Many commenters preferred a shorter, one-to-two page document more
heavily relying on layered disclosure with increased use of hyperlinks
and other cross-references to more detailed disclosure.\129\ Commenters
also said that investors are more likely to read a shorter
document.\130\ Several commenters submitted mock-ups that were shorter
than four pages.\131\ Others indicated that the length of Form CRS was
acceptable but should not exceed four pages.\132\ On the other hand,
certain commenters suggested that the length of the relationship
summary may be too short to appropriately describe firms' insurance
services or products.\133\ One commenter said that it would be
challenging for dual registrants to summarize all of their offerings
within the four-page limit.\134\ Investor feedback from surveys,
studies, roundtables, and Feedback Forms also did not show consistent
results. For example, 57% of the RAND 2018 survey respondents indicated
that the proposed relationship summary was too long, 41% said it was
about right, and roughly 2% said it was too short.\135\ In section-by-
section questioning, however, the most common response from RAND 2018
survey respondents was to keep the section length as is.\136\
Similarly, some roundtable participants provided feedback that the
proposed length was right at the maximum, ``about right,'' or ``good,''
\137\ whereas others would have preferred a shorter document.\138\
About

40% of commenters on Feedback Forms said that relationship summary was
an appropriate length, while about 30% indicated a preference for a
shorter document.\139\
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    \129\ See, e.g., Schwab Letter I (``Form CRS should simply be a
short navigation aid to the existing Form ADV Part 2 disclosure''
for investment advisers or ``to additional information readily
available on the firm's website or enclosed with the account
documentation'' for broker-dealers.); FSI Letter I (``While we
support the Commission's efforts to ensure concise disclosure by
limiting the required Form CRS to four pages (or its electronic
equivalent), we suggest an even shorter document (perhaps as short
as one page) with hyperlinks to more detailed disclosures.''); see
also AARP Letter; Better Markets Letter; Comment Letter of the
Teachers Insurance and Annuity Association of America (Aug. 7, 2018)
(``TIAA Letter''); Bank of America Letter; CCMR Letter; LPL
Financial Letter; Kleimann II, supra footnote 19 (``Form CRS should
be as short as possible.'').
    \130\ See Fidelity Letter; see also Schwab Letter I (Koski),
supra footnote 21 (85% of survey participants answered that they
would be more likely to read disclosure that is short and to the
point with links to more information; 61% answered that they would
be less likely to read a document that is longer and more
comprehensive, but 31% answered that they would be more likely to
read a longer and more comprehensive disclosure); Comment Letter of
Glen Strong (Jul. 27, 2018).
    \131\ See, e.g., Schwab Letter I; Fidelity Letter; IAA Letter I.
    \132\ See Cambridge Letter; Comment Letter of Morningstar, Inc.
(Aug. 7, 2018) (``Morningstar Letter''); Trailhead Consulting
Letter.
    \133\ See, e.g., ACLI Letter; MassMutual Letter.
    \134\ See Fidelity Letter.
    \135\ RAND 2018, supra footnote 13.
    \136\ RAND 2018, supra footnote 13; see also Cetera Letter II
(Woelfel), supra footnote 17 (when asked generally how the
relationship summary could be improved, 10% of survey respondents
said relationship summary could be shorter).
    \137\ Washington, DC Roundtable, at 18, 26.
    \138\ See Philadelphia Roundtable, at 5, 19 (noting that lengthy
disclosure ``actually prevents investor interest and really
understanding more. If something like [the relationship summary] can
replace the 200 pages and then you have access to the 200 pages if
you want them, that's a better system'').
    \139\ See Feedback Forms Comment Summary (summary of responses
to Question 6), supra footnote 11.
---------------------------------------------------------------------------

    In light of commenter and investor feedback, we have determined
that the relationship summary should be no more than four pages, and
that in many cases a document shorter than four pages is appropriate.
As proposed, both standalone firms and dual registrants were subject to
a four-page limit, even though a dual registrant may have to include
more disclosures discussing its advisory business and brokerage
business as compared with standalone firms. Upon further consideration
of the comments advocating for a more streamlined disclosure that
includes more white space, we are adopting a four-page limit for dual
registrants that prepare one combined relationship summary, to permit
them to capture all of the required information within twice as much
space as for standalone firms. If dual registrants and affiliated \140\
standalone firms choose to prepare separate relationship summaries for
their brokerage and investment advisory services, each relationship
summary should not exceed two pages.\141\ The two-page limit will help
to facilitate comparison of the dual registrant's services, as
investors can easily review the separate relationship summaries side-
by-side, and will encourage firms to focus on succinctly and clearly
explaining the required information. Some commenters, including
providers of insurance products, supported a longer relationship
summary or expressed concern that four pages would not be enough to
allow for a summary of all of their offerings.\142\ We believe that the
elimination of certain sections (such as the comparison section) \143\
and most of the prescribed wording from the relationship summary, along
with the flexibility firms will have under the final instructions to
describe services with their own wording, and to omit or modify
required disclosures or conversation starters that are inapplicable to
their business or specific wording that is inaccurate, should help to
alleviate the concerns of those who advocated for the relationship
summary to be longer.
---------------------------------------------------------------------------

    \140\ Form CRS defines an ``affiliate'' as ``Any persons
directly or indirectly controlling or controlled by you or under
common control with you.'' General Instruction 11.A. to Form CRS.
    \141\ General Instruction 1.C. to Form CRS (``Dual registrants
and affiliates that prepare separate relationship summaries are
limited to two pages for each relationship summary. . . . If
delivered electronically, the relationship summary must not exceed
the equivalent of two pages or four pages in paper format, as
applicable.'').
    \142\ See supra footnotes 133-134 and accompanying text.
    \143\ See infra Section II.B.6 (Proposed Items Omitted in Final
Instructions).
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3. Electronic and Graphical Formats, and Layered Disclosure
    We are adding instructions that clarify our support for firms
wishing to use electronic media in preparing the relationship summary
for retail investors.\144\ The proposed instructions would have
permitted firms to add embedded hyperlinks within the relationship
summary in order to supplement required disclosures \145\ and would
have required firms to use hyperlinks for any document that is cross-
referenced in any electronic relationship summary.\146\ The proposed
instructions also permitted firms to use various graphics or text
features to explain the required information but did not reference
whether they should be electronic- or paper-based.\147\
---------------------------------------------------------------------------

    \144\ Delivery is discussed in Section II.C. Firms may deliver
electronic versions of the relationship summary in accordance with
the final instructions and the Commission's guidance regarding
electronic delivery. See General Instructions 10.B. through 10.D. to
Form CRS.
    \145\ Proposed General Instruction 1.(g) to Form CRS (``You may
add embedded hyperlinks within the relationship summary in order to
supplement required disclosures, for example, links to fee
schedules, conflicts disclosures, the firm's narrative brochure
required by Part 2A of Form ADV, or other regulatory
disclosures.'').
    \146\ Proposed General Instruction 1.(g) to Form CRS (``In a
relationship summary that is posted on your website or otherwise
provided electronically, you must use hyperlinks for any document
that is cross-referenced in the relationship summary if the document
is available online.'').
    \147\ Proposed General Instruction 1.(f) to Form CRS (``You may
use charts, graphs, tables, and other graphics or text features to
respond to explain the required information, so long as the
information: (i) Is responsive to and meets the requirements in
these instructions (including space limitations); (ii) is not
inaccurate or misleading; and (iii) does not, because of the nature,
quantity, or manner of presentation, obscure or impede understanding
of the information that must be included. When using interactive
graphics or tools, you may include instructions on their use and
interpretation.'').
---------------------------------------------------------------------------

    Many commenters supported electronic formats, including in
connection with layered disclosure.\148\ One commenter endorsed
electronic, including mobile, formats as inherently easier to navigate
and use in a layered approach and asserted that the relationship
summary would be more engaging to investors, and thus more effective as
a disclosure, if the Commission encouraged more creative use of
electronic formats.\149\ Research submitted by commenters and feedback
from our investor roundtables indicated that investors preferred a more
visually appealing disclosure.\150\ Commenters recommended a more
visually-focused and designed experience, and many mock-ups that
commenters submitted used graphics and other design features
extensively.\151\ In addition, the IAC has recommended exploring the
use of layered disclosure in certain contexts.\152\ The IAC has also
recommended that the Commission ``continue to explore methods to
encourage a transition to electronic delivery that respect investor
preferences and that increase, rather than reduce, the likelihood that
investors will see and read important disclosure documents.'' \153\
Some commenters also expressed support for the IAC's recommendation
relating to electronic delivery.\154\
---------------------------------------------------------------------------

    \148\ See, e.g., IAA Letter I (``Each key point should be made
as simply and succinctly as possible, and the investor should then
be pointed clearly and directly to specific additional plain English
disclosure explaining the point . . . . This approach would also
provide firms with the flexibility they need to use innovative
design and delivery techniques.'').
    \149\ See IAA Letter I.
    \150\ See Betterment Letter I (Hotspex), supra footnote 18
(reporting study authors' conclusions that survey respondents found
a version of the standalone adviser relationship summary ``more
appealing and understandable,'' where Betterment revised the form to
``[i]mprove visual hierarchy (e.g., layout, shading, shorten and
standardize paragraph lengths to improve legibility, appeal and
retention of information''); Schwab Letter I (Koski), supra footnote
21(79% of survey respondents said they are more likely to read
disclosure that is ``visually appealing and did not seem like a
legal document''); Washington, DC Roundtable, at 20; Atlanta
Roundtable, at 35.
    \151\ See, e.g., CFA Letter I; Fidelity Letter (citing to
Stanford Law School Design Principles, Use visual design and
interactive experiences, to transform how you present legal info to
lay people, available at http://www.legaltechdesign.com/communication-design); Betterment Letter I (mock-up); SIFMA Letter;
IAA Letter I; Schwab Letter I; see also Kleimann II, supra footnote
19 (describing design assumptions for a redesigned version of the
relationship summary).
    \152\ See IAC Broker-Dealer Fiduciary Duty Recommendations,
supra footnote 10 (in connection with the disclosure of disciplinary
history, the Commission ``should look at whether it might be
beneficial to adopt a layered approach to such disclosures, with the
goal of developing a more abbreviated, user-friendly document for
distribution to investors'').
    \153\ Investor Advisory Committee, Recommendation of the
Investor as Purchaser Subcommittee: Promotion of Electronic Delivery
and Development of a Summary Disclosure Document for Delivery of
Investment Company Shareholder Reports (Dec. 7, 2017), available at
https://www.sec.gov/spotlight/investor-advisory-committee-2012/recommendation-promotion-of-electronic-delivery-and-development.pdf
(``IAC Electronic Delivery Recommendation'').
    \154\ See, e.g., FSI Letter I; Cambridge Letter; Comment Letter
of the Institute for Portfolio Alternatives (Aug. 7, 2018)
(``Institute for Portfolio Alternatives Letter'').
---------------------------------------------------------------------------

