total supervised persons) = 0.5 hours average initial burden per
investment adviser.
    \936\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per supervised person.
     (0.5 hours x $143 total cost per supervised person x 245,408
supervised persons) = $17,546,672 total initial cost for supervised
persons/245,408 total number of supervised persons) = $71.50 average
initial cost per supervised person.
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    Aside from the internal initial burden, we anticipate that there
would be certain associated outside costs as well. We believe that
investment advisers and their supervised persons may engage outside
counsel to assist them in understanding our proposed rule should it be
adopted.\937\ We assume that the amount of outsourced legal assistance
would vary among various sizes of investment advisers and their number
of supervised persons. As a result, we preliminarily estimate that
large investment advisers together with their supervised persons may
initially outsource approximately 8 hours of legal time in order to
understand the implications of our proposed rule and how best to comply
with the technical specifications.\938\ For small investment advisers,
we anticipate that such firms will outsource 4 hours of legal
time.\939\ The hour differences in our preliminary estimates take into
account that larger firms have more communications affected by our
proposed rule and more supervised persons to supervise than small
firms. We estimate initial outside legal costs associated with the
proposed rule of $19,565,344 for investment advisers \940\ (or $2,566
on average per investment adviser.) \941\
---------------------------------------------------------------------------

    \937\ We are assuming that supervised persons would not
independently seek outside counsel and would instead rely on the
advice received from outside counsel to the firm. Therefore, we are
not including a separate estimate for supervised persons.
    \938\ This estimate is based upon staff experience. See e.g.,
Release 34-78309, supra note 897; Release 34-76474, supra note 897.
    \939\ This estimate is based upon staff experience. See supra
note 938.
    \940\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for legal services is $472/hour.
    ($472 x 8 legal hours) = $3,776 x 2,738 large investment
advisers = $10,338,688.
    ($472 x 4 legal hours) = $1,888 x 4,887 small investment
advisers = $9,226,656.
    ($10,338,688 total large investment advisers costs + $9,226,656
total small investment advisers costs) = $19,565,344.
    \941\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for legal services is $472/hour.
    ($472 x 8 legal hours) = $3,776 x 2,738 large investment
advisers = $10,338,688.
    ($472 x 4 legal hours) = $1,888 x 4,887 small investment
advisers = $9,226,656.
    $10,338,688 total large investment advisers costs + $9,226,656
total small investment advisers costs = $19,565,344/7625 total
investment advisers = $2,566 total cost per investment adviser.
---------------------------------------------------------------------------

    Additionally, we anticipate that firms will also have one-time
outside costs associated with the cost of printing new communications
including new business cards, envelopes, pitch books, and letterheads.
As part of these costs, we anticipate that both large and small
investment advisers will have to work with printers to set the
disclosure on, for example, business cards. We

estimate initial costs to amend certain communications associated with
the proposed rule of $346,787,187 for investment advisers \942\ (or
$45,480 per investment adviser.) \943\ We assume that because small
investment advisers have fewer supervised persons there will be less
communications that will require printing.
---------------------------------------------------------------------------

    \942\ Our estimates are based on staff experience and industry
materials. In particular, staff factored in its cost estimate the
costs associated with printing envelopes, pitch books, letter heads,
and business cards. For large investment advisers, we assume
printing costs of $65,973. For small investment advisers, we assume
printing costs of $33,999.
    ($65,973 x 2,738 large investment advisers = $180,634,074) +
($33,999 x 4,887 small investment advisers = $166,153,113) =
$346,787,187 total investment adviser outside costs.
    \943\ ($65,973 x 2,738 large investment advisers = $180,634,074)
+ ($33,999 x 4,887 small investment advisers = $166,153,113) =
$346,787,187 total investment adviser outside costs/7,625 investment
advisers = $45,480 total cost per investment adviser.
---------------------------------------------------------------------------

    For the ongoing burden of new communications for investment
advisers, we preliminarily estimate that the burden for compliance,
business operations, and technology services for adding a registration
status statement would be 0.5 hours annual hours per investment
adviser.\944\ We anticipate that investment advisers will need to add
the registration disclosure to each new communication which they
create, however we anticipate the burdens associated with this task to
be minimal and therefore we do not believe there is a material
difference between large and small investment advisers.\945\ We
preliminarily estimate that the total ongoing annual aggregate burden
for investment advisers is 3,812.50 hours.\946\ We preliminarily
estimate a total ongoing monetized cost of approximately $545,187.50
for investment advisers.\947\ This would be an annual average burden of
0.5 hours per investment advisers \948\ (as monetized, is an annual
average cost of $71.50 per investment adviser).\949\
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    \944\ This estimate is based upon staff experience. See e.g.,
Release 2968, supra note 891; Enhanced Mutual Fund Disclosure
Adopting Release, supra note 47.
    In this estimate we are not calculating the print and
technological associated burdens of updating communications which we
analyzed earlier as we are assuming those burdens to be a one-time
initial burden for a firm seeking compliance with the proposed rule.
    \945\ Our assumption of no material difference between large and
small investment advisers rests on the fact that all major systems
changes would already have been implemented as part of the initial
burden. Therefore, any new electronic communications would have the
disclosure statement required by our proposed rule built in at the
outset which should take minimal time rather than having to
retroactively insert it into the systems logic which is a more
onerous task. We note that such communications would likely be
reviewed by compliance staff for compliance with applicable
securities laws including rule 206(4)-1 of the Advisers Act. We
anticipate that compliance with proposed rule 211h-1's requirements
would be reviewed as part of this larger compliance check.
    \946\ (0.5 hours x 7,625 investment advisers) = 3,812.50 total
ongoing burden for investment advisers.
    \947\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per investment adviser.
     (0.5 hours x $143 total cost per investment adviser x 7,625
investment advisers) = $545,187.50 total ongoing cost for investment
advisers.
    \948\ (0.5 hours x 7,625 investment advisers) = 3,812.50 total
ongoing burden for investment advisers.
    (3,812.5/7,625 total investment advisers) = 0.5 hours average
initial burden per investment adviser.
    \949\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per investment adviser.
     (0.5 hours x $143 total cost per investment adviser x 7,625
investment advisers) = $545,187.50 total ongoing cost for investment
advisers/7,625 total number of investment advisers = $71.50 average
annual ongoing cost per investment adviser.
---------------------------------------------------------------------------

    For the ongoing burden of new communications for supervised persons
of an investment adviser, we preliminarily estimate that the burden for
compliance, business operations, and technology services for adding a
registration status statement would be 0.5 hours.\950\ Therefore, we
preliminarily estimate that the total ongoing annual aggregate burden
for supervised persons is 122,704 hours.\951\ We preliminarily estimate
a total ongoing monetized cost of approximately $17,546,672 for
supervised persons.\952\ This would be an annual average burden of 0.5
hours per supervised person \953\ (as monetized, is an annual average
cost of $71.50 per supervised person).\954\
---------------------------------------------------------------------------

    \950\ This estimate is based upon staff experience. See e.g.,
Release 2968, supra note 891; Enhanced Mutual Fund Disclosure
Adopting Release, supra note 47.
    In this estimate we are not calculating the print and
technological associated burdens of updating communications which we
analyzed earlier as we are assuming those burdens to be a one-time
initial burden for a supervised person of an investment adviser
seeking compliance with the proposed rule.
    \951\ (0.5 hours x 245,408 supervised persons) = 122,704 total
ongoing burden for supervised persons.
    \952\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per supervised person.
     (0.5 hours x $143 total cost per supervised person x 245,408
supervised persons) = $17,546,672 total ongoing cost for supervised
persons.
    \953\ (0.5 hours x 245,408 supervised persons) = 122,704 total
ongoing annual burden for supervised persons.
    (122,704 total initial burden for supervised persons/245,408
total supervised persons) = 0.5 hours average ongoing annual burden
per supervised person.
    \954\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per supervised person.
     (0.5 hours x $143 total cost per supervised person x 245,408
supervised persons) = $17,546,672 total ongoing cost for supervised
persons/245,408 total number of supervised persons = $71.50 average
ongoing annual cost per supervised person.
---------------------------------------------------------------------------

    Additionally, we believe that any new investment advisers and their
supervised persons would likely only incur the same ongoing annual
burden estimate rather than the initial burden because they would
incorporate the proposed registration status in all communications at
their inception and not have to conduct a review and identification of
outstanding communications nor make changes to their already existing
communications. We do anticipate that such persons would also incur
similar outside legal

costs, depending on their size, as discussed above. We do not believe
that such new investment advisers would incur outside printing costs as
a result of our proposed rule because these new firms would have their
print communications produced with the appropriate disclosure initially
as part of other materials they seek to have printed. Therefore, we
preliminarily estimate that the total burden for new investment
advisers is 238.50 hours.\955\ Additionally, we preliminarily estimate
a cost of approximately $34,105.50 for new investment advisers.\956\
This would be an initial average burden of 0.5 hours per new investment
adviser \957\ (as monetized, is an initial average cost of $71.50 per
new investment adviser).\958\ Additionally, we anticipate 1,500 hours
\959\ for new supervised persons of an investment adviser and costs of
approximately $214,500 for new supervised persons \960\ of an
investment adviser resulting from these requirements. This would be an
initial average burden of 0.5 hours per new supervised person \961\ (as
monetized, is an initial average cost of $71.50 per supervised
person).\962\
---------------------------------------------------------------------------

    \955\ (0.5 hours x 477 new investment advisers) = 238.50 total
burden for new investment advisers.
    \956\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per investment adviser.
     (0.5 hours x $143 total cost per investment adviser x 477 new
investment advisers) = $34,105.50 total initial cost for new
investment advisers.
    \957\ (0.5 hours x 477 new investment advisers) = 238.50 total
initial burden for new investment advisers.
    (238.50 total initial burden for new investment advisers/477
total new investment advisers) = 0.5 hours average initial burden
per investment adviser.
    \958\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per investment adviser.
     (0.5 hours x $143 total cost per investment adviser x 477 new
investment advisers) = $34,105.50 total cost for new investment
advisers/477 total number of new investment advisers = $71.50
average initial cost per new investment adviser.
    \959\ (0.5 hours x 3,000 new supervised persons) = 1,500 total
burden for new supervised persons.
    \960\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per supervised person.
     (0.5 hours x $143 total cost per supervised person x 3,000 new
supervised persons) = $214,500 total cost for new supervised
persons.
    \961\ (0.5 hours x 3,000 new supervised persons) = 1,500 total
initial burden for new supervised persons.
    (1,500 total initial burden for new supervised persons/3000
total new supervised persons) = 0.5 hours average initial burden per
new supervised person.
    \962\ Based on the SIFMA Management and Professional Earnings
Report, Commission staff preliminarily estimates that the average
hourly rate for compliance services is $298, for business operation
services is $268, and for information technology services is $270.
    This figure was calculated as follows: 0.5 hours/3 firm staff
categories (i.e., compliance, business operations, and information
technology) = 0.17 hours per staff category
    ($298 compliance/hour x 0.17) = $51 per 0.17 of an hour.
    ($268 business operations rate/hour x 0.17) = $46 per 0.17 of an
hour.
    ($270 information technology rate/hour x 0.17) = $46 per 0.17 of
an hour.
    $51 + $46 + $46 = $143 total cost per supervised person.
     (0.5 hours x $143 total cost per supervised person x 3,000 new
supervised persons) = $214,500 total cost for new supervised
persons/3,000 total number of new supervised persons = $71.50
average initial cost per new supervised person.
---------------------------------------------------------------------------

I. Request for Comment

    We request comment on our estimates for the new estimated burden
hours and change in current burden hours, and their associated costs
described above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission
solicits comments in order to: (i) Evaluate whether the proposed
collections of information are necessary for the proper performance of
the functions of the Commission, including whether the information will
have practical utility; (ii) evaluate the accuracy of the Commission's
estimate of the burden of the proposed collections of information;
(iii) determine whether there are ways to enhance the quality, utility,
and clarity of the information to be collected; and (iv) determine
whether there are ways to minimize the burden of the collections of
information on those who are to respond, including through the use of
automated collection techniques or other forms of information
technology.
    The agency has submitted the proposed collections of information to
OMB for approval. Persons wishing to submit comments on the collection
of information requirements of the proposed amendments should direct
them to the Office of Management and Budget, Attention Desk Officer for
the Securities and Exchange Commission, Office of Information and
Regulatory Affairs, Washington, DC 20503, and should send a copy to
Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F
Street NE, Washington, DC 20549, with reference to File No. S7-08-18.
As OMB is required to make a decision concerning the collections of
information between 30 and 60 days after publication of the proposal, a
comment to OMB is best assured of having its full effect if OMB
receives it within 30 days of publication. Requests for materials
submitted to OMB by the Commission with regard to these collections of
information should be in writing, refer to File No. S7-08-18, and be
submitted to the Securities and Exchange Commission, Office of FOIA
Services, 100 F Street NE, Washington, DC 20549.

