PLANADVISER - May/June 2020 - 38

ERISA vista
Fred Reish and Joan Neri
Client Relationship Summary
Who exactly needs to receive a Form CRS?
QUESTION: I'm an investment adviser, registered with the
Securities and Exchange Commission (SEC), who provides
investment advisory services and/or investment management
services to workplace retirement plan accounts. I
know that I need to file a client relationship summary (Form
CRS) with the SEC by June 30 and deliver it to " retail investors. "
Does this delivery obligation apply to individuals, for
their workplace retirement plan accounts?
ANSWER: It depends. Our response builds on our previous
column (see " New Obligation to the SEC, " PLANADVISER,
March/April 2020) regarding the Form CRS disclosure obligation
that applies to rollover advice. If the services are for
the account of a plan participant, the Form CRS obligation
will apply. If, however, the services are provided to the plan
fiduciary for the workplace retirement plan, the Form CRS
obligation will usually not apply, though there are exceptions.
Form CRS must be delivered to a " retail investor. " There
are two components to the definition of retail investor-that
the investor: 1) must be a natural person or his/her legal
representative, and 2) seeks to receive or receives services
primarily for personal, family or household purposes. In
its adopting release on the Form CRS rule, SEC Release No.
34-86032, the SEC explains that individuals seeking services
for their retirement accounts should receive a Form CRS
because retirement saving is a personal, family or household
purpose. So Form CRS applies when you're providing investment
advisory and/or investment management services to
participants regarding their workplace plan account.
If, however, the plan fiduciary has engaged you to provide
advisory services about the investment options offered on
the plan lineup, the Form CRS obligation will not generally
apply, because the fiduciary is not seeking services primarily
for personal, family or household purposes. This is true
even if you help participants by providing education about
plan investment options, e.g., at an enrollment or investment
education meeting. As explained by the SEC in the
release, under these circumstances, the plan participant is
not " seeking or receiving services " as contemplated by Form
CRS because the decision to hire you for these services was
made by the fiduciary. If, however, you go beyond investment
education and provide investment advice to a participant,
then Form CRS must be delivered to that person.
What if the plan is established by a sole proprietor or
other self-employed individual who decides the plan service
arrangements and also participates in the plan?
The SEC explains that, in those circumstances, the selfemployed
individual would be a retail investor seeking
services for personal, family or household purposes and
must receive Form CRS.
What if the plan is establishe d
by a sole proprietor or other selfemployed
individual who decides
the plan service arrangements
and also participates in the plan?
For retail investors who are new clients, Form CRS must
be delivered before or at the time you enter into the investment
advisory contract. For retail investors who are existing
clients on June 30, the form will need to be delivered by July
30. Also, as we pointed out previously, if you provide rollover
advice to an existing client who has already received a Form
CRS, you will need to deliver a new one for the arrangement
related to the rollover recommendation.
Next Steps
Prior to June 30, you should take these steps to determine
whether Form CRS applies to your workplace retirement plan
clients. First, review your records to identify: 1) your advisory
clients who are plan participants, and 2) your clients
that are plan sponsors/fiduciaries with responsibility for the
plan as a whole. Clients in category 1) will need to receive a
Form CRS. Next, for service arrangements with the fiduciary,
determine whether the fiduciary is a sole proprietor or other
self-employed individual who also participates in the plan.
These clients will also need to receive Form CRS.
Fred Reish is chairman of the financial services ERISA [Employee
Retirement Income Security Act] practice at law firm Faegre Drinker
Biddle & Reath LLP. A nationally recognized expert in employee
benefits law, Fred has written four books and many articles on ERISA,
pension plan disputes and audits by the IRS and Department of Labor.
Joan Neri is counsel in the firm's financial services ERISA practice,
where she focuses on all aspects of ERISA compliance affecting
registered investment advisers and other plan service providers.
38 | planadviser.com May-June 2020
Art by Tim Bower
http://www.planadviser.com
PLANADVISER - May/June 2020

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