Articles Tagged with SEC Guidance

The SEC’s Divisions of Investment Management and Trading & Markets have issued guidance in the form of a set of Frequently Asked Questions (or “FAQs”) addressing the upcoming implementation of the newly-created SEC Form CRS Relationship Summary (“Form CRS”).

As previously profiled on this blog, Form CRS is a new SEC disclosure document that will be applicable to both RIAs and broker/dealers offering services to retail investors. Indeed, for RIAs, the new Form CRS will function as a new Part 3 to the RIA’s existing Form ADV. The purpose of Form CRS is to summarize basic information about the firm’s services, fees, and costs, as well as its conflicts of interest and material disciplinary events. As noted, Form CRS obligations only arise for firms dealing with “retail investors,” which the SEC defines as “natural persons” or their legal representatives, who seek to receive or receive services “primarily for personal, family or household purposes.” Full implementation of Form CRS is slated for June 30, 2020. Continue reading

In what is turning out to be a busy summer at the SEC for issuing new rules and interpretations applicable to RIAs, the Commission has just released detailed guidance clarifying the proxy voting obligations of SEC-registered advisers.  This latest release comes on the heels of the agency’s landmark package of releases issued on June 5th, which, for RIAs, included rules implementing the new Form CRS (a/k/a Form ADV, Part 3) and a major interpretive release clarifying the fiduciary duty owed to clients by all advisers.  This latest release aims to clarify an adviser’s obligations arising under Advisers Act Rule 206(4)-6 (“the Proxy Rule”) relating to voting proxies for clients, specifically in the context of using the services of a “proxy advisory firm.”

The Proxy Rule provides that it is a “fraudulent, deceptive, or manipulative act” for an SEC-registered adviser to “exercise voting authority with respect to client securities” unless the adviser adopts and implements written policies and procedures designed to ensure that such voting is done in the “best interest of clients.”  The Proxy Rule also requires certain disclosures be made to clients regarding any voting done for them.  Notably, the Proxy Rule does not require advisers to vote client securities.  Indeed, many advisers choose to escape the coverage of the Proxy Rule by simply not—in any instance—voting client securities.  However, for advisers exercising any voting authority over client securities—even one share—the Proxy Rule swings into effect.  Accordingly, all such advisers opting to vote client securities will need to be in full compliance with the Proxy Rule—and should pay close attention to the SEC’s new guidance on this matter. Continue reading