381  $3,436,755 + $5,124,015 = $8,560,770.  $8,560,770 / 2,766 broker-dealers = $3,095 per broker-dealer. 

1382  $8,560,770 initial aggregate monetized cost / 3 years = $2,853,590 annually.  $3,095 initial monetized cost 
per broker-dealer / 3 years = $1,032. 



 

463 

 

amend and file the updated relationship summary, and 0.5 hours to post it to their website.  We 

did not receive comments regarding hour burdens associated with preparing and filing 

amendments to the relationship summary.  As discussed in section II.C.4 above, in a change 

from the proposal, we are adding a requirement that broker-dealers delivering updated 

relationship summaries to customers also highlight the most recent changes by, for example, 

marking the revised text or including a summary of material changes.  To account for this change, 

we are increasing the annual burden to 1 hour per year for preparing and filing amendments to 

the relationship summary.  We are not changing the proposed 0.5 hours estimate to post the 

amendments to a public website.  

Based on staff experience, we believe that many broker-dealers will update their 

relationship summary at a minimum once a year, after conducting an annual supervisory review, 

for example.1383  We also estimate that on average, each broker-dealer preparing a relationship 

summary may amend the disclosure once more during the year, due to emerging issues.  

Therefore, we estimate that broker-dealers will update their relationship summary, on average, 

twice a year.  Thus, we estimate that broker-dealers will incur a total annual aggregate hourly 

burden of 5,532 hours per year to prepare and file amendments per year, and 2,766 hours per 

                                                                                                                                                             

1383  FINRA rules set an annual supervisory review as a minimum threshold for broker-dealers, for example in 
FINRA Rules 3110 (requiring an annual review of the businesses in which the broker-dealer engages), 
3120 (requiring an annual report detailing a broker-dealer’s system of supervisory controls, including 
compliance efforts in the areas of antifraud and sales practices); and 3130 (requiring each broker-dealer’s 
CEO or equivalent officer to certify annually to the reasonable design of the policies and procedures for  
compliance with relevant regulatory requirements).   



 

464 

 

year to post to their websites an estimated total of 5,532 amendments per year.1384  We therefore 

estimate that for making and filing amendments to their relationship summaries, broker-dealers 

will incur an annual aggregate monetized cost of $1,510,236, or approximately $546 per broker-

dealer to prepare and file amendments,1385 and an annual aggregate monetized cost of $171,492, 

or approximately $62 per broker-dealer to post the amendments.1386   In total, the aggregate 

annual monetized cost for broker-dealers to make, file, and post amendments will be $1,681,728, 

or approximately $608 per broker dealer.1387 

We do not expect ongoing external legal or compliance consulting costs for the 

relationship summary.1388  Although broker-dealers will be required to amend the relationship 

summary within 30 days whenever any information becomes materially inaccurate, we expect 

that the amendments will require relatively minimal wording changes, given the relationship 

summary’s page limitation and summary nature.  We believe that broker-dealers will be more 

knowledgeable about the information to include in the amendments than outside legal or 

                                                                                                                                                             

1384  2,766 broker-dealers amending relationship summaries x 2 amendments per year = 5,532 amendments per 
year. 5,532 amendments x 1 hour to amend and file = 5,532 hours.  2,766 broker-dealers x (0.5 hours to 
post amendments to website x 2 amendments a year) = 2,766 hours.  

1385  5,532 total aggregate initial hour burden for amending relationship summaries. We believe that 
performance of this function will most likely be equally allocated between a senior compliance examiner 
and a compliance manager. Data from the SIFMA Management and Professional Earnings Report suggest 
that costs for these positions are $237 and $309 per hour, respectively. (5,532 hours x 50% x $237 + 5,532 
hours x 50% x $309 = $1,510,236.  $1,510,236 / 2,677 investment advisers = $546 per investment broker-
dealer. 

1386  Based on data from the SIFMA Office Salaries Report, we expect that the posting will most likely be 
performed by a general clerk at an estimated cost of $62 per hour.  2,766 aggregate hours to post 
amendment x $62 = $171,492.  $171,492 / 2,766 broker-dealers = $62 in annual monetized costs.     

1387  $1,510,236 to prepare and file amendment + $171,492 to post the amendments = $1,681,728. $1,681,728 / 
2,766 = $608.  

1388  But see NNCP Letter.  



 

465 

 

compliance consultants and will be able to make these revisions in-house.  Therefore, we do not 

expect that broker-dealers will need to incur ongoing external costs for the preparation and 

review of relationship summary amendments. 

d. Delivery of the Relationship Summary 

Rule 17a-14 under the Exchange Act will require a broker-dealer to deliver the 

relationship summary, with respect to a retail investor that is a new or prospective customer, 

before or at the at the earliest of:  (i) a recommendation of an account type, a securities 

transaction or an investment strategy involving securities; (ii) placing an order for the retail 

investor; or (iii) the opening of a brokerage account for the retail investor.  Broker-dealers also 

will make a one-time, initial delivery of the relationship summary to all existing customers 

within a specified time period after the effective date of the rule.  Also with respect to existing 

customers, broker-dealers will deliver the most recent relationship summary before or at the time 

of (i) opening a new account that is different from the retail investor’s existing account(s); or (ii) 

recommending that the retail investor roll over assets from a retirement account into a new or 

existing account or investment; or (iii) recommending or providing a new brokerage or 

investment advisory service or investment that does not necessarily involve the opening of a new 

account and would not be held in the existing account.   

As discussed above in Section II.C.3.a, broker-dealers will be required to post a current 

version of the relationship summary prominently on their public websites (if they have one), and 

will be required to communicate any changes in an amended relationship summary to retail 

investors who are existing clients or customers within 60 days, instead of 30 days as proposed, 



 

466 

 

after the amendments are required to be made and without charge.1389  Broker-dealers also must 

deliver a current relationship summary to each retail investor within 30 days upon request.  In a 

change from the proposal, a broker-dealer must make available a copy of the relationship 

summary upon request without charge, and where a relationship summary is delivered in paper 

format, the broker-dealer may link to additional information by including URL addresses, QR 

codes, or other means of facilitating access to such information.1390  The broker-dealer must also 

include a telephone number where retail investors can request up-to-date information and request 

a copy of the relationship summary.1391   

As discussed further below, we received comments that our estimated burdens for 

delivery of the relationship summary were too low.1392  Some of these comments were focused 

on the delivery burdens related to the requirement to deliver a relationship summary to existing 

retail investors when changes are made to the existing account that would “materially change” 

the nature and scope of the relationship.1393  Other comments focused on the recordkeeping 

burdens related to the requirement to deliver the relationship summary to a new or prospective 

                                                                                                                                                             

1389  The communication can be made by delivering the relationship summary or by communicating the 
information through another disclosure that is delivered to the retail investor.   

1390  Additionally, we are adopting the instruction that if a relationship summary is delivered in paper format as 
part of a package of documents, the firm must ensure that the relationship summary is the first among any 
documents that are delivered at that time, substantially as proposed.  See supra footnotes 678 -679.   

1391  This differs from the proposal, which required only firms that do not have a public website to include a toll-
free number that retail investors may call to request documents.  See supra footnote 609.   

1392  See, e.g., SIFMA Letter.  

1393  See, e.g., Cambridge Letter; SIFMA Letter; LPL Financial Letter. 



 

467 

 

retail investor.1394  As discussed further below, we made changes to the proposal to require more 

specific triggers for initial delivery and additional delivery to existing customers in order to 

replace the requirements in response to comments.  We discuss below the specific separate 

delivery requirements and modifications.  

(1) One-Time Initial Delivery to Existing Customers 

We estimate the burden for broker-dealers to make a one-time initial delivery of the 

relationship summary to existing customers based on an estimate of the number of accounts held 

by these broker-dealers.  Based on FOCUS data, we estimate that the 2,766 broker-dealers that 

report retail activity have approximately 139 million customer accounts, and that approximately 

73.5%, or 102.165 million, of those accounts belong to retail customers.1395  We estimate that, 

under the adopted rule, broker-dealers will send their relationship summary along with other 

required disclosures, such as periodic account statements, in order to comply with initial delivery 

requirements for the relationship summary.   

As with investment advisers, we estimate that a broker-dealer will require no more than 

0.02 hours to deliver the relationship summary to each existing retail investor under rule 17a-14.  

We did not receive comments on the burdens specific to delivering the relationship summary to 

existing clients.  We will therefore estimate broker-dealers to incur an aggregate initial burden of 

                                                                                                                                                             

1394  See infra footnote 1427. 

1395  See supra footnotes 857 - 865 and accompanying text.  2,766 broker-dealers (including dually registered 
firms) report 139 million customer accounts.  Approximately 73.5% of registered broker-dealers report 
retail customer activity; see supra footnote 861. Therefore, 73.5% x 139 million accounts = 102.165 
million accounts.  This number likely overstates the number of deliveries to be made due to the double-
counting of deliveries to be made by dual registrants to a certain extent, and the fact that one customer may 
own more than one account. 



 

468 

 

2,043,300 hours, or approximately 739 hours per broker-dealer for the first year after the rule is 

in effect.1396  We expect the aggregate monetized cost for broker-dealers to make a one-time 

initial delivery of relationship summaries to existing customers to be $126,684,600.1397  

Amortized over three years, the total annual hourly burden is estimated to be 681,100 hours, or 

approximately 246 hours per broker-dealer,1398 with annual monetized costs of $42,228,200 and 

$15,267, respectively.1399  We do not expect that broker-dealers will incur external costs for the 

initial delivery of the relationship summary to existing clients because we estimate that they will 

make such deliveries along with another required delivery, such as periodic account statements. 

(2) Additional Delivery to Existing Customers 

 As discussed in Section II.C.3.c above, broker-dealers will be required to deliver the 

relationship summary to existing customers when opening a new account that is different from 

the retail investor’s existing account(s), as proposed.  In addition, in a change from the proposal, 

delivery will be required before or at the time the broker-dealer (i) recommends that the retail 

investor roll over assets from a retirement account into a new or existing account or investment, 

                                                                                                                                                             

1396  (0.02 hours per customer account x 102.165 million customer accounts) = 2,043,300 hours.  The burden for 
preparing updated relationship summaries is already incorporated into the burden estimate for Form CRS 
discussed above.  2,043,300 hours / 2,766 broker-dealers = approximately 739 hours per broker-dealer.   

1397 Based on data from SIFMA’s Office Salaries Report, we expect that initial delivery requirement to existing 
clients of rule 17a-14 will most likely be performed by a general clerk at an estimated cost of $62 per hour.  
2,043,300 hours x $62 = $126,684,600.  We estimate that broker-dealers will not incur any incremental 
postage costs because we estimate that they will make such deliveries with another mailing the broker-
dealer was already delivering to clients, such as periodic account statements. 

1398  2,043,300 initial aggregate hours / 3 = 681,100 total annual aggregate hours.  739 initial hours per broker-
dealer / 3 = 246 total annual hours per broker-dealer. 

1399  $126,684,600 initial aggregate monetized cost / 3 = $42,228,200 annual aggregate monetized cost.  
$42,228,200 / 2,766 broker-dealers = $15,267 annual monetized cost per broker-dealer. 



 

469 

 

or (ii) recommends or provides a new brokerage or investment advisory service or investment 

that does not necessarily involve the opening of a new account and would not be held in the 

existing account.  We are adopting these two triggers instead of the proposed requirement to 

deliver the relationship summary before or at the time changes are made to the existing account 

that would “materially change” the nature and scope of the relationship to address commenters’ 

requests for additional guidance or examples of what would constitute a “material change.”1400  

Commenters also described administrative and operational burdens arising from this requirement 

and argued that our estimated burdens were too low.1401  One commenter asserted that firms 

would be required to build entirely new operational and supervisory processes to identify asset 

movements that could trigger a delivery requirement.1402  Another noted the challenges of 

designing a system that distinguishes non-ordinary course events from routine account 

changes.1403   

As discussed above, we replaced the “materially change” requirement with more specific 

triggers to be clearer about when a relationship summary must be delivered.1404  While these 

specific triggers will still impose operational and supervisory burdens on broker-dealers, we 

believe that they are more easily identified and monitored, such that firms will not incur 

                                                                                                                                                             

1400 See supra footnotes 758–763 and accompanying text. 

1401  See, e.g., LPL Financial Letter (stating that proposed re-delivery triggering events would not be easily 
identifiable and would present operational challenges and compliance costs).   

1402  See SIFMA Letter. 

1403  See LPL Financial Letter. 

1404  See supra footnote 761 and accompanying text.  



 

470 

 

significant burdens as described by commenters to implement entirely new supervisory, 

administrative, and operational processes needed to monitor events that cause a material change.  

However, recognizing that some additional processes will be necessary to implement these 

delivery triggers, we are increasing our burden estimate from 0.02 to 0.04 hours.  We now 

estimate that each broker-dealer will incur 149 hours per year to deliver the relationship 

summary in these types of situations, and that delivery under these circumstances will take place 

among 10% of broker-dealer’s retail investors annually.  We will therefore estimate broker-

dealers to incur a total annual aggregate burden of 408,660 hours, or 148 hours per broker-

dealer,1405 at an annual aggregate monetized cost of $25,336,920, or approximately $9,160 per 

broker-dealer.1406   

(3) Communicating Changes to Amended Relationship 
Summaries, Including by Delivery 

As discussed above, broker-dealers will be required to amend their relationship 

summaries within 30 days when any of the information becomes materially inaccurate.  They 

must also communicate any changes in any new version of the relationship summary to retail 

investors who are existing customers within 60 days, instead of 30 days as proposed, after the 

                                                                                                                                                             

1405  10% of 102.165 million customers x 0.04 hours = 408,660 hours.  408,660 hours / 2,766 broker-dealers = 
148 hours per broker-dealer.   

1406  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
delivery requirements of rule 17a-14 will most likely be performed by a general clerk at an estimated cost 
of $62 per hour.  408,660 hours x $62 = $25,336,920.  $25,336,920 / 2,766 broker-dealers = $9,160 per 
broker-dealer.  We estimate that broker-dealers will not incur any incremental postage costs in these 
deliveries of the relationship summary to existing customers, because we estimate that broker-dealers will 
make such deliveries with another mailing the broker-dealer was already delivering to clients, such as 
periodic account statements, or new account agreements and other similar documentation. 



 

471 

 

updates are required to be made and without charge.  We do not expect this change to increase 

the PRA estimates.1407  The communication can be made by delivering the relationship summary 

or by communicating the information through another disclosure to the retail investor.  This 

requirement is a change from the proposed requirement but is substantively similar, and 

commenters did not comment on the estimated burden.1408  We have determined not to change 

the burden relative to the proposal. 

Consistent with our discussion on broker-dealers’ amendments to the relationship 

summary we are assuming that the broker-dealers with relationship summaries will amend them 

twice each year.  We also estimate that 50% will choose to deliver the relationship summary to 

communicate the updated information.  We did not receive comments on this estimate.  As with 

investment advisers, we believe that it is likely that the other 50% of broker-dealers will 

incorporate all of the updated information in other disclosures, which they are already obligated 

to deliver in order to avoid having to deliver two documents.  We estimate that broker-dealers 

will require 0.02 hours to make a delivery to each customer.1409  Therefore, the estimated burden 

                                                                                                                                                             

1407  As discussed in Section V.D.2.c., we have increased the burden estimates for preparing amendments to the 
relationship summary, acknowledging, among other things, that firms will incur additional burdens to 
prepare and file amendments as a result of the instructions that firms preparing amendments highlight the 
most recent changes, and that additional disclosure showing the revised text be attached as an exhibit to the 
unmarked relationship summary.    

1408  The proposed instructions would have required firms to communicate updated information by delivering 
the amended relationship summary or by communicating the information another way.  The revised 
instruction will eliminate the wording “another way” and will clarify that the communication can be made 
through another disclosure that is delivered to the retail investor.  See supra footnotes 775 - 778 and 
accompanying text. 

1409  For the other 50% of broker-dealers that may choose to communicate updated information in another 
disclosure, we estimate no added burden because these broker-dealers are communicating the information 
in other disclosures they are already delivering. 



 

472 

 

for those broker-dealers choosing to deliver an amended relationship summary to meet this 

communication requirement will be approximately 2,043,300 hours, or 739 hours per broker-

dealer,1410 translating into a monetized cost of $126,684,600 in aggregate, or $45,801 per broker-

dealer.1411   

In a change from the proposal, we are also adopting two requirements not included in the 

proposal.  First, all firms will be required to make available a copy of the relationship summary 

upon request without charge.  Second, in a relationship summary that is delivered in paper 

format, firms may link to additional information by including URL addresses, QR codes, or other 

means of facilitating access to such information.  We believe that these new requirements will 

increase the burden relative to the proposal for some broker-dealers that do not currently fulfill 

these types of disclosure requests, including, for example, additional costs associated with 

tracking customer delivery preferences related to making copies of the relationship summary 

available upon request, and printing and mailing costs for copies delivered in paper.  We 

estimate that the 2,766 broker-dealers with relationship summary obligations, on average, will 

require 0.5 hours each annually to comply with this requirement.  Therefore, we estimate that the 

2,766 broker-dealers with relationship summary obligations will incur a total of 1,383 aggregate 

                                                                                                                                                             

1410  2 amendments per year x 102.165 million customer accounts x 50% delivering the amended relationship 
summary to communicate updated information x 0.02 hours per delivery = 2,043,300 hours to deliver 
amended relationship summaries.  2,043,300 hours / 2,766 broker-dealers = 739 hours per broker-dealer. 

1411  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
delivery requirements of rule 17a-14 will most likely be performed by a general clerk at an estimated cost 
of $62 per hour.  2,043,300 hours x $62 = $126,684,600.  $126,684,600 / 2,766 broker-dealers = $45,801 
per broker-dealer.  We estimate that broker-dealers will not incur any incremental postage costs to deliver 
these relationship summaries, because we estimate that advisers will make the delivery along with other 
documentation they normally would provide, such as account opening documents.   



 

473 

 

burden hours to make copies of the relationship summary available upon request,1412 with a 

monetized cost per adviser of $31, or $85,746 in aggregate monetized cost.1413  We acknowledge 

that the burden may be more or less than 0.5 hours for some broker-dealers, but we believe that, 

on average, 0.5 hours is an appropriate estimate for calculating an aggregate burden for the 

industry for this collection of information.     

We do not expect broker-dealers to incur external costs in delivering amended 

relationship summaries or communicating the information in another way because we estimate 

that they will make these deliveries with, or as part of other disclosures required to be delivered.  

We did not receive comments on this assumption in the proposal.   

e. Delivery to New Customers or Prospective New Customers 

To estimate the delivery burden for broker-dealers’ new or prospective new customers, as 

discussed above, we estimate that the 2,766 standalone broker-dealers with retail activity have 

approximately 102.165 million retail customer accounts.1414  We did not receive comments on 

the burdens specific to delivering the relationship summary to new and prospective retail 

investors under rule 17a-14.  Based on FOCUS data over the past five years, we estimate that 

broker-dealers grow their customer base and enter into new agreements with, on average, 11% 

                                                                                                                                                             

1412  0.5 hours to make paper copies of the relationship summary available upon request x 2,677 broker-dealers 
with relationship summary obligations = 1,383 hours.  

1413  Based on data from the SIFMA Office Salaries Report, we expect that the requirement for broker-dealers to 
make paper copies of the relationship summary available upon request will most likely be performed by a 
general clerk at an estimated cost of $62 per hour.  0.5 hours per broker-dealer x $62 = $31 in monetized 
costs per broker-dealer.  $31 per broker-dealer x 2,766 broker-dealers with relationship summary 
obligations = $85,746 total aggregate monetized cost.   

1414  See supra footnotes 857-865 and accompanying text.   



 

474 

 

more new retail investors each year.1415  We estimate the hour burden for initial delivery of a 

relationship summary will be the same by paper or electronic format, at 0.02 hours for each 

relationship summary, as we have estimated above.  Therefore, the aggregate annual hour burden 

for initial delivery of the relationship summary by broker-dealers to new or prospective new 

customers will be 224,763 hours, or 81.3 hours per broker-dealer,1416 at a monetized cost of 

$13,935,306 at an aggregate level, or $5,038 per broker-dealer.1417 

f. Total New Initial and Annual Burdens 

As discussed above, we estimate the total annual collection of information burden for  

new rule 17a-14 in connection with obligations relating to the relationship summary, including 

(i) initial preparation, filing, and posting to a website; (ii) amendments to the relationship 

summary for material updates and related filing and website posting burdens; (iii) one-time 

initial delivery to existing customers; (iv) additional delivery to existing customers; (v) delivery 

of amended relationship summaries; (vi) delivery to new and prospective customers; and (vii) 

making copies available upon request.  Given these requirements, we estimate the total annual 

aggregate hourly burden to be approximately 3,408,533 hours per year, or 1,232 hours on a per 
                                                                                                                                                             

1415  This represents the average annual rate of growth from 2014-2018 in the number of accounts for all broker-
dealers reporting retail activity.   

1416  102.165 million customer accounts x 11% increase = 11,238,150 new customers.  11,238,150 new 
customers x 0.02 hours per delivery = 224,763 total annual aggregate hours.  224,763 / 2,766 broker-
dealers = 81.3 hours per broker-dealer for delivery to new customers.  

1417  Based on data from the SIFMA Office Salaries Report, modified to account for an 1,800-hour work-year 
and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, we expect that 
these functions will most likely be performed by a general clerk at an estimated cost of $62 per hour.  
224,763 hours x $62 = $13,935,306.  $13,935,306 / 2,766 broker-dealers = $5,038 per broker-dealer for 
delivery to new customers.  We estimate that broker-dealers will not incur any incremental postage costs to 
deliver the relationship summary to new or prospective clients because we estimate that broker-dealers will 
make the delivery along with other documentation, such as periodic account statements. 



 

475 

 

broker-dealer basis.1418  This translates into an aggregate annual monetized cost of $219,110,726, 

or $79,216 per broker-dealer per year.1419  In addition, we estimate that broker-dealers will incur 

external legal and compliance costs in the initial preparation of the relationship summary of 

approximately $8,560,770 in aggregate, or $3,095 per broker-dealer, translating into $2,853,590 

annually, or $1,032 per broker-dealer, when amortized over a three year period.1420 

E. Recordkeeping Obligations under Exchange Act Rule 17a-31421 

The final requirement to make a record indicating the date that a relationship summary 

was provided to each retail investor, including any relationship summary provided before such 

retail investor opens an account, will contain a collection of information that will be found at 17 

CFR 240.17a-3(a)(24) and will be mandatory.  The Commission staff will use this collection of 

information in its examination and oversight program, and the information generally is kept 

                                                                                                                                                             

1418  36,880 hours per year for initial preparation and filing of relationship summary + 4,149 hours for posting to 
website + 8,298 hours per year for amendments, filing, and posting of amendments + 681,100 hours for 
one-time initial delivery to existing customers + 408,660 hours for delivery to existing customers making 
material changes to their accounts + 2,043,300 hours for delivery of amendments + 224,763 hours for 
delivery to new customers + 1,383 hours to make paper copies available upon demand = 3,408,533 total 
annual aggregate hours. 3,408,533 hours / 2,766 broker-dealers = 1,232 hours per broker-dealer. 

