Currently, the Securities and Exchange Commission (SEC) does not appear to be inclined to extend deadlines for compliance with new Regulation BI and application of Form CRS. Members can expect that OCIE inspections after June 30 will address member’s compliance. We believe that the standard for a firm’s compliance will be its good faith attempt to comply and how it documented its compliance efforts.
With respect to Form CRS, firms can start filing and delivering to clients immediately, and do not need to wait until May 1.
From OCIE issued guidance, firm compliance is expected and their examinations can be expected to focus the firm’s planning for implementation. Clients are advised to examine the SEC’s Regulation BI interpretive guidance.
Although a lawsuit was filed, briefed and argued affecting Regulation BI and Form CRS implementation before the Second Circuit, a decision is not anticipated before June 1.
Members are recommended to review FINRA’s website devoted to COVID-19 matters Regulatory Notice 20-08, and FAQ’s.
FINRA is coordinating with the SEC staff concerning the SEC definition of ‘qualifying offices’ and refinement of the proposal’s definition of eligible locations. OCIE (and FINRA) can be expected to focus on the supervision of remote offices.
CARES Act Applicants Be Careful
Members who have utilized the capital financing aspects of the CARES Act should take notice that several advocacy groups have already positioned their readiness to make FOIA requests to assure that applicants have met all eligibility standards required and have not abused the purposes of the Act. Potentially, a member’s receipt of funding under the Act could involve future exam-related questions and requests for disclosures.
Enforcement Matters Postponed
FINRA enforcement matters appear to be delayed as scheduled hearings and appeals have been postponed and the defense bar has been diligent in asserting due process and fairness objections to proceeding with OTR’s by zoom or other remote access where counsel is not present with the subject or witness.