    Accordingly, we are adopting and adding provisions to the proposed

instructions to encourage the use of electronic formatting and
graphical, text, online features and layered disclosures in preparing
their relationship summaries.\155\ Key elements of the final
instructions include the following:
---------------------------------------------------------------------------

    \155\ We created a separate section in the instructions focused
on electronic and graphical formats that includes these
instructions. Proposed General Instruction 1.(f) to Form CRS (``You
may use charts, graphs, tables, and other graphics or text features
to explain the required information, so long as the information: (i)
Is responsive to and meets the requirements in these instructions
(including space limitations); (ii) is not inaccurate or misleading;
and (iii) does not, because of the nature, quantity, or manner of
presentation, obscure or impede understanding of the information
that must be included. When using interactive graphics or tools, you
may include instructions on their use and interpretation.'').
---------------------------------------------------------------------------

     The instructions encourage (rather than just permit, as
proposed) firms to use graphics or text features to respond to the
required disclosures, or to make comparisons among their offerings,
including by using charts, graphs, tables, text colors, and graphical
cues, such as dual-column charts.\156\ If the chart, graph, table, or
other graphical feature is self-explanatory and responsive to the
disclosure item, additional narrative language that may be duplicative
is not required. For a relationship summary provided electronically,
the instructions further encourage online tools that populate
information in comparison boxes based on investor selections.\157\
---------------------------------------------------------------------------

    \156\ See General Instruction 3.A. to Form CRS (``You are
encouraged to use charts, graphs, tables, and other graphics or text
features to respond to the required disclosures. You are also
encouraged to use text features, text colors, and graphical cues,
such as dual-column charts, to compare services, account
characteristics, investments, fees, and conflicts of interest.'').
    \157\ See General Instruction 3.A. to Form CRS (``For a
relationship summary that is posted on your website or otherwise
provided electronically, we encourage online tools that populate
information in comparison boxes based on investor selections.'').
---------------------------------------------------------------------------

     The instructions reference a non-exhaustive list of
electronic media, communications, or tools that firms may use in their
relationship summary.\158\ We are including an instruction that, in a
relationship summary that is posted on a firm's website or otherwise
provided electronically, firms must provide a means of facilitating
access (e.g., hyperlinking) to any information that is referenced in
the relationship summary if the information is available online.\159\
For relationship summaries delivered in paper format, firms may include
URL addresses, QR codes, or other means of facilitating access to such
information.\160\ This instruction permits layered disclosure through
paper disclosures and hybrid paper and electronic deliveries, while
supporting some investors' preference for paper.
---------------------------------------------------------------------------

    \158\ General Instruction 3.A. to Form CRS (``You also may
include: (i) A means of facilitating access to video or audio
messages, or other forms of information (whether by hyperlink,
website address, Quick Response Code (``QR code''), or other
equivalent methods or technologies); (ii) mouse-over windows; (iii)
pop-up boxes; (iv) chat functionality; (v) fee calculators; or (vi)
other forms of electronic media, communications, or tools designed
to enhance a retail investor's understanding of the material in the
relationship summary.'').
    \159\ General Instruction 3.B. to Form CRS. (``In a relationship
summary that is posted on your website or otherwise provided
electronically, you must provide a means of facilitating access to
any information that is referenced in the relationship summary if
the information is available online, including, for example,
hyperlinks to fee schedules, conflicts disclosures, the firm's
narrative brochure required by Part 2A of Form ADV, or other
regulatory disclosures.'').
    \160\ General Instruction 3.B. to Form CRS. (``In a relationship
summary that is delivered in paper format, you may include URL
addresses, QR codes, or other means of facilitating access to such
information.'').
---------------------------------------------------------------------------

     The instructions provide guidance that firms may include
instructions on the use and interpretation of interactive graphics or
tools, as proposed.\161\ We believe that these features can make the
relationship summary more engaging, accessible, and effective in
communicating to retail investors.\162\
---------------------------------------------------------------------------

    \161\ General Instruction 3.C. to Form CRS. Instructions that
firms provide on the use and interpretation of interactive graphics
or tools would not be subject to the page limitation for
relationship summaries under General Instruction 1.C to Form CRS,
but should be succinct, consistent with General Instruction 2.A.
    \162\ Similar to the proposed instructions, the final
instructions include the caveat that these graphical and text
features and electronic media, communications, or tools, (i) must be
responsive to and meet the requirements in these instructions for
the particular item in which the information is placed; and (ii) may
not, because of the nature, quantity, or manner of presentation,
obscure or impede understanding of the information that must be
included. General Instruction 3.C. to Form CRS. Cf. Proposed General
Instruction 1.(f) to Form CRS (``You may use charts, graphs, tables,
and other graphics or text features to explain the required
information, so long as the information: (i) Is responsive to and
meets the requirements in these instructions (including space
limitations); (ii) is not inaccurate or misleading; and (iii) does
not, because of the nature, quantity, or manner of presentation,
obscure or impede understanding of the information that must be
included.''). We deleted the reference in the proposed instructions
to ``is not inaccurate or misleading'' because it is covered by
another instruction.
---------------------------------------------------------------------------

     The instructions replace the term ``hyperlink'' with the
more evergreen concept of ``a means of facilitating access,'' which
will include hyperlinks as well as website addresses, QR Codes, or
other equivalent methods or technologies.\163\ Expanding the types of
technology referenced in the instructions will make them more relevant
as new technologies continue to be developed.
---------------------------------------------------------------------------

    \163\ See, e.g., General Instruction 3.A. to Form CRS (``You
also may include: (i) A means of facilitating access to video or
audio messages, or other forms of information (whether by hyperlink,
website address, Quick Response Code (``QR code''), or other
equivalent methods or technologies''); General Instruction 3.B. to
Form CRS (``In a relationship summary that is posted on your website
or otherwise provided electronically, you must provide a means of
facilitating access to any information that is referenced in the
relationship summary if the information is available online,
including, for example, hyperlinks to fee schedules, conflicts
disclosures, the firm's narrative brochure required by Part 2A of
Form ADV, or other regulatory disclosures.).'' Cf. Proposed General
Instruction 1.(g) to Form CRS (``In a relationship summary that is
posted on your website or otherwise provided electronically, you
must use hyperlinks for any document that is cross-referenced in the
relationship summary if the document is available online.'').
---------------------------------------------------------------------------

    A number of commenters suggested different approaches for whether
we would treat the relationship summary as ``incorporating by
reference'' information provided in additional disclosures or materials
that are hyperlinked to or otherwise accessible from the relationship
summary.\164\ Some of these commenters suggested that we treat certain
hyperlinked information as ``incorporated by reference.'' \165\ Other
commenters recommended that firms should be permitted, but not
necessarily required, to incorporate in the relationship summary
additional information provided in other documents.\166\
---------------------------------------------------------------------------

    \164\ See, e.g., Comment Letter of Cetera Financial Group (Aug.
7, 2018) (``Cetera Letter I''); IRI Letter; Schwab Letter I; Schwab
Letter III (providing sample Form CRS instructions permitting
incorporation of materials by reference); Comment Letter of The
National Society of Compliance Professionals (Aug. 7, 2018) (``NSCP
Letter''); Schnase Letter; LPL Financial Letter.
    \165\ Schwab Letter I (with respect to broker-dealers, Form CRS
should navigate investors to additional information readily
available on the firm's website or enclosed with account
information, and the additional information would be considered
incorporated by reference); NSCP Letter (firms should be permitted
to incorporate by reference public disciplinary disclosure events);
Schnase Letter (``Firms that follow the SEC rules in filing, posting
and linking should get the full anti-fraud benefit of the
information in the Firm Brochure being deemed ``delivered'' when the
Relationship Summary is delivered, without having to resort to
arcane and outmoded language and concepts such as ``incorporation by
reference.'').
    \166\ See Cetera Letter I (suggesting that firms ``should be
permitted to incorporate other information in Form CRS by reference
without reproducing the specified information in its' [sic]
entirety, so long as the location is reasonably accessible to the
public and the other sources of information are sufficient to meet
the standards of Form CRS''); IRI Letter (the Commission should
``permit (but not require) firms to use incorporation by reference
to satisfy particular components of the disclosures required under
Regulation Best Interest and/or Form CRS. In other words, if an
investor already receives a particular piece of information in an
existing disclosure document (including disclosures required under
the federal securities laws, SEC or FINRA rules, ERISA, or DOL
rules) the firm should be permitted to merely reference that
existing document (with sufficient information for investors to
locate or obtain that document.'').

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

    As discussed above, we support the use of layered disclosure and
believe that investors will benefit greatly from receiving a
relationship summary containing high-level information that they will
be more likely to read and understand, with the ability to access more
detailed information. Layered disclosure is an approach that can
balance the goal of keeping the relationship summary short and
accessible with the goal of providing retail investors with fulsome and
specific information. The relationship summary is intended to be a
self-contained document, however, and firms should be able to meet the
instructions' requirements by providing generalized and summary
responses to each item, without relying on incorporation by reference
to other documents providing additional information. In contrast with
other disclosure obligations such as prospectuses and registration
statements, a firm could not satisfy the disclosure requirements set
forth in the relationship summary instructions by incorporating another
document (such as the Form ADV Part 2A brochure) by reference.
    At the same time, we recognize the communicative value of layered
disclosure. The instructions provide, as discussed above, that firms
may \167\ (and in some cases must) \168\ cross-reference other
documents and use hyperlinks or other tools to give more details about
the topic. Where firms link to content outside the relationship summary
disclosure, whether on a permissive or mandatory basis, the information
may not substitute for providing any narrative descriptions that the
instructions require, and the additional information should be
responsive and relevant to the topic covered by the instruction. Firms
should be mindful that the antifraud standards under the federal
securities laws apply to linked information, as with other securities
law disclosures.
---------------------------------------------------------------------------

    \167\ See, e.g., General Instruction 3.A. to Form CRS (``You
also may include: (i) A means of facilitating access to video or
audio messages, or other forms of information (whether by hyperlink,
website address, Quick Response Code (``QR code''), or other
equivalent methods or technologies); (ii) mouse-over windows; (iii)
pop-up boxes; (iv) chat functionality; (v) fee calculators; or (vi)
other forms of electronic media, communications, or tools designed
to enhance a retail investor's understanding of the material in the
relationship summary.'').
    \168\ See, e.g., Item 3.A.(iii) of Form CRS (``You must include
specific references to more detailed information about your fees and
costs that, at a minimum, include the same or equivalent information
to that required by the Form ADV, Part 2A brochure (specifically
Items 5.A., B., C., and D.) and Regulation Best Interest, as
applicable.'').
---------------------------------------------------------------------------

    All together we believe encouraging the use of electronic and
graphical formatting online features, and layered disclosures will
permit firms to create innovative disclosures that engage investors.
4. Conversation Starters
    Consistent with the proposal, the relationship summary will be
required to contain suggested follow-up questions for retail investors
to ask their financial professional. The relationship summary, however,
will not include a separate section of ``Key Questions to Ask,'' at the
end of the relationship summary, as proposed. Instead, firms will be
required to integrate those ``key questions'' for retail investors to
ask their financial professionals throughout the relationship summary
as headings to items or as ``conversation starters.''
    The proposed relationship summary would have required firms to
include ten questions, as applicable to their particular business,
under the heading ``Key Questions to Ask'' after a statement that the
retail investors should ask their financial professional the key
questions about a firm's investment services and accounts.\169\ In
addition, we proposed to allow firms to include up to four additional
frequently asked questions.\170\
---------------------------------------------------------------------------