1419  $10,068,240 per year for initial preparation, filing, and posting of relationship summary + $257,238 per 
year for posting to website + $514,476 per year for amendments, filing, and posting of amendments + 
$42,228,200 for one-time initial delivery to existing customers (amortized over three years) + $25,336,920 
for delivery to existing customers making material changes to their accounts + $126,684,600 for delivery of 
amendments + $13,935,306 for delivery to new customers + $85,746 per year to make paper copies of the 
relationship summary available upon demand = $219,110,726 in total annual aggregate monetized cost. 
$219,110,726 / 2,766 broker-dealers = $79,216 per broker-dealer. 

1420  $3,436,755 total external legal costs + $5,124,015 total external compliance cost = $8,560,770 total 
external legal and compliance costs. $8,560,770 total external legal and compliance costs / 2,766 broker-
dealers = $3,095 per broker-dealer. $8,560,770 total external legal and compliance costs / 3 = $2,853,590 
annually. $3,095 / 3 = $1,032 per year. 

1421  In a concurrent release, we are adopting additional burden adjustments to Exchange Act rules 17a-3 and 
17a-4.  See Regulation Best Interest Release, supra footnote 47. 



 

476 

 

confidential.1422  The likely respondents to this collection of information requirement are the 

approximately 2,766 broker-dealers currently registered with the Commission that offer services 

to retail investors, as defined above.1423  

Exchange Act section 17(a)(1) requires registered broker-dealers to make and keep for 

prescribed periods such records as the Commission deems “necessary or appropriate in the 

public interest, for the protection of investors or otherwise in furtherance of the purposes of” the 

Exchange Act.”1424  Exchange Act rules 17a-3 and 17a-4 specify minimum requirements with 

respect to the records that broker-dealers must make, and how long those records and other 

documents must be maintained, respectively.      

The amendments to Exchange Act rule 17a-3 will require SEC-registered broker-dealers 

to make a record indicating the date that a relationship summary was provided to each retail 

investor and to each prospective retail investor who subsequently becomes a retail investor.  We 

are adopting these amendments as proposed.  In the Proposing Release, we estimated that the 

adoption of new paragraph (a)(24) of rule 17a-3 would result in an incremental burden increase 

of 0.1 hours annually for each of the estimated 2,766 SEC-registered broker-dealers that will be 

                                                                                                                                                             

1422  See section 24(b) of the Exchange Act. 

1423  See supra footnotes 857-865 and accompanying text.   

1424  See section 17(a) of the Exchange Act. 



 

477 

 

required to record the dates that the initial relationship summary and each new version thereof, is 

provided to an existing or prospective retail investor.1425   

As discussed above in Section II.E, several commenters suggested that our estimated 

burdens for the relationship summary recordkeeping obligations were too low.1426  Some 

commenters argued that keeping records of when a relationship summary was given to 

prospective retail clients would be unnecessarily burdensome or not feasible, and was not 

adequately considered in the Commission’s burden estimates.1427  One of these commenters said 

that it would be difficult for firms to integrate pre-relationship delivery dates into their 

operational systems and procedures, and that there is no way to track when a disclosure is 

accessed on a website.1428   

                                                                                                                                                             

1425  We applied the same 0.2 hour estimate as with investment advisers, but divided equally between creating a 
record of the relationship summary and its deliveries and the maintenance of those records.  As discussed 
above, we are increasing our estimates.  

1426  See, e.g., CCMC Letter; SIFMA Letter; see also NSCP Letter (estimating 80-500 hours to prepare, deliver, 
and file Form CRS, including recordkeeping policies and procedures).   

1427  See, e.g., CCMC Letter; SIFMA Letter; Committee of Annuity Insurers Letter; Edward Jones Letter.  A 
few others stated that creating recordkeeping policies and procedures relating to how professionals respond 
to “key questions” would be burdensome and extremely difficult.  See, e.g., LPL Financial Letter.  
Although the final instructions require “conversation starter” questions that are similar to the proposed “key 
questions,” we are not increasing the burden as urged by commenters.  As discussed in Section V.D.2.a. 
above, we increased the burden estimates for the initial preparation of the relationship summary, 
acknowledging, among other things, that certain broker-dealers that provide services only online will incur 
additional burdens to develop written answers to the conversation starters and make those available on their 
websites with a hyperlink to the appropriate page in the relationship summary for these documents.   
However, we do not expect these broker-dealers to incur additional recordkeeping burdens under 
amendments to Exchange Act rule 17a-3 because we are not establishing new or separate recordkeeping 
obligations related to the conversation starters or the answers provided by firms in response to the 
conversation starters.  See supra footnotes 814 - 816. 

1428  See SIFMA Letter.  



 

478 

 

After consideration of comments, and because broker-dealers do not currently maintain 

similar records like the relationship summary, we are revising our estimate of the time that it 

would take each broker-dealer to create the records required by new paragraph (a)(24) of rule 

17a-3 as adopted from 0.1 hours to 0.5 hours.  The incremental hour burden for broker-dealers to 

create the records required by new paragraph (a)(24) of rule 17a-3 as adopted will therefore be 

1,383 hours,1429 for a monetized cost of $87,627 in aggregate, or $32 per broker-dealer.1430  We 

also do not expect that broker-dealers will incur external costs for the requirement to make 

records because we believe that broker-dealers will make such records in a manner similar to 

their current recordkeeping practices, including those that apply to communications and 

correspondence with retail investors.     

F. Record Retention Obligations under Exchange Act Rule 17a-4  

Exchange Act section 17(a)(1) requires registered broker-dealers to make and keep for 

prescribed periods such records as the Commission deems “necessary or appropriate in the 

public interest, for the protection of investors or otherwise in furtherance of the purposes of” the 

Exchange Act.”1431  Exchange Act rule 17a-4 specifies minimum requirements with respect to 

how long records created under Exchange Act rule 17a-3 and other documents must be kept.  We 

                                                                                                                                                             

1429  2,766 broker-dealers x 0.5 hours annually = 1,383 annual hours for recordkeeping.  

1430  As with our estimates relating to the proposed amendments to Advisers Act rule 204-2 (see, e.g., supra 
footnote 1284 and accompanying text), we expect that performance of this function will most likely be 
allocated between compliance clerks and general clerks, with compliance clerks performing 17% of the 
function and general clerks performing 83% of the function.  Data from the SIFMA Office Salaries Report 
suggest that costs for these positions are $70 and $62, respectively. (17% x 1,383 hours x $70) + (83% x 
1,383 hours x $62) = $87,627.  $87,627/ 2,766 broker-dealers = $32 per broker-dealer.     

1431  See section 17(a) of the Exchange Act. 



 

479 

 

are adopting amendments to rule 17a-4 as proposed that will require broker-dealers to retain 

copies of each version of the relationship summary provided to current or prospective retail 

investors, and to preserve the record of dates that each version of the relationship summary was 

delivered to any existing retail investor or to any new or prospective retail investor customer, 

pursuant to the new requirements under new paragraph (a)(24) under rule 17a-3, as adopted, 

discussed above.  These records as well as a copy of each version of a firm’s relationship 

summary will be required to be maintained in an easily accessible place for at least six years 

after such record or relationship summary is created.  This collection of information will be 

found at 17 CFR 240.17a-4 and will be mandatory.  The Commission staff will use the collection 

of information in its examination and oversight program.  Requiring maintenance of these 

disclosures as part of the broker-dealer’s books and records will facilitate the Commission’s 

ability to inspect for and enforce compliance with firms’ obligations with respect to the 

relationship summary.  The information generally is kept confidential.1432 

The likely respondents to this collection of information requirement are the 

approximately 2,766 broker-dealers that report retail activity, as described above.  We did not 

receive comments related to burdens associated with record retention obligations for broker-

dealers.  We do not expect that broker-dealers will incur external costs for the requirement to 

maintain and preserve a copy of each version of the relationship summary as well as the records 

required to be made pursuant to new paragraph (a)(24) of Exchange Act rule 17a-3 because 

                                                                                                                                                             

1432  See section 24(b) of the Exchange Act. 



 

480 

 

broker-dealers are already required to maintain and retain similar records related to 

communication with retail investors.      

1. Changes in Burden Estimates and New Burden Estimates 

The approved annual aggregate burden for rule 17a-4 is currently 1,042,866 hours, with a 

total annual aggregate monetized cost burden of approximately $67.8 million, based on an 

estimate of 4,104 broker-dealers and 150 broker-dealers maintaining an internal broker-dealer 

system.1433  The currently approved annual reporting and recordkeeping cost estimate to 

respondents is $20,520,000.1434  We estimate that the adopted amendments will result in an 

increase in the collection of information burden estimate by 0.10 hour1435 for each of the 

estimated 2,766 currently registered broker-dealers that report retail sales activity and will have 

relationship summary obligations.1436  The incremental hour burden for broker-dealers will 

                                                                                                                                                             

1433  (4,104 broker-dealers x 254 hours per broker-dealer) + (150 broker-dealers maintaining internal broker-
dealer systems x 3 hours) = (1,042,416 hours + 450 hours) = 1,042,866 hours each year.  The monetized 
cost was based on these functions being performed by a compliance clerk earning an average of $65 per 
hour, resulting in a total internal cost of compliance of (1,042,416 x $65) + (450 x $65) = $67,786.  See 
Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rule 17a-4 
(Oct. 19, 2016), available at https://www.reginfo.gov/public/do/DownloadDocument?objectID=68823501 
(defining an internal broker-dealer system as “any facility that provides a mechanism for collecting, 
receiving, disseminating, or displaying system orders and facilitating agreement to the basic terms of a 
purchase or sale of a security between a customer and the sponsor, but excludes a national securities 
exchange, an exchange exempt from registration based on limited volume, and an alternative trading 
system.”).  

1434  4,104 broker-dealers x $5,000 annual recordkeeping cost per broker-dealer = $20,520,000.   

1435  In the Proposing Release, we applied the same 0.2 hour estimate as with investment advisers, but divided 
that burden equally between the rule 17a-3 requirement to create a record of the dates the relationship 
summary was delivered to current or prospective customers and the rule 17a-4 requirement to maintain 
those records as well as copies of each version of the relationship summary.  As discussed above, we are 
increasing the burden estimates for the recordkeeping requirement from 0.1 hours to 0.5 hours in light of 
certain comments, however, we believe, on balance, that 0.1 hour estimate for the record retention 
requirement is a reasonable estimate for purposes of the PRA analysis. 

1436  See supra footnotes 857-865.481 

 

therefore be 277 hours,1437 for a monetized cost of $19,390 in aggregate, or $7 per broker-

dealer.1438  This will yield an annual estimated aggregate burden of 702,841 hours for all broker-

dealers with relationship summary obligations to comply with paragraph (e)(10) of Exchange 

Act rule 17a-4, as amended,1439 for a monetized cost of approximately $49,198,870.1440  In 

addition, the 998 broker-dealers not subject to the amendments1441 will continue to be subject to 

an unchanged burden of 254 hours per broker-dealer, or 253,492 hours for these broker-

dealers.1442  In addition, those maintaining an internal broker-dealer system will continue to be 

subject to an unchanged burden of 450 hours annually, under paragraph (e)(10) of Exchange Act 

rule 17a-4, as amended.  In summary, taking into account the estimated annual burden of broker-

dealers that will be required to maintain records of the relationship summary, as well the 

estimated annual burden of broker-dealers that do not have relationship summary obligations and 

whose information collection burden is unchanged, the revised annual aggregate burden for all 

broker-dealer respondents to the recordkeeping requirements under rule 17a-4 is estimated to be 

                                                                                                                                                             

1437  2,766 broker-dealers x 0.1 hours annually = 277 annual hours for record retention.  

1438  Consistent with our prior paperwork reduction analyses for rule 17a-4, we expect that performance of this 
function will most likely be performed by compliance clerks.  Data from the SIFMA Office Salaries Report 
suggest that costs for these positions are $70 per hour. 277 hours x $70 = $19,390.  $19,390/ 2,766 broker-
dealers = $7 per broker-dealer.     

1439  2,766 broker-dealers required to prepare relationship summary x (254 hours + 0.1 hour) = 702,841 hours.  

1440  Consistent with our prior paperwork reduction analyses for rule 17a-4, we expect that performance of this 
function will most likely be performed by compliance clerks.  Data from the SIFMA Office Salaries Report 
suggest that costs for these positions are $70 per hour.  702,841 hours x $70 = $49,198,870. 

1441  See supra footnotes 858-863 and accompanying text. 

1442  998 broker-dealers x 254 hours = 253,492 hours for broker-dealers not preparing a relationship summary. 



 

482 

 

956,783 total annual aggregate hours,1443 for a monetized cost of approximately $66,974,810 

million.1444  

2. Revised Annual Burden Estimates 

As noted above, the approved annual aggregate burden for rule 17a-4 is currently 

1,042,866 hours, with a total annual aggregate monetized cost burden of approximately $67.8 

million, based on an estimate of 4,104 broker-dealers and 150 broker-dealers maintaining an 

internal broker-dealer system.  The revised annual aggregate hourly burden for rule 17a-4 will be 

956,7831445 hours, represented by a monetized cost of approximately $66,974,810 million,1446 

based on an estimate of 2,766 broker-dealers with the relationship summary obligation and 998 

broker-dealers without, as noted above.  This represents a decrease of 85,6331447 annual 

aggregate hours in the hour burden and an annual decrease of approximately $811,480 from the 

currently approved total aggregate monetized cost for rule 17a-4.1448  These changes are 

attributable to the amendments to rule 17a-4 relating to the relationship summary as discussed in 

this release and the decline in the number of registered broker-dealer respondents.  The revised 

annual reporting and recordkeeping cost to respondents is estimated at approximately 

                                                                                                                                                             

1443  702,841 + 253,492 + 450 = 956,783 total aggregate hours. 

1444  Consistent with our prior paperwork reduction analyses for rule 17a-4, we expect that performance of this 
function will most likely be performed by compliance clerks.  Data from the SIFMA Office Salaries Report 
suggest that costs for these positions are $70 per hour.  956,783 hours x $70 = $66,974,810. 

1445  See supra footnote 1443.  

1446  See supra footnote 1444.  

1447  1,042,416 hours – 956,783 hours = 85,633 hours. 

1448  $67,786,290 – $66,974,810 = $811,480. 



 

483 

 

$18,820,000, or a reduction of $1,700,000 million from the currently approved annual reporting 

and recordkeeping cost burden of $20,520,000.1449   

VI. FINAL REGULATORY FLEXIBILITY ANALYSIS 

The Commission has prepared the following Final Regulatory Flexibility Analysis 

(“FRFA”) in accordance with section 4(a) of the Regulatory Flexibility Act.1450  It relates to: (i) 

new rule 204-5 under the Advisers Act and amendment to Form ADV (17 CFR 279.1), to add a 

new Part 3: Form CRS (relationship summary); (ii) amendments to rule 203-1 under the Advisers 

Act; (iii) amendments to rule 204-1 under the Advisers Act; (iv) amendments to rule 204-2 under 

the Advisers Act; (v) new rule 17a-14 under the Exchange Act and new Form CRS (17 CFR 

249.640) (relationship summary); and (vi) amendments to rules 17a-3 and 17a-4 under the 

Exchange Act.1451  We prepared an Initial Regulatory Flexibility Analysis (“IRFA”) in the 

Proposing Release.1452 

A. Need for and Objectives of the Amendments 

Broker-dealers, investment advisers, and dually registered firms all provide important 

services for retail investors.  As discussed above in Sections I and IV, research continues to show 

                                                                                                                                                             

1449  3,764 registered broker-dealers as of December 31, 2018 x $5,000 per broker-dealer in record maintenance 
costs = $18,820,000.  $20,520,000 – $18,820,000 = $1,700,000. 

1450  5 U.S.C. 604(a). 

1451  The Commission is also amending 17 CFR 200.800 to display the control number assigned to information 
collection requirements for “Form CRS and rule 17a-14 under the Exchange Act” by OMB pursuant to the 
PRA.  Because the Commission is not publishing the amendments to 17 CFR 200.800 in a notice of 
proposed rulemaking, no analysis is required under the Regulatory Flexibility Act.  (See 5 U.S.C. 601(2) 
(for purposes of  the Regulatory Flexibility Act, the term “rule” means any rule for which the agency 
publishes a general notice of proposed rulemaking).)   

1452  See Proposing Release, supra footnote 5. 



 

484 

 

that retail investors are confused about services, fees, conflicts of interest, and the required 

standard of conduct for particular firms as well as the differences between broker-dealers and 

investment advisers.  Lack of knowledge about important aspects of the market for financial 

advice, such as the services, fees, conflicts of interest, and the required standard of conduct for 

particular firms may harm retail investors by deterring them from seeking brokerage or 

investment advisory services even if they could potentially benefit from them, or by increasing 

the risk of a mismatch between the investors’ preferences and expectations and the actual 

brokerage or advisory services they receive.  Therefore, it is important to reduce retail investor 

confusion in the marketplace for brokerage and investment advisory services and to assist retail 

investors with the process of deciding whether to (i) establish an investment advisory or 

brokerage relationship, (ii) engage a particular firm or financial professional, or (iii) terminate or 

switch a relationship or specific service.  Moreover, it is important to ensure that retail investors 

receive the information they need to clearly understand the relationships and services a firm 

offers, as well as the fees, costs, conflicts, standard of conduct, and disciplinary history of firms 

and financial professionals they are considering, and where to find additional information, to 

ameliorate this potential harm.   

As discussed above in Section I above, the Commission considered ways to address retail 

investor confusion and engaged in broad outreach to investors and other market participants to 

solicit feedback on the proposal, including comment letters, a “feedback form,” investor 

roundtables, and RAND investor testing.   

After carefully considering the comments we received, we are adopting disclosure 

requirements that are designed to ameliorate the potential harm of retail investor confusion and 

to assist retail investors with the process of deciding whether to (i) establish an investment 



 

485 

 

advisory or brokerage relationship, (ii) engage a particular firm or financial professional, or (iii) 

terminate or switch a relationship or specific service. 

As discussed in Section II above, we are adopting new rules and rule amendments to 

require broker-dealers and investment advisers to deliver a relationship summary to retail 

investors.  The relationship summary will be short with narrative information presented in a 

prescribed order with the following sections: (i) introduction; (ii) relationships and services; (iii) 

fees, costs, conflicts, and standard of conduct; (iv) disciplinary history; and (v) where to find 

additional information.  As discussed in Section II.C.3.c above, the relationship summary will be 

in addition to, and not in lieu of, current disclosure and reporting requirements for broker-dealers 

and investment advisers.  

To promote effective communication, firms will be required to write their relationship 

summary in plain English and they are encouraged to use charts, graphs, tables, and other 

graphics or text features to respond to the required disclosures.  We are limiting the length of the 

relationship summary to keep the disclosures focused.1453  The purpose of the relationship 

summary is to summarize information about a particular broker-dealer or investment adviser in a 

format that allows for comparability among firms, encourages retail investors to ask questions, 

and highlights additional sources of information.   

                                                                                                                                                             

1453  Specifically, the relationship summary for standalone broker-dealers and standalone investment advisers 
must not exceed two pages in paper format (or equivalent in electronic format).  Dual registrants will have 
the flexibility to decide whether to prepare separate or combined relationship summaries.  For dual 
registrants that prepare combined relationship summaries, they must not exceed four pages in paper format 
(or equivalent in electronic format).   



 

486 

 

As discussed in Section II above, we are adopting filing, delivery, and updating 

requirements for the relationship summary.  We also are adopting amendments to the 

recordkeeping requirements under the Advisers Act rule 204-2 and Exchange Act rules 17a-3 

and 17a-4 to address the new relationship summary.1454 

All of these requirements are discussed in detail in Section II above.  The costs and 

burdens of these requirements on small advisers and small broker-dealers are discussed below as 

well as above in our Economic Analysis and Paperwork Reduction Act Analysis, which discuss 

the costs and burdens on all investment advisers and broker-dealers.1455    

B. Significant Issues Raised by Public Comments  

The Commission is sensitive to the burdens that the new rules and rule amendments may 

have on small entities.  In the Proposing Release, we requested comment on matters discussed in 

the IRFA.  In particular, we sought comments on the number of small entities subject to the new 

relationship summary, and the new rules and rule amendments as well as the potential impacts on 

small entities.  We sought comments on whether the proposal could have an effect on small 

entities that had not been considered.  We also requested that commenters describe the nature of 

any impact on small entities and provide empirical data to support the extent of such impact.   

The Commission did not receive comments specifically addressing the IRFA.  However, 

as discussed in the Economic Analysis and Paperwork Reduction Act Analysis above, we 

                                                                                                                                                             

1454  17 CFR 275.204-2; 17 CFR 240.17a-3; 17 CFR 240.17a-4. 

1455  See supra Sections IV and V.    



 

487 

 

received comments regarding the potential costs and burdens of the proposal on investment 

advisers and broker-dealers, including those that are small entities.1456   

With regard to comment letters addressing small firms in particular, the Commission 

received comment letters concerning the impact of ongoing delivery requirements on small 

firms.1457  As discussed in Sections II.C.3.c and II.C.4, firms must comply with ongoing delivery 

requirements to (i) particular retail investors under certain circumstances1458 and (ii) all retail 

investors who are existing clients or customers when a relationship summary is updated.  The 

commenters appeared to be discussing both types of ongoing delivery requirements.  Specifically, 

a commenter stated that to comply with ongoing delivery requirements, firms would need to 

implement a process that would include additional costs for delivery, especially for small firms 

who are more likely to conduct such delivery in hard copy.1459  Another commenter stated that 

the existing Form ADV brochure delivery requirements and the ongoing delivery requirements 

of the relationship summary would impose unjustifiable administrative burdens on advisers, the 

majority of whom the commenter considers to be small businesses.1460  The commenter defined 

the term “small business” as an investment adviser who has ten or fewer non-clerical 

                                                                                                                                                             

1456  See supra Sections IV.D.2 and V. 

1457  See NSCP Letter; Pickard Djinis and Pisarri Letter. 

1458  As discussed in Section II.C.3.c, firms must deliver the most recent relationship summary to a retail 
investor who is an existing client or customer upon certain triggers.  Also, firms must deliver the 
relationship summary to a retail investor within 30 days upon the retail investor’s request.   

1459  See NSCP Letter. 

1460  See Pickard Djinis and Pisarri Letter. 



 

488 

 

employees.1461  As discussed in Section VI.C.1 below, the definition of small entities for 

purposes of the Advisers Act and the Regulatory Flexibility Act concerns assets under 

management and total assets, not the number of employees.1462  Therefore, we are unable to 

assess whether the businesses the commenter is discussing fall under the definition of small 

entity for purposes of the Advisers Act and the Regulatory Flexibility Act.1463  As discussed in 

Section VI.C.1 below, the new requirements will not affect most investment advisers that are 

small entities because they are generally registered with one or more state securities authorities 

and not with the Commission.     