VI. Initial Regulatory Flexibility Analysis

    The Commission has prepared the following Initial Regulatory
Flexibility Analysis (``IRFA'') in accordance with section 3(a) of the
Regulatory Flexibility Act (``RFA'').\963\ It relates to: (i) Proposed
new rule 204-5 under the Advisers Act and proposed amendment to, Form
ADV (17 CFR 279.1), to add a new Part 3: Form CRS; (ii) proposed
amendments to rule 203-1 under the Advisers Act; (iii) proposed
amendments to rule 204-1 under the Advisers Act; (iv) proposed
amendments to rule 204-2 under the Advisers Act; (v) proposed new rule
17a-14 under the Exchange Act and new Form CRS (17 CFR 249.640); (vi)
proposed amendments to rules 17a-3 and 17a-4 under the Exchange Act;
(vii) proposed new rules 15l-2 and 15l-3 under the Exchange Act; and
(viii) proposed new rule 211h-1 under the Advisers Act.
---------------------------------------------------------------------------

    \963\ 5 U.S.C. 603(a).

---------------------------------------------------------------------------

A. Reason for and Objectives of the Proposed Action

    Individual investors rely on the services of broker-dealers and
investment advisers when making and implementing investment decisions.
Such ``retail investors'' can receive investment advice from a broker-
dealer, an investment adviser, or both, or decide to make their own
investment decisions. Broker-dealers, investment advisers and dually
registered firms all provide important services for individuals who
invest in the markets. Studies show that retail investors are confused
about the differences among them.\964\ These differences include the
scope and nature of the services they provide, the fees and costs
associated with those services, conflicts of interest, and the
applicable legal standards and duties owed to investors. Studies also
indicate that retail investors are confused about whether their firm
and financial professional are broker-dealers or investment advisers,
or both.\965\ Based on these studies, it appears that certain names or
titles used by broker-dealers, including ``financial advisor,''
contribute to this confusion and could mislead retail investors into
believing that they are engaging with an investment adviser--and are
receiving services commonly provided by an investment adviser and
subject to an adviser's fiduciary duty, which applies to the retail
investors' entire relationship--when they are not.\966\
---------------------------------------------------------------------------

    \964\ See Siegel & Gale Study, supra note 5; Rand Study, supra
note 5; and CFA Survey, supra note 5.
    \965\ See Siegel & Gale Study, supra note 5; Rand Study, supra
note 5; and 913 Study, supra note 3.
    \966\ See supra note 375.
---------------------------------------------------------------------------

    We recognize the benefits of retail investors having access to
diverse business models and of preserving investor choice among
brokerage services, advisory services, or both. However, we believe
that retail investors need clear information in order to understand the
differences and key characteristics of each type of service. Providing
this clarity is intended to assist investors in making an informed
choice when choosing an investment firm and professional and type of
account to help to ensure they receive services that meet their needs
and expectations. We also believe it is important to mitigate the risk
that certain names or titles could result in retail investors being
misled, including believing that the financial professional is a
fiduciary, leading to uninformed decisions regarding which firm or
financial professional to engage, which may in turn result in investors
being harmed.
    The Commission considered ways to address investor confusion and
preserve investor choice, including reviewing studies, comment letters,
and committee recommendations.\967\ We believe it is important to
ensure that retail investors receive the information they need to
clearly understand the services, standard of conduct, fees, conflicts,
and disciplinary history of firms and financial professionals they are
considering. We also believe it is important for retail investors to
better understand the distinction between investment advisers and
broker-dealers and to have access to the information necessary to make
an informed decision about which firm type and financial professional
they are engaging or seeking to engage and avoid potential harm.
---------------------------------------------------------------------------

    \967\ See supra notes 6-22 and accompanying text, referring to
the Siegel & Gale Study, the RAND Study, the 913 Study, commenters
responding to the 2013 Request for Data, the 917 Financial Literacy
Study, comment letters of commenters providing input for these
studies, the recommendation of the Commission's Investor Advisory
Committee, and comment letters of commenters responding to Chairman
Clayton's Request for Comment.
---------------------------------------------------------------------------

1. Proposed Form CRS Relationship Summary
    We are proposing new rules and rule amendments to require broker-
dealers and investment advisers to deliver a Form CRS (or relationship
summary) to retail investors that would include general information
about each of these topics, including where to find additional
information. We preliminarily believe that providing this information
before or at the time a retail investor enters into an investment
advisory agreement or first engages a brokerage firm's services, as
well as at certain points during the relationship (e.g., switching or
adding account types), as further discussed above, is appropriate and
in the public interest and will improve investor protection, and will
deter potentially misleading sales practices by helping retail
investors to make a more informed choice among the types of firms and
services available to them.\968\
---------------------------------------------------------------------------

    \968\ See supra note 36 and accompanying text.
---------------------------------------------------------------------------

    As discussed above in Section II.A, the relationship summary would
be short, with a mix of tabular and narrative information, and contain
sections covering: (i) Introduction; (ii) the principal relationships
and services the firm offers to retail investors; (iii) the standard of
conduct applicable to those services; (iv) the fees and costs that
retail investors will pay; (v) comparisons of brokerage and investment
advisory services (for standalone broker-dealers and investment
advisers); (vi) conflicts of interest; (vii) where to find additional
information, including whether the firm or its financial professionals
currently have reportable legal or disciplinary events and who to
contact about complaints; and (viii) key questions for retail investors
to ask the firm's financial professional.
    The proposed rules and rule amendments would require advisers and
broker-dealers to deliver their relationship summaries to retail
investors, to file them electronically with the Commission, and to post
them electronically on their public websites (if they have a public
website). If they do not have a public website, they would be required
to include in their relationship summary a toll-free number that retail
investors may call to request documents. We are also proposing to
require firms to update their relationship summaries within 30 days
whenever any information in the relationship summary becomes materially
inaccurate. Firms would be required to file the updated version
electronically with the Commission, and post them on their firms'
websites (if they have a public website). Firms would be required to
communicate any changes in an updated relationship summary to retail
investors who are existing clients or customers of the firm within 30
days after the updates are required to be made and without charge. The
communication could be made by delivering the relationship summary or
by communicating the information in another way to the retail investor.
The proposal would require a firm to maintain a copy of the
relationship summary and each amendment or revision as part of its
books and records and make them available to Commission staff upon
request, as discussed in Section II.E above. All of these requirements
are discussed in detail above in Sections I through IV. The burdens of
these requirements on small advisers and broker-dealers are discussed
below as well as above in our Economic Analysis and Paperwork Reduction
Act Analysis, which discuss the burdens on all advisers and broker-
dealers.\969\
---------------------------------------------------------------------------

    \969\ See, e.g., Sections IV.B.2.b and V.
---------------------------------------------------------------------------

    As discussed in Section II above, the relationship summary would be
in addition to, and not in lieu of, current disclosure and reporting
requirements for broker-dealers and investment

advisers.\970\ The relationship summary would alert retail investors to
important information for them to consider when choosing a firm and a
financial professional and prompt retail investors to ask informed
questions. In addition, the content of the relationship summary would
facilitate comparisons across firms. As discussed in Section II above,
while the information required by the relationship summary is generally
already provided in greater detail for investment advisers by Form ADV
Part 2, the relationship summary would provide in one place information
about the services, fees, conflicts, and disciplinary history for
broker-dealers.\971\
---------------------------------------------------------------------------

    \970\ See, e.g., supra note 33 and accompanying text.
    \971\ See supra text accompanying note 316. In addition, under
Regulation Best Interest, broker-dealers would be required to
disclose, in writing, the material facts relating to the scope and
terms of the relationship with the retail customer and all material
conflicts of interest that are associated with the recommendation.
See supra note 296.
---------------------------------------------------------------------------

2. Proposed Rules Relating to Restrictions on the Use of Certain Terms
and Required Disclosure of Regulatory Status and a Financial
Professional's Firm Association
    We are also proposing a rule under the Exchange Act that would
restrict broker-dealers and their associated natural persons, when
communicating with a retail investor, from using as part of a name or
title the term ``adviser'' or ``advisor'' unless any such (1) broker or
dealer is an investment adviser registered under section 203 of the
Advisers Act or with a state, or (2) natural person who is an
associated person of a broker or dealer is a supervised person of an
investment adviser registered under section 203 of the Advisers Act or
with a state, and such person provides investment advice on behalf of
such investment adviser. We are also proposing rules under the Exchange
Act and Advisers Act that would require broker-dealers and investment
advisers and their associated natural persons and supervised persons,
respectively, to prominently disclose the firm's registration status
with the Commission and the financial professional's association with
such firm in print and electronic retail investor communications. As
discussed above in Section III, the proposed restriction is designed to
address the risk that retail investors could be misled by the term
``adviser'' or ``advisor'' and, as a result, make an uninformed
decision regarding which firm or financial professional they are
engaging or seeking to engage, resulting in investors being harmed.
Additionally, as discussed above in Section III, we believe that
requiring firms and their associated natural persons or supervised
persons, respectively, to disclose whether a firm is a broker-dealer or
investment adviser and requiring a financial professional to disclose
his or her association with such firm would assist retail investors in
determining which type of firm is more appropriate for their specific
investment needs. Similarly, our proposed rules to require a firm to
disclose whether it is a broker-dealer or an investment adviser in
print or electronic communications to retail investors would help to
facilitate investor understanding, even if investors currently may not
understand the differences between investment advisers and broker-
dealers. For similar reasons, we preliminarily believe that because
retail investors interact with a firm primarily through financial
professionals, it is important that financial professionals disclose
the firm type with which they are associated.

B. Legal Basis

    The Commission is proposing the following new rule and rule
amendments under the authority set forth in section 19(a) of the
Securities Act of 1933 [15 U.S.C. 77s(a)], sections 23(a) and 28(e)(2)
of the Securities Exchange Act of 1934 [15 U.S.C. 78w(a) and
78bb(e)(2)], section 319(a) of the Trust Indenture Act of 1939 [15
U.S.C. 7sss(a)], section 38(a) of the Investment Company Act of 1940
[15 U.S.C. 80a-37(a)], and sections 203(c)(1), 204, 206A, 206(4),
211(a) and 211(h), and of the Investment Advisers Act of 1940 [15
U.S.C. 80b-3(c)(1), 80b-4, 80b-6a, 80b-6(4), 80b-11(a) and 80b-11(h)],
and section 913(f) of Title IX of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (the ``Dodd-Frank Act''): (i) Proposed
new rule 204-5 under the Advisers Act ; (ii) amendments to rule 279.1,
Form ADV, to create Form CRS for investment advisers; (iii) amendments
to rule 203-1 under the Advisers Act; (iv) amendments to rule 204-1
under the Advisers Act; and (v) amendments to rule 204-2 under the
Advisers Act. The Commission is proposing the following rule amendments
under the authority set forth in section 913(f) of Title IX of the
Dodd-Frank Act, sections 3, 10, 15, 23 and 36 of the Exchange Act [15
U.S.C. 78c, 78j, 78o, 78q, 78w and 78mm]: (i) Proposed new rule 17a-14
under the Exchange Act; (ii) proposed Form CRS (17 CFR 249.640) under
the Exchange Act; and (iii) amendments to rule 17a-3 and 17a-4 under
the Exchange Act. The Commission is also proposing the following new
rules under the authority set forth in sections 15(l), 23(a), and 36 of
the Securities Exchange Act of 1934 (78o(l), 78w(a), and 78mm),
sections 211(h), 206A, 211(a) of the Investment Advisers Act of 1940,
15 U.S.C. 80b-1 et seq., (80b-11(h), 80b-6a, 80b-11(a), sections 913(f)
and 913(g)(2) of Title IX of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010; (i) proposed new rule 15l-2 under the
Exchange Act; (ii) proposed new rule 15l-3 under the Exchange Act; and
(iii) proposed new rule 211h-1 under the Advisers Act.