    \169\ See Proposed Item 8 of Form CRS.
    \170\ See id.
---------------------------------------------------------------------------

    Most comment letters that discussed the ``Key Questions to Ask''
section generally did not support the proposed approach of including a
separate section of up to fourteen questions at the end of the
relationship summary. Commenters who proposed keeping a key questions
section typically suggested significant substantive or stylistic
alterations.\171\ In a separate approach, many commenter mock-ups
included topics and questions from ``Key Questions to Ask'' in a
question-and-response format throughout the relationship summary.\172\
Several commenters suggested that the key questions be removed from the
relationship summary and placed on the Commission's website with other
educational materials.\173\
---------------------------------------------------------------------------

    \171\ See, e.g., CFA Institute Letter I (suggesting
interspersing questions through sections of Form CRS rather than
including at the end); SIFMA Letter (suggesting that firms only be
required to answer ``four to five'' questions to make the
communication ``shorter and more meaningful'' to investors).
    \172\ See, e.g., IAA Letter I; Comment Letter of the Institute
for the Fiduciary Standard (Aug. 6, 2018) (``IFS Letter''); LPL
Financial Letter; Schwab Letter I.
    \173\ See, e.g., ACLI Letter; IAA Letter I; LPL Financial
Letter. One commenter representing investors argued that the
Commission was better-placed to provide information on topics
covered in the ``Key Questions to Ask'' section because financial
professionals would have ``room for obfuscation'' in their
discussions with retail investors. See CFA Letter I.
---------------------------------------------------------------------------

    Observations reported in the RAND 2018 report and other surveys and
studies, and individual investor feedback at roundtables and on
Feedback Forms generally indicated, that retail investors found the key
questions helpful, however. In the RAND 2018 survey, the ``Key
Questions to Ask'' section received the highest support of all sections
to ``keep as is'' when investors were asked if they would add more
detail, keep as is, shorten, or delete the section, and a majority of
RAND 2018 survey respondents also indicated that they were either
``very comfortable'' or ``somewhat comfortable'' with asking each of
the key questions.\174\ Surveys and studies submitted by commenters
also indicated that most investors who reviewed one of the proposed
sample relationship summaries found the suggested questions to be
useful and said they were likely to ask the questions.\175\ In
addition, the ``Key Questions to Ask'' section received the most ``very
useful'' ratings from commenters who submitted Feedback Forms, and
narrative comments on several Feedback Forms specifically indicated
that the questions would encourage discussion with financial
professionals.\176\ Similarly, investors at

Commission-held roundtables indicated that they viewed the questions as
helpful.\177\
---------------------------------------------------------------------------

    \174\ See RAND 2018, supra footnote 13. RAND 2018 also reports
that, in qualitative interviews, ``[m]ost interview participants
said that they liked all of the questions, that they would ask these
questions in meeting with a financial service provider, and did not
suggest dropping any of the questions.''
    \175\ See Betterment Letter I (Hotspex) supra footnote 18 (82%
of respondents viewing a version of the investment-adviser
relationship summary found the suggested questions to be very or
somewhat useful and 93% were very or somewhat likely to ask the
questions); Cetera Letter II (Woelfel) supra footnote 17 (85% of
survey participants who viewed the sample dual-registrant
relationship summary found the key questions to be ``very'' or
``somewhat'' important to cover, and 84% ``strongly'' or
``somewhat'' agreed that the key questions described their topics
clearly); Kleimann I, supra footnote 19 (``Nearly all participants
saw the Key Questions as essential. They felt the questions were
straight forward and raised important questions . . . Many said they
would use the set of questions in their next exchange with their
broker or adviser.'').
    \176\ See Feedback Forms Comment Summary, supra footnote 11 (51
commenters (55%) responded to Question 2(g) that the Key Questions
section was ``very useful'' and 28 (30%) responded that the Key
Questions section was ``useful''; in comparison, other sections were
scored as ``very useful'' in the range of 31% to 44%; similarly,
more than 75% of Feedback Forms included a narrative response to
Question 7 or other response indicating that the Key Questions were
useful; 11 narrative responses included specific comments agreeing
that the Key Questions would encourage discussions with financial
professionals; and two others stated more generally that the
relationship summary would encourage dialogue).
    \177\ See, e.g., Atlanta Roundtable (three investors responded
positively to a question as to whether the key questions were
helpful, with no dissent to that view); Houston Roundtable (one
investor responding that ``the questions for me are very, very
good.'').
---------------------------------------------------------------------------

    In light of comments, we believe that including questions for
investors to ask their financial professionals is an important
component of the relationship summary. Several commenter mock-ups
showed questions throughout the relationship summary grouped by subject
matter rather than at the end of the document. Investor studies showed
that proximity and context are important for questions an investor may
have for a financial professional.\178\ In addition, some commenters'
Feedback Forms requested that questions be placed earlier in the
relationship summary document; one specifically suggested that we put
the questions with ``the appropriate section [with] each section to
which it applies.'' \179\ We have determined to follow a similar
approach by replacing the Key Questions to Ask section with specified
``conversation starters'' throughout the document. We are also using
some of the proposed questions as topic headings.
---------------------------------------------------------------------------

    \178\ See Kleimann I, supra footnote 19; Kleimann II, supra
footnote 19 (each recommending question-and-answer format in part to
place relevant information together).
    \179\ See Feedback Forms Comment Summary, supra footnote 1111
(summary of responses to Question 7); Hoggan Feedback Form (``Maybe
you should question at the end of each section--to help frame the
issue''); see also Hawkins Feedback Form (commenting on obligations
section that ``[g]iving some examples of types of questions to ask
would be beneficial'').
---------------------------------------------------------------------------

    There are required questions as conversation starters in each
section other than the Introduction.\180\ These conversation starters
are intended to cover the same topics as the proposed key questions and
in many cases are substantially similar in wording to the proposed key
questions.\181\ For each conversation starter, firms must use text
features to make the conversation starters more noticeable and
prominent in relation to the other discussion text. For example, they
may use larger or different font; a text box around the heading or
questions; bolded, italicized, or underlined text; or lines to offset
the questions from other sections.\182\ We believe the questions will
be more helpful to investors when included throughout the document with
formatting highlighting the conversation starters and organizing the
conversation starters together with the firm's disclosures about a
particular topic, providing retail investors clearer context for each
question. However, if a required conversation starter is inapplicable
to the firm's business, the firm may omit or modify that conversation
starter.\183\ With these changes, we believe that the conversation
starters will better help retail investors initiate and engage in
useful and informative conversations with their investment
professionals.
---------------------------------------------------------------------------

    \180\ See Items 2.D. (relationships and services); 3.A.(iv) and
3.B.(iii) (fees, costs, conflicts, and standard of conduct);
4.D.(ii) (disciplinary history); and 5.C. (additional information)
of Form CRS.
    \181\ For example, the proposed Key Question 6 (``How will you
choose investments to recommend for my account?'') has been included
in the final relationship summary as a conversation starter to the
Relationships and Services section (``How will you choose
investments to recommend to me?''). For discussion of additional
conversation starter questions, see infra Section II.A.4 See also
Proposed Item 8.6 of Form CRS and Item 2.D.(iv) of Form CRS.
    \182\ See General Instruction 4.A. to Form CRS.
    \183\ See General Instruction 2.B. to Form CRS.
---------------------------------------------------------------------------

    As proposed, investment advisers that provide only automated
investment advisory services or broker-dealers that provide services
only online without a particular individual with whom a retail investor
can discuss the conversation starters must include a section or page on
their website that answers each of the conversation starter questions
and must provide in the relationship summary a means of facilitating
access (e.g., by providing a hyperlink) to that section or page.\184\
For example, a firm could include a hyperlink, QR Code, or some other
equivalent methods or technologies that would enable a retail investor
to access that information. One commenter requested clarification that
all firms could provide retail investors with the answers to each key
question in writing, and then investors could call a call center for
follow-up questions.\185\ All firms could choose to provide written
answers to conversation starters, but the final instructions will only
require written responses in these limited circumstances to ensure that
retail investors receive responses when they do not have access to a
financial professional to ask questions. We continue to believe that
the requirement as adopted will encourage investor engagement and make
the conversation starters useful where there is no firm representative
to answer the question in-person (or by telephone) for the retail
investor. In addition, as proposed, if the firm provides automated
investment advisory or brokerage services, but also makes a financial
professional available to discuss the firm's services with a retail
investor, the firm must make the financial professional available to
discuss the conversation starters with the retail investor.\186\
---------------------------------------------------------------------------

    \184\ General Instruction 4.B. to Form CRS. As proposed, such
advisers or broker-dealers would have provided a hyperlink in the
relationship summary to the appropriate section or page. See
Proposed Item 8 of Form CRS. In response to comments supporting
electronic access more broadly, we broadened the instruction to
allow for other means of facilitating access. We also changed the
term ``automated advice'' from the proposed instructions to
``automated investment advisory services'' in the final instructions
to underscore the ongoing nature of the investment advisory
relationship.
    \185\ See LPL Financial Letter.
    \186\ General Instruction 4.B. to Form CRS.
---------------------------------------------------------------------------

    Six of the proposed key questions will continue to have analogous
``conversation starter'' questions in the final Form CRS, which we
discuss in each applicable section below.\187\ These questions cover
services, fees and costs, conflicts, disciplinary information, and
information about appropriate contact persons. As described below, we
revised the wording for all of these questions.
---------------------------------------------------------------------------

    \187\ See infra Sections II.B.2 (relating to Item 2.D. of Form
CRS), II.B.3.a (relating to Item 3.A.(iv) of Form CRS), II.B.3.b
(relating to Item 3.B.(iii) of Form CRS); II.B.4 (relating to Item
4.D.(ii) of Form CRS), and II.B.5 (relating to Item 5.C. of Form
CRS).
---------------------------------------------------------------------------

    We did not replace four of the key questions with analogous
``conversation starter'' questions; the topics raised by these key
questions will be addressed in other ways in the relationship summary.
First, we have replaced the question requesting financial professionals
to ``do the math for me'' with a different conversation starter.\188\
Commenters raised specific concerns about this question for operational
and recordkeeping reasons.\189\ We are

instead requiring that firms include a conversation starter question
prompting retail investors to ask their financial professional to help
them understand how the fees and costs might affect their investments
and the potential impact of fees and costs on a $10,000
investment.\190\ As we note below, our intent with the proposed ``Do
the math for me'' question was that it serve as a prompt to encourage
retail investors to ask about the hypothetical amount they would pay
per year for an account, what would make the fees more or less, and
what services they would receive for those fees. The question was not
intended to require firms to generate individualized cost estimates for
each particular retail investor. We believe that the newly worded
conversation starter makes that more clear. Additionally, the required
discussion of fees, costs, and conflicts, together with the
conversation starter question, will better serve as an initial basis
for understanding how fees affect investment returns and the fees that
they will pay than the ``Do the math for me'' key question.\191\
---------------------------------------------------------------------------