We agree that the ongoing delivery requirements will impose added costs, as discussed 

above in the Economic Analysis and Paperwork Reduction Act Analysis,1464 but the costs may 

not necessarily be higher for small firms.  To the extent that small firms are more likely to have 

fewer retail investors than larger firms, the ongoing delivery requirements should impose lower 

variable costs on small firms than on larger firms.  Therefore, the ongoing delivery requirements 

should impose lower variable costs on small firms, who have fewer retail investors, than on 

larger firms who have more retail investors.  Also, firms have the flexibility to communicate any 

changes in the relationship summary by either delivering the relationship summary or by 

communicating the information through another disclosure that is delivered to the retail investor, 

                                                                                                                                                             

1461  Id. 

1462  See 17 CFR 275.0-7. 

1463  Id. 

1464  See supra Sections IV and V. 



 

489 

 

which should mitigate the costs to all firms, including small firms.1465  The additional hours per 

investment adviser and broker-dealer, the monetized cost per investment adviser and broker-

dealer, and the incremental external legal and compliance cost for investment advisers and 

broker-dealers, attributable to ongoing delivery requirements are estimated above in the 

Paperwork Reduction Analysis.1466  To the extent that the ongoing delivery requirements impose 

added costs to small investment advisers, we disagree that existing Form ADV brochure delivery 

requirements and the ongoing delivery requirements of the relationship summary would impose 

administrative burdens on small investment advisers that are unjustifiable.  As discussed in 

Section II.C.3.c above, the relationship summary and the existing Form ADV brochure serve 

different purposes.  The relationship summary is designed to provide a high-level overview to 

retail investors while the Form ADV brochure is designed to present more detailed disclosures.     

The Commission is not adopting different ongoing delivery requirements for small 

entities.  For the reasons discussed in Section VI.E below, establishing different compliance or 

reporting requirements for small investment advisers and small broker-dealers will be 

inappropriate under these circumstances.  Moreover, retail investors considering and receiving 

services should receive current information from all firms, not just larger firms, to help them 

make a decision about continuing to receive services and to let them know when there have been 

changes to this information.  They should also understand their available options during certain 

                                                                                                                                                             

1465  See supra Sections II.C.4 and IV.D.2. 

1466  See supra Sections V.C.2 and V.D.2. 



 

490 

 

decision points when firms are required to deliver another relationship summary.1467  

Additionally, it is important and beneficial for retail investors to receive a relationship summary 

within 30 days upon request to ensure that retail investors receive the relationship summary as 

needed.  As a result, we believe that the benefits to retail investors justify the potential cost of 

ongoing delivery.  

C. Small Entities Subject to the Rule and Rule Amendments 

The amendments will affect many, but not all, broker-dealers and investment advisers 

registered with the Commission, including some small entities.   

1. Investment Advisers 

Under Commission rules, for the purposes of the Advisers Act and the Regulatory 

Flexibility Act, an investment adviser generally is a small entity if it:  (i) has assets under 

management having a total value of less than $25 million; (ii) did not have total assets of $5 

million or more on the last day of the most recent fiscal year; and (iii) does not control, is not 

controlled by, and is not under common control with another investment adviser that has assets 

under management of $25 million or more, or any person (other than a natural person) that had 

total assets of $5 million or more on the last day of its most recent fiscal year.1468  As discussed 

in Section V.A.1 above, the Commission estimates that based on IARD data as of December 31, 

                                                                                                                                                             

1467  As discussed in Section II.C.3.c, firms must deliver the most recent relationship summary to a retail 
investor who is an existing client or customer before or at the time the firm: (i) opens a new account that is 
different from the retail investor’s existing account(s); (ii) recommends that the retail investor roll over 
assets from a retirement account into a new or existing account or investment; or (iii) recommends or 
provides a new brokerage or investment advisory service or investment that does not necessarily involve 
the opening of a new account and would not be held in an existing account. 

1468  See 17 CFR 275.0-7.  



 

491 

 

2018, approximately 8,235 investment advisers will be subject to new rule 204-5 under the 

Advisers Act, Form CRS (required by new Part 3 of Form ADV) (the relationship summary), the 

amendments to rules 203-1, 204-1, and rule 204-2 under the Advisers Act.1469  Our new rules and 

amendments will not affect most investment advisers that are small entities (“small advisers”) 

because they are generally registered with one or more state securities authorities and not with 

the Commission.  Under section 203A of the Advisers Act, most small advisers are prohibited 

from registering with the Commission and are regulated by state regulators.1470  Based on IARD 

data, we estimate that as of December 31, 2018, approximately 561 SEC-registered advisers are 

small entities under the Regulatory Flexibility Act.1471  Of these, 183 have individual high net 

worth and individual non-high net worth clients, and will therefore be subject to the new 

requirements under the Advisers Act.1472  

                                                                                                                                                             

1469  See supra footnote 1204 and accompanying text. 

1470  15 U.S.C. 80b-3a. 

1471  Based on SEC-registered investment adviser responses to Items 5.F. and 12 of Form ADV.  

1472  Based on SEC-registered investment adviser responses to Items 5.D.(a)(1), 5.D.(a)(3), 5.D.(b)(1), 
5.D.(b)(2), 5.F. and 12 of Form ADV. These responses indicate that the investment adviser has clients that 
are high net worth individuals and/or individuals (other than high net worth individuals), or that the 
investment adviser has regulatory assets under management attributable to clients that are high net worth 
individuals and/or individuals (other than high net worth individuals), and that the investment adviser is a 
small entity.  Of these small advisers, two are dually registered as a broker-dealer and an investment 
adviser and may offer services to retail investors as both a broker-dealer and an investment adviser (e.g., 
“dual registrants” for purposes of the relationship summary).  See supra footnote 63.  As discussed in 
Section II.C.2, dual registrants must file the relationship summary using both IARD and Web CRD®.  In 
this FRFA, dual registrants are counted in both the total number of small advisers and small broker-dealers 
that would be subject to the new requirements.  We believe that counting these firms twice is appropriate 
because of their additional burdens of complying with the rules with respect to both their advisory and 
brokerage businesses.    



 

492 

 

2. Broker-Dealers 

For purposes of Commission rulemaking in connection with the Regulatory Flexibility 

Act, a broker-dealer will be deemed a small entity if it: (i) had total capital (net worth plus 

subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its 

audited financial statements were prepared pursuant to rule 17a-5(d) under the Exchange Act,1473 

or, if not required to file such statements, had total capital (net worth plus subordinated 

liabilities) of less than $500,000 on the last business day of the preceding fiscal year (or in the 

time that it has been in business, if shorter); and (ii) is not affiliated with any person (other than a 

natural person) that is not a small business or small organization.1474    

As discussed in Section V.D.1 above, the Commission estimates that as of December 31, 

2018, approximately 2,766 broker-dealers will be subject to the new Form CRS (relationship 

summary) requirements and new Exchange Act rule 17a-14, as well as amendments to Exchange 

Act rules 17a-3 and 17a-4.1475  Further, based on FOCUS Report data, the Commission estimates 

that as of December 31, 2018, approximately 985 broker-dealers may be deemed small entities 

under the Regulatory Flexibility Act.  Of these, approximately 756 have retail business, and will 

be subject to the new requirements.1476       

                                                                                                                                                             

1473  17 CFR 240.17a-5(d). 

1474  See 17 CFR 240.0-10(c). 

1475  See supra footnote 1352 and accompanying text. 

1476  See supra footnote 1352 (discussing how we identify retail sales activity from Form BR). 



 

493 

 

D. Projected Reporting, Recordkeeping, and Other Compliance Requirements 

The new requirements impose certain reporting and compliance requirements on certain 

investment advisers and broker-dealers, including those that are small entities, requiring them to 

create and update relationship summaries, and comply with certain filing, delivery, and 

recordkeeping requirements.  The new requirements are summarized in this FRFA (Section VI.A 

above).  All of these requirements are also discussed in detail, in Section II above, and these 

requirements as well as the costs and burdens on investment advisers and broker-dealers, 

including those that are small entities, are discussed above in Sections IV and V (the Economic 

Analysis and Paperwork Reduction Act Analysis) and below.   

1. Initial Preparation and Filing of the Relationship Summary 

Requiring each firm that offers services to retail investors to prepare and file a 

relationship summary will impose additional costs on may firms, including some small advisers 

and small broker-dealers.  Investment advisers must file their relationship summary as Form 

ADV Part 3 (Form CRS) electronically through IARD.  Broker-dealers must file their 

relationship summary as Form CRS electronically through Web CRD®.  All relationship 

summaries must be filed using text-searchable format with machine-readable headings. 

Investment Advisers.  Our Paperwork Reduction Analysis and Economic Analysis discuss 

the costs and burdens of preparing and filing the relationship summary for investment advisers, 

including small advisers.1477  In addition, as discussed in our Paperwork Reduction Analysis, 

above, we anticipate that some advisers may incur a one-time initial cost for external legal and 

                                                                                                                                                             

1477  See supra Sections V.A and IV.D.2. 



 

494 

 

compliance consulting fees in connection with the initial preparation of the relationship 

summary.1478  Generally, all advisers, including small advisers that advise retail investors are 

currently required to prepare and distribute Part 2A of Form ADV (the firm brochure).  Because 

advisers already provide disclosures about their services, fees, costs, conflicts, and disciplinary 

history in their firm brochures,1479 they will be able to use some of this information to respond to 

the disclosure requirements of the relationship summary.  They will, however, have to draft a 

completely new disclosure to comply with the new format of the relationship summary.  As 

discussed above, approximately 183 small advisers currently registered with us will be subject to 

the new requirements.1480  As discussed above in our Paperwork Reduction Act Analysis, the 

new initial preparation and filing requirements will impose an annual burden of approximately 

6.67 annual hours per adviser, or 1,221 annual hours in aggregate for small advisers.1481  We 

therefore expect the annual monetized costs to small advisers associated with these amendments 

to be $1,965 per adviser, or $359,595 in aggregate for small advisers.1482  We expect the 

                                                                                                                                                             

1478  See supra Section V.A.     

1479  See supra footnote 904.  

1480  See supra Section VI.C.1.  

1481  See supra Section V.A.2.  As discussed in the Paperwork Reduction Act Analysis, we expect each 
investment adviser to spend approximately 20 hours preparing and filing the relationship summary, which 
as amortized over three years is approximately 6.67 hours.  6.67 hours per adviser for preparing and filing 
the relationship summary x 183 small advisers = approximately 1,221 hours in aggregate for small advisers.   

1482  See supra Sections V.A.2.  Monetized cost of $1,965 per adviser for the initial preparation and filing of the 
relationship summary x 183 small advisers = $359,595 monetized cost in aggregate for small advisers.  As 
discussed in the Paperwork Reduction Act Analysis, we believe that performance of this function will most 
likely be equally allocated between a senior compliance examiner and a compliance manager. 



 

495 

 

incremental external legal and compliance cost for small advisers to be estimated at $825 per 

adviser, or $150,975 in aggregate for small advisers.1483   

Broker-Dealers.  Our Paperwork Reduction Analysis and Economic Analysis discuss the 

costs and burdens of preparing and filing the relationship summary for broker-dealers, including 

small broker-dealers.1484  In addition, as discussed in our Paperwork Reduction Analysis, above, 

we anticipate that some broker-dealers may incur a one-time initial cost for external legal and 

compliance consulting fees in connection with the initial preparation of the relationship 

summary.1485  As discussed in Sections IV.D.2 and V.D.2, broker-dealers are not currently 

required to deliver to their retail investors a comprehensive written document comparable to 

investment advisers’ Form ADV Part 2A.  Therefore, broker-dealers may incur comparatively 

greater compliance costs than investment advisers.  As discussed above, approximately 756 

small broker-dealers will be subject to the new requirements.1486  As discussed above in our 

Paperwork Reduction Act Analysis, the new initial preparation and filing requirements will 

impose an annual burden of approximately 13.33 annual hours per broker-dealer, or 10,077 

annual hours in aggregate for small broker-dealers.1487  We therefore expect the annual 

                                                                                                                                                             

1483  See supra Section V.A.2.b.  $825 in external legal and compliance costs per adviser x 183 small advisers = 
$150,975 in aggregate for small advisers. 

1484  See supra Sections V.D and IV.D.2. 

1485  See supra Section V.D.   

1486  See supra Section VI.C.2.   

1487  See supra Section V.D.2.  As discussed in the Paperwork Reduction Act Analysis, we expect each broker-
dealer to spend approximately 40 hours preparing and filing the relationship summary, which as amortized 
over three years is approximately 13.33 hours.  13.33 hours per broker-dealer for preparing and filing the 

 



 

496 

 

monetized costs to small broker-dealers associated with these amendments to be $3,640 per 

broker-dealer, or $2,751,840 in aggregate for small broker-dealers.1488  We expect the 

incremental external legal and compliance cost for small broker-dealers to be estimated at $1,032 

per broker-dealer, or $780,192 in aggregate for small broker-dealers.1489    

Costs Generally.  The costs associated with preparing the new relationship summaries 

will be limited for investment advisers and broker-dealers, including small entities, for several 

reasons.  First, the disclosure document is concise, no more than two pages for a standalone 

investment adviser and standalone broker-dealer and four pages for a dual registrant in length or 

equivalent limit if in electronic format.  Second, although the relationship summary will require 

more narrative responses, the disclosure will still involve some degree of standardization across 

firms, requiring firms to use standardized headings in a prescribed order.  Third, firms will be 

prohibited from including disclosures in the relationship summary other than the disclosure that 

is required or permitted by the Instructions and applicable items.   

The compliance costs could, however, be different across firms with relatively smaller or 

larger numbers of retail investors as customers or clients.  For example, as discussed in Section 

IV.D.2 above, to the extent that developing the relationship summary entails a fixed cost, firms 

                                                                                                                                                             

relationship summary x 756 small broker-dealers = approximately 10,077 hours in aggregate for small 
broker-dealers.   

1488  See supra Section V.D.2.  Monetized cost of $3,640 per broker-dealer for the initial preparation and filing 
of the relationship summary x 756 small broker-dealers = $2,751,840 monetized cost in aggregate for small 
broker-dealers.  As discussed in the Paperwork Reduction Act Analysis, we believe that the performance of 
this function will most likely be equally allocated between a senior compliance examiner and a compliance 
manager. 

1489  See supra Section V.D.2.b.  756 small broker-dealers x $1,032 in external legal and compliance costs on 
average per broker-dealer = $780,192. 



 

497 

 

with fewer retail investors as customers or clients may be at disadvantage relative to firms with 

more retail investors as customers or clients because the former would amortize these costs over 

a smaller retail investor base.  Therefore, to the extent that small firms are more likely to have 

fewer retail investors than larger firms, small firms may be at a disadvantage relative to larger 

firms.  On the other hand, smaller firms are likely to have fewer types of fees, costs, and conflicts 

to report compared to larger firms, potentially making it less burdensome for them to summarize 

the required information.   

As discussed in Section IV.D.2 above, small advisers and small broker-dealers may 

disproportionately incur costs associated with electronic and graphical formatting, particularly if 

they do not have an existing web presence.  However, because the final instructions encourage, 

but do not require electronic and graphical formatting, firms would only bear these costs if they 

expected these features to provide benefits that justify these costs.  Similarly, small advisers and 

small broker dealers may disproportionally incur costs associated with the requirement to file 

their relationship summaries with machine-readable headings and text-searchable format.  

However, costs for firms, including small entities, could be minimal to the extent they implement 

structured headings in PDF formatted documents by creating a bookmark for each of the 

headings.1490 

                                                                                                                                                             

1490  See supra Section II.C.2. 



 

498 

 

2. Delivery and Updating Requirements Related to the Relationship 
Summary 

As discussed in Section II.C above, firms must follow certain delivery and updating 

requirements.  Investment advisers must deliver a relationship summary to each retail investor 

before or at the time the firm enters into an investment advisory contract with the retail investor, 

even if the agreement is oral.  Broker-dealers must deliver a relationship summary to each retail 

investor, before or at the earliest of: (i) a recommendation of an account type, a securities 

transaction, or an investment strategy involving securities; (ii) placing an order for the retail 

investor; or (iii) the opening of a brokerage account for the retail investor.  Dual registrants must 

deliver the relationship summary at the earlier of the delivery requirements for the investment 

adviser or broker-dealer.  

As discussed in Section II.C above, firms must update, file amendments to, and re-deliver 

the relationship summary under certain circumstances.  Specifically, firms must update the 

relationship summary and file it within 30 days whenever any information in the relationship 

summary becomes materially inaccurate.  The filing must include an exhibit highlighting 

changes.  Firms must communicate any changes in the updated relationship summary to retail 

investors who are existing clients or customers within 60 days after the updates are required to be 

made and without charge.1491  Additionally, firms must deliver the relationship summary to a 

                                                                                                                                                             

1491  Firms can make the communication by delivering the amended relationship summary or by communicating 
the information through another disclosure that is delivered to the retail investor. 



 

499 

 

retail investor within 30 days upon the retail investor’s request and re-deliver the relationship 

summary to existing clients and customers under certain circumstances.1492     

As discussed in Sections II.C above, we are adopting requirements concerning electronic 

posting and manner of delivery.  Firms must post the current version of the relationship summary 

prominently on their public website, if they have one.  Firms must include a telephone number 

where retail investors can request up-to-date information and request a copy of the relationship 

summary.  Firms must make a copy of the relationship summary available upon request without 

charge.  If the relationship summary is delivered electronically, it must be presented prominently 

in the electronic medium.  If the relationship summary is delivered in paper format as part of a 

package of documents, firms must ensure that the relationship summary is the first among any 

documents that are delivered at that time.  The additional hours per adviser and broker-dealer, 

the monetized cost per adviser and broker-dealer, and the incremental external legal and 

compliance cost for small entity investment advisers and broker-dealers, attributable to these 

requirements are estimated above in the Paperwork Reduction Analysis.1493    

3. Recordkeeping Requirements Related to the Relationship Summary 

As discussed in Section II.E above, we are adopting amendments to the recordkeeping 

requirements under Advisers Act rule 204-2 and Exchange Act rules 17a-3 and 17a-4 to address 

                                                                                                                                                             

1492  Specifically, firms must deliver the most recent relationship summary to a retail investor who is an existing 
client or customer before or at the time the firm: (i) opens a new account that is different from the retail 
investor’s existing account(s); (ii) recommends that the retail investor roll over assets from a retirement 
account into a new or existing account or investment; or (iii) recommends or provides a new brokerage or 
investment advisory service or investment that does not necessarily involve the opening of a new account 
and would not be held in an existing account. 

1493  See supra Section V. 



 

500 

 

the new relationship summary.1494  The amendments to Advisers Act rule 204-2 will require 

investment advisers who are registered or required to be registered to make and keep true, 

accurate and current, a copy of each relationship summary and each amendment or revision to 

the relationship summary, as well as a record of the dates that each relationship summary, and 

each amendment or revision thereto, was given to any client or to any prospective client who 

subsequently becomes a client.  Investment advisers must maintain and preserve their respective 

records in an easily accessible place for a period of not less than five years from the end of the 

fiscal year during which the last entry was made on such record, the first two years in an 

appropriate office of the investment adviser.1495  The amendments to Exchange Act rule 17a-3 

will require broker-dealers to make and keep current a record of the date that each relationship 

summary was provided to each retail investor, including any relationship summary that was 

provided before such retail investor opens an account.  The amendments to Exchange Act rule 

17a-4 will require broker-dealers to maintain and preserve in an easily accessible place all record 

dates described above as well as a copy of each relationship summary until at least six years after 

such record or relationship summary is created.   

These amendments are designed to update recordkeeping rules in light of the new 

relationship summary, and, for investment advisers, they mirror the current recordkeeping 

requirements for the Form ADV brochure and brochure supplement.1496  As discussed in Section 

                                                                                                                                                             

1494  17 CFR 275.204-2; 17 CFR 240.17a-3; 17 CFR 240.17a-4. 

1495  See 17 CFR 275.204-2(e)(1). 

1496  See 17 CFR 275.204-2(a)(14)(i) and 17 CFR 275.204-2(e)(1).501 

 

II.E above, the recordkeeping requirements will facilitate the Commission’s ability to inspect for 

and enforce compliance with the relationship summary requirements and also may facilitate 

firms’ ability to monitor for compliance with delivery requirements.     

As discussed in the Paperwork Reduction Act Analysis in Section V.B above, the 

amendments to Advisers Act rule 204-2 will impose an annual burden of approximately 0.2 

annual hours per adviser, or 37 annual hours in aggregate for small advisers.1497  We therefore 

expect the annual monetized costs to small advisers associated with these amendments to be $12 

per adviser,1498 or $2,196 in aggregate for small advisers.1499  We do not expect investment 

advisers to incur any external costs with respect to the amendments to Advisers Act rule 204-

2.1500  

As discussed in the Paperwork Reduction Act Analysis in Sections V.E and V.F, the 

amendments to Exchange Act rules 17a-3 and 17a-4 will impose an annual burden of 

approximately 0.6 annual hours per broker-dealer, or 454 annual hours in the aggregate for small 

broker-dealers.1501  We therefore expect the annual monetized cost to small broker-dealers 

                                                                                                                                                             

1497  0.2 hours x 183 small advisers = 37 hours, when rounded up to the nearest hour.   

1498  As discussed in, the Paperwork Reduction Analysis, we believe the performance of this function will most 
likely be allocated between compliance clerks and general clerks, with compliance clerks performing 17% 
of the function and general clerks performing 83% of the function.  See supra Section V.B. 

1499  $12 per adviser x 183 small advisers = approximately $2,196 in aggregate for small advisers. 

1500  See supra Section V.B. 

1501  As discussed in Section V.E, amendments to Exchange Act rule 17a-3 will impose a burden of 
approximately 0.5 annual hours per broker-dealer.  As discussed in Section V.F, amendments to Exchange 
Act rule 17a-4 will impose a burden of approximately 0.1 annual hours per broker-dealer.  Therefore, 
together, amendments to Exchange Act rules 17a-3 and 17a-4 will impose a burden of approximately 0.6 
hours annually.  0.6 hours x 756 small broker-dealers = approximately 454 annual hours in aggregate for 
small broker-dealers.   