C. Small Entities Subject to the Rule and Rule Amendments

    In developing these proposals, we have considered their potential
impact on small entities that would be subject to the proposed
amendments. The proposed amendments would affect many, but not all,
broker-dealers and investment advisers registered with the Commission,
including some small entities.
1. Investment Advisers
    Under Commission rules, for the purposes of the Advisers Act and
the RFA, an investment adviser generally is a small entity if it: (1)
Has assets under management having a total value of less than $25
million; (2) did not have total assets of $5 million or more on the
last day of the most recent fiscal year; and (3) does not control, is
not controlled by, and is not under common control with another
investment adviser that has assets under management of $25 million or
more, or any person (other than a natural person) that had total assets
of $5 million or more on the last day of its most recent fiscal
year.\972\ As discussed in Section V, above, the Commission estimates
that based on IARD data as of December 31, 2017, approximately 7,625
investment advisers would be subject to the proposed new rule 204-5
under the Advisers Act, Form CRS (required by a new Part 3 of Form
ADV), the proposed amendments to rules 203-1, 204-1, and rule 204-2
under the Advisers Act, and the proposed new rule 211h-1 under the
Advisers Act.\973\ Our proposed new

rules and amendments would not affect most investment advisers that are
small entities (``small advisers'') because they are generally
registered with one or more state securities authorities and not with
the Commission. Under section 203A of the Advisers Act, most small
advisers are prohibited from registering with the Commission and are
regulated by state regulators. Based on IARD data, we estimate that as
of December 31, 2017, approximately 618 SEC-registered advisers are
small entities under the RFA.\974\ Of these, 179 provide advice to
individual high net worth and individual non-high net worth clients,
and would therefore be subject to the proposed Form CRS requirements
and the related new and amended rules under the Advisers Act, and
proposed new rule 211h-1 under the Advisers Act requiring disclosure of
Commission registration status and a financial professional's
association in certain communications with retail investors.\975\
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    \972\ Advisers Act rule 0-7(a).
    \973\ See supra Section V, at note 712 and accompanying text.
Based on responses to Item 5.D. of Form ADV. These advisers
indicated that they advise either high net worth individuals or
individuals (other than high net worth individuals), which includes
trusts, estates, and 401(k) plans and IRAs of individuals and their
family members, but does not include businesses organized as sole
proprietorships. The proposed definition of retail investor would
include a trust or other entity similar entity that represents of
natural persons, even if another person is a trustee or managing
agent of the trust. We are not able to determine, based on responses
to Form ADV, exactly how many advisers provide investment advice to
these types of trusts or other entities; however, we believe that
these advisers most likely also advise individuals and are therefore
included in our estimate.
    \974\ Based on SEC-registered investment adviser responses to
Items 5.F. and 12 of Form ADV.
    \975\ Based on SEC-registered investment adviser responses to,
Items 5.D.(a), 5.D.(b), 5.F. and 12 of Form ADV, which indicate that
the adviser has clients that are high net worth individuals and/or
individuals (other than high net worth individuals) and that the
adviser is a small entity. Of these, 3 firms are dually registered
as a broker-dealer and an investment adviser and may offer services
to retail investors as both a broker-dealer and investment adviser
(e.g., ``dual registrants'' for purposes of the relationship
summary). See supra note 25. Dual registrants would file Form CRS on
both IARD and EDGAR describing their retail advisory and retail
brokerage businesses. In this RFA, dual registrants are counted in
both the total number of small entity investment advisers and
broker-dealers that would be subject to Form CRS and the proposed
related rules and rule amendments. We believe that counting these
firms twice is appropriate because of their additional burdens of
complying with the rules with respect to both their advisory and
brokerage businesses and filing Form CRS with IARD and EDGAR.
---------------------------------------------------------------------------

2. Broker-Dealers
    For purposes of a Commission rulemaking in connection with the RFA,
a broker-dealer will be deemed a small entity if it: (1) Had total
capital (net worth plus subordinated liabilities) of less than $500,000
on the date in the prior fiscal year as of which its audited financial
statements were prepared pursuant to rule 17a-5(d) under the Exchange
Act,\976\ or, if not required to file such statements, had total
capital (net worth plus subordinated liabilities) of less than $500,000
on the last day of the preceding fiscal year (or in the time that it
has been in business, if shorter); and (2) is not affiliated with any
person (other than a natural person) that is not a small business or
small organization.
---------------------------------------------------------------------------

    \976\ See 17 CFR 240.0-10(c).
---------------------------------------------------------------------------

    As discussed in Sections IV and V, above, the Commission estimates
that as of December 31, 2017, approximately 2,857 retail broker-dealers
would be subject to the proposed Form CRS requirements and new rule
17a-14 under the Exchange Act, and proposed amendments to rule 17a-3
and 17a-4 under the Exchange Act, and proposed new rules 15l-2 and 15l-
3 under the Exchange Act.\977\ Further, based on FOCUS Report data, the
Commission estimates that as of December 31, 2017, approximately 1,040
broker-dealers may be deemed small entities under the RFA.\978\ Of
these, approximately 802 have retail business, and would be subject to
the proposed Form CRS requirements and related proposed new and amended
rules, the proposed rule requiring disclosure of Commission
registration status in certain communications with retail investors,
and the proposed rule regarding the prohibition of certain terms in
names or titles in certain communications with retail investors.\979\
---------------------------------------------------------------------------

    \977\ See supra note 461 and accompanying text. Retail sales
activity is identified from Form BD, which categorizes retail
activity broadly (by marking the ``sales'' box) or narrowly (by
marking the ``retail'' or ``institutional'' boxes as types of sales
activity). We use the broad definition of sales as we preliminarily
believe that many firms will just mark ``sales'' if they have both
retail and institutional activity. However, we note that this may
capture some broker-dealers that do not have retail activity,
although we are unable to estimate that frequency.
    \978\ The Commission's estimate is obtained from Form BD
filings. Although Form BD filings are updated on a more frequent
basis than annually, FOCUS data, which also informs this baseline
with respect to broker-dealers, is only sparsely updated throughout
the year. Moreover, instead, broker-dealers tend to make their most
complete updates in the fourth calendar quarter of each year.
Therefore, in order to minimize discrepancies in the broker-dealer
data between Form BD and FOCUS data, we have normalized all of the
data to the most recently complete FOCUS data, which is for December
2017.
    \979\ Id.
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D. Projected Reporting, Recordkeeping and Other Compliance Requirements

1. Initial Preparation of Form CRS Relationship Summary
    Proposed Form CRS and the proposed rules and rule amendments would
impose certain reporting and compliance requirements on certain
advisers and broker-dealers, including those that are small entities,
requiring them to create and update relationship summaries containing
specified information regarding their advisory and brokerage
businesses, as applicable. The proposed rules and rule amendments,
including new recordkeeping requirements, are summarized in this RFA
(Section VI.A., above). All of these proposed requirements are also
discussed in detail, above, in Sections II.A-E., and these requirements
and the burdens on advisers and broker-dealers, including those that
are small entities, are discussed above in Sections IV and V (the
Economic Analysis and Paperwork Reduction Act Analysis) and below.
    The proposed amendments to Form ADV that would require each
registered investment adviser that offers advisory services to retail
investors to prepare, file and deliver Form CRS would impose additional
costs on many registered advisers, including some small advisers. Our
Economic Analysis, discussed in Section IV, above, discusses these
costs and burdens for investment advisers, which include small
advisers.\980\ In addition, as discussed in our Paperwork Reduction
Analysis, above, we anticipate that some advisers may incur a one-time
initial cost for outside legal and consulting fees in connection with
the initial preparation of the relationship summary.\981\ Generally,
all advisers, including small advisers that advise retail investors are
currently required to prepare and distribute Part 2 of Form ADV (the
firm brochure). Because advisers already provide disclosures about
their services, fees, conflicts and disciplinary history in their firm
brochures,\982\ they would be able to use some of this information to
respond to the disclosure requirements of the relationship summary.
They would, however, have to draft completely new disclosure to comply
with the proposed new format of Form CRS. As discussed above,
approximately 179 small advisers currently registered with us would be
subject to the proposed new Form ADV

Part 3.\983\ As discussed above in our Paperwork Reduction Act
Analysis, we expect these 179 small advisers to spend, on average, an
additional total of 23,152 annual hours, or approximately 129.34 hours
per adviser,\984\ which translates into an approximate monetized cost
of $1,478,055, or $8,257 per adviser, attributable to the initial
preparation, filing, posting, and delivery related to Form CRS.\985\ We
expect the incremental external legal and compliance cost for small
entity investment advisers to be estimated at $525 per adviser, or
$93,936 in aggregate for small advisers.\986\
---------------------------------------------------------------------------

    \980\ See supra notes 621-637 and accompanying text (discussing
the direct costs of Form CRS and related requirements on broker-
dealers and investment advisers, including costs associated with
delivery, preparation, and firm-wide implementation of the
relationship summary, as well as training and monitoring for
compliance).
    \981\ See supra notes 729-730 and accompanying text (stating,
however, that we do not anticipate external costs to investment
advisers in the form of website set-up, maintenance, or licensing
fees because they would not be required to establish a website for
the sole purpose of posting their relationship summary if they do
not already have a website, and we also do not expect other ongoing
external costs for the relationship summary).
    \982\ Much of the disclosure in Part 2A addresses an investment
adviser's conflicts of interest with its clients, and is disclosure
that the adviser, as a fiduciary, must make to clients in some
manner regardless of the form requirements. See supra note 314.
    \983\ See supra note 975 and accompanying text.
    \984\ See supra Sections V.A.2, V.B, and V.C. 2.52 hours for
preparing and filing of the relationship summary + 126.8 hours for
posting to the website and delivery = 129.3 hours per adviser.
    \985\ See supra Sections V.A.2, V.B, and V.C. 129.3 hours x 179
small advisers = $23,152 in total annual aggregate hours for small
advisers. $8,257 x 179 small advisers = $1,478,055 in total annual
aggregate monetized cost for small advisers.
    \986\ See supra Section V.A.2.b.
---------------------------------------------------------------------------