    \188\ See Proposed Item 8.2 of Form CRS (``Do the math for me.
How much would I pay per year for an advisory account? How much for
a typical brokerage account? What would make those fees more or
less? What services will I receive for those fees?'').
    \189\ See, e.g., Comment Letter of Edward D. Jones and Co., L.P.
(Aug. 7, 2018) (``Edward Jones Letter'') (``[G]iven the range of
services available, it would be very difficult for financial
professionals to fully address this question at the outset of the
[customer] relationship, particularly for investors selecting
transaction-based services.''); SIFMA Letter (``[M]ost firms do not
currently have systems in place to allow the financial professionals
to answer questions such as customer-specific `Do the math for me'
requests.''); John Hancock Letter (``We further believe that the
costs and operational hurdles associated with providing personalized
fee information have been underestimated, and encourage the SEC to
provide that any ``do the math''-type questions may be answered
through the use of examples.''). In part to avoid recordkeeping
requirements on behalf of a financial professional, one commenter
suggested reframing the questions as reflecting questions back to an
investor with a prompt to ask the representative for help if the
investor was unsure as to a response to the questions. See Primerica
Letter.
     For additional discussion of recordkeeping, see infra Section
II.E.
    \190\ See Item 3.A.(iv) of Form CRS.
    \191\ See infra Section II.B.3.
---------------------------------------------------------------------------

    Two other proposed key questions regarding costs associated with an
account and how firms make money \192\ covered information that the
relationship summary as adopted requires to be disclosed under the
section on fees, costs, conflicts, and standard of conduct.\193\
Specifically, firms must (i) summarize the principal fees and costs
that retail investors will incur from their services (including how
frequently they are assessed and the conflicts of interest they create)
and (ii) describe any other fees related to their brokerage or
investment advisory services in addition to those principal fees that
the retail investor will incur.\194\ Additionally, the new conversation
starter question included in Item 3 is intended to elicit similar
points of discussion with the following wording: ``Help me understand
how these fees and costs might affect my investments. If I give you
$10,000 to invest, how much will go to fees and costs, and how much
will be invested for me?'' Finally, unlike the proposal, the
relationship summary must include a description of the ways in which
the firm and its affiliates make money from brokerage or investment
advisory services and investments it provides to retail investors as
well as material conflicts of interest.\195\ As a result of these
disclosure requirements, the separate questions from the proposal are
not necessary.
---------------------------------------------------------------------------

    \192\ See Proposed Items 8.3 (``What additional costs should I
expect in connection with my account?'') and 8.4 (``Tell me how you
and your firm make money in connection with my account. Do you or
your firm receive any payments from anyone besides me in connection
with my investments?'') of Form CRS.
    \193\ See Item 3 of Form CRS. The Item 3.C. disclosure combined
with the conversation starter included therein would similarly cover
information intended to be discussed in response to the fifth
proposed key question (``What are the most common conflicts of
interest in your advisory and brokerage accounts? Explain how you
will address those conflicts when providing services to my
account.''). See infra Section II.B.3.b.
    \194\ See Items 3.A.(i) and 3.A.(ii) of Form CRS; see also infra
Section II.B.3.
    \195\ See Item 3.B.(ii) of Form CRS; see also infra Section
II.B.3.
---------------------------------------------------------------------------

    Finally, we are not adopting a conversation starter question
analogous to the proposed key question asking ``How often will you
monitor my account's performance and offer investment advice?'',
because the Relationships and Services section of the adopted
relationship summary requires disclosure about the services and advice
or recommendations that firms offer and whether or not they monitor
accounts, including the frequency and any material limitations on any
such monitoring.\196\
---------------------------------------------------------------------------

    \196\ See Item 2.B.(i) of Form CRS (``Explain whether or not you
monitor the performance of retail investors' investments, including
the frequency and any material limitations. Indicate whether or not
the services described in response to this Item 2.B.(i) are offered
as part of your standard services.''); see also infra Section
II.B.2.
---------------------------------------------------------------------------

5. Presentation of Relationship Summaries by Dual Registrants and
Affiliated Firms
    We are modifying the proposed instructions in order to encourage a
dual registrant to prepare one combined relationship summary discussing
both its brokerage and advisory services, but a dual registrant will be
permitted to provide two separate relationship summaries, each
describing one type of service.\197\ The proposal would have required a
dual registrant to prepare one relationship summary, presenting most of
the required items under standardized headings and in a tabular format,
with brokerage services described in one column and advisory services
described in another.\198\ We also are adding a new instruction
permitting affiliates to prepare a single relationship summary
describing both brokerage and investment advisory services that they
offer or to prepare separate relationship summaries, one for each type
of service.\199\ In comparison, the proposed instructions did not
permit affiliates to deliver one combined relationship summary, but did
allow them to state that they offer retail investors their affiliates'
brokerage or advisory services, as applicable.\200\
---------------------------------------------------------------------------

    \197\ General Instruction 5.A. to Form CRS.
    \198\ Proposed General Instruction 1.(e) to Form CRS.
    \199\ General Instruction 5.B. to Form CRS.
    \200\ Proposed Item 2.D. of Form CRS. This disclosure only
applied in the context of an affiliate of the firm. This item was
not intended to describe disclosure of a financial professional's
outside business activities, such as an outside investment advisory
business of a broker-dealer registered representative. Cf. Comment
Letter of Northwestern Mutual Life Insurance Company (Aug. 7, 2018)
(``Northwestern Mutual Letter'') (interpreting Proposed Item 3 to
prohibit the mention of affiliate services).
---------------------------------------------------------------------------

    We are not adopting the definitions of ``standalone broker-dealer''
and ``standalone investment adviser'' as proposed, because they are no
longer necessary given the streamlining of the instructions relative to
the proposal.\201\ Under the final instructions, however, we are
defining a dual registrant as ``[a] firm that is dually registered as a
broker-dealer under section 15 of the Exchange Act and an investment
adviser under section 203 of the Advisers Act and offers services to
retail investors as both a broker-dealer and an investment adviser'',
substantially as proposed. To clarify, a firm that is dually registered
as both a broker-dealer and an investment adviser but does not offer
both brokerage and investment advisory services to retail investors
would not fall within the definition of dual registrant. For example, a
firm that is dually registered and offers investment advisory services
to retail investors, but offers brokerage services only to
institutional customers, would be required to prepare, file, and
deliver the relationship summary only in accordance with the
obligations of an investment adviser offering services to retail
investors.\202\
---------------------------------------------------------------------------

    \201\ See supra footnote 8.
    \202\ See also Advisers Act Rule 204-5; Exchange Act Rule 17a-
14(a); General Instructions to Form CRS (``If you do not have any
retail investors to whom you must deliver a relationship summary,
you are not required to prepare or file one.''); General Instruction
11.C to Form CRS.
---------------------------------------------------------------------------

    Dual Registrants. Investor studies and surveys showed mixed results
in connection with the dual-column, combined relationship summary. For
example, when presented with screen shots of each separate section in
dual-column format, 85% of RAND 2018 survey respondents indicated that
the side-by-side comparison format helped them decide whether a broker-
dealer or investment adviser account would be right for them, but
during qualitative interviews, some participants had difficulty with
the two column

format.\203\ On Feedback Forms, some indicated that they liked the
side-by-side or grid presentation.\204\ One Feedback Form commenter
said the dual-column format was confusing, however.\205\ An interview-
based study also indicated that both the formatting and the language in
the dual-column format in our proposed sample relationship summary
contributed to investor confusion about differences between broker-
dealers' and investment advisers' services.\206\ Both industry
representatives and commenters representing investors also expressed
concerns about the proposed formatting requirements for dual
registrants' relationship summaries.\207\ Two commenters supported
using visual formatting to help investors understand the options dual
registrants provide, but argued that the proposed content or design
should be changed.\208\
---------------------------------------------------------------------------

    \203\ See RAND 2018, supra footnote 13, at 22; see also id., at
46 (``Some participants grasped that the document was organized into
two columns, each corresponding to an account type. Some others did
not realize this immediately but grasped it once it was pointed out
by an interviewer.'').
    \204\ See, e.g., Anonymous03 Feedback Form (``a side by side
chart with u's [sic] to say which type of account offers which
service''); Anonymous14 Feedback Form (``recommend chart
structure''); Anonymous28 (``Presenting the differences in parallel
columns gives the best chance for people new ot [sic] investing to
understand what is involved''); Baker Feedback Form (``the double
column format, comparing the two classes, was clear and easy to
follow''); and Smith1 Feedback Form (``I like the side by side
comparisons'').
    \205\ See Anonymous02 Feedback Form (``Maybe a bit hard to read
the columns.'').
    \206\ See Kleimann I, supra footnote 19, at 30-31 (``Most
participants tried to read the CRS by looking first at one column,
usually the Broker Dealer Services, and then at the second column .
. . when they turned to the second column they then tried to match
the bullets . . . . Sometimes this matching was relatively easy to
do, as in the Types of Relationships and Services section because
the bullets aligned almost exactly. They struggled and found the
misaligned bullets confusing in subsequent sections . . . Some
participants simply took information from the first bullet they read
or from bolded words or phrases.'').
    \207\ See AARP Letter; CFA Letter I; TIAA Letter; Fidelity
Letter; MassMutual Letter; LPL Financial Letter; SIFMA Letter;
Comment Letter of BlackRock, Inc. (Aug. 7, 2018) (``BlackRock
Letter'') (expressing concern that investors may be confused if dual
registrants were required to disclose all of their advisory and
brokerage services in a single relationship summary); see also
Schwab Letter II (``Dual-registrant firms recommend flexibility
because of real-world concerns that the side-by-side comparison will
not be effective.'').
    \208\ See AARP Letter (``[a]lthough the visual formatting is
helpful, the substantive information laid out within the table
remains technical and is likely to be confusing to the average
retail investor''); CFA Letter I (emphasizing that investors must
see all available options in order to make an informed decision, and
that the Commission consult with disclosure design experts toward
developing a form that is most likely to result in informed investor
choice.'').
---------------------------------------------------------------------------

    Several commenters suggested letting dual registrants choose
whether to prepare one combined relationship summary or two separate
ones.\209\ Commenters argued that providing information about both
brokerage and investment advisory services as proposed would confuse
investors.\210\ Another suggested requiring dual registrants to prepare
and deliver different relationship summaries to retail investors
depending on whether the investors enter into an advisory or brokerage
relationship, and to highlight the availability and link to the
relationship summary of the other type of service.\211\ One commenter
argued that dual registrants needed flexibility to maintain two
separate disclosures to allow each financial professional associated
with the dual registrant to provide a tailored disclosure to his/her
customer, without including services that he/she is not licensed to
provide.\212\
---------------------------------------------------------------------------