 

502 

 

associated with these amendments to be $39 per broker-dealer,1502 or $29,484 in aggregate for 

small broker-dealers.1503  We do not expect broker-dealers to incur any external costs with 

respect to the amendments to Exchange Act rules 17a-3 and 17a-4.1504  

E. Agency Action to Minimize Effect on Small Entities 

The Regulatory Flexibility Act directs the Commission to consider significant 

alternatives that would accomplish the stated objective, while minimizing any significant adverse 

impact on small entities.  We considered the following alternatives for small entities in relation 

to the new requirements: (i) the establishment of differing compliance or reporting requirements 

or timetables that take into account the resources available to small entities; (ii) the clarification, 

consolidation, or simplification of compliance and reporting requirements for small entities; (iii) 

the use of performance rather than design standards; and (iv) an exemption from coverage of the 

new requirements, or any part thereof, for such small entities.1505   

                                                                                                                                                             

1502  $32 per broker dealer for amendments to Exchange Act rule 17a-3 + $7 per broker-dealer for amendments 
to Exchange Act rule 17a-4 = $39 per broker-dealer.  As discussed in the Paperwork Reduction Act 
Analysis, we believe that the performance of the functions associated with the amendments to Exchange 
Act rule 17a-3 will most likely be allocated between compliance clerks and general clerks.  Also as 
discussed in the Paperwork Reduction Act Analysis, we believe that the performance of the functions 
associated with the amendments to Exchange Act rule 17a-4 will be performed by compliance clerks.  See 
supra Sections V.E and V.F.   

1503  $32 per broker dealer for amendments to Exchange Act rule 17a-3 + $7 per broker-dealer for amendments 
to Exchange Act rule 17a-4 = $39 per broker-dealer.  $39 x 756 small broker-dealers = $29,484.  See supra 
Sections V.E and V.F. 

1504  See supra Sections V.E and V.F. 

1505  As discussed in the Economic Analysis in Section IV.D.4, the Commission considered the following 
alternatives as they affect all firms, including small entities: (i) requiring a new, separate disclosure versus 
amending existing disclosure requirements; (ii) alternatives concerning the form and format of the 
relationship summary; (iii) alternatives concerning the disclosures concerning the summary of fees, costs, 
conflicts, and standard of conduct; (iv) alternatives concerning filing and delivery; and (v) alternatives to 
compliance deadlines, including transition provisions.     



 

503 

 

Regarding the first alternative, the Commission believes that establishing different 

compliance or reporting requirements for small advisers and small broker-dealers will be 

inappropriate under these circumstances.  We considered adopting tiered compliance dates so 

that smaller investment advisers and smaller broker-dealers would have had more time to comply.  

This would have been an alternative to the proposal, which did not include such tiered 

compliance.  However, as adopted, instead of providing more time to smaller investment 

advisers and smaller broker-dealers only, we are extending the compliance dates for all firms.  

As discussed in Section II.D above, we believe the final compliance dates provide adequate 

notice and opportunity for all firms to comply with the new requirements. 

Because the protections of the Advisers Act and Exchange Act are intended to apply 

equally to retail investor clients and customers of both large and small firms, it will be 

inconsistent with the purposes of the Advisers Act and the Exchange Act to specify differences 

for small entities under the new requirements.  As discussed above, we believe that the new 

requirements will result in multiple benefits to all retail investors, including alerting retail 

investors to certain information to consider when deciding whether to (i) establish an investment 

advisory or brokerage relationship, (ii) engage a particular firm or financial professional, or (iii) 

terminate or switch a relationship or specific service.1506  In addition, the content of the 

relationship summary will facilitate comparisons across firms.1507  We believe that these benefits 

should apply to retail investors that engage smaller firms as well as retail investors that engage 

                                                                                                                                                             

1506  See supra Sections IV and VI.A. 

1507  See supra Sections I and IV.  



 

504 

 

larger firms.  To establish different disclosure requirements for small entities will diminish this 

investor protection for clients and customers of small entities.   

As discussed above in Section II.C above, we are requiring that investment advisers and 

broker-dealers file their relationship summaries with the Commission.1508  As discussed in 

Section II.C.2, there are several reasons we are requiring the relationship summaries to be filed 

with the Commission.  First, the public will benefit by being able to use a central location to find 

any firm’s relationship summary,1509 which may facilitate simpler comparisons across firms.  

Second, some firms may not maintain a website, and therefore their relationship summaries will 

not otherwise be accessible to the public.  Third, by having firms file the relationship summaries 

with the Commission, Commission staff can more easily monitor the filings for compliance.  

These benefits of filing are important for retail investors who are clients and customers of both 

large and small firms.  Furthermore, almost all advisers, including small advisers, have Internet 

access and use the Internet for various purposes so using the Internet to file electronically should 

not increase costs for those advisers.1510  All relationship summaries must be filed using a text-

searchable format with machine-readable headings.  There are several reasons we are requiring 

                                                                                                                                                             

1508  Investment advisers must file their relationship summaries with the Commission electronically through 
IARD in the same manner as they currently file Form ADV Parts 1 and 2.  Broker-dealers must file their 
relationship summaries with the Commission electronically through Web CRD®.  Dual registrants must file 
the relationship summary using both IARD and Web CRD®. 

1509  The filed relationship summaries will be accessible through the Commission’s investor education website 
Investor.gov.  See supra footnote 661 and accompanying text. 

1510  Electronic Filing by Investment Advisers; Proposed Amendments to Form ADV, Investment Advisers Act 
Release No. 1862 (Apr. 5, 2000) [65 FR 20524 (Apr. 17, 2000)], at n.304 and accompanying text.  
However, an adviser that is a small business may be eligible for a continuing hardship exemption for Form 
ADV filings, which includes the relationship summary, if it can demonstrate that filing electronically 
would impose an undue hardship.  See General Instruction 17 to Form ADV. 



 

505 

 

firms to file their relationship summaries with machine-readable headings and text-searchable 

format, including that this formatting will facilitate the aggregation and comparison of responses 

to specific items across different relationship summaries and is consistent with the Commission’s 

ongoing efforts to modernize our forms by taking advantage of technological advances, both in 

the manner in which information is reported to the Commission and how it is provided to 

investors and other users, as discussed above.1511  These benefits are important for filings by all 

firms and would be significantly reduced by allowing different requirements for small entities.  

Costs for firms, including small entities, could be minimal to the extent they implement 

structured headings in PDF formatted documents by creating a bookmark for each of the 

headings.1512   

The requirement for investment advisers and broker-dealers to post their relationship 

summary on their public websites, if they have a public website, in a location and format that is 

easily accessible for retail investors, already incorporates the flexibility to permit different 

compliance and reporting requirements for small entities, if applicable.  To the extent that 

broker-dealers and investment advisers that are small entities are less likely to have public 

websites and do not have them, they will not be required to post the relationship summary on 

their websites.1513  In other ways, as well, the requirements incorporate flexibility for small 

broker-dealers and small advisers to comply with the requirements.  For instance, we are 

                                                                                                                                                             

1511  See supra Section II.C.2. 

1512  See supra Section II.C.2. 

1513  Firms must provide a telephone number in their relationship summary that retail investors can call to obtain 
up-to-date information and request a copy of the relationship summary.  See supra Section II.B.5.  



 

506 

 

requiring firms to communicate the information in an updated relationship summary to retail 

investors who are existing clients or customers within 60 days after the updates are required to be 

made and without charge.1514  Firms can communicate this information by delivering the 

amended relationship summary or by communicating the information through another disclosure 

that is delivered to the retail investor.  This requirement provides firms the ability to disclose 

changes without requiring them to duplicate disclosures and incur additional costs.   

We believe it will be inappropriate to establish different recordkeeping requirements for 

small entities, because the recordkeeping requirements will facilitate the Commission’s ability to 

inspect for and enforce compliance with firms’ obligations with respect to the relationship 

summary, which is important for retail investor clients and customers of both large and small 

firms.  Also, the Commission is not adopting different ongoing delivery requirements for small 

entities for the reasons discussed in Section VI.B above.   

Regarding the second alternative, we clarified and simplified certain requirements for all 

entities, as an alternative to the proposal.1515  However, we believe the final requirements are 

clear and that further clarification, consolidation, or simplification of the compliance and 

                                                                                                                                                             

1514  See supra Section II.C.4.  

1515  See supra Sections I and II.  For example, we have clarified re-delivery requirements by replacing the 
proposed standard of “materially change the nature and scope of the relationship” with two more specific 
and easily identifiable triggers that we believe would not implicate the same operational or supervisory 
burdens described by commenters to meet the proposed requirement. As another example, in a change from 
the proposal, we eliminated the proposed requirement that standalone broker-dealers and standalone 
investment advisers include a separate section using prescribed wording that generally describes how the 
services of investment advisers and broker-dealers, respectively, differ from the firm’s services.  Instead, 
we adopted a simpler approach so firms will be required to simply state that free and simple tools are 
available to research firms and financial professionals at Investor.gov/CRS, which also provides 
educational materials about broker-dealers, investment advisers, and investing. 



 

507 

 

reporting requirements separately for small entities is not necessary.  For the same reasons 

discussed above in this section concerning the first alternative, we believe that further clarifying, 

consolidating, or simplifying the requirements only for small entities will be inappropriate under 

these circumstances. 

Regarding the third alternative, we considered using performance rather than design 

standards.  Performance standards would allow for increased flexibility in the methods firms can 

use to achieve the objectives of the requirements.  Design standards would specify the behavior 

or manner of compliance that regulated entities must adopt.  We revised the combination of 

performance and design standards of the requirements, as an alternative to the proposal.1516  The 

Commission believes that the final relationship summary and the related new rules and 

amendments appropriately use a combination of performance and design standards for all firms, 

including those that are small entities.   

The Commission is adopting certain performance standards as an alternative to design 

standards so firms will have some flexibility in how they complete the relationship summary.  

Instead of requiring extensive prescribed language, as proposed, prescribed wording will be 

limited and, instead, firms will complete most of the relationship summary using their own 

words.1517  Although this increases costs to firms, including small firms, as discussed above,1518 

                                                                                                                                                             

1516  See supra Sections I and II.  For example, in the final requirements we require less prescribed wording, and 
provide more flexibility in certain formatting and filing requirements.  See supra Sections II.A.1 
(discussing limited prescribed wording) and II.A.5 (discussing more flexible formatting and filing 
requirements for dual registrants).   

1517  See supra Section II.A.1. 

1518  See supra Sections V.A and V.D. 



 

508 

 

firms will now have the flexibility to create disclosures that are more accurately tailored to their 

business, and therefore more understandable and relevant to retail investors.1519  In addition, we 

are encouraging, but not requiring, firms to use charts, graphs, tables, and other graphics or text 

features to respond to the required disclosures.1520  In an alternative to the proposal, which 

required dual registrants to file a single relationship summary, dual registrants will have the 

flexibility to decide whether to prepare separate or combined relationship summaries.1521  In 

another alternative to the proposal, which required firms to provide a toll-free telephone number 

under certain circumstances, we are not requiring the telephone number to be toll-free.1522  As 

discussed in Section II.B.5 above, firms must include a telephone number where retail investors 

can request up-to-date information and request a copy of the relationship summary.  Although 

we are adopting a requirement to provide a telephone number, we are not requiring the telephone 

number to be toll-free.  If firms, including small firms, do not already have a toll-free telephone 

number, they will not be required to obtain one to comply with the requirements of the 

relationship summary.  Firms will have the flexibility to decide whether the telephone number 

they provide in their relationship summary will be toll-free.  

In conjunction with the performance standards, the Commission is adopting certain 

design standards.  For example, with respect to delivery requirements, as discussed in Section 

II.C.3.c above, in an alternative to the proposal, we replaced a performance standard with a 
                                                                                                                                                             

1519  See supra Section II.A.1. 

1520  See supra Section II.A.3. 

1521  See supra Section II.A.5. 

1522  See supra Section II.B.5. 



 

509 

 

design standard to clarify requirements and reduce operational and supervisory burdens.  

Specifically, we proposed a performance standard that would have required a firm to deliver a 

relationship summary to an existing client or customer when changes are made to the existing 

account that would “materially change the nature and scope of the relationship.”  This 

requirement would have required analysis about facts and circumstances and commenters 

expressed concern that it would impose operational and supervisory burdens.  In response, we 

replaced the standard of “materially change the nature and scope of the relationship” with two, 

more specific and easily identifiable, triggers that we believe would not implicate the same 

operational or supervisory burdens described by commenters to meet the proposed requirement.  

Therefore, the final requirements set forth specific triggers that require re-delivery of the 

relationship summary in situations that the proposed “material changes” language sought to 

address, but are presented as a design standard rather than a performance standard and, as a result, 

are designed to ease burdens for all firms, including small entities.   

The relationship summary includes design standards to more easily allow for 

comparability among firms.  These requirements specify the headings and sequence of the topics; 

prohibit disclosure other than the disclosure that is required or permitted; limit the length of the 

relationship summary; and require limited prescribed language in certain sections.  The 

Commission considered alternative performance standards such as unlimited page numbers and 

not prohibiting disclosure other than the disclosure that is required or permitted.  However, as 

discussed in Section II.A.1 above, we believe that retail investors will benefit from receiving a 

relationship summary that contains high-level information, with the ability to access more 

detailed information.  We also believe that the relationship summary should present information 

that is responsive and relevant to the topics covered by the final instructions.  We believe that 



 

510 

 

allowing only the mandatory or permissible information will promote consistency of information 

presented to investors, and allow investors to focus on relevant information that is helpful in 

deciding among firms.  We believe that the design standards that we are adopting will provide 

comparative information in a user-friendly format that helps retail investors with informed 

decision making.   

We believe that this approach of using both performance and design standards balances 

the need to provide firms flexibility in making the presentation of information consistent with 

their particular business model while ensuring that all retail investors receive certain information 

in a manner that promotes comparability.  

Regarding the fourth alternative, we believe that, similar to the first alternative, it would 

be inconsistent with the purposes of the Advisers Act and the Exchange Act to exempt small 

advisers and broker-dealers from the new requirements, or any part thereof.  Because the 

protections of the Advisers Act and Exchange Act are intended to apply equally to retail 

investors that are clients and customers of both large and small firms, it would be inconsistent 

with the purposes of the Advisers Act and Exchange Act to specify differences for small entities 

under the final requirements.  As discussed above, we believe that the new requirements will 

result in multiple benefits to all retail investors, including alerting retail investors to certain 

information to consider when deciding whether to (i) establish an investment advisory or 

brokerage relationship, (ii) engage a particular firm or financial professional, or (iii) terminate or 

switch a relationship or specific service.1523  In addition, the content of the relationship summary 

                                                                                                                                                             

1523  See supra Sections IV and VI.A. 



 

511 

 

will facilitate comparisons across firms.1524  We believe that providing this information at the 

prescribed timeframes is appropriate and in the public interest and will improve investor 

protection by helping retail investors to make a more informed choice among the types of firms 

and services available to them.  Because we view investor confusion about brokerage and 

advisory services as an issue for many retail investors who are clients and customers of advisers 

and broker-dealers, it will be inconsistent with the purpose of the relationship summary to 

specify different requirements for small entities.1525 

VII. STATUTORY AUTHORITY 

The Commission is adopting amendments to rule 203-1 under the Advisers Act pursuant 

to authority set forth in sections 203(c)(1), 204, and 211(a) of the Investment Advisers Act of 

1940 [15 U.S.C. 80b-3(c)(1), 80b-4, and 80b-11(a)]. 

The Commission is adopting amendments to rule 204-1 under the Advisers Act pursuant 

to authority set forth in sections 203(c)(1) and 204 of the Investment Advisers Act of 1940 [15 

U.S.C. 80b-3(c)(1) and 80b-4]. 

The Commission is adopting new rule 204-5 under the Advisers Act pursuant to authority 

set forth in sections 204, 206A, 206(4), 211(a), and 211(h) of the Investment Advisers Act of 

1940 [15 U.S.C. 80b-4, 80b-6a, 80b-6(4), 80b-11(a), 80b-11(h)], and section 913(f) of Title IX 

of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank 

Act”).   

                                                                                                                                                             

1524  See supra Sections I and IV.  

1525  See supra Sections I and IV (discussing investor confusion). 



 

512 

 

The Commission is adopting amendments to rule 279.1, Form ADV, under section 19(a) 

of the Securities Act of 1933 [15 U.S.C. 77s(a)], sections 23(a) and 28(e)(2) of the Securities 

Exchange Act of 1934 [15 U.S.C. 78w(a) and 78bb(e)(2)], section 319(a) of the Trust Indenture 

Act of 1939 [15 U.S.C. 7sss(a)], section 38(a) of the Investment Company Act of 1940 [15 

U.S.C. 80a-37(a)], and sections 203(c)(1), 204, 206A, 211(a) and 211(h), and of the Investment 

Advisers Act of 1940 [15 U.S.C. 80b-3(c)(1), 80b-4, 80b-6a, 80b-11(a) and 80b-11(h)], and 

section 913(f) of Title IX of the Dodd-Frank Act.   

The Commission is adopting amendments to rule 204-2 under the Advisers Act pursuant 

to authority set forth in sections 204 and 211 of the Advisers Act [15 U.S.C. 80b-4 and 80b-11].  

The Commission is adopting new rule 17a-14 under the Exchange Act, Form CRS, and 

amendments to rules 17a-3 and 17a-4 under the Exchange Act pursuant to the authority set forth 

in the Exchange Act sections 3, 10, 15, 15(c)(6), 15(l), 17, 23 and 36 thereof 15 U.S.C. 78c, 78j, 

78o, 78o(c)(6), 78o(l), 78q, 78w and 78mm, and section 913(f) of Title IX of the Dodd-Frank 

Act. 

The Commission is adopting amendments to rule 800 under the Organization; Conduct 

and Ethics; and Information and Requests pursuant to the authority set forth in PRA sections 

3506 and 3507 [44 U.S.C. 3506, 3507]. 

TEXT OF THE RULE AND FORM 

List of Subjects in 17 CFR Part 200 

 Administrative practice and procedure, Organization and functions (Government 

agencies). 



 

513 

 

List of Subjects  

17 CFR Parts 240 and 249 

Brokers, Reporting and recordkeeping requirements, Sales practice and disclosure 

requirements, Securities.  

17 CFR Parts 275 and 279  

Investment advisers, Reporting and recordkeeping requirements, Securities. 

For the reasons set out in the preamble, title 17, chapter II of the Code of Federal 

Regulations is amended as follows: 

PART 200 – ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 

REQUESTS  

 

Subpart N – Commission Information Collection Requirements Under the Paperwork 

Reduction Act: OMB Control Numbers  

 
1.  The authority citation for part 200 subpart N continues to read as follows:  

Authority: 44 U.S.C. 3506; 44 U.S.C. 3507.  

2.  In § 200.800, the table in paragraph (b) is amended by adding an entry in numerical order 

by part and section number for “Form CRS” to read as follows:  

 
§200.800 OMB control numbers assigned pursuant to the Paperwork Reduction Act.  

* * * * *  

(b)  *  *  * 

 

 



 

514 

 

Information collection 
requirement 

17 CFR part or section 
where identified and 
described 

Current OMB control No.  

*            * 
 

 
        *         *         * 
 

*            * 

Form CRS 
 
249.640 
 

3235-0766 

*            * 
 
      *         *         * 
 

*            * 

 

PART 240 – GENERAL RULES AND REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

3. The general authority citation for part 240 continues to read as follows and sectional 

authority for 240.17a-14 is added to read as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 

77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 

78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 

80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq.; and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 

18 U.S.C. 1350; and Pub. L. 111-203, 939A, 124 Stat. 1887 (2010); and secs. 503 and 602, Pub. 

L. 112-106, 126 Stat. 326 (2012), unless otherwise noted.  

* * * * * 

Section 240.17a-14 is also issued under Pub. L. 111-203, sec. 913, 124 Stat. 1376 (2010). 

* * * * * 

 4. Section 240.17a-3 is amended by adding paragraph (a)(24) to read as follows: 

§240.17a-3  Records to be made by certain exchange members, brokers and dealers. 

(a) * * * 



 

515 

 

(24) A record of the date that each Form CRS was provided to each retail investor, 

including any Form CRS provided before such retail investor opens an account. 

* * * * * 

 3. Section 240.17a-4 is amended by adding paragraph (e)(10) to read as follows: 

§240.17a-4  Records to be preserved by certain exchange members, brokers and dealers. 

* * * * * 

(e) * * * 

(10) All records required pursuant to §240.17a-3(a)(24), as well as a copy of each Form 

CRS, until at least six years after such record or Form CRS is created. 

* * * * * 

4. Section 240.17a-14 is added to read as follows: 

§240.17a-14   Form CRS, for preparation, filing and delivery of Form CRS. 

(a) Scope of section.  This section shall apply to every broker or dealer registered with the 

Commission pursuant to section 15 of the Act that offers services to a retail investor.   

(b) Form CRS.  You must: 

(1) Prepare Form CRS 17 CFR 249.640, by following the instructions in the form. 

(2) File your current Form CRS electronically with the Commission through the Central 

Registration Depository (“Web CRD®”) operated by the Financial Industry Regulatory 

Authority, Inc., and thereafter, file an amended Form CRS in accordance with the instructions in 

Form CRS. 

(3) Amend your Form CRS as required by the instructions in the form. 

(c) Delivery of Form CRS.  You must: 

(1) Deliver to each retail investor your current Form CRS before or at the earliest of:   



 

516 

 

(i) A recommendation of an account type, a securities transaction; or an investment 

strategy involving securities;  

(ii) Placing an order for the retail investor; or  

(iii) The opening of a brokerage account for the retail investor.    

(2) Deliver to each retail investor who is an existing customer your current Form CRS 

before or at the time you:  

(i) Open a new account that is different from the retail investor’s existing account(s);  

(ii) Recommend that the retail investor roll over assets from a retirement account into a 

new or existing account or investment; or  

(iii) Recommend or provide a new brokerage service or investment that does not 

necessarily involve the opening of a new account and would not be held in an existing account.   

(3) Post the current Form CRS prominently on your public Website, if you have one, in a 

location and format that is easily accessible for retail investors. 

(4) Communicate any changes made to Form CRS to each retail investor who is an 

existing customer within 60 days after the amendments are required to be made and without 

charge.  The communication can be made by delivering the amended Form CRS or by 

communicating the information through another disclosure that is delivered to the retail investor. 

(5) Deliver a current Form CRS to each retail investor within 30 days upon request. 

(d) Other disclosure obligations. Delivering a Form CRS in compliance with this section 

does not relieve you of any other disclosure obligations arising under the federal securities laws 

and regulations or other laws or regulations (including the rules of a self-regulatory 

organization). 

(e) Definitions.  For purposes of this section: 



 

517 

 

(1) Current Form CRS means the most recent version of the Form CRS. 

(2) Retail investor means a natural person, or the legal representative of such natural 

person, who seeks to receive or receives services primarily for personal, family or household 

purposes. 

(f) Transition rule. (1) If you are registered with the Commission prior to June 30, 2020, 

pursuant to Section 15 of the Act, you must file your initial Form CRS with the Commission in 

accordance with section (b)(2) of this section, beginning on May 1, 2020, and by no later than 

June 30, 2020. 