    Similarly, requiring each broker-dealer that offers brokerage
services to retail investors to prepare, file and deliver Form CRS
would impose additional costs on many broker-dealers, including some
small broker-dealers. Our Economic Analysis, discussed in Section IV,
above, discusses these costs and burdens for broker-dealers, which
include small broker-dealers.\987\ In addition, as discussed in our
Paperwork Reduction Analysis, above, we anticipate that some broker-
dealers may incur a one-time initial cost for outside legal and
consulting fees in connection with the initial preparation of the
relationship summary.\988\ As discussed above,\989\ unlike investment
advisers, broker-dealers are not currently required to deliver to their
retail investors written disclosures covering their services, fees,
conflicts, and disciplinary history in one place such as the investment
advisory firm brochure.\990\ Under existing provisions of the Exchange
Act and self-regulatory organization rules, however, a broker-dealer is
required to disclose certain information to its customers.\991\ To the
extent that some of the new Form CRS disclosure burdens would apply to
small broker-dealers, these broker-dealers are therefore already
obligated to make certain of these disclosures to retail investors,
although the disclosure is not currently required to be included in one
comprehensive document such as Form ADV. As discussed above,\992\
approximately 802 broker-dealers that are small entities would be
subject to the proposed Form CRS requirements and proposed new and
amended rules. As discussed above, we expect these 802 small broker-
dealers to spend, on average, 1,080 hours per broker-dealer,\993\ for a
monetized value of $66,006 per broker-dealer,\994\ or 865,956 aggregate
annual hours to respond to the proposed new Form CRS requirements,\995\
for an annual monetized burden of approximately $52,936,812. We expect
the aggregate annual external third-party cost to small broker-dealers
associated with this process would be $376,940.\996\
---------------------------------------------------------------------------

    \987\ See supra notes 621-637 and accompanying text (discussing
the direct costs of Form CRS and related requirements on broker-
dealers and investment advisers, including costs associated with
delivery, preparation, and firm-wide implementation of the
relationship summary, as well as training and monitoring for
compliance).
    \988\ See supra Section V.D.1. (stating, however, that we do not
expect ongoing external legal or compliance consulting costs for the
relationship summary).
    \989\ See supra Section IV, at note 629 and accompanying text.
    \990\ Broker-dealers are required under certain circumstances,
such as when effecting certain types of transactions, to disclose
certain conflicts of interest to their customers in writing, in some
cases at or before the time of the completion of the transaction.
See 913 Study, supra note 3, at nn.256-259 and accompanying text.
See supra note 311 and accompanying text. Under Regulation Best
Interest, broker-dealers would also be required to disclose the
material facts relating to the scope and terms of the relationship.
Regulation Best Interest Proposal, supra note 24.
    \991\ See supra Section II, at notes 309-312 and accompanying
text. See also Regulation Best Interest Proposal, supra note 24.
    \992\ See supra note 979.
    \993\ See supra note 846.
    \994\ See supra note 847.
    \995\ See supra note 823 and accompanying text. 802 small
broker-dealers x 1,080 hours per broker-dealer = 865,956 annual
aggregate hours. 802 small broker-dealers x $66,006 in monetized
cost per broker-dealer = 52,936,812 annual aggregate hours.
    \996\ See supra note 829 and accompanying text. 802 small
broker-dealers x $470 in external legal and compliance costs on
average per broker-dealer = $376,940.
---------------------------------------------------------------------------

    The costs associated with preparing the new relationship summaries
will be limited for investment advisers and broker-dealers, including
small entities, for several reasons. First, the disclosure document is
concise (no more than four pages in length or equivalent limit if in
electronic format), and much of the information is already provided by
the broker-dealers and investment advisers as part of current
disclosure practices. Second, the disclosure will be uniform across
retail investors and would not be customized or personalized to
potential investors. Third, the disclosure would involve a certain
degree of standardization across firms. In particular, firms would be
required to use the same headings, prescribed wording, and present the
information under the headings in the same order. Additionally, firms
would be prohibited from adding any items to those prescribed by the
Commission and any information other than what the Instructions require
or permit. These standardized elements allow for potential economies of
scale for entities that may have subsidiaries that would also be
required to produce the disclosure. The compliance costs could,
however, be different across firms with relatively smaller or larger
numbers of retail investors as customers or clients.\997\
---------------------------------------------------------------------------

    \997\ See supra note 628 and accompanying text (discussing the
Commission's preliminary belief that compliance costs could be
different across firms with relatively smaller or larger numbers of
retail investors as customers or clients).
---------------------------------------------------------------------------

    Filing, Delivery, and Updating Requirements Related to Form CRS. As
discussed above, a firm would be required to give a relationship
summary to each retail investor, if the firm is an investment adviser,
before or at the time the firm enters into an investment advisory
agreement with the retail investor, or if the firm is a broker-dealer,
before or at the time the retail investor first engages the services of
the broker-dealer.\998\ A firm would be required to deliver the
relationship summary even if the firm's agreement with the retail
investor is oral. A dual registrant would deliver the relationship
summary at the earlier of entering into an investment advisory
agreement with the retail investor or the retail investor engaging the
firm's services. In order to ensure that existing retail investors
receive the disclosures in the relationship summary, the Commission
proposes that firms would deliver the relationship summary to retail
investors who are existing clients and customers on an initial one-time
basis within 30 days after the date the firm is first required to file
its relationship summary with the Commission.\999\ In addition, firms
would be required to deliver the relationship summary to a retail
investor who is an existing client or customer before or at the time a
new account is opened or changes are made to the retail investor's
account(s) that would materially change the nature and scope of the
firm's relationship with the retail investor. This would include, for
example, before or at the time the firm recommends that the retail
investor transfers from an investment advisory account to a brokerage
account or from a brokerage account to an investment advisory account,
or moves assets from one type of account to another in a

transaction not in the normal, customary or already agreed course of
dealing.
---------------------------------------------------------------------------

    \998\ See supra Section II.C for a discussion of the delivery
requirements.
    \999\ See supra Section II.D for a discussion of the delivery
requirements during the proposed transition period following the
effectiveness of the proposed new rule.
---------------------------------------------------------------------------

    As discussed above, firms would be required to update the
relationship summary within 30 days whenever any information in the
relationship summary becomes materially inaccurate.\1000\ Firms also
would be required to post the latest version on its website (if it has
one), and electronically file the relationship summary with the
Commission. Firms would be required to communicate any changes in the
updated relationship summary to retail investors who are existing
clients or customers of the firm within 30 days after the updates are
required to be made and without charge. The firm could communicate the
information by delivering the amended relationship summary or by
communicating the information in another way to the retail investor. We
believe that this flexibility would minimize the burden of the
communication requirement for all firms, including small advisers and
broker-dealers. Firms also would also be required to deliver the
relationship summary to a retail investor upon the retail investor's
request.
---------------------------------------------------------------------------

    \1000\ See supra Section II.C.3 for a discussion of updating
requirements.
---------------------------------------------------------------------------

    In addition, firms would be permitted to deliver the relationship
summary, as well as updates, electronically consistent with the
Commission's prior guidance regarding electronic delivery. We believe
that this would further minimize the burden of delivery for all firms,
including small advisers and broker-dealers. To the extent that small
advisers and broker-dealers are more likely to have fewer retail
investors than larger advisers and broker-dealers, the proposed
delivery requirements should impose lower variable costs on small
advisers and broker-dealers than on larger firms. The additional hours
per adviser and broker-dealer, the monetized cost per adviser and
broker-dealer, and the incremental external legal and compliance cost
for small entity investment advisers and broker-dealers, attributable
to the initial preparation, filing, posting, delivery, and
recordkeeping related to Form CRS, are estimated above and in the
Paperwork Reduction Analysis.\1001\
---------------------------------------------------------------------------

    \1001\ See supra Sections V.A.-F.
---------------------------------------------------------------------------

    Recordkeeping Requirements Related to Form CRS. The proposed
amendments would impose new recordkeeping requirements on many
investment advisers and broker-dealers, including some small advisers
and broker-dealers. We are proposing amendments to Advisers Act rule
204-2 and Exchange Act rules 17a-3 and 17a-4, which set forth
requirements for maintaining, making and preserving specified books and
records, to require SEC-registered investment advisers and broker-
dealers to retain copies of each relationship summary. Firms would also
be required to maintain each amendment and revision to the relationship
summary and a record of dates that each relationship summary and each
amendment was delivered.
    These proposed changes are designed to update the books and records
rules in light of proposed Form CRS, and they mirror the current
recordkeeping requirements for the Form ADV brochure and brochure
supplement. The records for investment advisers would be required to be
maintained in the same manner, and for the same period of time, as
other books and records required to be maintained under rule 204-2(a)
under the Advisers Act, and the records for broker-dealers would be
required to maintained for six years after the record was created in
accordance with rule 17a-4(e)(10) under the Exchange Act.\1002\ As
discussed in the Paperwork Reduction Act Analysis in Section IV above,
the proposed amendments to rule 204-2 under the Advisers Act would
increase the annual burden by approximately 0.2 hours per adviser, or
35.80 hours in aggregate for small advisers.\1003\ We therefore expect
the annual monetized aggregate cost to small advisers associated with
our proposed amendments would be $2,148.\1004\ Also as discussed in the
Paperwork Reduction Act Analysis in Section IV above, the proposed
amendments to rules 17a-3 and 17a-4 under the Exchange Act would
increase the burden by approximately 0.2 annual hours per broker-
dealer, or 160.4 annual hours in the aggregate.\1005\ We expect the
aggregate cost to small broker-dealers associated with our proposed
amendments would be $9,624.\1006\
---------------------------------------------------------------------------

    \1002\ See supra note 371 (referencing Advisers Act rule 204-
2(e)(1) and Exchange Act rule 17a-4(e)(10), and stating that
pursuant to Advisers Act rule 204-2(e)(1), investment advisers will
be required to maintain the relationship summary for a period of
five years, while Exchange Act rule 17a-4(e)(5) will require broker-
dealers to maintain the relationship summary for a period of six
years).
    \1003\ See supra note 765. 0.2 hours x 179 small entity retail
investment advisers = 35.8.
    \1004\ See supra note 768.
    \1005\ 0.2 hours x 802 small broker-dealers = 160.4 hours.
    \1006\ See supra note 854 and accompanying text. $12 per broker-
dealer x 802 small broker-dealers = $9,624.
---------------------------------------------------------------------------

2. Rule 15l-2 Relating to Restrictions on the Use of Certain Terms in
Names and Titles
    As discussed above in Section III, we are proposing to restrict
broker-dealers and associated natural persons of broker-dealers, when
communicating with a retail investor, from using as part of a name or
title the term ``adviser'' or ``advisor'' unless any such (1) broker or
dealer is an investment adviser registered under section 203 of the
Advisers Act or with a state, or (2) natural person who is an
associated person of a broker or dealer is a supervised person of an
investment adviser registered under section 203 of the Advisers Act or
with a state, and such person provides investment advice on behalf of
such investment adviser.
    This would include such names or titles as, for example, financial
advisor (or adviser), wealth advisor (or adviser), and trusted advisor
(or adviser), and advisory (e.g., ``Sample Firm Advisory'') when
communicating with any retail investor.
    The proposed rule would permit firms that are registered both as
investment advisers and broker-dealers to use the term ``adviser'' or
``advisor'' in their name or title. The proposed rule would, however,
only permit an associated natural person of a dually registered firm
\1007\ to use these terms where such person is also a supervised person
of an investment adviser registered with the Commission or with a state
and provides investment advice on behalf of such investment adviser.
This would limit the ability of natural persons associated with a
broker-dealer that do not typically provide investment advisory
services to retail investors from continuing to use the term
``adviser'' or ``advisor'' by virtue of the fact that they are
affiliated with a dually registered firm.
---------------------------------------------------------------------------

    \1007\ For purposes of rules 15l-2, 15l-3 and 211h-1, we are
defining a ``dually registered firm'' in the same manner as a ``dual
registrant'' is defined in the baseline of the Economic Analysis.
See supra Section IV, note 453. See also supra note 411. We use the
more narrowly defined ``dual registrant'' for purposes of the
relationship summary discussion only.
---------------------------------------------------------------------------