    \209\ See Schwab Letter III (providing sample Form CRS
instructions that permit dual registrants either to prepare a
single, comparative relationship summary, or two separate
relationship summaries describing each type of service and providing
links to each other); TIAA Letter; Fidelity Letter; MassMutual
Letter; LPL Financial Letter; SIFMA Letter; BlackRock Letter.
    \210\ See, e.g., TIAA Letter (a combined relationship summary
would confuse customers of dually registered firms that provide only
one type of service and would overwhelm them with information not
relevant to the relationship); LPL Financial Letter; SIFMA Letter;
BlackRock Letter.
    \211\ See IAA Letter I.
    \212\ See MassMutual Letter.
---------------------------------------------------------------------------

    We encourage dual registrants to prepare a single disclosure,
designed in a manner that facilitates comparison between their
brokerage and advisory services. Informed by comments, we have
determined that two separate disclosures might be appropriate,
depending on the different ways firms and their financial professionals
offer services and on the particular facts and circumstances. For
example, financial professionals with licenses to offer services as a
representative of a broker-dealer and investment adviser may offer
services through a dual registrant, affiliated firms, or unaffiliated
firms, or only offer one type of service notwithstanding their dual
licensing.\213\ Financial professionals who are not dually licensed may
offer one type of service through a firm that is dually registered.
Accordingly, the final instructions permit dual registrants and
affiliates to prepare a single relationship summary, or alternatively,
two separate ones, to describe their brokerage and investment advisory
services in a way that accurately reflects their business models and
will be the most helpful to retail investors. The instructions
explicitly encourage preparation of a single relationship summary,
however, given that a number of investors and commenters reacted
positively to this presentation.\214\
---------------------------------------------------------------------------

    \213\ See, e.g., LPL Financial Letter.
    \214\ See, e.g., RAND 2018, supra footnote 13 (reporting that
85% of survey respondents found the side-by-side comparison format
to be helpful for purposes of deciding between a broker-dealer and
investment adviser); see also CFA Letter I (stating it supported
using one document to provide comparing brokerage and investment
advisory services); Fidelity Letter (stating that a single Form CRS
for a dual-registered firm could accomplish its objective); Schnase
Letter (supporting the idea of having a unique form for dual
registrants).
---------------------------------------------------------------------------

    A firm preparing a single relationship summary will be required to
employ design elements of its own choosing to promote comparability;
however, we are not prescribing the two-column format, as proposed. We
agree that making retail investors aware of a range of options is
important to help them make an informed choice,\215\ but we recognize
the potential limits of a tabular format, as illustrated by results
from some investor studies and surveys,\216\ and we have concluded that
firms are generally in a better position than the Commission to
determine a format and design that facilitates comparison of their
specific brokerage and investment advisory services. Whether a firm
prepares a single relationship summary or two separate ones, the final
instructions require a firm to present the information with equal
prominence and in a manner that clearly distinguishes and facilitates
comparison of the two types of services.\217\ For example, a firm could
use a tabular format; text features such as text boxes; bolded,
italicized, or underlined text; or lines to clearly indicate
similarities and differences in its services.
---------------------------------------------------------------------------

    \215\ See supra footnote 208 and accompanying text; infra
footnote 1046 and accompanying text (discussing studies concerning
the availability and presentation of comparative information on
decision making).
    \216\ See supra footnotes 203-206 and accompanying text.
    \217\ General Instruction 5.A. to Form CRS.
---------------------------------------------------------------------------

    While we are providing this flexibility, we believe investors
should see a range of options. Accordingly, the final instructions
provide that a firm preparing two separate relationship summaries must
provide a means of facilitating access to each relationship summary
(e.g., include cross-references or hyperlinks) and deliver both with
equal prominence and at the same time to each retail investor, whether
or not that retail investor qualifies for those retail services or
accounts.\218\ We disagree with commenters suggesting that dual
registrants should have the option to deliver to retail investors a
relationship summary describing only one type of service if, for
example, that

investor does not qualify for one of the services.\219\ Retail
investors should be able to learn about and compare the range of
options a firm offers to retail investors, even if the financial
professional does not believe that the retail investor meets the
requirements for or is considering certain services at that time. For
example, a retail investor may initially seek ongoing advice through an
advisory account, but after learning about both brokerage and advisory
services and speaking with a financial professional, may decide that a
brokerage account is a better choice. Or a retail investor may not
qualify for certain accounts at the time of receiving the relationship
summary, e.g., by not being able to meet an account opening minimum,
but may qualify for them in the future, or may qualify for a particular
service at one firm but not another. Furthermore, a retail investor may
initially make the financial professional aware of only certain asset
holdings (for example, he or she approaches a firm to rollover an IRA).
On that basis, the firm may believe the investor only qualifies for
certain of the firm's services. However, the investor may also have
substantial other asset holdings and thus qualify for a variety of
accounts that the firm offers. Knowing about the alternative brokerage
and investment advisory options that a firm offers will help retail
investors to compare firms' offerings and consider whether to adjust
the relationship or services as investors' financial circumstances
change.
---------------------------------------------------------------------------

    \218\ General Instruction 5.A. to Form CRS.
    \219\ See IAA Letter I; Fidelity Letter.
---------------------------------------------------------------------------

    Affiliate Services. As discussed above, the proposed instructions
did not permit affiliates to prepare a combined relationship summary,
but did permit firms with affiliates offering retail investors
brokerage or advisory services to disclose these services.\220\ Several
commenters recommended that affiliates should have the same flexibility
to prepare one or two relationship summaries as dual registrants.\221\
We agree that this flexibility is appropriate for affiliates and are
modifying the instructions to permit, but not require, delivery of a
single relationship summary. Affiliates preparing a single relationship
summary will provide the same comparative benefits for investors as
dual registrants doing so. As with dual registrants, some affiliated
firms market their services together and have financial professionals
who hold licenses through each firm. We recognize, however, that not
all affiliates operate in the same way. Some affiliated firms operate
independently, do not market their services together, and do not share
financial professionals. The different ways in which financial
professionals affiliate with firms to provide services also warrant
this flexibility. For example, some commenters noted that many
financial professionals are licensed representatives of a brokerage
firm and are also licensed through an affiliated investment advisory
firm or an unaffiliated investment advisory firm (sometimes as a sole
proprietor) separately registered with the Commission or one or more
States.\222\ Depending on the relationship among affiliates and their
financial professionals, a single relationship summary or two separate
summaries may be more appropriate.\223\
---------------------------------------------------------------------------

    \220\ Proposed Item 2.D. of Form CRS.
    \221\ See Fidelity Letter; LPL Financial Letter (``[D]ual-hatted
financial professionals may either (i) provide brokerage and
advisory services on behalf of LPL or (ii) provide brokerage
services on behalf of LPL while providing advisory services on
behalf of an unaffiliated RIA that is separately registered . . . .
[In the latter case, an investor] would receive a dual registrant
relationship summary from LPL and a standalone investment adviser
relationship summary from the RIA'' without knowing which entity
would be providing advisory services.''). Other commenters suggested
that the instructions clarify whether the requirements for dual
registrants apply to affiliated broker-dealers and investment
advisers. Comment Letter of State Farm Mutual Automobile Insurance
Company (Aug. 6, 2018) (``State Farm Letter'') (``[T]he SEC did not
provide a template or otherwise discuss whether affiliated broker-
dealers and investment advisers can use blended or combined Form
CRS''); Cambridge Letter (requesting that the Commission clarify
that all references to dual registrants are applicable to broker-
dealers and registered investment advisers organized under a single
corporate structure as affiliated entities).
    \222\ See, e.g., LPL Financial Letter.
    \223\ One commenter described arrangements in which a dual-
hatted financial professional may provide brokerage services on
behalf of a dual registrant and advisory services on behalf of an
unaffiliated investment adviser. The commenter expressed concern
that an investor may be confused if the dual registrant's and
unaffiliated investment adviser's relationship summaries both
describe investment advisory services. See LPL Financial Letter. We
believe the flexibility for dual registrants and affiliated firms to
prepare combined or separate relationship summaries under the final
instructions should address this concern, and firms can determine
which presentations are most helpful for investors.
---------------------------------------------------------------------------

    Many dually licensed financial professionals offer services on
behalf of two affiliates, similar to dually licensed financial
professionals offering services for a dual registrant. One commenter
requested that the Commission provide clarity that all references to
dual registrants apply to broker-dealers and investment advisers
organized under a single corporate structure as affiliated
entities.\224\ Consistent with our discussion above, we believe that
retail investors seeking services from dually licensed financial
professionals should receive information about all of the services the
financial professional offers, even if the services are through two
affiliated SEC-registered firms. As a result, if two affiliated SEC-
registered firms prepare separate relationship summaries, and they
provide brokerage and investment advisory services through dually
licensed financial professionals, the final instructions require the
firms to deliver to each retail investor both firms' relationship
summaries with equal prominence and at the same time, without regard to
whether the particular retail investor qualifies for those retail
services or accounts. To provide clarity, we have added a definition
for dually licensed professionals in the final instructions that was
not included in the proposal.\225\ The final instructions also provide
that each of the relationship summaries must cross-reference and link
to the other.\226\ If the affiliated firms are not providing brokerage
and investment advisory services through dually licensed financial
professionals, they may choose whether or not to reference each other's
relationship summary and whether or not to deliver the affiliate's
relationship summary with equal prominence and at the same time.\227\
---------------------------------------------------------------------------

    \224\ See Cambridge Letter.
    \225\ General Instruction 11.B. to Form CRS (defining ``dually
licensed financial professional'' as ``A natural person who is both
an associated person of a broker or dealer registered under section
15 of the Exchange Act, as defined in section 3(a)(18) of the
Exchange Act, and a supervised person of an investment adviser
registered under section 203 of the Advisers Act, as defined in
section 202(a)(25) of the Advisers Act.'').
    \226\ General Instruction 5.B. to Form CRS. As discussed above,
as is the case for dual registrants, affiliates preparing separate
relationship summaries must deliver them to each retail investor
with equal prominence and at the same time, without regard to
whether the particular retail investor qualifies for those retail
services or accounts. Each of the relationship summaries must
reference and provide a means of facilitating access to the other.
General Instruction 5.B.(ii).a. to Form CRS.
    \227\ General Instruction 5.B.(ii).b. to Form CRS. Firms that
are unaffiliated will be treated as standalone broker-dealers and
standalone investment advisers, each with an independent
responsibility to create and deliver its own relationship summary in
accordance with the final instructions.
---------------------------------------------------------------------------

    Finally, we modified the instructions to explicitly permit a firm
to acknowledge other financial services the firm provides in addition
to its services as a broker-dealer or investment adviser registered
with the SEC, such as insurance, banking, or retirement services, or
investment advice pursuant to state registration or licensing.\228\