(2) On or after June 30, 2020, if you file an application for registration with the 

Commission or have an application for registration pending with the Commission as a broker or 

dealer pursuant to Section 15 of the Act, you must begin to comply with this section by the date 

on which your registration application becomes effective pursuant to Section 15 of the Act, 

including by filing your Form CRS in accordance with paragraph (b)(2) of this section. 

(3) Within 30 days after the date by which you are first required by paragraph (f) of this 

section to electronically file your initial Form CRS with the Commission, you must deliver to 

each of your existing customers who is a retail investor your current Form CRS. 

(4) As of the date by which you are first required to electronically file your Form CRS 

with the Commission pursuant to this section, you must begin using your Form CRS as required 

to comply with paragraph (c) of this rule. 

PART 249 – FORMS, SECURITIES EXCHANGE ACT OF 1934 

 5. The authority citation for part 249 is amended by revising the general authority 

and adding sectional authority for 249.640 to read as follows: 



 

518 

 

Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 

1350; Sec. 953(b), Pub. L. 111-203, 124 Stat. 1904; Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 

309 (2012); Sec. 107, Pub. L. 112-106, 126 Stat. 313, (2012), and Sec. 72001, Pub. L. 114-94, 

129 Stat. 1312 (2015), unless otherwise noted.  

* * * * * 

 Section 249.640 is also issued under Pub. L. 111-203, sec. 913, 124 Stat. 1376 (2010). 

* * * * * 

6.  Section 249.641 is added to subpart G read as follows: 

§249.641   Form CRS, Relationship Summary for Brokers and Dealers Providing Services 

to Retail Investors, pursuant to §240.17a-14 of this chapter. 

This form shall be prepared and filed by brokers and dealers registered with the Securities 

and Exchange Commission pursuant to Section 15 of the Act that offer services to a retail 

investor pursuant to §240.17a-14 of this chapter. 

PART 275 – RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 

1940 

7. The general authority citation for part 275 continues to read as follows and 

sectional authorities for 275.204-5 and 275.211h-1 are added to read as follows: 

Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-2(a)(17), 80b-3, 80b-4, 

80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless otherwise noted. 

* * * * * 

Section 275.204-5 is also issued under sec. 913, Pub. L. 111-203, sec. 124 Stat. 1827-28 (2010). 

Section 275.211h-1 is also issued under sec. 913, Pub. L. 111-203, sec. 124 Stat. 1827-28 (2010). 

* * * * * 



 

519 

 

8. Amend §275.203-1 by revising paragraph (a) to read as follows: 

§275.203-1   Application for investment adviser registration. 

(a) Form ADV. (1) To apply for registration with the Commission as an investment 

adviser, you must complete Form ADV (17 CFR 279.1) by following the instructions in the form 

and you must file Part 1A of Form ADV, the firm brochure(s) required by Part 2A of Form ADV 

and Form CRS required by Part 3 of Form ADV electronically with the Investment Adviser 

Registration Depository (IARD) unless you have received a hardship exemption under §275.203-

3. You are not required to file with the Commission the brochure supplements required by Part 

2B of Form ADV. 

NOTE 1 TO PARAGRAPH (a)(1): Information on how to file with the IARD is available on 

the Commission's website at http://www.sec.gov/iard. If you are not required to deliver a 

brochure or Form CRS to any clients, you are not required to prepare or file a brochure or Form 

CRS, as applicable, with the Commission. If you are not required to deliver a brochure 

supplement to any clients for any particular supervised person, you are not required to prepare a 

brochure supplement for that supervised person. 

(2)(i) On or after June 30, 2020, the Commission will not accept any initial application 

for registration as an investment adviser that does not include a Form CRS that satisfies the 

requirements of Part 3 of Form ADV. 

(ii) Beginning on May 1, 2020, any initial application for registration as an investment 

adviser filed prior to June 30, 2020, must include a Form CRS that satisfies the requirements of 

Part 3 of Form ADV by no later than June 30, 2020. 

* * * * * 



 

520 

 

 9. Amend  §275.204-1 by revising paragraphs (a) and (b) and adding paragraph (e) 

to read as follows: 

§275.204-1   Amendments to Form ADV. 

(a) When amendment is required. You must amend your Form ADV (17 CFR 279.1):  

(1) Parts 1 and 2: 

(i) At least annually, within 90 days of the end of your fiscal year; and  

(ii) More frequently, if required by the instructions to Form ADV. 

(2) Part 3 at the frequency required by the instructions to Form ADV. 

(b) Electronic filing of amendments. (1) Subject to paragraph (c) of this section, you must 

file all amendments to Part 1A, Part 2A, and Part 3 of Form ADV electronically with the IARD, 

unless you have received a continuing hardship exemption under §275.203-3. You are not 

required to file with the Commission amendments to brochure supplements required by Part 2B 

of Form ADV. 

(2) If you have received a continuing hardship exemption under §275.203-3, you must, 

when you are required to amend your Form ADV, file a completed Part 1A, Part 2A and Part 3 

of Form ADV on paper with the SEC by mailing it to FINRA. 

* * * * * 

(e) Transition to Filing Form CRS. If you are registered with the Commission or have an 

application for registration pending with the Commission prior to June 30, 2020, you must 

amend your Form ADV by electronically filing with IARD your initial Form CRS that satisfies 

the requirements of Part 3 of Form ADV (as amended effective September 30, 2019) beginning 

on May 1, 2020 and by no later than June 30, 2020.521 

 

Note 1 to paragraphs (e): This note applies to paragraphs (a), (b), and (e) of this section. 

Information on how to file with the IARD is available on our Web site at 

http://www.sec.gov/iard. For the annual updating amendment: Summaries of material changes 

that are not included in the adviser's brochure must be filed with the Commission as an exhibit to 

Part 2A in the same electronic file; and if you are not required to prepare a brochure, a summary 

of material changes, an annual updating amendment to your brochure, or Form CRS you are not 

required to file them with the Commission. See the instructions for Part 2A and Part 3 of Form 

ADV. 

* * * * * 

10. Section 275.204-2 is amended by revising paragraph (a)(14)(i) as follows: 

§275.204-2 Books and records to be maintained by investment advisers. 

(a) * * * 

(14)(i) A copy of each brochure, brochure supplement and Form CRS, and each 

amendment or revision to the brochure, brochure supplement and Form CRS, that satisfies the 

requirements of Part 2 or Part 3 of Form ADV, as applicable [17 CFR 279.1]; any summary 

of material changes that satisfies the requirements of Part 2 of Form ADV but is not contained in 

the brochure; and a record of the dates that each brochure, brochure supplement and Form CRS, 

each amendment or revision thereto, and each summary of material changes not contained in a 

brochure given to any client or to any prospective client who subsequently becomes a client. 

* * * * * 

11. Section 275.204-5 is added to read as follows: 



 

522 

 

§275.204-5   Delivery of Form CRS. 

(a) General requirements. If you are registered under the Act as an investment adviser, 

you must deliver Form CRS, required by Part 3 of Form ADV [17 CFR 279.1], to each retail 

investor. 

(b) Delivery requirements. You (or a supervised person acting on your behalf) must: 

(1) Deliver to each retail investor your current Form CRS before or at the time you enter 

into an investment advisory contract with that retail investor.   

(2) Deliver to each retail investor who is an existing client your current Form CRS before 

or at the time you:  

(i) Open a new account that is different from the retail investor’s existing account(s);  

(ii) Recommend that the retail investor roll over assets from a retirement account into a 

new or existing account or investment; or  

(iii) Recommend or provide a new investment advisory service or investment that does 

not necessarily involve the opening of a new account and would not be held in an existing 

account.   

(3) Post the current Form CRS prominently on your website, if you have one, in a 

location and format that is easily accessible for retail investors. 

(4) Communicate any changes made to Form CRS to each retail investor who is an 

existing client within 60 days after the amendments are required to be made and without charge.  

The communication can be made by delivering the amended Form CRS or by communicating the 

information through another disclosure that is delivered to the retail investor. 

(5) Deliver a current Form CRS to each retail investor within 30 days upon request. 



 

523 

 

(c) Other disclosure obligations. Delivering Form CRS in compliance with this section 

does not relieve you of any other disclosure obligations you have to your retail investors under 

any Federal or State laws or regulations. 

(d) Definitions. For purposes of this section: 

(1) Current Form CRS means the most recent version of the Form CRS. 

(2) Retail investor means a natural person, or the legal representative of such natural 

person, who seeks to receive or receives services primarily for personal, family or household 

purposes. 

(3) Supervised person means any of your officers, partners or directors (or other persons 

occupying a similar status or performing similar functions) or employees, or any other person 

who provides investment advice on your behalf. 

(e) Transition rule. (1) Within 30 days after the date by which you are first required by 

§275.204-1(b)(3) to electronically file your Form CRS with the Commission, you must deliver to 

each of your existing clients who is a retail investor your current Form CRS as required by Part 3 

of Form ADV.  

(2) As of the date by which you are first required to electronically file your Form CRS 

with the Commission, you must begin using your Form CRS as required by Part 3 of Form ADV 

to comply with the requirements of paragraph (b) of this section.  

PART 279 – FORMS PRESCRIBED UNDER THE INVESTMENT ADVISERS 

ACT OF 1940  

12. The authority citation for part 279 is revised to read as follows:  

Authority: The Investment Advisers Act of 1940, 15 U.S.C. 80b-1, et seq., Pub. L. 111-

203, 124 Stat. 1376.   



 

524 

 

Note: The following amendment does not appear in the Code of Federal Regulations. 

13. Form ADV [referenced in §279.1] is amended by:  

a. In the instructions to the form, revising the section entitled “Form ADV: General 

Instructions.” The revised version of Form ADV: General Instructions is attached as Appendix 

A;  

b. In the instructions to the form, adding the section entitled “Form ADV, Part 3: 

Instructions to Form CRS.” The new version of Form ADV, Part 3: Instructions to Form CRS is 

attached as Appendix B. 

Dated:  June 5, 2019 

By the Commission. 

 

Vanessa A. Countryman 

Acting Secretary 

 

 Note: The appendices will not appear in the Code of Federal Regulations. 

 

APPENDICES 

 

 



SEC 1707 ([06]-19)  File 1 of 5  

 

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APPENDIX A 
 
FORM ADV (Paper Version) 

• UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION 
     AND 

• REPORT FORM BY EXEMPT REPORTING ADVISERS 
  
Form ADV:  General Instructions 
 
Read these instructions carefully before filing Form ADV.  Failure to follow these instructions, 
properly complete the form, or pay all required fees may result in your application or report 
being delayed or rejected. 
 
In these instructions and in Form ADV, “you” means the investment adviser (i.e., the advisory 
firm).   
 
If you are a “separately identifiable department or division” (SID) of a bank, “you” means the 
SID, rather than your bank, unless the instructions or the form provide otherwise.   
 
If you are a private fund adviser filing an umbrella registration, “you” means the filing adviser 
and each relying adviser, unless the instructions or the form provide otherwise.  The information 
in Items 1, 2, 3 and 10 (including corresponding schedules) should be provided for the filing 
adviser only.   
 
Terms that appear in italics are defined in the Glossary of Terms to Form ADV. 
 
1. Where can I get more information on Form ADV, electronic filing, and the IARD? 
 

The SEC provides information about its rules and the Advisers Act on its website:  
<http://www.sec.gov/iard>. 
 
NASAA provides information about state investment adviser laws and state rules, and how to 
contact a state securities authority, on its website:  <http://www.nasaa.org>. 
 
FINRA provides information about the IARD and electronic filing on the IARD website:  
<http://www.iard.com>. 

 
2. What is Form ADV used for? 
 
Investment advisers use Form ADV to: 
 

• Register with the Securities and Exchange Commission 
• Register with one or more state securities authorities 



 

2 

 

• Amend those registrations; 
 

• Report to the SEC as an exempt reporting adviser 
• Report to one or more state securities authorities as an exempt reporting adviser 
• Amend those reports; and 
• Submit a final report as an exempt reporting adviser 

 
3. How is Form ADV organized? 
 
Form ADV contains five parts: 
 

• Part 1A asks a number of questions about you, your business practices, the persons who 
own and control you, and the persons who provide investment advice on your behalf. 
o All advisers registering with the SEC or any of the state securities authorities must 

complete Part 1A. 
o Exempt reporting advisers (that are not also registering with any state securities 

authority) must complete only the following Items of Part 1A:  1, 2, 3, 6, 7, 10, and 
11, as well as corresponding schedules.  Exempt reporting advisers that are 
registering with any state securities authority must complete all of Form ADV. 

 Part 1A also contains several supplemental schedules.  The items of Part 1A let you know 
 which schedules you must complete. 

o Schedule A asks for information about your direct owners and executive officers. 
o Schedule B asks for information about your indirect owners. 
o Schedule C is used by paper filers to update the information required by Schedules A 

and B (see Instruction 18). 
o Schedule D asks for additional information for certain items in Part 1A. 
o Schedule R asks for additional information about relying advisers. 
o Disclosure Reporting Pages (or DRPs) are schedules that ask for details about 

disciplinary events involving you or your advisory affiliates. 
 

• Part 1B asks additional questions required by state securities authorities.  Part 1B 
contains three additional DRPs.  If you are applying for SEC registration or are registered 
only with the SEC, you do not have to complete Part 1B.  (If you are filing electronically 
and you do not have to complete Part 1B, you will not see Part 1B). 

 
• Part 2A requires advisers to create narrative brochures containing information about the 

advisory firm.  The requirements in Part 2A apply to all investment advisers registered 
with or applying for registration with the SEC, but do not apply to exempt reporting 
advisers.  Every application for registration must include a narrative brochure prepared in 
accordance with the requirements of Part 2A of Form ADV.  See Advisers Act Rule 203-
1.   

 
• Part 2B requires advisers to create brochure supplements containing information about 

certain supervised persons.  The requirements in Part 2B apply to all investment advisers 



 

3 

 

registered with or applying for registration with the SEC, but do not apply to exempt 
reporting advisers. 

 
• Part 3 requires advisers to create relationship summary (Form CRS) containing 

information for retail investors.  The requirements in Part 3 apply to all investment 
advisers registered or applying for registration with the SEC, but do not apply to exempt 
reporting advisers.  Every adviser that has retail investors to whom it must deliver a 
relationship summary must include in the application for registration a relationship 
summary prepared in accordance with the requirements of Part 3 of Form ADV.  See 
Advisers Act Rule 203-1. 

 
4. When am I required to update my Form ADV? 
 

• SEC- and State-Registered Advisers: 
 

o Annual updating amendments:  You must amend your Form ADV each year by filing 
an annual updating amendment within 90 days after the end of your fiscal year.  
When you submit your annual updating amendment, you must update your responses 
to all items in Part 1A, 1B, 2A and 2B (as applicable), including corresponding 
sections of Schedules A, B, C, and D and all sections of Schedule R for each relying 
adviser.  You must submit your summary of material changes required by Item 2 of 
Part 2A either in the brochure (cover page or the page immediately thereafter) or as 
an exhibit to your brochure.  You may, but are not required, to submit amended 
versions of the relationship summary required by Part 3 as part of your annual 
updating amendment. 

           
o Other-than-annual amendments:  In addition to your annual updating amendment, 

 
 If you are registered with the SEC or a state securities authority, you must 

amend Part 1A, 1B, 2A and 2B (as applicable) of your Form ADV, including 
corresponding sections of Schedules A, B, C, D, and R, by filing additional 
amendments (other-than-annual amendments) promptly, if: 

 
o you are adding or removing a relying adviser as part of your umbrella 

registration; 
 

o information you provided in response to Items 1 (except 1.O. and Section 
1.F. of Schedule D), 3, 9 (except 9.A.(2), 9.B.(2), 9.E., and 9.F.), or 11 of 
Part 1A or Items 1, 2.A. through 2.F., or 2.I. of Part 1B or Sections 1 or 3 
of Schedule R becomes inaccurate in any way; 

 
o information you provided in response to Items 4, 8, or 10 of Part 1A, or 

Item 2.G. of Part 1B, or Section 10 of Schedule R becomes materially 
inaccurate; or 

 



 

4 

 

o information you provided in your brochure becomes materially inaccurate 
(see note below for exceptions). 

 
Notes:  Part 1:  If you are submitting an other-than-annual amendment, you are not 

required to update your responses to Items 2, 5, 6, 7, 9.A.(2), 9.B.(2), 9.E., 
9.F., or 12 of Part 1A, Items 2.H. or 2.J. of Part 1B, Section 1.F. of Schedule 
D or Section 2 of Schedule R even if your responses to those items have 
become inaccurate. 

 
Part 2:  You must amend your brochure supplements (see Form ADV, Part 
2B) promptly if any information in them becomes materially inaccurate.  If 
you are submitting an other-than-annual amendment to your brochure, you are 
not required to update your summary of material changes as required by Item 
2.  You are not required to update your brochure between annual amendments 
solely because the amount of client assets you manage has changed or because 
your fee schedule has changed.  However, if you are updating your brochure 
for a separate reason in between annual amendments, and the amount of client 
assets you manage listed in response to Item 4.E. or your fee schedule listed in 
response to Item 5.A. has  become materially inaccurate, you should update 
that item(s) as part of the interim amendment.     

 
• If you are an SEC-registered adviser, you are required to file your 

brochure amendments electronically through IARD.  You are not 
required to file amendments to your brochure supplements with the 
SEC, but you must maintain a copy of them in your files. 

 
• If you are a state-registered adviser, you are required to file your 

brochure amendments and brochure supplement amendments with the 
appropriate state securities authorities through IARD. 

 
Part 3:  If you are registered with the SEC, you must amend Part 3 of your 
Form ADV within 30 days whenever any information in your relationship 
summary becomes materially inaccurate by filing with the SEC an additional 
other-than-annual amendment or by including the relationship summary as 
part of an annual updating amendment.  You must include an exhibit 
highlighting the most recent changes required by Form ADV, Part 3 (Form 
CRS), General Instruction 8.C. 

 
• Exempt reporting advisers: 

 
o Annual Updating Amendments:  You must amend your Form ADV each year by 

filing an annual updating amendment within 90 days after the end of your fiscal year.  
When you submit your annual updating amendment, you must update your responses 
to all required items, including corresponding sections of Schedules A, B, C, and D. 

 



 

5 

 

o Other-than-Annual Amendments:  In addition to your annual updating amendment, 
you must amend your Form ADV, including corresponding sections of Schedules A, 
B, C, and D, by filing additional amendments (other-than-annual amendments) 
promptly if: 

 
 information you provided in response to Items 1 (except Item 1.O. and Section 

1.F. of Schedule D), 3, or 11 becomes inaccurate in any way; or 
 

 information you provided in response to Item 10 becomes materially 
inaccurate. 

 
Failure to update your Form ADV, as required by this instruction, is a violation of SEC 
rules or similar state rules and could lead to your registration being revoked. 

 
5. What is SEC umbrella registration and how can I satisfy the requirements of filing 
 an umbrella registration?  
 

An umbrella registration is a single registration by a filing adviser and one or more relying 
advisers who advise only private funds and certain separately managed account clients that 
are qualified clients and collectively conduct a single advisory business.  Absent other facts 
suggesting that the filing adviser and relying adviser(s) conduct different businesses, 
umbrella registration is available under the following circumstances: 

 
i. The filing adviser and each relying adviser advise only private funds and clients in 
 separately managed accounts that are qualified clients and are otherwise eligible to invest 
 in the private funds advised by the filing adviser or a relying adviser and whose accounts 
 pursue investment objectives and strategies that are substantially similar or otherwise 
 related to those private funds. 
 
ii. The filing adviser has its principal office and place of business in the United States and, 
 therefore, all of the substantive provisions of the Advisers Act and the rules thereunder 
 apply to the filing adviser's and each relying adviser's dealings with each of its clients, 
 regardless of whether any client of the filing adviser or relying adviser providing the 
 advice is a United States person. 
 
iii. Each relying adviser, its employees and the persons acting on its behalf are subject to the 
 filing adviser’s supervision and control and, therefore, each relying adviser, its employees 
 and the persons acting on its behalf are “persons associated with” the filing adviser (as 
 defined in section 202(a)(17) of the Advisers Act). 
 
iv. The advisory activities of each relying adviser are subject to the Advisers Act and the 
 rules thereunder, and each relying adviser is subject to examination by the SEC. 
 
v. The filing adviser and each relying adviser operate under a single code of ethics adopted 
 in accordance with SEC rule 204A-1 and a single set of written policies and procedures 



 

6 

 

 adopted and implemented in accordance with SEC rule 206(4)-7 and administered by a 
 single chief compliance officer in accordance with that rule. 

 
To satisfy the requirements of Form ADV while using umbrella registration the filing 
adviser must sign, file, and update as required, a single Form ADV (Parts 1 and 2) that 
relates to, and includes all information concerning, the filing adviser and each relying adviser 
(e.g., disciplinary information and ownership information), and must include this same 
information in any other reports or filings it must make under the Advisers Act or the rules 
thereunder (e.g., Form PF).  The filing adviser and each relying adviser must not be 
prohibited from registering with the SEC by section 203A of the Advisers Act (i.e., the filing 
adviser and each relying adviser must individually qualify for SEC registration). 
 
Unless otherwise specified, references to “you” in Form ADV refer to both the filing adviser 
and each relying adviser.  The information in Items 1, 2, 3 and 10 (including corresponding 
schedules) should be provided for the filing adviser only.  A separate Schedule R should be 
completed for each relying adviser.  References to “you” in Schedule R refer to the relying 
adviser only. 
 
A filing adviser applying for registration with the SEC should complete a Schedule R for 
each relying adviser.  If you are a filing adviser registered with the SEC and would like to 
add or delete relying advisers from an umbrella registration, you should file an other-than-
annual amendment and add or delete Schedule Rs as needed. 
 
Note:  Umbrella registration is not available to exempt reporting advisers. 

 
6. Where do I sign my Form ADV application or amendment? 
 

You must sign the appropriate Execution Page.  There are three Execution Pages at the end 
of the form.  Your initial application, your initial report (in the case of an exempt reporting 
adviser), and all amendments to Form ADV must include at least one Execution Page. 

 
• If you are applying for or are amending your SEC registration, or if you are reporting as 

an exempt reporting adviser or amending your report, you must sign and submit either a: 
 

o Domestic Investment Adviser Execution Page, if you (the advisory firm) are a 
resident of the United States; or 

o Non-Resident Investment Adviser Execution Page, if you (the advisory firm) are not a 
resident of the United States. 

 
• If you are applying for or are amending your registration with a state securities authority, 

you must sign and submit the State-Registered Investment Adviser Execution Page. 
 
7. Who must sign my Form ADV or amendment? 
 

The individual who signs the form depends upon your form of organization: 
 



 

7 

 

• For a sole proprietorship, the sole proprietor. 
• For a partnership, a general partner. 
• For a corporation, an authorized principal officer. 
• For a “separately identifiable department or division” (SID) of a bank, a principal officer 

of your bank who is directly engaged in the management, direction, or supervision of 
your investment advisory activities. 