    Proposed rule 15l-2 would impose certain compliance requirements on
broker-dealers, including small broker-dealers, but would not impose
reporting or recordkeeping requirements on broker-dealers. The
compliance burdens on broker-dealers, including small broker-dealers,
are described above in our Economic Analysis in Section IV. They would
need to change their names or titles where their names or titles
include ``adviser'' or ``advisor'' in violation of the proposed rule.
As

discussed in Section IV above, the Commission estimates that as of
December 31, 2017, approximately 2,857 broker-dealers would be subject
to the proposed rule 151-2 under the Exchange Act.\1008\ As discussed
in Section IV, above, approximately 103 broker-dealers that are not
dually registered as investment advisers use the term ``adviser,''
``advisor,'' or ``advisory'' as part of their current company name. To
the extent these broker-dealers, some of which may be small entities,
advise retail investors and would be subject to proposed rule 151-2,
they would be subject to potentially substantial, one-time costs
associated with the proposed rule. Broker-dealer firms subject to the
restriction on the use of certain names or titles would be required to
change current company names (if the company name contains ``adviser/
advisor''), marketing materials, advertisements (e.g., print ads or
television commercials), website and social media appearance, among
other items, resulting in direct compliance costs.
---------------------------------------------------------------------------

    \1008\ See supra Section IV.A.1.a.
---------------------------------------------------------------------------

    In addition, as discussed in Section IV, as a result of the
proposed rule 151-2, broker-dealers would need to assess whether their
associated natural persons use as part of a name or title the term
``adviser'' or ``advisor.'' As discussed in Section IV, financial
professionals providing brokerage services use a large variety of names
or titles to describe their business and the services that they offer,
including ``financial advisor,'' ``financial consultant,'' ``banker,''
and ``broker.'' \1009\ To the extent their associated natural persons
use the terms adviser'' or ``advisor'' when communicating with a retail
investor, firms would need to assess whether to require their
associated natural persons to change their names or title to comply
with the proposed rule and modify their retail investor communications.
We request comment on how many associated natural persons of broker-
dealers, including small entity broker-dealers, are currently using the
terms ``adviser'' or ``advisor'' in their names or titles, and how many
of these associated natural persons are supervised persons of an
investment adviser registered with the Commission or with a state and
who provide investment advice on behalf of such investment adviser.
---------------------------------------------------------------------------

    \1009\ As discussed in Section IV, approximately 39 percent of
the 103 broker-dealers described above used a proper name coupled
with the term ``advisor'' alone, and an additional 31 percent used a
proper name coupled with the term ``capital advisor.'' Additionally,
as discussed in the RAND Study, professionals providing advisory
services or both brokerage and advisory services similarly also use
a wide variety of titles, but the proportion of professionals who
use titles containing the terms ``adviser'' or ``advisor'' are
somewhat larger at 35%. See supra Section IV, Table 8: Replication
of Table 6.3 of the RAND Study--Professional Titles Most Commonly
Reported by Respondents, and accompanying text.
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    The proposed restriction on the use of the term ``adviser'' and
``advisor'' in a name or title does not apply to registered investment
advisers, whether they are solely registered as investment advisers or
whether they are dually registered as broker-dealers. Consequently,
there would be no compliance costs for registered investment advisers
associated with the restriction on certain terms in names or titles.
However, as discussed in Sections III and IV, supervised persons of
dually registered investment advisers who do not provide investment
advice on behalf of such investment adviser would be restricted from
using these terms when communicating with a retail investor, which
could lead to costs for those financial professionals or their firms.
3. Rules 15l-3 and 211h-1 Relating to Disclosure of Commission
Registration Status and Financial Professional Association
    As discussed above, we are proposing rule 15l-3 under Exchange Act
and rule 211h-1 under the Advisers Act that would require broker-
dealers and investment advisers and their associated natural persons
and supervised persons, respectively, to disclose the firm's
registration status with the Commission and such financial
professional's relationship with the firm in print or electronic retail
investor communications. These rules would impose certain compliance
requirements on many broker-dealers and investment advisers but would
not impose separate reporting or recordkeeping requirements on
investment advisers and broker-dealers. The compliance burdens on
broker-dealers and investment advisers, including small broker-dealers
and investment advisers, are described above in our Economic Analysis
in Section IV and the Paperwork Reduction Act discussion in Section V.
These include the requirement for investment advisers and broker-
dealers that would be subject to the proposed rule to prominently
disclose their registration status in print or electronic retail
investor communications. In addition, associated natural persons would
need to prominently disclose that they are associated persons of a
broker-dealer registered with the Commission, and supervised persons
would need to prominently disclose that they are supervised persons of
an investment adviser registered with the Commission.
    As discussed in Sections IV and V above, the Commission estimates
that as of December 31, 2017, approximately 2,857 broker-dealers would
be subject to the proposed rule 15l-3 under the Exchange Act. As
discussed above, of these, approximately 802 are small entities. These
broker-dealers would be subject to the rule's requirements described in
the previous paragraph. As discussed above, the Commission estimates
that as of December 31, 2017, approximately 7,625 investment advisers
would be subject to the proposed rule 211h-1 under the Advisers Act.
Based on IARD data, we estimate that as of December 31, 2017,
approximately 618 advisers are small entities under the RFA. Of these,
approximately 179 advise retail investors, and would therefore be
subject to the proposed rule 211h-1 under the Advisers Act.
    Compliance with these proposed rules would require changes to
retail investor communications, which would have to be modified to
incorporate the registration status in the manner the rule prescribes.
As discussed above in Sections IV and V, to comply with our proposed
rule with respect to print communications, broker-dealers and
investment advisers would need to review their print and electronic
retail investor communications, identify which would need to be
amended, make the changes, and verify that all firm retail investor
communications comply with the rule's requirements including its
technical specifications such as the type size, font, and prominence.
As discussed above in Section V, we preliminarily anticipate that the
costs associated with complying with the proposed rule with respect to
print communications would be larger for large broker-dealers than for
small broker-dealers, because we assume large broker-dealers will have
to review, identify and change more print communications and in turn
have their compliance staff verify more print communications as being
compliant with our proposed rule as compared to small broker-dealers
which will have fewer print communications. With respect to electronic
communications, broker-dealers would need to review, identify and make
the required updates coupled with verifying that such retail investor
communications (present and future) would be compliant with the
proposed rule.\1010\ We preliminarily

estimate that the costs associated with complying with the proposed
rule regarding electronic communications would similarly be lower for
small broker-dealers than for large broker-dealers, because we assume
that small broker-dealers have fewer electronic communications that are
subject to our proposed rule as compared to large firms. For investment
advisers, as discussed above in Section V, we preliminarily estimate
that large firms would require larger costs than small firms to comply
with the proposed rule (e.g., large firms have a greater amount of
retail investor communications subject to our proposed rule that would
need to be reviewed, changed, and verified).
---------------------------------------------------------------------------

    \1010\ As stated in Section III.D above, we are not requiring
firms to send new communications to replace all older print
communications as this would be overly burdensome and costly for
firms. Instead, we are staging the compliance date to ensure that
firms can phase out certain older communications from circulation
through the regular business lifecycle rather than having to
retroactively change them.
---------------------------------------------------------------------------

    The Commission also preliminarily estimates that the costs
associated with complying with the proposed rules' disclosure
requirements for broker-dealers, investment advisers, and their
associated natural persons and supervised persons, respectively, would
also be smaller for small firms than for large firms. With respect to
broker-dealers, we estimate that the costs would increase with the size
of the broker-dealer, such as costs associated with revisions to each
individual representative's communication and advertising
materials.\1011\ Specifically, large broker-dealers would have to
review, identify and change more print and electronic communications
and in turn have their compliance staff verify more communications as
being compliant with our proposed rules as compared to small broker-
dealers which would have fewer communications. Similarly, with respect
to investment advisers, we estimate that small investment advisers
would have fewer print and electronic communications that would be
subject to our proposed rule as compared to large firms, resulting in a
lower burden preliminary estimate. In addition, the Commission
estimates that small entity advisers have fewer employees performing
investment advisory functions than large advisers.\1012\ Therefore, we
anticipate that small entity retail investment advisers would require
fewer resources to oversee their employees' compliance with the
proposed rule.
---------------------------------------------------------------------------

    \1011\ See Section IV.
    \1012\ Based on adviser responses to Item 5.B.(1) of Form ADV,
we estimate that as of September 30, 2017, the median small entity
retail investment adviser employed 1 person performing investment
advisory functions, and the median non-small entity retail
investment advisers employed 5 persons performing investment
advisory functions.
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E. Duplicative, Overlapping, or Conflicting Federal Rules

    As noted above, broker-dealers and investment advisers have other
disclosure obligations under the federal securities laws and other
federal laws.\1013\ For example, the information required by the
relationship summary is generally already provided in greater detail
for investment advisers by Form ADV Part 2. The current disclosure
requirements and obligations result in varying degrees and kinds of
information to investors, but we believe that all retail investors
would benefit from a short summary that focuses on certain key aspects
of the firm and its services. By requiring both investment advisers and
broker-dealers to deliver a relationship summary that discusses both
types of services and their differences, the relationship summary would
help all retail investors, whether they are considering an investment
adviser or a broker-dealer. A relationship summary would help retail
investors to understand their relationship with a particular firm, to
compare different types of accounts, and to compare that firm with
other firms. The relationship summary would provide in one place, for
the first time, summary information about the services, fees,
conflicts, and disciplinary history for broker-dealers.
---------------------------------------------------------------------------

    \1013\ See supra notes 308-316.
---------------------------------------------------------------------------

    Under our proposed rules, firms would be required to file their
relationship summary with the Commission, and the relationship summary
will be available on the Commission's public disclosure website. Dual
registrants would be required to file Form CRS on both IARD and EDGAR.
We are proposing IARD and EDGAR because they are familiar filing
systems for investment advisers and broker-dealers.\1014\ By having
firms file the relationship summaries with the Commission, the
Commission can more easily monitor the filings for compliance with Form
CRS. We believe that requiring dual registrants to file on both EDGAR
and IARD is appropriate and in the public interest and will improve
investor protection. This is because retail investors seeking brokerage
services (but not investment advisory services) would be likely to
search EDGAR, and retail investors seeking investment advisory services
(but not brokerage services) would be likely to search IARD.
---------------------------------------------------------------------------

    \1014\ See supra Section II.C.1.
---------------------------------------------------------------------------

F. Significant Alternatives

    The RFA directs the Commission to consider significant alternatives
that would accomplish our stated objectives, while minimizing any
significant adverse impact on small entities. We considered the
following alternatives for small entities in relation to the proposed
Form CRS required by Part 3 of Form ADV, the proposed amendments to
Form ADV (17 CFR 279.1) and rules 203-1, 204-1, and 204-2 under the
Advisers Act, the proposed new rule 204-5 under the Advisers Act, the
proposed amendments to rules 17a-3 and 17a-4 under the Exchange Act,
the proposed new rule 17a-14 and new Form CRS (17 CFR 249.640) under
the Exchange Act, the proposed new rules 15l-2 and 15l-3 under the
Exchange Act, and the proposed new rule 211h-1 under the Advisers Act:
(i) The establishment of differing compliance or reporting requirements
that take into account the resources available to small entities; (ii)
the clarification, consolidation, or simplification of compliance and
reporting requirements under the proposed Form CRS, and proposed new
rules and rule amendments for such small entities; (iii) the use of
performance rather than design standards; and (iv) an exemption from
coverage of the proposed Form CRS, and proposed rules and rule
amendments, or any part thereof, for such small entities.
1. Form CRS Relationship Summary
    Regarding the first alternative, the Commission believes that
establishing different compliance or reporting requirements for small
advisers and broker-dealers would be inappropriate under these
circumstances. Because the protections of the Advisers Act and Exchange
Act are intended to apply equally to retail investor clients and
customers of both large and small firms, it would be inconsistent with
the purposes of the Advisers Act and the Exchange Act to specify
differences for small entities under the proposed rules and rule
amendments. As discussed above, we believe that the proposed new Form
CRS, and the proposed rules and rule amendments would result in
multiple benefits to all retail investors, including alerting retail
investors to certain information to consider when choosing a firm and a
financial professional and prompting retail investors to ask informed
questions. In addition, the content of the relationship summary would
facilitate comparisons across firms. We believe that these benefits
should apply to retail investors of smaller firms as well as retail

investors of larger firms.\1015\ To establish different disclosure
requirements for small entities would diminish this investor protection
for clients of small advisers.
---------------------------------------------------------------------------