Firms may include a means of facilitating access (e.g., cross-
references or hyperlinks) to additional information about those
services.\229\ Some commenters encouraged the SEC to allow firms to
disclose services of other affiliates, even if those services are not
regulated by the SEC, such as investment advisory services offered by
an affiliated thrift savings institution.\230\ In response to our
request for comment asking whether we should permit firms to include
wording regarding other types of services and lines of businesses,
several commenters submitting mock-ups of relationship summaries
included language referencing banking and insurance services or
products.\231\ We found these comments persuasive and believe that
permitting firms to reference financial services not necessarily
regulated by the Commission so that retail investors can see the range
of options available to them can benefit their decision-making, as
discussed above.\232\ This new instruction supports and expands upon
the commenters' suggestions. Given that the focus of the relationship
summary is on brokerage and/or advisory services, however, information
pertaining to other services should not obscure or impede understanding
of the information that must be disclosed in accordance with the Form
CRS instructions.\233\
---------------------------------------------------------------------------

    \228\ General Instruction 5.C. to Form CRS. This would also
permit a broker-dealer that is registered with one or more states as
an investment adviser to refer to such advisory services.
    \229\ General Instruction 5.C. to Form CRS.
    \230\ See Northwestern Mutual Letter (seeking flexibility to
disclose advisory services offered through an affiliated thrift
because this would be in the clients' best interest); ACLI Letter
(asserting that Form CRS is not flexible enough to describe in a
meaningful and accurate way investment advisory services provided by
insurance affiliates such as banks or thrifts).
    \231\ See ASA Letter; Primerica Letter; Comment Letter of Stifel
Financial (Aug. 7, 2018) (``Stifel Letter'') (referencing bank sweep
accounts and also providing: ``Banks and insurance brokers and
agents may also provide access to financial planning and advice
services, but these services are beyond the scope of this
document.''); Cetera Letter I (referencing bank sweep programs).
    \232\ See supra footnotes 215, 218-219, and accompanying text.
    \233\ See General Instruction 5.C. to Form CRS.
---------------------------------------------------------------------------

    We believe that, together, these requirements for dually registered
firms, financial professionals, and affiliates will enhance
comparability while providing flexibility for them to present their
services and relationships in the way the firm believes to be the
clearest.

B. Items

    The relationship summary is principally designed to provide
succinct information about (i) relationships and services the firm
offers to retail investors; (ii) fees and costs that retail investors
will pay, conflicts of interest, and the applicable standard of
conduct; and (iii) disciplinary history. The proposed relationship
summary included this information as well as additional topics that we
are eliminating, as explained further below. In determining the scope
of the relationship summary, we balanced the need for robust
disclosures with the risk of ``information overload'' and reader
disengagement, a theme in comment letters, investor feedback at
roundtables and in the Feedback Forms, and observations reported in the
RAND 2018 report and other surveys and studies.
    Some of the key changes from the proposal include:
     We have modified the sections to place substantively
related information generally together. We believe this will facilitate
comprehension, leading to a better-informed decision-making process and
selection of a firm, financial professional, account type, services,
and investments.
     The final instructions simplify the introduction;
highlight disciplinary history in a separate section; and integrate key
questions, now characterized as ``conversation starters,'' among the
remaining sections of the relationship summary.
     After reviewing the comments and observations reported in
the RAND 2018 report and other surveys and studies, we have determined
to remove prescribed generalized comparisons between brokerage and
investment advisory services.
1. Introduction
    The relationship summary will include a standardized introductory
paragraph. The instructions will require a firm to: (i) State the name
of the broker-dealer or investment adviser and whether the firm is
registered with the Securities and Exchange Commission as a broker-
dealer, investment adviser, or both; (ii) indicate that brokerage and
investment advisory services and fees differ and that it is important
for the retail investor to understand the differences; and (iii) state
that free and simple tools are available to research firms and
financial professionals at the Commission's investor education website,
Investor.gov/CRS, which also provides educational materials about
broker-dealers, investment advisers, and investing.\234\
---------------------------------------------------------------------------

    \234\ See Item 1 of Form CRS. Firms also must include the date
prominently at the beginning of the relationship summary, for
example, in the header or footer of the first page or in a similar
location for a relationship summary provided electronically. See id.
---------------------------------------------------------------------------

    The introduction's instructions as adopted differ from the
proposal, which would have required prescribed wording in the
introduction that differed for broker-dealers, investment advisers, and
dual registrants. Specifically, the prescribed wording in the proposed
introduction was intended to highlight in a generalized sense and make
investors aware that broker-dealers and investment advisers are
different, and that investors needed to carefully consider this choice.
We received one comment specifically addressing the introduction. It
stated that the prescribed wording would not capture the attention of
retail investors and failed to adequately convey information regarding
differences between investment advisers and broker-dealers.\235\ In
addition, several of the mock-ups commenters submitted included other
suggestions for beginning the relationship summary, many of which had
an introduction that was generally shorter and included less discussion
about generalized business models than the proposed relationship
summary.\236\ In response to the comment and the mock-ups, a number of
which we found conveyed useful information in a more concise manner
than the proposed prescribed wording, we simplified and standardized
the introductory paragraph, eliminating or replacing most of the
prescribed wording we proposed, as discussed further below. In
addition, we added a requirement to provide a link to Investor.gov/CRS
in the Introduction to highlight the tools and educational resources
available to retail investors. This dedicated page on Investor.gov will
provide information specifically tailored to educate retail investors
about financial professionals, including search tools in order to
research firms and financial professionals and information about
broker-dealers and investment advisers and their different services,
fees, and conflicts. We believe the changes and the new page will
better focus retail investors on how the relationship summary can be
most helpful to them, while providing a link to resources to more
general investor education information at the front of the relationship
summary.
---------------------------------------------------------------------------

    \235\ See CFA Letter I. The commenter argued that the
introduction would best be used to convey additional basic
information about the differences between services offered by
broker-dealers, investment advisers, and dual registrants. See id.
    \236\ See, e.g., Primerica Letter; Schwab Letter I; SIFMA
Letter.
---------------------------------------------------------------------------

    We made the following specific changes to the introduction: First,
the final instructions require all firms to include certain information
without prescribing the specific words that firms

must use.\237\ The proposed relationship summary would have required
prescribed wording that differed for standalone investment advisers,
standalone broker-dealers, and dual registrants.\238\ These changes
correspond with the general approach throughout the final instructions
of permitting more flexibility for firms to tailor the wording of their
relationship summaries to enhance the relationship summary's accuracy,
clarity, usability, and design.\239\
---------------------------------------------------------------------------

    \237\ See Item 1 of Form CRS.
    \238\ See Proposed Items 1.B. (standalone broker-dealers); 1.C.
(standalone investment advisers); and 1.D. (dual registrants) of
Form CRS.
    \239\ See supra footnote 83 and accompanying text.
---------------------------------------------------------------------------

    Second, we eliminated the proposed requirement that standalone
investment advisers state that they do not provide brokerage services,
and vice versa.\240\ We believe this information is more succinctly
conveyed by including the firm's registration status.\241\
Additionally, commenters pointed out that the choice of financial
services providers is not binary--there are more than two types of
services offered that could apply.\242\ We agree that the proposed
wording could be viewed as unduly constricting and potentially
misleading.
---------------------------------------------------------------------------

    \240\ In bold font, a standalone broker-dealer would have been
required to state: ``We are a broker-dealer and provide brokerage
accounts and services rather than advisory accounts and services.''
Proposed Item 1.B. of Form CRS. Likewise, a standalone investment
adviser would have been required to state in bold font: ``We are an
investment adviser and provide advisory accounts and services rather
than brokerage accounts and services.'' Proposed Item 1.C. of Form
CRS. Dual registrants would have included a similar statement in
bold font: ``Depending on your needs and investment objectives, we
can provide you with services in a brokerage account, investment
advisory account, or both at the same time.'' Proposed Item 1.D. of
Form CRS.
    \241\ As noted and discussed further infra, the Introduction
will also refer retail investors to Investor.gov/CRS for further
information regarding broker-dealers and investment advisers.
    \242\ See, e.g., ACLI Letter (describing the ``binary approach
that the SEC has taken, which is not entirely accurate for the
distribution of variable annuity and variable life products'').
---------------------------------------------------------------------------

    Third, we excluded the statement for dual registrants that,
depending on an investor's needs and investment objectives, the firm
can provide services in a brokerage account, investment advisory
account, or both at the same time. We believe that this information is
conveyed more effectively by the statement of a firm's registration
status and the information provided elsewhere in the relationship
summary, such as in the description of services that the firm
provides.\243\ In addition, requiring a statement of a firm's
registration status at the beginning of the relationship summary helps
obviate a need for the Affirmative Disclosures under the Exchange Act
and the Advisers Act proposed specifically to require a broker-dealer
and an investment adviser to prominently disclose that it is registered
as a broker-dealer or investment adviser, as applicable, with the
Commission in print or electronic retail investor communications.\244\
As discussed below, we are not adopting the Affirmative
Disclosures.\245\ In response to our request for comment relating to
the Affirmative Disclosures,\246\ several commenters stated that the
proposed rules were duplicative of other disclosure obligations (e.g.,
Form ADV, Regulation Best Interest, Form CRS) \247\ and that such rules
were costly and difficult to implement and supervise.\248\
---------------------------------------------------------------------------

    \243\ See infra Section II.B.2.
    \244\ See Proposing Release, supra footnote 5, at Section III.D.
    \245\ See infra Section III.
    \246\ See Proposing Release, supra footnote 5, at Section III.D.
    \247\ See, e.g., LPL Financial Letter; SIFMA Letter; IRI Letter;
Committee of Annuity Insurers Letter; Trailhead Consulting Letter;
see also infra Section III.
    \248\ See, e.g., LPL Financial Letter; Bank of America Letter;
IRI Letter; SIFMA Letter; Comment Letter of Altruist Financial
Advisors LLC (Aug. 7, 2018) (``Altruist Letter''); see also infra
Section III.
---------------------------------------------------------------------------

    Fourth, we have included an instruction that allows (but does not
require) reference to FINRA or Securities Investor Protection
Corporation (``SIPC'') membership in a manner consistent with other
rules and regulations (e.g., FINRA rule 2210).\249\
---------------------------------------------------------------------------

    \249\ See Item 1.A. of Form CRS.
---------------------------------------------------------------------------

    We are not adopting the proposed requirements to include statements
that: (i) There are different ways an investor can get help with
investments; (ii) an investor should carefully consider which types of
accounts and services are right for him or her; (iii) the relationship
summary gives an investor a summary of the types of services the firm
provides and how the investor pays; and (iv) an investor should ask for
more information with a specific reference to the key questions.\250\
We believe that this information is not necessary in the introduction
and is better conveyed through the revised question-and-answer
structure of the relationship summary and a more streamlined
introduction highlighting that it is important for retail investors to
understand the difference between brokerage and investment advisory
services and fees and referencing Investor.gov/CRS.\251\ The
conversation starters more directly prompt discussion between retail
investors and their investment professionals than a generalized
statement to ask for more information, and the conversation starters
relating to the Relationships and Services item convey that an investor
should carefully consider which types of accounts and services are
appropriate. In addition, several commenter mock-ups demonstrated that
removing the prescribed wording from each of these changes results in a
shorter introduction and promotes additional white space in the
relationship summary. Our adopted instructions remove required text
that might be unnecessary for investors, similar to introductions in
mock-ups that were typically shorter with less discussion about
generalized business models than the proposed relationship
summary.\252\ As a result, we believe these changes will enhance the
relationship summary's clarity, usability, and design.
---------------------------------------------------------------------------

