A prospective retail client meets with a registered representative at a broker-dealer to discuss transferring assets from an external account. During this initial advisory conversation, before any formal account application is signed or any order is placed, the representative recommends a specific asset allocation model comprising mutual funds and variable annuities. Under SEC Regulation Best Interest (Reg BI) rules, which of the following statements accurately describes the firm's obligation regarding the delivery of Form CRS (Client Relationship Summary)?
- The firm must deliver Form CRS to the prospective retail client before or at the earliest point of making the investment strategy recommendation, regardless of whether an account has been formally opened.Answer
- BForm CRS delivery is not required until the client officially completes the account opening agreement, provided it is delivered prior to the settlement of the first trade.
- CThe firm is exempt from Form CRS delivery during prospective consultation meetings if the investment strategy involves registered investment company products covered by separate prospectus delivery rules.
- DForm CRS must be delivered to the client within 30 calendar days following the initial meeting, provided the representative documents the discussion in the firm's books and records.
Answer
The firm must deliver Form CRS to the prospective retail client before or at the earliest point of making the investment strategy recommendation, regardless of whether an account has been formally opened.
The correct option correctly states that Form CRS must be delivered at or before the earliest trigger event. Under SEC rules governing Regulation Best Interest, making a recommendation of an investment strategy to a prospective retail customer is an independent trigger that requires immediate delivery of Form CRS, even if account documentation has not yet been executed.
Step-by-Step Solution
Key Concept
Form CRS Delivery Triggers under Regulation Best Interest
Estimated Time:1m 30s