SEC Adopts Regulation Best Interest and Form CRS in Open Meeting: Let the Sun Shine
By Toppan Merrill
1 min read | Industry Insights Insights Home

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The Sunshine Act

Supreme court justice Louis Brandeis famously said that “Sunlight is the best of disinfectants.” His description is often used regarding securities regulation: when information is open and available then everyone benefits. Every US Federal agency is mandated to make their meetings open to the public under the “Sunshine Act” unless it falls under a specific exception.

Under Commissioner Jay Clayton, the SEC has held few open meetings. Many new rules and initiatives have been mandated during closed meetings.

Open meetings can sometimes be contentious with lively debate by the Commission. The Commission consists of 5 members usually: two Democrats, two Republicans and the Chair.  A majority of the sitting Commission is required to adopt a new rule (currently, that would mean 3 of 4 votes in favor). Commissioner Kara Stein left the SEC earlier this year as her term ended. Her replacement has not been confirmed by the Senate yet.

SEC Regulation Investment Professions: Improving Investing Transparency

The SEC held an open public meeting on June 5, 2019 focused on regulation of Broker-Dealers and Investment Advisors. The detailed agenda consisted of two SEC final rules and two interpretive releases all designed to improve the information available to investors who use these investment professionals. The SEC adopted both final rules detailed below.

Regulation Best Interest-Standards of Conduct for Broker-Dealers A new rule to establish a standard of conduct for broker-dealers and natural persons who are associated persons of a broker-dealer when making a recommendation to a retail customer of any securities transaction or investment strategy involving securities.

Form CRS-Client Regulation Summary New and amended rules and forms to require registered investment advisers and registered broker-dealers to provide a brief relationship summary to retail investors.

Form CRS “Client Relationship Summary” will be a new XML format filing by BD/IA. The form is designed to make information public and easy to understand for investors, such as fees, conflict of interests and more. The disclosures would be coupled with rules under “Regulation Best Interest” providing a framework for how investment professionals need to follow their client’s best interests in providing investment advice and services.

Additionally, the SEC issued supporting interpretations to augment the new rules regulating Broker/Dealers and Investment Advisers: 1) Standard of Conduct for Investment Advisers an interpretation of the standard of conduct for investment advisers and 2) Interpretation of "Solely Incidental an interpretation of the solely incidental prong of section 202(a)(11)(C) of the Investment Advisers Act of 1940.

Discussion in the market has been robust about the new requirements since the SEC proposed them last year. Some indicated the rules do not go far enough, while others stated the burden on Broker and Investment Advisers will increase with few tangible benefits to investors. By holding an open meeting to discuss improving disclosure to investors, the SEC is using the approach of Sunshine as the best disinfectant to ensure transparent information is available as people decide how to invest their money.

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Toppan Merrill


Toppan Merrill, a leader in financial printing and communication solutions, is part of the Toppan Printing Co., Ltd., the world's leading printing group, headquartered in Tokyo with approximately US$14 billion in annual sales. Toppan Merrill has been a pioneer and trusted partner to the financial, legal and corporate communities for five decades, providing secure, innovative solutions to complex content and communications requirements. Through proactive partnerships, unparalleled expertise, continuous innovation and unmatched service, Toppan Merrill delivers a hassle-free experience for mission-critical content for capital markets transactions, financial reporting and regulatory disclosure filings, and marketing and communications solutions for regulated and non-regulated industries. With global expertise in major capital markets, Toppan Merrill delivers unmatched service around the world.


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