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Advisers Are Permitted to Use the Word “Fiduciary” in Form CRS
 

Advisers are permitted to use the word “fiduciary” in their disclosures, including new Form CRS, contrary to recent press reports that seem to imply otherwise. The IAA received this confirmation yesterday from senior staff in the SEC’s Division of Investment Management.

The final instructions to Form CRS require investment advisers, broker-dealers, and dual-registrants to include a brief statement of the applicable standard of conduct. Firms are required to use the exact language specified in the form’s instructions, which does not include the word “fiduciary.”

According to the adopting release, the final language was modified from the proposal in an effort to use “simplified wording that is short, plain language...but still describes the key components of a broker-dealer’s or investment adviser’s standard of conduct when providing recommendations or advice.” The SEC opted to focus on the term “best interest,” and eliminated the word “fiduciary” from the prescribed statement to be provided by advisers.

However, as noted in the adopting release and confirmed by SEC staff, final Form CRS requires less prescribed wording overall, so that firms may generally use their own wording to address required topics and will have more flexibility to provide accurate information to investors. Accordingly, advisers may still use the term “fiduciary” in Form CRS to further elaborate on the duties owed to their clients, for example, when discussing their conflicts of interest.

Registered advisers will have from May 1, 2020 until June 30, 2020 to file their initial Form CRS with the SEC.

The IAA has formed an Implementation Group to assist members in addressing similar questions and interpretative issues. If you are interested in joining the group, please contact Sanjay Lamba at sanjay.lamba@investmentadviser.org. In addition, the IAA will hold a webinar on Form CRS on July 19, 2019 at 12:00 pm ET. Registration will open soon.

There has been notable confusion regarding the continued strength of the fiduciary duty in light of the SEC’s recent interpretation. We will address this important issue and more on a webinar on the Advisers Act fiduciary duty interpretation on June 27 at 3 pm ET. Register here.