    \1015\ See supra Section I (discussing the benefits of retail
investors having access to diverse business models and of preserving
investor choice among brokerage services, advisory services, or
both).
---------------------------------------------------------------------------

    It would also be inappropriate to establish different recordkeeping
requirements for small entities, because requiring maintenance of Form
CRS and related records as part of the firm's books and records would
facilitate the Commission's ability to inspect for and enforce
compliance with firms' obligations with respect to Form CRS, which is
important for retail investors clients of both large and small firms.
    In addition, as discussed above in Section II, we are proposing to
require that investment advisers and dual registrants file their
relationship summaries with the Commission electronically through IARD
in the same manner as they currently file Form ADV Parts 1 and 2. We
are proposing to require that broker-dealers file their relationship
summaries with the Commission electronically on EDGAR. As discussed
above, there are several reasons we propose having the relationship
summaries filed with the Commission, including that the public would
benefit by being able to use a central location to find any firm's
relationship summary, and that easy access to various relationship
summaries through one source may facilitate simpler comparison across
firms.\1016\ In addition, as also discussed below, some firms may not
maintain a website, and therefore their relationship summaries would
not otherwise be accessible to the public.\1017\ We do not believe that
proposing different filing requirements for large and small firms would
be appropriate given our belief that the benefits of electronic filing
are important for retail investors clients and customers of both large
and small firms. Furthermore, almost all advisers, including small
advisers, have Internet access and use the Internet for various
purposes.\1018\
---------------------------------------------------------------------------

    \1016\ See supra note 320 and accompanying text.
    \1017\ Id.
    \1018\ See 2000 Brochure Proposing Release, supra note 271, at
n.304 and accompanying text. However, an adviser that is a small
business may be eligible for a continuing hardship exemption for
Form ADV filings, which would include proposed Form CRS, if it can
demonstrate that filing electronically would impose an undue
hardship. See Instruction 17 of General Instructions to Form ADV.
---------------------------------------------------------------------------

    Finally, the proposal to require investment advisers and broker-
dealers post their relationship summary on their public websites, if
they have a public website, in a way that is easy for retail investors
to find, already incorporates the flexibility to permit different
compliance and reporting requirements for small entities, if
applicable. To the extent that broker-dealers and investment advisers
that are small entities are less likely to have public websites and do
not have them, they would not be required under our proposal to post
the relationship summary on their websites.\1019\ In other ways, as
well, the proposal incorporates flexibility for smaller broker-dealers
and investment advisers to comply with the proposed requirements. For
instance, we are proposing to require firms to communicate the
information in an amended relationship summary to retail investors who
are existing clients or customers of the firm within 30 days after the
updates are required to be made and without charge.\1020\ This
requirement provides firms the ability to disclose changes without
requiring them to duplicate disclosures and incur additional costs.
---------------------------------------------------------------------------

    \1019\ See supra note 320 (we are proposing that firms without a
website include a toll-free telephone number in their relationship
summaries that retail investors can call to obtain up-to-date
information).
    \1020\ Advisers Act proposed rule 204-5(b)(4) and Exchange Act
proposed rule 17a-14(c)(2)(iv4); proposed General Instruction 6.(b)
to Form CRS. See supra Section II.C.3. Firms could communicate this
information by delivering the amended relationship summary or by
communicating the information another way to the retail investor.
Id.
---------------------------------------------------------------------------

    Regarding the second alternative, we believe the current proposal
is clear and that further clarification, consolidation, or
simplification of the compliance requirements is not necessary. The
proposed Instructions are designed to present requirements for
advisers' and broker-dealers' relationship summaries clearly and simply
to all such firms, including small entities. In addition, to aid firms
in understanding the type of disclosures we propose to require, we have
created mock-ups of a relationship summary for an investment advisory
firm, a brokerage firm, and a dual registrant, and have included them
as appendices to this release. These mock-ups examples are designed to
illustrate the application of the proposed requirements. We also
believe that the delivery and filing requirements are clear. As further
discussed above, our proposal would require: Delivery of the
relationship summary to each retail investor before or at the time of
beginning a relationship with a firm,\1021\ updating the relationship
summary within 30 days whenever any information in the relationship
summary becomes materially inaccurate,\1022\ and delivery of the
relationship summary to an existing retail investor client or customer
at certain points during the relationship.\1023\ Firms would also be
required to file their relationship summaries with the Commission and
post them on their firm websites, if they have a public website.
---------------------------------------------------------------------------

    \1021\ See supra Section II.C.2. We are proposing different
triggers for initial delivery of the relationship summary by
investment advisers (before or at the time the firm enters into an
investment advisory agreement with the retail investor) and by
broker-dealers (before or at the time the retail investor first
engages the firm's services). These proposed requirements are
intended to make the relationship summary readily accessible to
retail investors at the time when they are choosing investment
services and are generally consistent with the approach many
commenters recommended. Id.
    \1022\ See supra Section II.C.3.
    \1023\ See supra Section II.C.2. For example, our proposal would
require firms to communicate the information in an amended
relationship summary to retail investors who are existing clients or
customers of the firm within 30 days after the updates are required
to be made and without charge.
---------------------------------------------------------------------------

    Regarding the third alternative, the Commission believes that
proposed Form CRS and the related new rules and amendments
appropriately use a combination of performance and design standards. We
are proposing to standardize the relationship summaries among firms by
specifying the headings, sequence, and content of the topics;
prescribing language for firms to use as applicable; and limiting the
length of the relationship summary. We believe that the standardization
will provide comparative information in a user-friendly format that
helps retail investors with informed decision making. For example, we
are prescribing the use of graphical formats in specified
circumstances, based on studies that indicate the effectiveness of
graphical presentation for retail investors.\1024\ Also, as discussed
above, we are requiring firms to use prescribed wording in many items,
and we are proposing that firms may not include disclosure in the
relationship summary other than disclosure that is required or
permitted by the Instructions.\1025\ We believe that allowing only the
proposed mandatory or permissible information would promote consistency
of

information presented to investors, and allow investors to focus on
information that we believe is particularly helpful in deciding among
firms.\1026\
---------------------------------------------------------------------------

    \1024\ For example we are proposing to require dual registrants
to present all of the information required by Items 2 through 4 and
Item 6 in a tabular format, comparing advisory services and
brokerage services side-by-side, with prescribed headings. See
proposed General Instruction 1.(e) to Form CRS. Similarly,
standalone broker-dealers and investment advisers would be required
to provide general information about fee types in tabular format, in
a separate comparison section. See proposed Item 5 of Form CRS.
    \1025\ See supra notes 54-55 and accompanying text.
    \1026\ It would also encourage impartial information by
preventing firms from adding information commonly used in marketing
materials, such as performance.
---------------------------------------------------------------------------

    Within the framework of standardization, we are proposing that for
certain disclosure Items in Form CRS, firms would have some flexibility
in how they include the required information.\1027\ In addition, we
have proposed permitting, but not requiring, the use of graphical
formats where doing so does not unduly constrain effective description
of a range of information. With respect to the prescribed wording, we
are proposing that if a prescribed statement is inapplicable to a
firm's business or would be misleading to a reasonable retail investor,
the firm would be permitted to omit or modify that statement.\1028\
---------------------------------------------------------------------------

    \1027\ See supra note 56.
    \1028\ See proposed General Instruction 3 to Form CRS. Firms may
omit or modify prescribed wording or other statements required to be
part of the relationship summary if such statements are inapplicable
to a firm's business or would be misleading to a reasonable retail
investor.
---------------------------------------------------------------------------

    We believe that this approach of using both performance and design
standards balances the need to provide firms flexibility in making the
presentation of information consistent with their particular business
model while ensuring that all investors receive certain information
regardless of the firm in a manner that promotes comparability. In the
sections above, we request comment on whether the proposed mix of
design and performance standards would work for investment advisers and
broker-dealers, including small entities, and what the impact of such
standards would be on firms.\1029\
---------------------------------------------------------------------------

    \1029\ See requests for comment in Sections II.A and II.B with
respect to the proposed prescribed wording in places throughout the
relationship summary, and the proposed prescribed headings, order
and format.
---------------------------------------------------------------------------

    Regarding the fourth alternative, we believe that, similar to the
first alternative, it would be inconsistent with the purposes of the
Advisers Act and the Exchange Act to exempt small advisers and broker-
dealers from the proposed rule and form amendments, or any part
thereof. Because the protections of the Advisers Act and Exchange Act
are intended to apply equally to retail investors that are clients and
customers of both large and small advisers and broker-dealers, it would
be inconsistent with the purposes of the Advisers Act and Exchange Act
to specify differences for small entities under the proposed
amendments. As discussed above, the information in the relationship
summary would alert retail investors to important information for them
to consider when choosing a firm and a financial professional, and
would prompt retail investors to ask informed questions. In addition,
the content of the relationship summary would facilitate comparisons
across firms that offer the same or substantially similar services. We
preliminarily believe that providing this information before or at the
time a retail investor enters into an investment advisory agreement or
first engages a brokerage firm's services, as well as at certain points
during the relationship (e.g., switching account types) is appropriate
and in the public interest and will improve investor protection, and
will deter potentially misleading sales practices by helping retail
investors to make a more informed choice among the types of firms and
services available to them. Since we view investor confusion about
brokerage and advisory services as an issue for many retail investors
who are clients and customers of advisers and broker-dealers, it would
be inconsistent with the purpose of the relationship summary to specify
different requirements for small entities.\1030\
---------------------------------------------------------------------------

    \1030\ See supra note 3, citing studies that show retail
investor confusion about the differences among broker-dealers and
investment advisers.
---------------------------------------------------------------------------

2. Rule 15l-2 Relating to Restrictions on the Use of Certain Terms in
Names and Titles
    Regarding the first alternative, the Commission preliminarily
believes that establishing different compliance or reporting
requirements for small broker-dealers would be inappropriate under
these circumstances. We believe it is important to address the risk
that retail investors are confused and potentially misled based on the
names or titles of their firms and financial professionals and as a
result, make uninformed decisions regarding which firm or financial
professional they are engaging or seeking to engage. Because the
protections of the Exchange Act are intended to apply equally to retail
investor clients of both large and small firms, the Commission
preliminarily believes it would be inconsistent with the purposes of
the Exchange Act to specify differences for small entities under the
proposed rule.
    Regarding the second alternative, we believe that the current
proposal is clear and that further clarification, consolidation, or
simplification is not necessary. As discussed in Section III above, the
restriction is limited to use of the terms ``adviser'' and ``advisor.''
As discussed above in Section III, we considered whether we should
restrict broker-dealers from using additional terms, such as, for
example, ``financial consultant.'' We believe, however, that the term
``adviser'' or ``advisor'' is more closely related to the statutory
term ``investment adviser,'' which makes it more likely than these
other terms that retail investors would associate such terms with an
investment adviser and its advisory activities than with a broker-
dealer and its brokerage activities. We preliminarily believe that the
use of the terms ``adviser'' and ``advisor'' by broker-dealers and
their associated natural persons has particularly contributed to
investor confusion about the typical services, fee structures,
conflicts of broker-dealers and investment advisers, and legal
standards of conduct to which broker-dealers and investment advisers
are subject. Therefore, we believe that the current proposal is clear
in its limited scope of restricted terms.
    Regarding the third alternative, we believe that using performance
rather than our proposed design standards would be less effective in
addressing the issue of investor confusion based on the names or titles
of their firms and financial professionals. As discussed in Section
III, the proposed rule would restrict broker-dealers' or its associated
natural persons' use of the term ``adviser'' or ``advisor'' as part of
a name or title when communicating with a retail investor. We believe
that the use of the terms ``adviser'' and ``advisor'' has particularly
contributed to investor confusion about the typical services, fee
structures, conflicts of interest, and legal standards of conduct to
which broker-dealers and investment advisers are subject and as a
result has potentially misled retail investors as to the type of firm
or financial professional they are engaging or seeking to engage.
Accordingly, we believe that restricting these terms appropriately
addresses these issues based on a broker-dealer's or its associated
natural persons' use of the term ``adviser'' or ``advisor'' as part of
a name or title. As discussed above in Section III, we preliminarily
believe that without restricting a broker-dealer or its associated
natural person(s) from using ``adviser'' or ``advisor'' in a name or
title, a retail investor may be misled into believing and expecting
that their ``financial advisor,'' who may, for example, solely provide
brokerage services at a broker-dealer, is an