• For all others, an authorized individual who participates in managing or directing your 
affairs. 

 
The signature does not have to be notarized, and in the case of an electronic filing, should be 
a typed name.  

 
8. How do I file my Form ADV? 
 

Complete Form ADV electronically using the Investment Adviser Registration Depository 
(IARD) if: 

 
• You are filing with the SEC (and submitting notice filings to any of the state securities 

authorities), or 
 

• You are filing with a state securities authority that requires or permits advisers to submit 
Form ADV through the IARD. 

 
 Note:  SEC rules require advisers that are registered or applying for registration with the 
 SEC, or that are reporting to the SEC as an exempt reporting adviser, to file 
 electronically through the IARD system.  See SEC rules 203-1 and 204-4.  
 

To file electronically, go to the IARD website (<www.iard.com>), which contains detailed 
instructions for advisers to follow when filing through the IARD. 
 
Complete Form ADV (Paper Version) on paper if: 

 
• You are filing with the SEC or a state securities authority that requires electronic filing, 

but you have been granted a continuing hardship exemption.  Hardship exemptions are 
described in Instruction 17. 

 
• You are filing with a state securities authority that permits (but does not require) 

electronic filing and you do not file electronically. 
 
9. How do I get started filing electronically? 
 

First, obtain a copy of the IARD Entitlement Package from the following website:  
<http://www.iard.com/GetStarted.asp>.  Second, request access to the IARD system for your 
firm by completing and submitting the IARD Entitlement Package.  The IARD Entitlement 
Package explains how the form may be submitted.  Mail the forms to:  FINRA Entitlement 
Group, 9509 Key West Avenue, Rockville, MD 20850. 



 

8 

 

 
When FINRA receives your Entitlement Package, they will assign a CRD number 
(identification number for your firm) and a user I.D. code and password (identification 
number and system password for the individual(s) who will submit Form ADV filings for 
your firm).  Your firm may request an I.D. code and password for more than one individual.  
FINRA also will create a financial account for you from which the IARD will deduct filing 
fees and any state fees you are required to pay.  If you already have a CRD account with 
FINRA, it will also serve as your IARD account; a separate account will not be established. 
 
Once you receive your CRD number, user I.D. code and password, and you have funded your 
account, you are ready to file electronically. 
 
Questions regarding the Entitlement Process should be addressed to FINRA at 240.386.4848. 

 
10. If I am applying for registration with the SEC, or amending my SEC registration, 
 how do I make notice filings with the state securities authorities? 
 

If you are applying for registration with the SEC or are amending your SEC registration, one 
or more state securities authorities may require you to provide them with copies of your SEC 
filings.  We call these filings “notice filings.”  Your notice filings will be sent electronically 
to the states that you check on Item 2.C. of Part 1A.  The state securities authorities to which 
you send notice filings may charge fees, which will be deducted from the account you 
establish with FINRA.  To determine which state securities authorities require SEC-
registered advisers to submit notice filings and to pay fees, consult the relevant state 
investment adviser law or state securities authority.  See General Instruction 1. 
 
If you are granted a continuing hardship exemption to file Form ADV on paper, FINRA will 
enter your filing into the IARD and your notice filings will be sent electronically to the state 
securities authorities that you check on Item 2.C. of Part 1A. 

 
11. I am registered with a state.  When must I switch to SEC registration? 
 

If at the time of your annual updating amendment you meet at least one of the requirements 
for SEC registration in Item 2.A.(1) to (12) of Part 1A, you must apply for registration with 
the SEC within 90 days after you file the annual updating amendment.  Once you register 
with the SEC, you are subject to SEC regulation, regardless of whether you remain registered 
with one or more states.  See SEC rule 203A-1(b)(2).  Each of your investment adviser 
representatives, however, may be subject to registration in those states in which the 
representative has a place of business.  See Advisers Act section 203A(b)(1); SEC rule 
203A-3(a).  For additional information, consult the investment adviser laws or the state 
securities authority for the particular state in which you are “doing business.”  See General 
Instruction 1. 

 
12. I am registered with the SEC.  When must I switch to registration with a state 
 securities authority? 
 



 

9 

 

If you check box 13 in Item 2.A. of Part 1A to report on your annual updating amendment 
that you are no longer eligible to register with the SEC, you must withdraw from SEC 
registration within 180 days after the end of your fiscal year by filing Form ADV-W.  See 
SEC rule 203A-1(b)(2).  You should consult state law or the state securities authority for the 
states in which you are “doing business” to determine if you are required to register in these 
states.  See General Instruction 1.  Until you file your Form ADV-W with the SEC, you will 
remain subject to SEC regulation, and you also will be subject to regulation in any states 
where you register.  See SEC rule 203A-1(b)(2). 

 
13. I am an exempt reporting adviser.  When must I submit my first report on Form 
 ADV? 
 

• All exempt reporting advisers: 
You must submit your initial Form ADV filing within 60 days of relying on the 
exemption from registration under either section 203(l) of the Advisers Act as an adviser 
solely to one or more venture capital funds or section 203(m) of the Advisers Act because 
you act solely as an adviser to private funds and have assets under management in the 
United States of less than $150 million. 

 
• Additional instruction for advisers switching from being registered to being exempt 

reporting advisers: 
If you are currently registered as an investment adviser (or have an application for 
registration pending) with the SEC or with a state securities authority, you must file a 
Form ADV-W to withdraw from registration in the jurisdictions where you are switching.  
You must submit the Form ADV-W before submitting your first report as an exempt 
reporting adviser.  

 
14. I am an exempt reporting adviser.  Is it possible that I might be required to also 
 register with or submit a report to a state securities authority? 
 

Yes, you may be required to register with or submit a report to one or more state securities 
authorities.  If you are required to register with one or more state securities authorities, you 
must complete all of Form ADV.  See General Instruction 3.  If you are required to submit a 
report to one or more state securities authorities, check the box(es) in Item 2.C. of Part 1A 
next to the state(s) you would like to receive the report.  Each of your investment adviser 
representatives may also be subject to registration requirements.  For additional information 
about the requirements that may apply to you, consult the investment adviser laws or the 
state securities authority for the particular state in which you are “doing business.”  See 
General Instruction 1.  

 
15. What do I do if I no longer meet the definition of “exempt reporting adviser”? 
 

• Advisers Switching to SEC Registration: 
 

o You may no longer be an exempt reporting adviser and may be required to register 
with the SEC if you wish to continue doing business as an investment adviser.  For 



 

10 

 

example, you may be relying on section 203(l) and wish to accept a client that is not a 
venture capital fund as defined in SEC rule 203(l)-1, or you may have been relying on 
SEC rule 203(m)-1 and reported in Section 2.B. of Schedule D to your annual 
updating amendment that you have private fund assets of $150 million or more. 

 
 If you are relying on section 203(l), unless you qualify for another exemption, 

you would violate the Advisers Act’s registration requirement if you accept a 
client that is not a venture capital fund as defined in SEC rule 203(l)-1 before 
the SEC approves your application for registration.  You must submit your 
final report as an exempt reporting adviser and apply for SEC registration in 
the same filing. 

 
 If you were relying on SEC rule 203(m)-1 and you reported in Section 2.B. of 

Schedule D to your annual updating amendment that you have private fund 
assets of $150 million or more, you must register with the SEC unless you 
qualify for another exemption.  If you have complied with all SEC reporting 
requirements applicable to an exempt reporting adviser as such, you have up 
to 90 days after filing your annual updating amendment to apply for SEC 
registration, and you may continue doing business as a private fund adviser 
during this time.  You must submit your final report as an exempt reporting 
adviser and apply for SEC registration in the same filing.  Unless you qualify 
for another exemption, you would violate the Advisers Act’s registration 
requirement if you accept a client that is not a private fund during this 
transition period before the SEC approves your application for registration, 
and you must comply with all SEC reporting requirements applicable to an 
exempt reporting adviser as such during this 90-day transition period.  If you 
have not complied with all SEC reporting requirements applicable to an 
exempt reporting adviser as such, this 90-day transition period is not available 
to you.  Therefore, if the transition period is not available to you, and you do 
not qualify for another exemption, your application for registration must be 
approved by the SEC before you meet or exceed SEC rule 203(m)-1’s $150 
million asset threshold. 

 
o You will be deemed in compliance with the Form ADV filing and reporting 

requirements until the SEC approves or denies your application.  If your application is 
approved, you will be able to continue business as a registered adviser. 

 
o If you register with the SEC, you may be subject to state notice filing requirements.  

To determine these requirements, consult the investment adviser laws or the state 
securities authority for the particular state in which you are “doing business.”  See 
General Instruction 1. 

 
Note:  If you are relying on SEC rule 203(m)-1 and you accept a client that is not a 
private fund, you will lose the exemption provided by SEC rule 203(m)-1 immediately.  
To avoid this result, you should apply for SEC registration in advance so that the SEC 
has approved your registration before you accept a client that is not a private fund. 



 

11 

 

 
The 90-day transition period described above also applies to investment advisers with 
their principal offices and places of business outside of the United States with respect to 
their clients who are United States persons (e.g., the adviser would not be eligible for the 
90-day transition period if it accepted a client that is a United States person and is not a 
private fund). 

 
• Advisers Not Switching to SEC Registration: 

 
o You may no longer be an exempt reporting adviser but may not be required to 

register with the SEC or may be prohibited from doing so.  For example, you may 
cease to do business as an investment adviser, become eligible for an exemption that 
does not require reporting, or be ineligible for SEC registration.  In this case, you 
must submit a final report as an exempt reporting adviser to update only Item 1 of 
Part 1A of Form ADV. 

 
o You may be subject to state registration requirements.  To determine these 

requirements, consult the investment adviser laws or the state securities authority for 
the particular state in which you are “doing business.”  See General Instruction 1.  

 
16. Are there filing fees? 
 

Yes.  These fees go to support and maintain the IARD.  The IARD filing fees are in addition 
to any registration or other fee that may be required by state law.  You must pay an IARD 
filing fee for your initial application, your initial report, and each annual updating 
amendment.  There is no filing fee for an other-than-annual amendment, a final report as an 
exempt reporting adviser, or Form ADV-W.  The IARD filing fee schedule is published at 
<http://www.sec.gov/iard>; <http://www.nasaa.org>; and <http://www.iard.com>. 
 
If you are submitting a paper filing under a continuing hardship exemption (see Instruction 
17), you are required to pay an additional fee.  The amount of the additional fee depends on 
whether you are filing Form ADV or Form ADV-W.  (There is no additional fee for filings 
made on Form ADV-W.)  The hardship filing fee schedule is available by contacting FINRA 
at 240.386.4848. 

 
17.  What if I am not able to file electronically? 
 

If you are required to file electronically but cannot do so, you may be eligible for one of two 
types of hardship exemptions from the electronic filing requirements. 

 
• A temporary hardship exemption is available if you file electronically, but you 

encounter unexpected difficulties that prevent you from making a timely filing with 
the IARD, such as a computer malfunction or electrical outage.  This exemption does 
not permit you to file on paper; instead it extends the deadline for an electronic filing 
for seven business days.  See SEC rules 203-3(a) and 204-4(e). 

 



 

12 

 

• A continuing hardship exemption may be granted if you are a small business and 
you can demonstrate that filing electronically would impose an undue hardship.  You 
are a small business, and may be eligible for a continuing hardship exemption, if you 
are required to answer Item 12 of Part 1A (because you have assets under 
management of less than $25 million) and you are able to respond “no” to each 
question in Item 12.  See SEC rule 0-7. 

 
If you have been granted a continuing hardship exemption, you must complete and 
submit the paper version of Form ADV to FINRA.  FINRA will enter your responses 
into the IARD.  As discussed in General Instruction 16, FINRA will charge you a fee 
to reimburse it for the expense of data entry. 

 
18. I am eligible to file on paper.  How do I make a paper filing? 
 

When filing on paper, you must: 
 

• Type all of your responses. 
• Include your name (the same name you provide in response to Item 1.A. of Part 1A) and 

the date on every page. 
• If you are amending your Form ADV: 

o complete page 1 and circle the number of any item for which you are changing your 
response. 

o include your SEC 801-number (if you have one), or your 802-number (if you have 
one), and your CRD number (if you have one) on every page. 

o complete the amended item in full and circle the number of the item for which you 
are changing your response. 

o to amend Schedule A or Schedule B, complete and submit Schedule C. 
 

Where you submit your paper filing depends on why you are eligible to file on paper: 
 

• If you are filing on paper because you have been granted a continuing hardship 
exemption, submit one manually signed Form ADV and one copy to:  IARD Document 
Processing, FINRA, P.O. Box 9495, Gaithersburg, MD 20898-9495. 

 
If you complete Form ADV on paper and submit it to FINRA but you do not have a 
continuing hardship exemption, the submission will be returned to you. 

 
• If you are filing on paper because a state in which you are registered or in which you are 

applying for registration allows you to submit paper instead of electronic filings, submit 
one manually signed Form ADV and one copy to the appropriate state securities 
authorities. 

 
19. Who is required to file Form ADV-NR? 
 

Every non-resident general partner and managing agent of all SEC-registered advisers and 
exempt reporting advisers, whether or not the adviser is resident in the United States, must 



 

13 

 

file Form ADV-NR in connection with the adviser’s initial application or report.  A general 
partner or managing agent of an SEC-registered adviser or exempt reporting adviser who 
becomes a non-resident after the adviser’s initial application or report has been submitted 
must file Form ADV-NR within 30 days.  Form ADV-NR must be filed on paper (it cannot 
be filed electronically). 

 
Submit Form ADV-NR to the SEC at the following address: 

 
 Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549;  
 Attn:  OCIE Registrations Branch. 
 

Failure to file Form ADV-NR promptly may delay SEC consideration of your initial 
application. 

 
 

Federal Information Law and Requirements 
 
Sections 203 and 204 of the Advisers Act [15 U.S.C. 80b-3 and 80b-4] authorize the SEC to 
collect the information required by Form ADV.  The SEC collects the information for regulatory 
purposes, such as deciding whether to grant registration.  Filing Form ADV is mandatory for 
advisers who are required to register with the SEC and for exempt reporting advisers.  The SEC 
maintains the information submitted on this form and makes it publicly available.  The SEC may 
return forms that do not include required information.  Intentional misstatements or omissions 
constitute federal criminal violations under 18 U.S.C. 1001 and 15 U.S.C. 80b-17. 
 

SEC’s Collection of Information 
 

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid control number.  The Advisers Act authorizes the 
SEC to collect the information on Form ADV from investment advisers.  See 15 U.S.C. 80b-3 
and 80b-4.  Filing the form is mandatory. 
 
The form enables the SEC to register investment advisers and to obtain information from and 
about exempt reporting advisers.  Every applicant for registration with the SEC as an adviser, 
and every exempt reporting adviser, must file the form.  See 17 CFR 275.203-1 and 204-4.  By 
accepting a form, however, the SEC does not make a finding that it has been completed or 
submitted correctly.  The form is filed annually by every adviser, no later than 90 days after the 
end of its fiscal year, to amend its registration or its report.  It is also filed during the year to 
reflect material changes.  See 17 CFR 275.204-1.  The SEC maintains the information on the 
form and makes it publicly available through the IARD. 
 
Anyone may send the SEC comments on the accuracy of the burden estimate on page 1 of the 
form, as well as suggestions for reducing the burden.  The Office of Management and Budget has 
reviewed this collection of information under 44 U.S.C. 3507. 
  



 

14 

 

The information contained in the form is part of a system of records subject to the Privacy Act of 
1974, as amended.  The SEC has published in the Federal Register the Privacy Act System of 
Records Notice for these records. 
 



 

APPENDIX B 
UNITED STATES1 

SECURITIES AND EXCHANGE COMMISSION 
 

FORM CRS 

Sections 3, 10, 15, 15(c)(6), 15(l), 17, 23, and 36 of the Securities Exchange Act of 1934 (“Exchange Act”) and 
section 913(f) of Title IX of the Dodd-Frank Act authorize the Commission to require the collection of the 
information on Form CRS from brokers and dealers.  See 15 U.S.C. 78c, 78j, 78o, 78o(c)(6), 78o(l), 78q, 78w and 
78mm.  Filing Form CRS is mandatory for every broker or dealer registered with the Commission pursuant to 
section 15 of the Exchange Act that offers services to a retail investor.  See 17 CFR 240.17a-14.  Intentional 
misstatements or omissions constitute federal criminal violations (see 18 U.S.C. 1001 and 15 U.S.C. 78ff(a)).  The 
Commission may use the information provided in Form CRS to manage its regulatory and examination programs.  
Form CRS is made publically available.   
 
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless 
it displays a currently valid control number.  Any member of the public may direct to the Commission any 
comments concerning the accuracy of this burden estimate and any suggestions for reducing this burden.  This 
collection of information has been reviewed by the Office of Management and Budget in accordance with the 
requirements of 44 U.S.C. 3507.  
 
The information contained in the form is part of a system of records subject to the Privacy Act of 1974, as amended.  
The information may be disclosed as outlined above and in the routine uses listed in the applicable system of records 
notice, SEC-70, SEC’s Division of Trading and Markets Records, published in the Federal Register at 83 FR 6892 
(February 15, 2018). 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SEC 2942 (06-19)  

                                                                                                                                                             

1  This cover page will be included for Form CRS (17 CFR 249.640) only. 

OMB APPROVAL 
 
OMB Number:      3235-0766  
Expires:                         [Date]  
Estimated average burden  
hours per response:     [xx.xx] 

 

 



 

2 

 

 [Form ADV, Part 3:  Instructions to Form CRS]2 

General Instructions 

Under rule 17a-14 under the Securities Exchange Act of 1934 and rule 204-5 under the 
Investment Advisers Act of 1940, broker-dealers registered under section 15 of the Exchange 
Act and investment advisers registered under section 203 of the Advisers Act are required to 
deliver to retail investors a relationship summary disclosing certain information about the firm.3  
Read all the General Instructions as well as the particular item requirements before preparing or 
updating the relationship summary. 

If you do not have any retail investors to whom you must deliver a relationship summary, you 
are not required to prepare or file one.  See also Advisers Act rule 204-5; Exchange Act rule 17a-
14(a). 

1. Format.  

A. The relationship summary must include the required items enumerated below.  
The items require you to provide specific information. 

B. You must respond to each item and must provide responses in the same order as 
the items appear in these instructions.  You may not include disclosure in the 
relationship summary other than disclosure that is required or permitted by these 
Instructions and the applicable item.   

C. You must make a copy of the relationship summary available upon request 
without charge.  In paper format, the relationship summary for broker-dealers and 
investment advisers must not exceed two pages.  For dual registrants that include 
their brokerage services and investment advisory services in one relationship 
summary, it must not exceed four pages in paper format.  Dual registrants and 
affiliates that prepare separate relationship summaries are limited to two pages for 
each relationship summary.  See General Instruction 5.  You must use reasonable 
paper size, font size, and margins.  If delivered electronically, the relationship 
summary must not exceed the equivalent of two pages or four pages in paper 
format, as applicable. 

2. Plain English; Fair Disclosure.   

A. The items of the relationship summary are designed to promote effective 
communication between you and retail investors.  Write your relationship 
summary in plain English, taking into consideration retail investors’ level of 

                                                                                                                                                             

2  The bracketed text will be included for Form ADV, Part 3 (17 CFR 279.1) only. 
3  Terms that are italicized in these instructions are defined in General Instruction 11.3 

 

financial experience.  You should include white space and implement other design 
features to make the relationship summary easy to read.  The relationship 
summary should be concise and direct.  Specifically: (i) use short sentences and 
paragraphs; (ii) use definite, concrete, everyday words; (iii) use active voice; (iv) 
avoid legal jargon or highly technical business terms unless you clearly explain 
them; and (v) avoid multiple negatives.  You must write your response to each 
item as if you are speaking to the retail investor, using “you,” “us,” “our firm,” 
etc. 

Note: The SEC’s Office of Investor Education and Advocacy has published A 
Plain English Handbook.  You may find the handbook helpful in writing your 
relationship summary.  For a copy of this handbook, visit the SEC’s website at 
www.sec.gov/news/extra/handbook.htm. 

B. All information in your relationship summary must be true and may not omit any 
material facts necessary in order to make the disclosures required by these 
Instructions and the applicable Item, in light of the circumstances under which 
they were made, not misleading.  If a required disclosure or conversation starter is 
inapplicable to your business or specific wording required by these Instructions is 
inaccurate, you may omit or modify that disclosure or conversation starter.  

C. Responses must be factual and provide balanced descriptions to help retail 
investors evaluate your services.  For example, you may not include exaggerated 
or unsubstantiated claims, vague and imprecise “boilerplate” explanations, or 
disproportionate emphasis on possible investments or activities that are not 
offered to retail investors.   

D. Broker-dealers and investment advisers have disclosure and reporting obligations 
under state and federal laws, including, but not limited to, obligations under the 
Exchange Act, the Advisers Act, and the respective rules thereunder.  Broker-
dealers are also subject to disclosure obligations under the rules of self-regulatory 
organizations.  Delivery of the relationship summary will not necessarily satisfy 
the additional requirements that you have under the federal securities laws and 
regulations or other laws or regulations.  

3. Electronic And Graphical Formats.  

A. You are encouraged to use charts, graphs, tables, and other graphics or text 
features in order to respond to the required disclosures.  You are also encouraged 
to use text features, text colors, and graphical cues, such as dual-column charts, to 
compare services, account characteristics, investments, fees, and conflicts of 
interest.  For a relationship summary that is posted on your website or otherwise 
provided electronically, we encourage online tools that populate information in 
comparison boxes based on investor selections.  You also may include: (i) a 
means of facilitating access to video or audio messages, or other forms of 
information (whether by hyperlink, website address, Quick Response Code (“QR 
code”), or other equivalent methods or technologies); (ii) mouse-over windows; 



 

4 

 

(iii) pop-up boxes; (iv) chat functionality; (v) fee calculators; or (vi) other forms 
of electronic media, communications, or tools designed to enhance a retail 
investor’s understanding of the material in the relationship summary.   

B. In a relationship summary that is posted on your website or otherwise provided 
electronically, you must provide a means of facilitating access to any information 
that is referenced in the relationship summary if the information is available 
online, including, for example, hyperlinks to fee schedules, conflicts disclosures, 
the firm’s narrative brochure required by Part 2A of Form ADV, or other 
regulatory disclosures.  In a relationship summary that is delivered in paper 
format, you may include URL addresses, QR codes, or other means of facilitating 
access to such information. 

C. Explanatory or supplemental information included in the relationship summary 
pursuant to General Instructions 3.A. or 3.B.: (i) must be responsive to and meet 
the requirements in these instructions for the particular Item in which the 
information is placed; and (ii) may not, because of the nature, quantity, or manner 
of presentation, obscure or impede understanding of the information that must be 
included.  When using interactive graphics or tools, you may include instructions 
on their use and interpretation.  