    \250\ See Proposed Items 1.B. (standalone broker-dealers); 1.C.
(standalone investment advisers); and 1.D. (dual registrants) of
Form CRS.
    \251\ Similarly, we eliminated the reference to suggested
questions on a specified page because the key questions are now
included throughout the relationship summary.
    \252\ See, e.g., Primerica Letter; Schwab Letter I; SIFMA
Letter.
---------------------------------------------------------------------------

    Finally, we added a requirement to provide a link to Investor.gov/
CRS and state that free and simple search tools are available at
Investor.gov/CRS in order to research firms and financial
professionals. Firms also will state that the page provides educational
materials about broker-dealers, investment advisers, and investing.
These materials include information about the different services and
fees that broker-dealers and investment advisers offer. We believe a
focus on Investor.gov and specifically the Investor.gov/CRS page at the
beginning of the relationship summary will be more helpful to retail
investors than the proposed relationship summary introduction.
Investor.gov provides various resources that can assist with investor
education relating to firms and their professionals. Among other
components, Investor.gov currently provides resources prepared by
Commission staff for retail investors to:
     Review the background of their investment professional;
     Educate themselves about investment products, including
the risks and unique characteristics of many products;
     Perform fee calculations;
     Review Investor Alerts and Bulletins;
     Find contact information for the Commission; and

     Review educational information regarding broker-dealers
and investment advisers.\253\
---------------------------------------------------------------------------

    \253\ See Investor Bulletin: Ten Ways to Use Investor.gov (Mar.
8, 2017), available at https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-bulletin-ten-ways-use-investorgov; see also Brokers, available at https://www.investor.gov/research-before-you-invest/methods-investing/working-investment-professional/brokers; Investment Advisers,
available at https://www.investor.gov/research-before-you-invest/methods-investing/working-investment-professional/investment-advisers.
_____________________________________-

    The Investor.gov/CRS page will bring together these types of
educational materials about investment professionals, along with
broader tools and other content specifically tailored for retail
investors on Investor.gov, which will help them to more easily learn
about different types of firms and find information about specific
firms and financial professionals.
    As discussed further below, we are removing discussions in the
proposed relationship summary that were more generalized or educational
in nature, including the comparison sections for standalone broker-
dealers and investment advisers and other statements comparing these
two different types of financial services and fees. Many commenters
indicated that the Commission is generally better-positioned to provide
investor education materials as compared to firms.\254\ As a result,
the revised introduction provides the Investor.gov/CRS link at the
beginning of the relationship summary to direct retail investors to the
Commission staff's resources and highlights the importance of investor
education.\255\
---------------------------------------------------------------------------

    \254\ See supra footnote 40 and accompanying text.
    \255\ Certain commenters provided mock-ups that did not include
any introductory wording. E.g., Fidelity Letter; IAA Letter I. In
our view, these mock-ups either did not include, or, at minimum, did
not appropriately highlight, important information regarding the
registration status of the firm or the availability of additional
information for retail investors.
---------------------------------------------------------------------------

    Investors and commenters also supported highlighting Investor.gov
more generally. Investor feedback at roundtables generally indicated
that Investor.gov was a useful website for retail investors and should
be prominent in the relationship summary.\256\ Comment letters were
supportive of the Commission providing educational materials to retail
investors generally and Investor.gov specifically.\257\ Observations in
surveys and studies also indicated that many retail investors would
seek information at Investor.gov and would trust that information
because it is a government site.\258\ Some investor studies, however,
indicated that retail investors did not understand what information was
available at Investor.gov.\259\ Moving the link to Investor.gov/CRS and
the related explanation to the front of the relationship summary (from
the ``Additional Information'' section at the end of the relationship
summary, as proposed) will address this issue by making the website
more prominent and by concentrating information helpful to retail
investors on one dedicated page on Investor.gov.
---------------------------------------------------------------------------

    \256\ See Denver Roundtable (Investor Nine: ``Yeah, I went there
[to Investor.gov], that's good.'' Ms. Siethoff: ``Did you think that
sort of thing should be highlighted more?'' Investor Nine: ``More,
yes. More''); Philadelphia Roundtable (Investor Four: ``I went to
those websites [including Investor.gov] and I found them very
useful.''). Some Feedback Form commenters also indicated that a link
to Investor.gov or a similar educational website would be helpful.
See, e.g., Baker Feedback Form (``I found the document overall
extremely useful and learned, most importantly, to refer to the
sec.gov website often''); Shepard Feedback Form (``An investing.gov
[sic] website seems to be a useful source''); Smith2 Feedback Form
(``would like to see a link included to a site or sites that contain
general investment information'').
    \257\ See, e.g., MassMutual Letter (``The SEC provides a wealth
of information at www.investor.gov for educational purposes . . .
Providing general information about broker-dealers and investment
advisers in a consistent and readily-accessible [sic] space on the
SEC's website would allow each firm to use the space available in
Form CRS to accurately describe its brokerage and advisory services,
with tailored language to reflect its business model, products and
services offered and conflicts of interest.'').
    \258\ See Kleimann II, supra footnote 19 (``Many participants
said that they would use the investor.gov site . . . [and] that they
would put a high level of trust in whatever information would be on
the site because it was a government site.''); RAND 2018, supra
footnote 13 (finding that two-thirds of investors would be ``very
likely'' or ``somewhat likely'' to click on a hyperlink for investor
education materials).
    \259\ See Kleimann I, supra footnote 19 (``None [of the study
participants] had a clear idea of the information that would be
provided at Investor.gov.''); see also Kleimann II, supra footnote
19 (``Many participants said that they would use the investor.gov
site to research the firm, but few knew what specific information
would be at that site . . .'').
---------------------------------------------------------------------------

2. Relationships and Services
    As proposed, after the introduction firms will be required to
summarize the relationships and services that they offer to retail
investors. They will use a revised heading, ``What investment services
and advice can you provide me? '', which follows the new question-and-
answer format.\260\ Several commenters used this question or a similar
heading in mock-ups they provided.\261\ Generally as proposed, we are
requiring firms to provide information about specific aspects of their
brokerage and investment advisory services, with modifications from the
proposal to permit firms to use their own wording to cover these
topics.
---------------------------------------------------------------------------

    \260\ Item 2.A. of Form CRS.
    \261\ See, e.g., IAA Letter I; LPL Financial Letter; Primerica
Letter ; SIFMA Letter; Wells Fargo Letter; Fidelity Letter; Schwab
Letter I (mock-up). We proposed requiring the heading, ``[Types of]
Relationships and Services.'' As discussed above, many commenters
recommended that the relationship summary use a question-and-answer
format as a more engaging approach for retail investors.
---------------------------------------------------------------------------

    We proposed separate instructions for firms to describe brokerage
account services and investment advisory account services. Firms would
have used a mix of prescribed wording and their own wording to provide
a summary overview of fees and certain required topics, including the
scope of advice services, investment discretion, monitoring, and
significant limitations on investments available to retail
investors.\262\ We received feedback from the observations in the RAND
2018 report, other surveys and studies and on Feedback Forms that
relationships and services is an important area to cover,\263\ and that
investors learned important information from the prescribed wording on
relationships and services.\264\ In addition, the IAC recommended that
the Commission adopt a uniform, plain English disclosure for retail
investors that would include basic information ``about the nature of
services offered,'' among other

things.\265\ However, some commenters expressed concern that, without
more educational content, this approach would not sufficiently inform
or would confuse retail investors.\266\ One commenter pointed out that
the proposed instructions dictated different ways for broker-dealers
and investment advisers to describe similar services.\267\ These
commenters suggested including more explanatory wording or definitions
to cover what services are typically associated with brokerage accounts
and investment advisory accounts, to provide more background
information to help retail investors understand the firm-specific
disclosures.\268\ At the same time, commenters noted that summary,
prescribed wording for this section may not accurately describe the
services of every broker-dealer or investment adviser.\269\ Results of
the RAND 2018 survey reflected these concerns and showed that almost a
quarter of survey respondents (22.2%) described the relationships and
services section as ``difficult'' or ``very difficult'' to
understand.\270\ Comments from participants in qualitative interviews
reported in the RAND 2018 report, as well as comments from roundtable
participants and on Feedback Forms, indicated that prescribed terms
such as ``transaction-based fee,'' ``asset-based fee,'' ``discretionary
account,'' and ``non-discretionary account'' contributed to this
difficulty.\271\
---------------------------------------------------------------------------