investment adviser (i.e., a fiduciary) on the basis of his name or
title.
    Additionally, we considered two performance-based standards, as
discussed above in Section III.C.\1031\ However, we believe that either
performance standard would be less effective than our proposed design
standard in addressing investor confusion stemming from their
association with the statutory term investment adviser. In the first
alternative approach, we considered proposing a rule which would have
stated that a broker-dealer that uses the term ``adviser'' or
``advisor'' as part of a name or title would not be considered to
provide investment advice solely incidental to the conduct of its
brokerage business and therefore would not be excluded from the
definition of investment adviser under section 202(a)(11)(C) of the
Advisers Act. For the second alternative approach, we considered
precluding a broker-dealer from relying on the solely incidental
exclusion of section 202(a)(11)(C) if it ``held itself out'' as an
investment adviser to retail investors such as by representing or
implying through any communication or other sales practice (including
through the use of names or titles) that they are offering investment
advice subject to a fiduciary relationship with an investment adviser.
Under this second approach, there would be a prohibition on certain
broker-dealer and its associated natural person communications that
suggest, or could reasonably be understood as suggesting, that such
broker-dealer or its associated natural persons are performing
investment advisory services in a manner that would subject them to the
Advisers Act rather than as solely incidental to their business as a
broker-dealer. For the reasons we set out in Section III above, we
believe that our proposed restriction on the use of ``adviser'' and
``advisor'' in combination with the requirement to deliver a
relationship summary is a simpler, more administrable approach to
address the confusion about the difference between investment advisers
and broker-dealers, and to prevent investors from being potentially
misled. As a result, we believe that our proposed approach is more
tailored toward creating greater clarity than our alternative
approaches.
---------------------------------------------------------------------------

    \1031\ See supra Section III.C.
---------------------------------------------------------------------------

    Regarding the fourth alternative, we preliminarily believe that,
similar to the first alternative, it would be inconsistent with the
purposes of the Exchange Act to exempt small broker-dealers from the
proposed rule, or any part thereof.
3. Rule 15l-3 Relating to Disclosure of Commission Registration Status
and Financial Professional Association
    Regarding the first alternative, the Commission believes that
establishing different compliance or reporting requirements for small
advisers and broker-dealers would be inappropriate under these
circumstances. We believe it is important to assist retail investors in
determining which type of firm is more appropriate for their specific
investment needs and promote better informed decisions regarding which
firm or financial professional they are engaging or seeking to engage.
Because the protections of the Advisers Act and Exchange Act are
intended to apply equally to retail investor clients of both large and
small firms, we preliminarily believe it would be inconsistent with the
purposes of the Exchange Act and the Advisers Act to specify
differences for small entities under the proposed rule.
    Regarding the second alternative, we believe that the current
proposal is clear and that further clarification, consolidation, or
simplification of the compliance requirements is not necessary. As
discussed in Section III.D, we are proposing rules under the Exchange
Act and Advisers Act that would require broker-dealers and investment
advisers and their associated natural persons and supervised persons,
respectively, to prominently disclose the firm's registration status
with the Commission and the associated natural persons and supervised
person's relationship with the firm in print and electronic retail
investor communications. As discussed above in Section III, our
proposal would subject broker-dealers and investment advisers to the
same requirements, adding to the clarity and consolidation of the
compliance requirements. Finally, we note that our proposed rules
contain specific presentation and prominence requirements, as discussed
above in Section III, for both print and electronic communications.
    Regarding the third alternative, we believe that using performance
rather than design standards would be less effective in assisting
retail investors in determining which type of firm is more appropriate
for their specific investment needs. Specifically, we are concerned
that in the absence of the specific prominence and formatting
requirements, firms and financial professionals may disclose their
registration status in a footnote or at the bottom of a website and in
small print as they do today with other regulatory mandated disclosures
(e.g., member of Securities Investor Protection Corporation). In such
cases, retail investors would be unable to readily discern whether a
firm is a broker-dealer or investment adviser and thus avoid making an
uniformed choice of which firm or financial professional to engage or
seek to engage, undermining a key purpose of our proposed rules.
Therefore, we believe that our proposed design standards would
facilitate the presentation of required information to retail
investors. Specifically, as we noted above, disclosures as important as
a firm's registration status or a financial professional's association
with such firm should not be disclosed inconspicuously or placed in
fine print. Accordingly, we are proposing to require a firm and its
financial professionals to disclose their registration statuses in
print communications in a type size at least as large as and of a font
style different from, but at least as prominent as, that used in the
majority of the communication. In addition, we are proposing to require
the disclosure to be presented in the body of the communication and not
in a footnote. Finally, we are also proposing that if a communication
is delivered through an electronic communication or in any publication
by radio or television, the disclosure must be presented in a manner
reasonably calculated to draw retail investors' attention to it. We
believe that through these design standards retail investors would have
the information necessary to facilitate an informed choice of financial
firm and its professionals.
    Regarding the fourth alternative, we preliminarily believe that,
similar to the first alternative, it would be inconsistent with the
purposes of the Advisers Act and the Exchange Act to exempt small
advisers and broker-dealers from the proposed rule, or any part
thereof.

G. Solicitation of Comments

    We encourage written comments on the matters discussed in this
IRFA. We solicit comment on the number of small entities subject to the
proposed Form CRS, and the proposed rules and rule amendments as well
as the potential impacts discussed in this analysis; and whether the
proposal could have an effect on small entities that has not been
considered. We request that commenters describe the nature of any
impact on small entities and provide empirical data to support the
extent of such impact.

VII. Consideration of the Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996, or ``SBREFA,'' \1032\ we must advise OMB whether a
proposed regulation constitutes a ``major'' rule. Under SBREFA, a rule
is considered ``major'' where, if adopted, it results in or is likely
to result in (1) an annual effect on the economy of $100 million or
more; (2) a major increase in costs or prices for consumers or
individual industries; or (3) significant adverse effects on
competition, investment or innovation.
---------------------------------------------------------------------------

    \1032\ Public Law 104-121, Title II, 110 Stat. 857 (1996)
(codified in various sections of 5 U.S.C., 15 U.S.C. and as a note
to 5 U.S.C. 601).
---------------------------------------------------------------------------

    We request comment on the potential effect of the proposed
amendments on the U.S. economy on an annual basis; any potential
increase in costs or prices for consumers or individual industries; and
any potential effect on competition, investment or innovation.
Commenters are requested to provide empirical data and other factual
support for their views to the extent possible.

VIII. Statutory Authority

    The Commission is proposing amendments to rule 203-1 under the
Advisers Act pursuant to authority set forth in sections 203(c)(1),
204, and 211(a) of the Investment Advisers Act of 1940 [15 U.S.C. 80b-
3(c)(1), 80b-4, and 80b-11(a)].
    The Commission is proposing amendments to rule 204-1 under the
Advisers Act pursuant to authority set forth in sections 203(c)(1) and
204 of the Investment Advisers Act of 1940 [15 U.S.C. 80b-3(c)(1) and
80b-4].
    The Commission is proposing new rule 204-5 under the Advisers Act
pursuant to authority set forth in sections 204, 206A, 206(4), 211(a),
and 211(h) of the Investment Advisers Act of 1940 [15 U.S.C. 80b-4,
80b-6a, 80b-6(4), 80b-11(a), 80b-11(h)], and section 913(f) of Title IX
of the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010 (the ``Dodd-Frank Act'').
    The Commission is proposing amendments to rule 279.1, Form ADV,
under section 19(a) of the Securities Act of 1933 [15 U.S.C. 77s(a)],
sections 23(a) and 28(e)(2) of the Securities Exchange Act of 1934 [15
U.S.C. 78w(a) and 78bb(e)(2)], section 319(a) of the Trust Indenture
Act of 1939 [15 U.S.C. 7sss(a)], section 38(a) of the Investment
Company Act of 1940 [15 U.S.C. 80a-37(a)], and sections 203(c)(1), 204,
206A, 211(a) and 211(h), and of the Investment Advisers Act of 1940 [15
U.S.C. 80b-3(c)(1), 80b-4, 80b-6a, 80b-11(a) and 80b-11(h)], and
section 913(f) of Title IX of the Dodd-Frank Act.
    The Commission is proposing to amend rule 204-2 under the Advisers
Act pursuant to authority set forth in sections 204 and 211 of the
Advisers Act [15 U.S.C. 80b-4 and 80b-11].
    The Commission is proposing new rule 17a-14 under the Exchange Act,
Form CRS, and amendments to rules 17a-3 and 17a-4 under the Exchange
Act pursuant to the authority set forth in the Exchange Act and
particularly sections 3, 10, 15, 17, 23 and 36 thereof 15 U.S.C. 78c,
78j, 78o, 78q, 78w and 78mm, and section 913(f) of Title IX of the
Dodd-Frank Act.
    The Commission is proposing new rules 15l-2 and 15l-3 under the
authority set forth in sections 10, 15, 23, and 36 of the Securities
Exchange Act of 1934 [15 U.S.C. 78j, 78o, 78w, and 78mm] and new rule
211h-1 under the authority set forth in sections 211(h), 206A, 211(a)
of the Investment Advisers Act of 1940 [15 U.S.C. 80b-11(h), 80b-6a,
80b-11(a)].

IX. Text of Rule and Form

List of Subjects

17 CFR Parts 240 and 249

    Brokers, Reporting and recordkeeping requirements, Sales practice
and disclosure requirements, Securities.

17 CFR Parts 275 and 279

    Investment advisers, Reporting and recordkeeping requirements,
Securities.

Text of Proposed Rules

    For the reasons set out in the preamble, title 17, chapter II of
the Code of Federal Regulations is proposed to be amended as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
1. The general authority citation for part 240 continues to read as
follows and sectional authorities for 240.15l-2, 240.15l-3, and
240.17a-14 are added to read as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20,
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq.; and
8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; and
Pub. L. 111-203, 939A, 124 Stat. 1887 (2010); and secs. 503 and 602,
Pub. L. 112-106, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *
    Section 240.15l-2 is also issued under Public Law 111-203, sec.
913, 124 Stat. 1376 (2010).
    Section 240.15l-3 is also issued under Public Law 111-203, sec.
913, 124 Stat. 1376 (2010).
    Section 240.17a-14 is also issued under Public Law 111-203, sec.
913, 124 Stat. 1376 (2010).
* * * * *
0
2. Section 240.15l-2 is added to read as follows:

Sec.  240.15l-2  Use of the Term ``Adviser'' or ``Advisor''.

    (a) A broker or dealer, or a natural person who is an associated
person of a broker or dealer shall be restricted, when communicating
with a retail investor, from using as part of a name or title the term
``adviser'' or ``advisor'' unless any such:
    (1) Broker or dealer is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940 or with a State, or
    (2) Natural person who is an associated person of a broker or
dealer is a supervised person of an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940 or with a State, and
such person provides investment advice on behalf of such investment
adviser.
    (b) The term retail investor has the meaning set forth in Sec.
240.17a-14.
0
3. Section 240.15l-3 is added to read as follows:

Sec.  240.15l-3  Disclosure of Registration Status.