4. Formatting For Conversation Starters, Additional Information, and Standard of 
Conduct. 

A. For the “conversation starters” required by Items 2, 3, 4, and 5 below, you must 
use text features to make the conversation starters more noticeable and prominent 
in relation to other discussion text, for example, by: using larger or different font, 
a text box around the heading or questions; bolded, italicized or underlined text; 
or lines to offset the questions from the other sections.   

B. Investment advisers that provide only automated investment advisory services or 
broker-dealers that provide services only online without a particular individual 
with whom a retail investor can discuss these conversation starters must include a 
section or page on their website that answers each of the questions and must 
provide in the relationship summary a means of facilitating access to that section 
or page.  If you provide automated investment advisory or brokerage services but 
also make a financial professional available to discuss your services with a retail 
investor, a financial professional must be available to discuss these conversation 
starters with the retail investor. 

C. For references to additional information regarding services, fees, and conflicts of 
interest required by Items 2.C., 3.A.(iii), and 3.B.(iv) below, you must use text 
features to make this information more noticeable and prominent in relation to 
other discussion text, for example, by: using larger or different font, a text box 
around the heading or questions, bolded, italicized or underlined text, or lines to 
offset the information from the other sections.  A relationship summary provided 



 

5 

 

electronically must include a hyperlink, QR code, or other means of facilitating 
access that leads directly to the relevant additional information.   

5. Dual Registrants, Affiliates, and Additional Services. 

A. If you are a dual registrant, you are encouraged to prepare a single relationship 
summary discussing both your brokerage and investment advisory services. 
Alternatively, you may prepare two separate relationship summaries for 
brokerage services and investment advisory services. Whether you prepare a 
single relationship summary or two, you must present the brokerage and 
investment advisory information with equal prominence and in a manner that 
clearly distinguishes and facilitates comparison of the two types of services.  If 
you prepare two separate relationship summaries, you must reference and provide 
a means of facilitating access to the other, and you must deliver to each retail 
investor both relationship summaries with equal prominence and at the same 
time, without regard to whether the particular retail investor qualifies for those 
retail services or accounts.     

B. If you are a broker-dealer or investment adviser and your affiliate also provides 
brokerage or investment advisory services to retail investors, you may prepare a 
single relationship summary discussing the services you and your affiliate 
provide. Alternatively, you may prepare separate relationship summaries for your 
services and your affiliate’s services.   

(i) Whether you prepare a single relationship summary or separate 
relationship summaries, you must design them in a manner that presents 
the brokerage and investment advisory information with equal prominence 
and clearly distinguishes and facilitates comparison of the two types of 
services.   

(ii) If you prepare separate relationship summaries: 

a. If a dually licensed financial professional provides brokerage and 
investment advisory services on behalf of you and your affiliate, 
you must deliver to each retail investor both your and your 
affiliate’s relationship summaries with equal prominence and at 
the same time, without regard to whether the particular retail 
investor qualifies for those retail services or accounts.  Each of the 
relationship summaries must reference and provide a means of 
facilitating access to the other.  

b. If General Instruction 5.B.(ii)(a) does not apply, you may choose 
whether or not to reference and provide a means of facilitating 
access to your affiliate’s relationship summary and whether or not 
to deliver your and your affiliate’s relationship summaries to each 
retail investor with equal prominence and at the same time. 



 

6 

 

C. You may acknowledge other financial services that you provide in addition to 
your services as a broker-dealer or investment adviser registered with the SEC, 
such as insurance, banking, or retirement services, or investment advice pursuant 
to state registration or licensing.  You may include references and means of 
facilitating access to additional information about those services.  Information not 
pertaining to brokerage or investment advisory services may not, because of the 
nature, quantity, or manner of presentation, obscure or impede understanding of 
the information that must be included.  See also General Instruction 3.C. 

6. Preserving Records. 

A. You must maintain records in accordance with Advisers Act rule 204-2(a)(14)(i) 
and/or Exchange Act rule 17a-4(e)(10), as applicable.   

7. Initial Filing and Delivery; Transition Provisions.  

A. Initial filing.  

(i) If you are an investment adviser and are required to deliver a relationship 
summary to a retail investor, you must file Form ADV, Part 3 (Form CRS) 
electronically with the Investment Adviser Registration Depository 
(IARD).  If you are a registered broker-dealer and are required to deliver a 
relationship summary to a retail investor, you must file Form CRS 
electronically through the Central Registration Depository (“Web 
CRD®”) operated by the Financial Industry Regulatory Authority, Inc. 
(FINRA).  If you are a dual registrant and are required to deliver a 
relationship summary to one or more retail investor clients or customers 
of both your investment advisory and brokerage businesses, you must file 
using IARD and Web CRD®.  You must file Form CRS using a text-
searchable format with machine-readable headings.  

(ii) Information for investment advisers on how to file with IARD is available 
on the SEC’s website at www.sec.gov/iard.  Information for broker-
dealers on how to file through Web CRD® is available on FINRA’s 
website at http://www.finra.org/industry/web-crd/web-crd-system-links.  

B. Initial delivery.   

(i) Investment Advisers:  If you are an investment adviser, you must deliver a 
relationship summary to each retail investor before or at the time you 
enter into an investment advisory contract with the retail investor.  You 
must deliver the relationship summary even if your agreement with the 
retail investor is oral.  See Advisers Act rule 204-5(b)(1).  

(ii) Broker-Dealers:  If you are a broker-dealer, you must deliver a 
relationship summary to each retail investor, before or at the earliest of:  
(i) a recommendation of an account type, a securities transaction, or an 
investment strategy involving securities; (ii) placing an order for the retail 



 

7 

 

investor; or (iii) the opening of a brokerage account for the retail investor.  
See Exchange Act rule 17a-14(c)(1).   

(iii) Dual Registrants:  A dual registrant must deliver the relationship 
summary at the earlier of the timing requirements in General Instruction 
7.B.(i) or (ii). 

C. Transition provisions for initial filing and delivery after the effective date of 
the new Form CRS requirements.   

(i) Filings for Investment Advisers  

a. If you are already registered or have an application for registration 
pending with the SEC as an investment adviser before June 30, 
2020 you must electronically file, in accordance with Instruction 
7.A. above, your initial relationship summary beginning on May 1, 
2020 and by no later than June 30, 2020 either as: (1) an other-
than-annual amendment or (2) part of your initial application or 
annual updating amendment.  See Advisers Act rules 203-1 and 
204-1.   

b. If you file an application for registration with the SEC as an 
investment adviser on or after June 30, 2020, the Commission will 
not accept any initial application that does not include a 
relationship summary.  See Advisers Act rule 203-1. 

(ii) Filings for Broker-Dealers 

a. If you are already registered with the SEC as a broker-dealer 
before June 30, 2020, you must electronically file, in accordance 
with Instruction 7.A. above, your initial relationship summary 
beginning on May 1, 2020 and by no later than June 30, 2020. See 
Exchange Act rule 17a-14.   

b. If you file an application for registration or have an application 
pending with the SEC as a broker-dealer on or after June 30, 2020, 
you must file your relationship summary by no later than the date 
that your registration becomes effective. See Exchange Act rule 
17a-14. 

(iii) Delivery to New and Prospective Clients and Customers: As of the date by 
which you are first required to electronically file your relationship 
summary with the SEC, you must begin to deliver your relationship 
summary to new and prospective clients and customers who are retail 
investors as required by Instruction 7.B. See Advisers Act rule 204-5 and 
Exchange Act rule 17a-14. 

(iv) Delivery to Existing Clients and Customers: Within 30 days after the date 
by which you are first required to electronically file your relationship 



 

8 

 

summary with the SEC, you must deliver your relationship summary to 
each of your existing clients and customers who are retail investors. See 
Advisers Act rule 204-5 and Exchange Act rule 17a-14. 

8. Updating the Relationship Summary and Filing Amendments. 

A. You must update your relationship summary and file it in accordance with 
Instruction 7.A. above within 30 days whenever any information in the 
relationship summary becomes materially inaccurate. The filing must include an 
exhibit highlighting changes required by Instruction 8.C. below.  

B. You must communicate any changes in the updated relationship summary to 
retail investors who are existing clients or customers within 60 days after the 
updates are required to be made and without charge.  You can make the 
communication by delivering the amended relationship summary or by 
communicating the information through another disclosure that is delivered to the 
retail investor.   

C. Each amended relationship summary that is delivered to a retail investor who is 
an existing client or customer must highlight the most recent changes by, for 
example, marking the revised text or including a summary of material changes.  
The additional disclosure showing revised text or summarizing the material 
changes must be attached as an exhibit to the unmarked amended relationship 
summary. 

9. Additional Delivery Requirements to Existing Clients and Customers.   

A. You must deliver the most recent relationship summary to a retail investor who is 
an existing client or customer before or at the time you: (i) open a new account 
that is different from the retail investor’s existing account(s); (ii) recommend that 
the retail investor roll over assets from a retirement account into a new or existing 
account or investment; or (iii) recommend or provide a new brokerage or 
investment advisory service or investment that does not necessarily involve the 
opening of a new account and would not be held in an existing account, for 
example, the first-time purchase of a direct-sold mutual fund or insurance product 
that is a security through a “check and application” process, i.e., not held directly 
within an account.  

B. You also must deliver the relationship summary to a retail investor within 30 
days upon the retail investor’s request.   

10. Electronic Posting and Manner of Delivery.   

A. You must post the current version of the relationship summary prominently on 
your public website, if you have one, in a location and format that is easily 
accessible for retail investors.   



 

9 

 

B. You may deliver the relationship summary electronically, including updates, 
consistent with SEC guidance regarding electronic delivery, in particular Use of 
Electronic Media by Broker-Dealers, Transfer Agents, and Investment Advisers 
for Delivery of Information, which you can find at 
www.sec.gov/rules/concept/33-7288.txt.  You may deliver the relationship 
summary to new or prospective clients or customers in a manner that is consistent 
with how the retail investor requested information about you or your financial 
professional consistent with SEC guidance, in particular Form CRS Relationship 
Summary; Amendments to Form ADV, which you can find at 
https://www.sec.gov/rules/final/2019/34-86032.pdf. 

C. If the relationship summary is delivered electronically, it must be presented 
prominently in the electronic medium, for example, as a direct link or in the body 
of an email or message, and must be easily accessible for retail investors. 

D. If the relationship summary is delivered in paper format as part of a package of 
documents, you must ensure that the relationship summary is the first among any 
documents that are delivered at that time.  

11. Definitions. 

For purposes of Form CRS and these Instructions, the following terms have the meanings 
ascribed to them below:  

A. Affiliate:  Any persons directly or indirectly controlling or controlled by you or 
under common control with you.   

B. Dually licensed financial professional:  A natural person who is both an 
associated person of a broker-dealer registered under section 15 of the Exchange 
Act, as defined in section 3(a)(18) of the Exchange Act, and a supervised person 
of an investment adviser registered under section 203 of the Advisers Act, as 
defined in section 202(a)(25) of the Advisers Act. 

C. Dual registrant:  A firm that is dually registered as a broker-dealer under section 
15 of the Exchange Act and an investment adviser under section 203 of the 
Advisers Act and offers services to retail investors as both a broker-dealer and an 
investment adviser.  For example, if you are dually registered and offer 
investment advisory services to retail investors, but offer brokerage services only 
to institutional investors, you are not a dual registrant for purposes of Form CRS 
and these Instructions. 

D. Relationship summary:  A written disclosure statement prepared in accordance 
with these Instructions that you must provide to retail investors.  See Advisers 
Act rule 204-5; Exchange Act rule 17a-14; Form CRS. 

E. Retail investor:  A natural person, or the legal representative of such natural 
person, who seeks to receive or receives services primarily for personal, family or 
household purposes.  



10 

Item Instructions 

 
Item 1. Introduction 

Include the date prominently at the beginning of the relationship summary (e.g., in the header or 
footer of the first page or in a similar location for a relationship summary provided 
electronically).  Briefly discuss the following information in an introduction: 

A. State your name and whether you are registered with the Securities and Exchange 
Commission as a broker-dealer, investment adviser, or both.  Also indicate that 
brokerage and investment advisory services and fees differ and that it is important 
for the retail investor to understand the differences.  You may also include a 
reference to FINRA or Securities Investor Protection Corporation membership in 
a manner consistent with other rules or regulations (e.g., FINRA rule 2210).  

B. State that free and simple tools are available to research firms and financial 
professionals at Investor.gov/CRS, which also provides educational materials 
about broker-dealers, investment advisers, and investing.   

Item 2. Relationships and Services 

A. Use the heading: “What investment services and advice can you provide me?”   

B. Description of Services: State that you offer brokerage services, investment 
advisory services, or both, to retail investors, and summarize the principal 
services, accounts, or investments you make available to retail investors, and any 
material limitations on such services.  For broker-dealers, state the particular 
types of principal brokerage services you offer to retail investors, including 
buying and selling securities, and whether or not you offer recommendations to 
retail investors.  For investment advisers, state the particular types of principal 
investment advisory services you offer to retail investors, including, for example, 
financial planning and wrap fee programs. 

In your description you must address the following:  

(i) Monitoring:  Explain whether or not you monitor retail investors’ 
investments, including the frequency and any material limitations.  If so, 
indicate whether or not the services described in response to this Item 
2.B.(i) are offered as part of your standard services. 

(ii) Investment Authority:  For investment advisers that accept discretionary 
authority, describe those services and any material limitations on that 
authority.  Any such summary must include the specific circumstances 
that would trigger this authority and any material limitations on that 
authority (e.g., length of time).  For investment advisers that offer non-
discretionary services and broker-dealers, explain that the retail investor 
makes the ultimate decision regarding the purchase or sale of investments.  



 

11 

 

Broker-dealers may, but are not required to state whether you accept 
limited discretionary authority.         

Note:  If you are a broker-dealer offering recommendations, you should consider 
the applicability of the Investment Advisers Act of 1940, consistent with SEC 
guidance. 

(iii) Limited Investment Offerings:  Explain whether or not you make available 
or offer advice only with respect to proprietary products, or a limited 
menu of products or types of investments, and if so, describe these 
limitations. 

(iv) Account Minimums and Other Requirements:  Explain whether or not you 
have any requirements for retail investors to open or maintain an account 
or establish a relationship, such as minimum account size or investment 
amount.   

C. Additional Information:  Include specific references to more detailed 
information about your services that, at a minimum, include the same or 
equivalent information to that required by the Form ADV, Part 2A brochure 
(Items 4 and 7 of Part 2A or Items 4.A. and 5 of Part 2A Appendix 1) and 
Regulation Best Interest, as applicable. If you are a broker-dealer that does not 
provide recommendations subject to Regulation Best Interest, to the extent you 
prepare more detailed information about your services, you must include specific 
references to such information. You may include hyperlinks, mouse-over 
windows, or other means of facilitating access to this additional information and 
to any additional examples or explanations of such services. 

D. Conversation Starters:  Include the following additional questions for a retail 
investor to ask a financial professional and start a conversation about relationships 
and services: 

(i) If you are a broker-dealer and not a dual registrant, include: “Given my 
financial situation, should I choose a brokerage service?  Why or why 
not?” 

(ii) If you are an investment adviser and not a dual registrant, include: “Given 
my financial situation, should I choose an investment advisory service?  
Why or why not?” 

(iii) If you are a dual registrant, include: “Given my financial situation, should 
I choose an investment advisory service?  Should I choose a brokerage 
service?  Should I choose both types of services?  Why or why not?”   

(iv) “How will you choose investments to recommend to me?” 

(v) “What is your relevant experience, including your licenses, education and 
other qualifications?  What do these qualifications mean?” 



 

12 

 

Item 3. Fees, Costs, Conflicts, and Standard of Conduct  

A. Use the heading: “What fees will I pay?”  

(i) Description of Principal Fees and Costs:  Summarize the principal fees 
and costs that retail investors will incur for your brokerage or investment 
advisory services, including how frequently they are assessed and the 
conflicts of interest they create.   

a. Broker-dealers must describe their transaction-based fees.  With 
respect to addressing conflicts of interest, a broker-dealer could, 
for example, include a statement that a retail investor would be 
charged more when there are more trades in his or her account, and 
that the firm may therefore have an incentive to encourage a retail 
investor to trade often. 

b. Investment advisers must describe their ongoing asset-based fees, 
fixed fees, wrap fee program fees, or other direct fee arrangement.  
The principal fees for investment advisory services should align 
with the type of fee(s) that you report in response to Form ADV 
Part 1A, Item 5.E.   

(1) Include information about each type of fee you report in Form 
ADV that is responsive to this Item 3.A.  Investment advisers 
with wrap fee program fees are encouraged to explain that 
asset-based fees associated with the wrap fee program will 
include most transaction costs and fees to a broker-dealer or 
bank that has custody of these assets, and therefore are higher 
than a typical asset-based advisory fee.   

(2) With respect to addressing conflicts of interest, an investment 
adviser that charges an asset-based fee could, for example, 
include a statement that the more assets there are in a retail 
investor’s advisory account, the more a retail investor will pay 
in fees, and the firm may therefore have an incentive to 
encourage the retail investor to increase the assets in his or her 
account. 

Note: If you receive compensation in connection with the purchase 
or sale of securities, you should carefully consider the applicability 
of the broker-dealer registration requirements of the Securities 
Exchange Act of 1934 and any applicable state securities statutes. 

(ii) Description of Other Fees and Costs:  Describe other fees and costs 
related to your brokerage or investment advisory services and investments 
in addition to the firm’s principal fees and costs disclosed in Item 3.A.(i) 
that the retail investor will pay directly or indirectly.  List examples of the 



 

13 

 

categories of the most common fees and costs applicable to your retail 
investors (e.g., custodian fees, account maintenance fees, fees related to 
mutual funds and variable annuities, and other transactional fees and 
product-level fees).   

(iii) Additional Information:  State “You will pay fees and costs whether you 
make or lose money on your investments.  Fees and costs will reduce any 
amount of money you make on your investments over time.  Please make 
sure you understand what fees and costs you are paying.”  You must 
include specific references to more detailed information about your fees 
and costs that, at a minimum, include the same or equivalent information 
to that required by the Form ADV, Part 2A brochure (specifically Items 
5.A., B., C., and D.) and Regulation Best Interest, as applicable.  If you are 
a broker-dealer that does not provide recommendations subject to 
Regulation Best Interest, to the extent you prepare more detailed 
information about your fees and costs, you must include specific 
references to such information. You may include hyperlinks, mouse-over 
windows, or other means of facilitating access to this additional 
information and to any additional examples or explanations of such fees 
and costs included in response to Item 3.A.(i) or (ii). 

(iv) Conversation Starter:  Include the following question for a retail investor 
to ask a financial professional and start a conversation about the impact of 
fees and costs on investments: “Help me understand how these fees and 
costs might affect my investments.  If I give you $10,000 to invest, how 
much will go to fees and costs, and how much will be invested for me?” 

B. If you are a broker-dealer, use the heading: “What are your legal obligations to 
me when providing recommendations?  How else does your firm make money 
and what conflicts of interest do you have?”  If you are an investment adviser, use 
the heading: “What are your legal obligations to me when acting as my 
investment adviser?  How else does your firm make money and what conflicts of 
interest do you have?”  If you are a dual registrant that prepares a single 
relationship summary, use the heading: “What are your legal obligations to me 
when providing recommendations as my broker-dealer or when acting as my 
investment adviser?  How else does your firm make money and what conflicts of 
interest do you have?” 

(i) Standard of Conduct. 

a. If you are a broker-dealer that provides recommendations subject 
to Regulation Best Interest, include (emphasis required): “When we 
provide you with a recommendation, we have to act in your best 
interest and not put our interest ahead of yours.  At the same time, 
the way we make money creates some conflicts with your interests.  
You should understand and ask us about these conflicts because 



 

14 

 

they can affect the recommendations we provide you.  Here are 
some examples to help you understand what this means.”  If you 
are a broker-dealer that does not provide recommendations subject 
to Regulation Best Interest, include (emphasis required):  “We do 
not provide recommendations.  The way we make money creates 
some conflicts with your interests.  You should understand and ask 
us about these conflicts because they can affect the services we 
provide you.  Here are some examples to help you understand what 
this means.” 

b. If you are an investment adviser, include (emphasis required): 
“When we act as your investment adviser, we have to act in your 
best interest and not put our interest ahead of yours.  At the same 
time, the way we make money creates some conflicts with your 
interests.  You should understand and ask us about these conflicts 
because they can affect the investment advice we provide you.  
Here are some examples to help you understand what this means.” 

c. If you are a dual registrant that prepares a single relationship 
summary and you provide recommendations subject to Regulation 
Best Interest as a broker-dealer, include (emphasis required): 
“When we provide you with a recommendation as your broker-
dealer or act as your investment adviser, we have to act in your 
best interest and not put our interest ahead of yours.  At the same 
time, the way we make money creates some conflicts with your 
interests.  You should understand and ask us about these conflicts 
because they can affect the recommendations and investment 
advice we provide you.  Here are some examples to help you 
understand what this means.”  If you are a dual registrant that 
prepares a single relationship summary and you do not provide 
recommendations subject to Regulation Best Interest as a broker-
dealer, include (emphasis required):  “We do not provide 
recommendations as your broker-dealer.  When we act as your 
investment adviser, we have to act in your best interest and not put 
our interests ahead of yours.  At the same time, the way we make 
money creates some conflicts with your interest.  You should 
understand and ask us about these conflicts because they can affect 
the services and investment advice we provide you.  Here are some 
examples to help you understand what this means.”  If you are a 
dual registrant that prepares two separate relationship summaries, 
follow the instructions for broker-dealers and investment advisers 
in Items 3.B., 3.B.(i).a., and 3.B.(i).b. 

(ii) Examples of Ways You Make Money and Conflicts of Interest:  If 
applicable to you, summarize the following other ways in which you and 
your affiliates make money from brokerage or investment advisory 



 

15 

 

services and investments you provide to retail investors.  If none of these 
conflicts applies to you, summarize at least one other material conflict of 
interest that affects retail investors.  Explain the incentives created by each 
of these examples. 

a. Proprietary Products:  Investments that are issued, sponsored, or 
managed by you or your affiliates. 

b. Third-Party Payments:  Compensation you receive from third 
parties when you recommend or sell certain investments.   

c. Revenue Sharing:  Investments where the manager or sponsor of 
those investments or another third party (such as an intermediary) 
shares with you revenue it earns on those investments.   

d. Principal Trading:  Investments you buy from a retail investor, 
and/or investments you sell to a retail investor, for or from your 
own accounts, respectively.   

(iii) Conversation Starter:  Include the following question for a retail investor 
to ask a financial professional and start a conversation about conflicts of 
interest: “How might your conflicts of interest affect me, and how will you 
address them?” 

