August 6, 2018
Regulation Best Interest is intended "to (establish) a standard for broker-dealers…" yet the SEC manages to add compliance requirements for RIAs who are not even the subject to the proposed rule. I guess you simply can't help yourselves. I suggest that the SEC remove all references (and requirements) for RIAs under this proposed rule.
Specifically, the SEC wants to add a "relationship summary" disclosure document to be sent to prospective clients. The SEC makes clear that this document has a limit of four pages. Any takers for a bet that within a few years, the SEC, in its inimitable fashion, will be adding requirements to this document so that it well exceeds the present four-page limit?
This document is to inform prospective clients of a basic overview of the firm including its "services, fees, conflicts and disciplinary history." Isn't this already in ADV Part 1I, already sent to prospective clients? The rational apparently is that because the ADV has got too long, investors might miss this crucial information.
Surely even regulators can see the irony in this? The ADV has become a worthless and unread document, just like mutual fund prospectuses, precisely because you keep adding requirements for inclusion, which the SEC-spawned compliance industry takes and runs with. In my firm's case, our clean, "plain language" (albeit with a few frowned-up double-negatives and passive tenses, oh the horror!) used to be five pages. It was read and understood by clients. We used to receive comments and questions on it. Now the SEC (and its devil spawn, the compliance industry) has turned this into a 21-page, dense, boring document that hardly anyone reads any more.
So—in the SEC's view—the solution is MORE PAPER! You really can't help yourselves, can you?
Proposal: do away with the proposal for RIAs to send ADV Part III to clients, and allow more flexibility in ADV Part II.
You should also remove the new requirement for a disclosure in communications with clients concerning the registration status of the firm and the person's relationship with the firm. Is this now the start of a new series of requirements in what must be included in communications with clients? So the required disclosures will be longer than most of the communications. Remember, no-one except ambulance-chasing attorneys after a problem and SEC examiners on visits actually reads these disclosures.
So remove all reference and requirements to RIAs in your proposed rule which is intended for broker-dealers.
Adrian Day
President