    (a) A broker or dealer shall prominently disclose that it is
registered with the Commission as a broker-dealer in print or
electronic retail investor communications.
    (b) A natural person who is an associated person of a broker or
dealer shall prominently disclose that he or she is an associated
person of a broker-dealer registered with the Commission in print or
electronic retail investor communications.
    (c) Such disclosures in paragraphs (a) and (b) shall be provided in
the following manner:
    (1) For print communications, such status must be displayed in a
type size at least as large as and of a font style different from, but
at least as prominent as, that used in the majority of the
communication. In addition, such disclosure must be presented in the
body of the communication and not in a footnote.
    (2) For electronic communications, or in any publication by radio
or television, such disclosure must be presented in a manner reasonably
calculated to draw retail investor attention to it.

    (d) The term retail investor has the meaning set forth in Sec.
240.17a-14.
0
4. Section 240.17a-3 is amended by adding paragraph (a)(24) to read as
follows:

Sec.  240.17a-3  Records to be made by certain exchange members,
brokers and dealers.

    (a) * * *
    (24) A record of the date that each Form CRS was provided to each
retail investor, including any Form CRS provided before such retail
investor opens an account.
* * * * *
0
5. Section 240.17a-4 is amended by adding paragraph (e)(10) to read as
follows:

Sec.  240.17a-4  Records to be preserved by certain exchange members,
brokers and dealers.

* * * * *
    (e) * * *
    (10) All records required pursuant to Sec.  240.17a-3(a)(24), as
well as a copy of each Form CRS, until at least six years after such
record or Form CRS is created.
* * * * *
0
6. Section 240.17a-14 is added to read as follows:

Sec.  240.17a-14   Form CRS, for preparation, filing and delivery of
Form CRS.

    (a) Scope of Section. This section shall apply to every broker or
dealer registered with the Commission pursuant to section 15 of the Act
that offers services to a retail investor.
    (b) Form CRS. You must:
    (1) Prepare Form CRS 17 CFR 249.640, by following the instructions
in the form.
    (2) File your current Form CRS electronically with the Commission
through the Commission's EDGAR system, and thereafter, file an amended
Form CRS in accordance with the instructions in the form.
    (3) Amend your Form CRS as required by the instructions in the
form.
    (c) Delivery of Form CRS. You must:
    (1) Deliver to each retail investor your current Form CRS before or
at the time the retail investor first engages your services.
    (2) Deliver to each retail investor who is an existing customer
your current Form CRS before or at the time (i) a new account is opened
that is different from the retail investor's existing account(s); or
(ii) changes are made to the retail investor's existing account(s) that
would materially change the nature and scope of the relationship with
the retail investor, including before or at the time you recommend that
the retail investor transfers from an advisory account to a brokerage
account, transfers from a brokerage account to an advisory account, or
moves assets from one type of account to another in a transaction not
in the normal, customary or already agreed course of dealing. Whether a
change would require delivery of the Form CRS would depend on the
specific facts and circumstances.
    (3) Post the current Form CRS prominently on your website, if you
have one, in a location and format that is easily accessible for retail
investors.
    (4) Communicate any changes made to Form CRS to each retail
investor who is an existing customer within 30 days after the
amendments are required to be made and without charge. The
communication can be made by delivering the current Form CRS or by
communicating the information in another way to the retail investor.
    (5) Deliver a current Form CRS to each retail investor within 30
days upon request.
    (d) Other disclosure obligations. Delivering a Form CRS in
compliance with this section does not relieve you of any other
disclosure obligations arising under the federal securities laws and
regulations or other laws or regulations (including the rules of a
self-regulatory organization).
    (e) Definitions. For purposes of this section:
    (1) Current Form CRS means the most recent version of the Form CRS.
    (2) Retail investor means a customer or prospective customer who is
a natural person (an individual). This term includes a trust or other
similar entity that represents natural persons, even if another person
is a trustee or managing agent of the trust.
    (f) Transition rule. (1) You must begin to comply with this section
by [INSERT DATE SIX MONTHS AFTER EFFECTIVE DATE OF RULES/FORM],
including by filing your Form CRS in accordance with paragraph (b)(2)
of this section by that date.
    (2) Within 30 days after the date by which you are first required
by paragraph (f)(1) of this section to electronically file your Form
CRS with the Commission, you must deliver to each of your existing
customers who is a retail investor your current Form CRS.
    (3) After [INSERT DATE SIX MONTHS AFTER EFFECTIVE DATE OF RULES/
FORM], if you are a newly registered broker or dealer that is subject
to this section, you must begin to comply with this section by the date
on which your registration with the Commission becomes effective
pursuant to Section 15(b) of the Act, including by filing your Form CRS
in accordance with paragraph (b)(2) of this section by that date.

    Editorial Note: For Federal Register citations affecting Form
CRS, see the List of CFR Sections Affected, which appears in the
Finding Aids section of the printed volume and at www.fdsys.gov.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
7. The authority citation for part 249 is amended by adding sectional
authorities to read as follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C.
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b), Pub. L. 111-203, 124
Stat. 1904; Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 309 (2012);
Sec. 107, Pub. L. 112-106, 126 Stat. 313, (2012), and Sec. 72001,
Pub. L. 114-94, 129 Stat. 1312 (2015), unless otherwise noted.
* * * * *
    Section 249.640 is also issued under Public Law 111-203, sec.
913, 124 Stat. 1376 (2010).
* * * * *
0
8. Section 249.640 is added to read as follows:

Sec.  249.640  Form CRS, Relationship Summary for Broker-Dealers
Providing Services to Retail Investors, pursuant to Sec.  240.17a-14 of
this chapter.

    This form shall be prepared and filed by broker-dealers registered
with the Securities and Exchange Commission pursuant to Section 15 of
the Act that offer services to a retail investor pursuant to Sec.
240.17a-14 of this chapter.

PART 275--RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940

0
9. The general authority citation for part 275 continues to read as
follows and sectional authorities for 275.204-5 and 275.211h-1 are
added to read as follows:

    Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-
2(a)(17), 80b-3, 80b-4, 80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless
otherwise noted.
* * * * *
    Section 275.204-5 is also issued under sec. 913, Public Law 111-
203, sec. 124 Stat. 1827-28 (2010).
    Section 275.211h-1 is also issued under sec. 913, Public Law
111-203, sec. 124 Stat. 1827-28 (2010).
* * * * *
0
10. Amend Sec.  275.203-1 by revising paragraph(a) to read as follows:

Sec.  275.203-1  Application for investment adviser registration.

    (a) Form ADV. (1) To apply for registration with the Commission as
an investment adviser, you must complete Form ADV (17 CFR 279.1) by
following the instructions in the form and you

must file Part 1A of Form ADV, the firm brochure(s) required by Part 2A
of Form ADV and Form CRS required by Part 3 of Form ADV electronically
with the Investment Adviser Registration Depository (IARD) unless you
have received a hardship exemption under Sec.  275.203-3. You are not
required to file with the Commission the brochure supplements required
by Part 2B of Form ADV.
    (2) After [INSERT DATE SIX MONTHS AFTER EFFECTIVE DATE OF RULES/
FORM] the Commission will not accept any initial application for
registration as an investment adviser that does not include a Form CRS
that satisfies the requirements of Part 3 of Form ADV.

    Note to paragraph (a)(1): Information on how to file with the
IARD is available on the Commission's Web site at http://www.sec.gov/iard. If you are not required to deliver a brochure or
Form CRS to any clients, you are not required to prepare or file a
brochure or Form CRS, as applicable, with the Commission. If you are
not required to deliver a brochure supplement to any clients for any
particular supervised person, you are not required to prepare a
brochure supplement for that supervised person.

* * * * *
0
11. Amend Sec.  275.204-1 by revising paragraphs (a) and (b) to read as
follows:

Sec.  275.204-1  Amendments to Form ADV.

    (a) When amendment is required. You must amend your Form ADV (17
CFR 279.1):
    (1) Parts 1 and 2:
    (i) At least annually, within 90 days of the end of your fiscal
year; and
    (ii) More frequently, if required by the instructions to Form ADV.
    (2) Part 3 at the frequency required by the instructions to Form
ADV.
    (b) Electronic filing of amendments. (1) Subject to paragraph
(b)(3) of this rule, you must file all amendments to Part 1A, Part 2A
and Part 3 of Form ADV electronically with the IARD, unless you have
received a continuing hardship exemption under Sec.  275.203-3. You are
not required to file with the Commission amendments to brochure
supplements required by Part 2B of Form ADV.
    (2) If you have received a continuing hardship exemption under
Sec.  275.203-3, you must, when you are required to amend your Form
ADV, file a completed Part 1A, Part 2A and Part 3 of Form ADV on paper
with the SEC by mailing it to FINRA.
    (3) Transition to filing Form CRS. You must amend your Form ADV by
electronically filing with the IARD Form CRS that satisfies the
requirements of Part 3 of Form ADV (as amended effective [INSERT
EFFECTIVE DATE OF RULES/FORM]) as part of the next annual updating
amendment you are required to file after [INSERT DATE SIX MONTHS AFTER
EFFECTIVE DATE OF RULES/FORM].

    Note to paragraphs (a) and (b): Information on how to file with
the IARD is available on our Web site at http://www.sec.gov/iard.
For the annual updating amendment: Summaries of material changes
that are not included in the adviser's brochure must be filed with
the Commission as an exhibit to Part 2A in the same electronic file;
and if you are not required to prepare a brochure, a summary of
material changes, an annual updating amendment to your brochure, or
Form CRS you are not required to file them with the Commission. See
the instructions for Part 2A and Part 3 of Form ADV.

* * * * *
0
12. Section 275.204-2 is amended by revising paragraph (a)(14)(i) as
follows:

Sec.  275.204-2  Books and records to be maintained by investment
advisers.

    (a) * * *
    (14)
    (i) A copy of each brochure, brochure supplement and Form CRS, and
each amendment or revision to the brochure, brochure supplement and
Form CRS, that satisfies the requirements of Part 2 or Part 3 of Form
ADV, as applicable [17 CFR 279.1]; any summary of material changes that
satisfies the requirements of Part 2 of Form ADV but is not contained
in the brochure; and a record of the dates that each brochure, brochure
supplement and Form CRS, each amendment or revision thereto, and each
summary of material changes not contained in a brochure was given to
any client or to any prospective client who subsequently becomes a
client.
* * * * *
0
13. Section 275.204-5 is added to read as follows:

Sec.  275.204-5  Delivery of Form CRS.

    (a) General requirements. If you are registered under the Act as an
investment adviser, you must deliver Form CRS, required by Part 3 of
Form ADV [17 CFR 279.1], to each retail investor.
    (b) Delivery requirements. You (or a supervised person acting on
your behalf) must:
    (1) Deliver to each retail investor your current Form CRS before or
at the time you enter into an investment advisory contract with that
retail investor.
    (2) Deliver to each retail investor who is an existing client your
current Form CRS before or at the time (i) a new account is opened that
is different from the retail investor's existing account(s); or (ii)
changes are made to the retail investor's existing account(s) that
would materially change the nature and scope of the relationship with
the retail investor, including before or at the time you recommend that
the retail investor transfers from an advisory account to a brokerage
account, transfers from a brokerage account to an advisory account, or
moves assets from one type of account to another in a transaction not
in the normal, customary or already agreed course of dealing. Whether a
change would require delivery of the Form CRS would depend on the
specific facts and circumstances.
    (3) Post the current Form CRS prominently on your website, if you
have one, in a location and format that is easily accessible for retail
investors.
    (4) Communicate any changes made to Form CRS to each retail
investor who is an existing client within 30 days after the amendments
are required to be made and without charge. The communication can be
made by delivering the amended Form CRS or by communicating the
information in another way to the retail investor.
    (5) Deliver a current Form CRS to each retail investor within 30
days upon request.
    (c) Other disclosure obligations. Delivering Form CRS in compliance
with this section does not relieve you of any other disclosure
obligations you have to your retail investors under any federal or