(iv) Additional Information:  You must include specific references to more 
detailed information about your conflicts of interest that, at a minimum, 
include the same or equivalent information to that required by the Form 
ADV, Part 2A brochure and Regulation Best Interest, as applicable.  If 
you are a broker-dealer that does not provide recommendations subject to 
Regulation Best Interest, to the extent you prepare more detailed 
information about your conflicts, you must include specific references to 
such information.  You may include hyperlinks, mouse-over windows, or 
other means of facilitating access to this additional information and to any 
additional examples or explanations of such conflicts of interest. 

C. Use the heading: “How do your financial professionals make money?” 

(i) Description of How Financial Professionals Make Money:  Summarize 
how your financial professionals are compensated, including cash and 
non-cash compensation, and the conflicts of interest those payments 
create.   

(ii) Required Topics in the Description:  Include, to the extent applicable, 
whether your financial professionals are compensated based on factors 
such as: the amount of client assets they service; the time and complexity 
required to meet a client’s needs; the product sold (i.e., differential 
compensation); product sales commissions; or revenue the firm earns from 
the financial professional’s advisory services or recommendations.  



 

16 

 

Item 4. Disciplinary History 

A. Use the heading: “Do you or your financial professionals have legal or 
disciplinary history?” 

B. State “Yes” if you or any of your financial professionals currently disclose, or are 
required to disclose, the following information: 

(i) Disciplinary information in your Form ADV (Item 11 of Part 1A or Item 9 
of Part 2A).  

(ii) Legal or disciplinary history in your Form BD (Items 11 A–K) (except to 
the extent such information is not released to BrokerCheck, pursuant to 
FINRA Rule 8312).  

(iii) Disclosures for any of your financial professionals in Items 14 A–M on 
Form U4 (Uniform Application for Securities Industry Registration or 
Transfer), or in Items 7A or 7C–F of Form U5 (Uniform Termination 
Notice for Securities Industry Registration), or on Form U6 (Uniform 
Disciplinary Action Reporting Form) (except to the extent such 
information is not released to BrokerCheck, pursuant to FINRA Rule 
8312). 

C. State “No” if neither you nor any of your financial professionals currently 
discloses, or is required to disclose, the information listed in Item 4.B. 

D. Regardless of your response to Item 4.B, you must: 

(i) Search Tool:  Direct the retail investor to visit Investor.gov/CRS for a free 
and simple search tool to research you and your financial professionals.   

(ii) Conversation Starter:  Include the following questions for a retail investor 
to ask a financial professional and start a conversation about the financial 
professional’s disciplinary history: “As a financial professional, do you 
have any disciplinary history?  For what type of conduct?” 

Item 5. Additional Information 

A. State where the retail investor can find additional information about your 
brokerage or investment advisory services and request a copy of the relationship 
summary.  This information should be disclosed prominently at the end of the 
relationship summary.   

B. Include a telephone number where retail investors can request up-to-date 
information and request a copy of the relationship summary. 



 

17 

 

C. Conversation Starter:  Include the following questions for a retail investor to 
ask a financial professional and start a conversation about the contacts and 
complaints: “Who is my primary contact person?  Is he or she a representative of 
an investment adviser or a broker-dealer?  Who can I talk to if I have concerns 
about how this person is treating me?” 

 

 



 

APPENDIX C 
 
Feedback Forms Comment Summary 
 
The Proposing Release, at Appendix F, provided investors seeking to comment on the 
relationship summary a form with standardized questions for providing their feedback.  The 
Appendix F form could be completed electronically on our website.  As of June 4, 2019, 93 
individuals provided a relevant response or comment answering at least one question on this 
form (a “responsive” answer.).1  About 50% (47) were completed electronically using the on-line 
version of the form on our website.2  Other commenters (46) submitted a downloaded and 
completed copy of the form to the comment file in a .pdf file or submitted a completed a copy of 
the form at one of our investor roundtables.3   
 
This Appendix reports the staff’s summary of the 93 comments provided using the Appendix F 
form with a responsive answer to one or more questions (the “Feedback Forms”).  Some 
questions called for a “structured” response (e.g., Question 2 asks commenters to indicate 
whether specific sections of the relationship summary are: “very useful," “useful," “not useful" 
or “unsure").  For these questions, the Feedback Forms are summarized from the structured 
question options. Other questions requested a narrative response and, for these questions, the 
Feedback Forms are summarized from the sentiment of these narrative answers.   
 
Question 1: Overall do you find the Relationship Summary useful? If not, how would you 
change it? If so, what topics and how can they be improved? 
 
Question 1 requested a narrative answer. 70 (over 70%) of individuals who submitted the 
Feedback Forms indicated in narrative answers in Question 1 or to other questions that they 
found the relationship summary to be useful.   
 
Among those who indicated that they found the document overall to be useful, many suggested 
ways to improve the document. For example, 41 noted that some topics are too technical or 
otherwise need improvement in response to Question 4 or in other comments, 48 suggested 
additional information in response to Question 5 or in other comments; and 27 indicated that the 
document should be shorter in response to Question 6 or in other comments.  Also, many 
indicated that they did not find the relationship summary entirely easy to read and follow (33 
commenters (35%) answered “Somewhat” or “No” in either of Question 3(a) (Do you find the 
format of the Relationship Summary easy to follow?) or Question 3(c) (Is the Relationship 
Summary easy to read?).      

                                                                                                                                                             

1 A few individuals used the on-line version of the Appendix F form to provide comments on other topics and did 
not provide any responses or comments relevant to any of the form’s questions. These non-responsive comment 
documents are not included in this summary.  
2 Feedback forms completed on line and included in this summary are at listed at Endnote 1. 
3 Feedback forms submitted to the comment file on a downloaded and completed copy of the Feedback form or at 
one of our investor roundtables that are included in this summary are listed at Endnote 2. 



 

2 

 

 
9 (about 10%) indicated that they did not find the relationship summary to be useful. The 
remaining responses to this question did not express a clear sentiment.   
 
Question Q2(a): How useful is the Type of Relationship and Service section of the 
Relationship Summary?4 
 

Very 
Useful Useful 

Not 
Useful Unsure 

No 
Response 

41 
(44%) 

41 
(44%) 

5 
(5%) 

4 
(4%) 

2 
(2%) 

 
Question Q2(b): How useful is the Our Obligations to You section of the Relationship 
Summary? 
 

Very 
Useful Useful 

Not 
Useful Unsure 

No 
Response 

36 
(39%) 

42 
(45%) 

7 
(8%) 

4 
(4%) 

4 
(4%) 

 
 
Question Q2(c): How useful is the Fees and Costs section of the Relationship Summary? 
 

Very 
Useful Useful 

Not 
Useful Unsure 

No 
Response 

33 
(35%) 

43 
(46%) 

8 
(9%) 

6 
 (6%) 

3  
(3%) 

 
Question Q2(d): How useful is the Comparison to different account types section of the 
Relationship Summary? 
 

Very 
Useful Useful 

Not 
Useful Unsure 

No 
Response 

29 
(31%) 

39 
(42%) 

6 
(6%) 

11 
(12%) 

8 
(9%) 

 

                                                                                                                                                             

4 Percentages reported in tables summarized responses to Questions 2 and 3 are based on the total number of 
Feedback Forms. 



 

3 

 

Question Q2(e): How useful is the Conflict of Interests section of the Relationship Summary? 
 

Very 
Useful Useful 

Not 
Useful Unsure 

No 
Response 

39 
(42%) 

30 
(32%) 

10 
(11%) 

10 
(11%) 

4 
(4%) 

 
Question Q2(f): How useful is the Additional Information section of the Relationship 
Summary? 
 

Very 
Useful Useful 

Not 
Useful Unsure 

No 
Response 

30 
(32%) 

35 
(38%) 

10 
(11%) 

10 
(11%) 

8 
(9%) 

 
Question Q2(g): How useful is the Key Questions to Ask section of the Relationship 
Summary? 
 

Very 
Useful Useful 

Not 
Useful Unsure 

No 
Response 

51 
(55%) 

28 
(30%) 

7 
(8%) 

3 
(3%) 

4 
(4%) 

 
Question Q3(a): Do you find the format of the Relationship Summary easy to follow? 
 

Yes Somewhat No 
No 

Response 
58 

(62%) 
24 

(26%) 
7 

(8%) 
4 

(4%) 
 
Question Q3(b): Is the information in the appropriate order? 
 

Yes Somewhat No 
No 

Response 
57 

(61%) 
26 

(28%) 
7 

(8%) 
3 

(3%) 
 
Question Q3(c): Is the Relationship Summary easy to read? 
 

Yes Somewhat No 
No 

Response 
55 

(59%) 
23 

(25%) 
10 

(11%) 
5 

(5%) 
 



 

4 

 

Question Q3(d): Should the Relationship Summary include additional information about 
different account types? 

Yes Somewhat No 
No 

Response 
49 

(53%) 
9 

(10%) 
29 

(31%) 
6 

(6%) 
 
Question Q3(e): Would you seek out additional information about a firm's disciplinary history 
as suggested in the Relationship Summary? 
 

Yes Somewhat No 
No 

Response 
65 

(70%) 
14 

(15%) 
10 

(11%) 
4 

(4%) 
 
Question 4: Are there topics in the Relationship Summary that are too technical or that could 
be improved? 

 
Question 4 requested a narrative answer.  Narrative answers offered by 25 (more than 25% of 
Feedback Forms) specifically stated that the relationship summary was not too technical.   
 
On 27 Feedback Forms (about 30%), commenters did not respond to Question 4 or offered an 
answer that did not address this question.  Among these 27, 13 appeared to fully agree that 
relationship summary format was easy to follow and the relationship summary was easy to read 
by checking “yes” in response to Question 3(a) (Do you find the format of the Relationship 
Summary easy to follow?) and Question 3(c) (Is the Relationship Summary easy to read?).  
Overall, 45 commenters (48%) on Feedback Forms fully agreed that the relation summary is 
easy to read and follow by checking “yes” in response to Question 3(a) (“Do you find the format 
of the Relationship Summary easy to follow”) and Question 3(c) (“Is the Relationship Summary 
easy to read?).  
 
On 41 of the Feedback Forms (44% of 93 Feedback Forms), the narrative response to Question 4 
or other comments on the Feedback Form indicated that the relationship summary was too 
technical or suggested one or more topics that could be improved.  Across all Feedback Forms 
(including those with comments indicating that the relationship summary was not too technical): 

• 20 Feedback Forms included comment indicating that the relationship summary language 
was generally too technical, wordy or confusing, or should be made simpler; 

• 23 Feedback Forms included narrative comments indicating that information about fees 
and costs was too technical or needed to be more clear, including seven (7) that asked for 
definitions of terms such as transaction-based fee, asset-based fee or wrap fee; 

• 23 Feedback Forms included narrative comments suggesting that information in sections 
covering relationships and services and the obligations of financial professionals needed 
clarification, including ten (10) Feedback Forms that asked for a definition or better 
explanation of the term  “fiduciary”; and  



 

5 

 

• 14 Feedback Forms included narrative comments suggesting clarification or more 
information about conflicts of interest. 

 
Question 5: Is there additional information that we should require in the Relationship 
Summary, such as more specific information about the form or additional information about 
fees? Is that because you do not receive the information now, or because you would also like 
to see it presented in this summary document, or both? Is there any information that should be 
made more prominent? 
 
Question 5 requested a narrative answer.  48 of the Feedback Forms (more than 50%) included 
comments suggesting additional information that could be required in response to Question 5 or 
another question on the Feedback Form.  Many (29) indicated that additional information about 
fees and costs would be helpful.  
 
On 13 of the Feedback Forms (about 14%) narrative comments responding to Question 5 
indicated that no additional information was needed.  On the remainder of Feedback Forms (32, 
over 30% of Feedback Forms), there was no answer given or the answer given was not relevant 
to Question 5.   
 
Question 6: Is the Relationship Summary an appropriate length? If not, should it be longer or 
shorter? 
 
Question 6 requested a narrative answer.  37 narrative answers responding to Question 6 or 
another question (about 40% of 93 Feedback Forms) specifically indicated that the relationship 
summary’s length is appropriate.  27 of the Feedback Forms (about 30%) included comments 
suggesting that the relationship summary should be shorter.  Two commenters suggested that the 
form should be longer.  On the remainder of Feedback Forms (27, or almost 30%), there was no 
answer given or the answer given was not relevant to Question 6.  
 
Question 7: Do you find the ‘Key Questions to Ask’ useful?  Would the questions improve the 
quality of your discussion with your financial professional?  If not, why not? 
 
Question 7 requested a narrative answer. Responses on 77 (over 75%) of Feedback Forms 
indicated that the Key Questions were useful (“useful” and “very  useful” answers to Question 
2(g) are included, if there was no answer provided to Question 7).   
 
11 Feedback Forms (about 12%) included specific comments agreeing that the Key Questions 
would encourage discussions with financial professionals.  Another two (2) included a comment 
agreeing that, in general, the relationship summary could encourage dialogue between financial 
professionals and clients.   
 
Several commenters (8) suggested moving the Key Questions to the beginning or closer to the 
beginning of the relationship summary, or including the Key Questions within individual 
sections, rather than placing the key questions at the end of the document.6 

 

Endnotes: 
[1] Feedback forms completed on-line and included in this summary:  Fors Anderson, 3/17/2019, 
https://www.sec.gov/comments/s7-08-18/s70818-5134364-183356.htm (“Anderson Feedback 
Form”), Sylva Baker, 8/6/2018, https://www.sec.gov/comments/s7-08-18/s70818-4170945-
172084.pdf (“Baker Feedback Form”); Linda Baumbusch, 7/29/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4133141-171850.htm (“Baumbusch Feedback 
Form”); Mahesh Bhupalam, 7/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4069296-169437.htm (“Bhupalam Feedback Form”);  Hugh Caddess, 7/23/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4097528-170159.htm(“Caddess Feedback 
Form”);  Paul Calderon, 7/30/2018, https://www.sec.gov/comments/s7-08-18/s70818-4140254-
171938.htm(“Calderon Feedback Form”);  Robert Carr, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4024224-167344.htm (“Carr Feedback Form”); 
Rod Carroll, 7/10/2018m, https://www.sec.gov/comments/s7-08-18/s70818-4029201-
167352.htm (“Carroll Feedback Form”); Charles Christine, 6/22/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3910620-166661.htm(“Christine Feedback 
Form”); Lloyd Coleman, 7/17/2018, https://www.sec.gov/comments/s7-08-18/s70818-4063665-
169130.htm (“Coleman Feedback Form”); Janice Daunheimer, 8/7/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4185205-172598.htm (“Daunheimer Feedback 
Form”); Juanita Fontaine, 7/21/2018, https://www.sec.gov/comments/s7-08-18/s70818-4096751-
170113.htm (“Fontaine Feedback Form”); Frederick Greene, 7/13/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4044546-168910.htm (“Greene Feedback 
Form”);  Chester Hawkins, 8/1/2018, https://www.sec.gov/comments/s7-08-18/s70818-4171653-
172230.htm (“Hawkins Feedback Form”); Anthony Hicks, 7/20/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4096231-170102.htm (“Hicks Feedback 
Form”); Jeffrey T., 7/10/2018, https://www.sec.gov/comments/s7-08-18/s70818-4024265-
167345.htm (“Jeffrey Feedback Form”); Mike Keeler, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4024769-167348.htm (“Keeler Feedback 
Form”); Duane Lee, 12/3/2018, https://www.sec.gov/comments/s7-08-18/s70818-4719639-
176708.htm (“Lee2 Feedback Form”); George Macke, 6/2/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3768103-162690.htm (“Macke Feedback 
Form”); Mary Malone, 7/15/2018, https://www.sec.gov/comments/s7-08-18/s70818-4048232-
168957.htm (“Malone Feedback Form”); Mary Margolis, MBR Financial, 6/28/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3974252-167135.htm (“Margolis Feedback 
Form”); Darren Markle, 7/6/2018, https://www.sec.gov/comments/s7-08-18/s70818-4008397-
167254.htm (“Markle Feedback Form”); Chelsea Matvey, 7/19/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4078676-169821.htm (“Matvey Feedback 
Form”); Kevin McGuire, 7/17/2018, https://www.sec.gov/comments/s7-08-18/s70818-4063664-
169164.htm (“McGuire Feedback Form”); Jennifer Mellgren, 7/22/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4097514-170157.htm (“Mellgren Feedback 
Form”); Robert Mennella, 8/22/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4251004-173033.htm (“Mennella Feedback Form”); Steven Miller, 7/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4065013-169285.htm (“Miller Feedback 
Form”); Bob Murphy, 7/25/2018, https://www.sec.gov/comments/s7-08-18/s70818-4111730-
170372.htm (“Murphy Feedback Form”); Mary Newton, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4024770-167347.htm (“Newton Feedback 



 

7 

 

Form”); Jon Panitzke, 7/23/2018, https://www.sec.gov/comments/s7-08-18/s70818-4105327-
170265.htm (“Panitzke Feedback Form”); Marcus Paredes, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4024691-167346.htm (“Panitzke Feedback 
Form”); Huelien Pham, 7/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-4069312-
169440.htm (“Pham Feedback Form”); Loizos Prodromou, 7/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4064613-169273.htm (“Prodromou Feedback 
Form”); Richard Rohr, 6/22/2018, https://www.sec.gov/comments/s7-08-18/s70818-3910614-
166660.htm (“Rohr Feedback Form”); Kathy Sachs, 7/23/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4105119-170257.htm (“Sachs Feedback 
Form”); Richard Salkowitz, 7/19/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4078450-169772.htm (“Salkowitz Feedback Form”); Dwight Sanders, 6/8/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3816823-162750.htm (“Sanders1Feedback 
Form”); Dr. Dwight Sanders, 6/30/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3985541-167075.htm (“Sanders2 Feedback Form”); Daniel Schuman, 7/20/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4096425-170103.htm (“Schuman Feedback 
Form”); Ron Shepherd, 6/20/2018, https://www.sec.gov/comments/s7-08-18/s70818-3900517-
162957.htm (“Shepherd Feedback Form”); Pat Smith, 7/24/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4110731-170363.htm (“Smith1 Feedback 
Form”); Joe Smith, 8/6/2018, https://www.sec.gov/comments/s7-08-18/s70818-4173957-
172348.htm (“Smith2 Feedback Form”); Star Identifier, 11/5/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4611472-176365.htm (“Star Feedback Form”); 
Cyril Anouar Streit, 9/10/2018, https://www.sec.gov/comments/s7-08-18/s70818-4445712-
173232.htm (“Streit Feedback Form”); Jay Thompson, 7/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4069295-169419.htm (“Thompson Feedback 
Form”); Brenda Winslow, 6/6/2018, https://www.sec.gov/comments/s7-08-18/s70818-3784415-
162708.htm (“Winslow Feedback Form”); Mark Winsor, 7/21/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4096783-170118.htm (“Winsor Feedback 
Form”). 
[2]  Feedback Forms filed in the comment file in .pdf format:  Anonymous, 6/15/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3857882-162788.pdf (“Anonymous01 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3898398-162931.pdf (“Anonymous02 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3898681-162940.pdf (“Anonymous03 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3897774-162930.pdf (“Anonymous04 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3898814-162941.pdf (“Anonymous05 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3897701-162929.pdf (“Anonymous06 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899032-162942.pdf (“Anonymous07 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3897489-162926.pdf (“Anonymous08 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3898137-162934.pdf (“Anonymous09 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3898482-162937.pdf (“Anonymous10 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3897632-162927.pdf (“Anonymous11 



 

8 

 

Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3898148-162936.pdf (“Anonymous12 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3898590-162939.pdfv (“Anonymous13 
Feedback Form”); Anonymous, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-
3898570-162938.pdf, (“Anonymous14 Feedback Form”); Anonymous, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3897651-162928.pdf (“Anonymous15 
Feedback Form”); Anonymous, 7/10/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4030385-167421.pdf (“Anonymous16 Feedback Form”); Anonymous, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4030375-167399.pdf (“Anonymous17 
Feedback Form”); Anonymous, 7/10/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4030330-167397.pdf (“Anonymous18 Feedback Form”); Anonymous, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4030369-167398.pdf (“Anonymous19 
Feedback Form”); Anonymous, 7/10/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4030378-167420.pdf (“Anonymous20 Feedback Form”); Anonymous, 7/10/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4030325-167411.pdf (“Anonymous21 
Feedback Form”); Anonymous, 7/17/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4345352-173277.pdf (“Anonymous22 Feedback Form”); Anonymous, 7/17/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4345314-173293.pdf (“Anonymous23 
Feedback Form”); Anonymous, 7/17/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4345453-173280.pdf (“Anonymous24 Feedback Form”);  Anonymous, 7/17/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4345356-173278.pdf (“Anonymous25 
Feedback Form”); Anonymous, 7/17/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4345378-173279.pdf (“Anonymous26 Feedback Form”); Anonymous, 7/17/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4345323-173294.pdf (“Anonymous27 
Feedback Form”); Anonymous, 8/6/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4287928-173164.pdf (“Anonymous28 Feedback Form”); Anonymous, 9/27/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-4447388-175712.pdf) (“Anonymous29 
Feedback Form”); Leo Asen, 8/4/2018, https://www.sec.gov/comments/s7-08-18/s70818-
4171811-172312.pdf (“Asen Feedback Form”); Lee Baird, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899545-162952.pdf (“Baird Feedback 
Form”); MT Bowling, 6/1/2018, https://www.sec.gov/comments/s7-08-18/s70818-3757598-
162619.pdf (“Bowling Feedback Form”); Mike Brantley, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899574-162955.pdf (“Brantley Feedback 
Form”); James Davis, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-3899432-
162948.pdf (“Davis Feedback Form”); George Durgin, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899422-162947.pdf (“Durgin Feedback 
Form”); Brain Hobbes, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-3899428-
162945.pdf (“Hobbes Feedback Form”); Karean Hoggan, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899522-162951.pdf (“Hoggan Feedback 
Form”); Joker Jenkins, 6/18/2018,  
https://www.sec.gov/comments/s7-08-18/s70818-3899511-162950.pdf (“Jenkins Feedback 
Form”); Jennifer Lee 4/28/2018, https://www.sec.gov/comments/s7-08-18/s70818-3551103-
162323.pdf (“Lee1 Feedback Form”); Angela Montellano, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3897484-162925.pdf (“Montellano Feedback 
Form”); Don Parsons, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-3899387-



 

9 

 

162944.pdf (“Parsons Feedback Form”); David Schreiner, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899390-162946.pdf (“Schreiner Feedback 
Form”); Ron Seits, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-3899580-
162956.pdf (“Seits Feedback Form”); Mark Shaffer, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899570-162954.pdf (“Shaffer Feedback 
Form”); Malia Starmer, 6/18/2018, https://www.sec.gov/comments/s7-08-18/s70818-3899562-
162953.pdf (“Starmer1 Feedback Form”); Jason Starmer, 6/18/2018, 
https://www.sec.gov/comments/s7-08-18/s70818-3899436-162949.pdf (“Starmer2 Feedback 
Form”).