    \262\ See, e.g., Proposed Item 2.B. of Form CRS (``If you are a
broker-dealer that offers brokerage accounts to retail investors,
summarize the principal brokerage services that you provide to
retail investors.''); and Proposed Item 2.C. of Form CRS (``If you
are an investment adviser that offers investment advisory accounts
to retail investors, summarize the principal investment advisory
services that you provide to retail investors.'').
    \263\ See RAND 2018, supra footnote 13 (next to fees and costs,
survey participants responded the relationships and services section
was one of the most informative; more than 56% of survey
participants said to keep the section the same length); see also
Cetera Letter II (Woelfel) supra footnote 17 (85% of survey
participants responded that this section was very or somewhat
important); Schwab Letter I (Koski) supra footnote 21 (54% of survey
participants selected ``a description of the investment advice
services the firm will provide to me'' from a menu of 11 subjects as
one of the four most important things for firms to communicate). In
addition, nearly 90% of Feedback Form commenters graded this section
as ``very useful'' or ``useful.'' See Feedback Forms Comment Summary
supra footnote 11 (summary of responses to Question 2(a)).
    \264\ See RAND 2018, supra footnote 13 (in qualitative
interviews, participants appeared to have ``a general understanding
that this section describes two different services or accounts that
a client would choose''); Kleimann I, supra footnote 19 (while study
authors found that participants had difficulty with ``sorting out
the similarities and differences,'' this study also reports that
``[n]early all participants easily identified a key difference
between the Brokerage Accounts and Advisory Accounts as the fee
structure either being tied to transactions or to assets. Some
further identified as a key difference who had the final approval on
all transactions, seeing the Brokerage Account as giving them more
control on making the final decision.'').
    \265\ See IAC Broker-Dealer Fiduciary Duty Recommendations,
supra footnote 10; and IAC Form CRS Recommendation, supra footnote
10.
    \266\ See CFA Letter I (``We believe the Commission should . . .
require firms to be crystal clear about the nature of the services
they offer. Simply telling [investors] that the account is a
brokerage account or an advisory account doesn't necessarily convey
useful information.''); CFA Institute Letter I (``Given the
similarities to what investment advisers offer, CRS disclosure of
these additional services will likely confuse investors without
language clarifying that they are outside of their usual broker-
dealer duties and would typically require a separate contract.'').
    \267\ CFA Letter I.
    \268\ See CFA Letter I (suggesting prescribed wording for how
typical broker-dealers and investment advisers might describe their
services); CFA Institute Letter I (suggesting alternative wording
for how broker-dealers might describe their services). Commenters on
Feedback Forms also asked for explanatory wording and definitions.
See Feedback Forms Comment Summary, supra footnote 11 (summary of
responses to Question 4) (seven commenters asked for definitions of
terms such as transaction-based fee, asset-based fee or wrap fee; 10
asked for a definition or better explanation of the term
``fiduciary''); see also, Bhupalam Feedback Form (``The definition
of a broker dealer [sic] and investment advisory [sic] is not very
clear.''); Daunheimer Feedback Form (``For a novice investor, all
terms that seasoned investors take for granted, are new to them.
Consider making the language as simple as possible.''); Margolis
Feedback Form (``wording is very confusing and not very accurate'');
Anonymous27 Feedback Form (``define better''), but see Baker
Feedback Form (``the discussion of differences among the
relationships is very useful as it describe [sic] the differences in
services provided . . . and most importantly, the difference between
a commission-based fee and an `asset-value' fee''); Hawkins Feedback
Form (``Summary does a good job of explaining the basis [sic]
services for a brokerage vs advisory account. Some clearer examples
could help.''); Rohr Feedback Form (``Makes clear how a
discretionary account differs from a brokerage account'').
    \269\ See, e.g., MassMutual Letter (explaining that the
prescribed wording that a customer will pay a commission each time a
security is bought and sold is not universally true, e.g., for
mutual funds and variable annuities with internal exchange programs,
which allow a customer to switch from one investment to another
without paying a commission); CFA Letter I (recognizing that a
generalized description of portfolio management services, included
for purposes of educating investors, does not apply to all business
model among registered investment advisers).
    \270\ RAND 2018, supra footnote 13. In the RAND 2018 qualitative
interviews, participants noted several phrases that raised concerns
such as ``additional services'' and ``might pay more'' and
identified terms that needed further definition. Id. Another
interview-based investor study found that ``[p]articipants were
quite mixed in their understanding about the advice and monitoring
that was offered in the two accounts'' when presented with the
proposed sample dual registrant relationship summary. Kleimann I,
supra footnote 19.
    \271\ RAND 2018, supra footnote 13; see also Betterment Letter I
(Hotspex) supra footnote 18 (finding that ``respondents found
certain terminology (e.g., `fiduciary,' `asset-based,' `ETF') to be
unclear or lack sufficient detail''). Roundtable discussions found
similar results. See, e.g., Philadelphia Roundtable (participant
finding ``transaction-based fee'' to be complex); Miami Roundtable
(participant stating that ``most people don't really understand''
what fiduciary duty means); see also Feedback Forms Comment Summary,
supra footnote 11 (summary of responses to Question 4) (Seven
Feedback Forms included narrative comments that asked for
definitions of terms such as ``transaction-based fee,'' ``asset-
based fee'' or ``wrap fee;'' 10 asked for explanation or definition
of the term ``fiduciary''); Anonymous06 Feedback Form (``Definitions
might not be understood transaction based vs asset based fee'');
Baker Feedback Form (``It may be more helpful to have detailed
definitions (Ex. ``transaction-based fee'') that, unfortunately,
result in a longer document.''); Bhupalam Feedback Form
(``definition of a broker dealer [sic] and investment advisory [sic]
is not very clear''); Starmer2 Feedback Form (``Spell out . . . best
interest'').
---------------------------------------------------------------------------

    As discussed in Section II.A.1. above, we are sensitive to the
potential inaccuracies and confusion that the prescribed wording can
create. We also recognize that in some cases, providing instructions
that require broker-dealers and investment advisers to describe similar
services in different ways can create confusion. Accordingly, we have
revised the instructions to allow firms to use more of their own
wording. We also eliminated the separate instructions for brokerage
account services and investment advisory account services, and instead
are adopting one set of instructions that generally applies the same
requirements to all firms.\272\ To facilitate comparison of firms'
relationships and services, however, we have retained the concept of
specific sub-topics that each firm must cover in this section.\273\
---------------------------------------------------------------------------

    \272\ See, e.g., Item 2.B. of Form CRS (requiring all firms to
summarize their principal services but requiring broker-dealers to
state whether or not they offer recommendations and investment
advisers to state the particular types of advisory services they
offer).
    \273\ As discussed in Section II.A.2 above, we are not requiring
that these sub-topics follow a prescribed order, so firms are able
to tailor the presentation of their services, as well as include
additional information about their brokerage or advisory services,
so long as the description covers all applicable topics. See supra
footnote 121 and accompanying text.
---------------------------------------------------------------------------

    Another change from the proposed instructions relates to a concern
regarding how accounts were delineated. The proposed instructions would
have applied based on whether or not broker-dealers and investment
advisers offered brokerage accounts or investment advisory accounts to
retail investors and would have included some prescribed language
referencing accounts.\274\ Insurance and variable annuity providers
commented that this focus on accounts would not allow them to
accurately describe insurance offerings and would be confusing,
particularly to investors whose insurance or annuity products are held
directly with an issuing insurance company.\275\ We agree and have
replaced references to accounts in this section with references to
``services, accounts, or investments you make available to retail
investors.'' \276\
---------------------------------------------------------------------------

    \274\ See, e.g., Proposed Items 2.B.2. (``If you offer accounts
in which you offer recommendations to retail investors, state that
the retail investor may select investments or you may recommend
investments for the retail investor's account . . . .'') and 2.C.4.
(``If you significantly limit the types of investments available to
retail investors in any accounts, include the following . . . .'')
of Form CRS. In addition, some of the prescribed wording included
language specific to accounts. See, e.g., Proposed Item 2.B.1. of
Form CRS. Broker-dealers would state, ``If you open a brokerage
account, you will pay us a transaction-based fee, generally referred
to as a commission, every time you buy or sell an investment.''
    \275\ E.g., ACLI Letter; Committee of Annuity Insurers Letter;
IRI Letter; MassMutual Letter; New York Life Letter; Northwestern
Mutual Letter.
    \276\ Item 2.B. of Form CRS.
---------------------------------------------------------------------------

a. Description of Services
    The final instructions have an overarching requirement to state
that the firm offers brokerage services, investment advisory services,
or both, to retail investors, and to summarize the principal services,
accounts, or investments the firm makes available to retail
investors.\277\ A firm also must include any material limitations on
those services.\278\ The final instructions require firms to include
certain

information in their descriptions. Similar to the proposal, broker-
dealers must state the particular types of principal brokerage services
the firm offers to retail investors, including buying and selling
securities, and whether or not they offer recommendations to retail
investors (i.e., to distinguish execution-only services).\279\
Investment advisers must state the particular types of principal
advisory services they offer to retail investors, including, for
example, financial planning and wrap fee programs.\280\ The final
instructions do not, however, require prescribed wording to describe
the particular characteristics of these services, as did the proposed
instructions.\281\ Commenters argued that the proposed prescribed
wording may not accurately describe the services of every broker-dealer
or investment adviser.\282\ As discussed in Section II.A.1 above, given
that investors may be confused by information that does not directly
relate to the firm's offerings, we are allowing firms to use their own
wording to describe their own services. Therefore, unlike the proposal,
the final instructions do not prescribe specific wording for firms to
describe the particular characteristics of these services.\283\
---------------------------------------------------------------------------

    \277\ Item 2.B. of Form CRS.
    \278\ Item 2.B. of Form CRS.
    \279\ Item 2.B. of Form CRS.
    \280\ Item 2.B. of Form CRS.
    \281\ See, e.g., Proposed Item 2.B.2. of Form CRS (requiring
broker-dealers (i) that only offer accounts in which they offer
recommendations to retail investors to state that the retail
investor may select investments or the broker-dealer may recommend
investments for the retail investor's account, but the retail
investor ``will make the ultimate investment decision regarding the
investment strategy and the purchase or sale of investments'' and
(ii) that do not offer recommendations to state that the retail
investor ``will select the investments'' and ``will make the
ultimate investment decision regarding the investment strategy and
the purchase or sale of investments'').
    \282\ See, e.g., MassMutual Letter (explaining that the
prescribed wording that a customer will pay a commission each time a
security is bought and sold is not universally true, e.g., for
mutual funds and variable annuities with internal exchange programs,
which allow a customer to switch from one investment to another
without paying a commission); CFA Letter I (recognizing that a
generalized description of portfolio management services, included
for purposes of educating investors, does not apply to all business
models among registered investment advisers).
    \283\ See generally Items 2.B.(i) through 2.B.(v) of Form CRS.
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    Some commenters raised concerns about investor confusion if both
broker-dealers and investment advisers discuss the advice they provide
in the relationship summary. To mitigate that confusion, some
commenters called for an explicit statement that broker-dealers are in
sales relationships.\284\ In response to these concerns, we added the
explicit requirement that broker-dealers state that they buy and sell
securities, in order to clarify their principal services.\285\ We also
have included a note in the final instructions that broker-dealers
offering recommendations should consider the applicability of the
Investment Advisers Act of 1940, consistent with SEC guidance.\286\
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    \284\ See, e.g., CFA Institute Letter I; Consumers Union Letter;
see also Kleimann II, supra footnote 19 (alternative wording for
redesigned relationship summary described broker-dealer services as
a ``sales relationship'').
    \285\ See Item 2.B of Form CRS (``For broker-dealers, state the
particular types of principal brokerage services you offer,
including buying and selling securities, and whether or not you
offer recommendations to retail investors.'').
    \286\ See Item 2.B.(ii) to Form CRS. See Solely Incidental
Release, supra footnote 47.
---------------------------------------------------------------------------

    The final instructions require all firms to address the following
topics in the description of their services: (i) Monitoring; (ii)
investment authority; (iii) limited investment offerings; and (iv)
account minimums and other requirements.\287\ As discussed further
below, the final instructions require firms to include much of the same
substantive information as proposed, but rely less on prescribed
wording and assumptions regarding typical brokerage and investment
advisory accounts.\288\ In response to comments, we added a new
requirement for firms to disclose whether or not they have account
minimums.\289\ Commenters recommended that we include information about
account minimums in the relationship summary.\290\ In addition, a
number of commenters submitting mock-ups included disclosures on
account minimums in their forms.\291\ We agree this information is
important to investors when they are deciding on account types and
services, particularly as they consider the amount of funds they are
planning to invest and whether they may incur any fees or become
ineligible for certain services if their accounts fall under certain
dollar thresholds. We also removed requirements to discuss fees at the
beginning of this section \292\ and are consolidating these
requirements with other related ones in the fees, costs, conflicts, and
standard of conduct section, as discussed below.\293\ We also are not
adopting a proposed requirement to describe any regular communications
with retail investors.\294\ Neither the RAND 2018 report nor other
surveys and studies suggested that this information was important to
investors, as compared to fees. Mock-ups submitted by commenters also
did not include this disclosure, underscoring the relative importance
of other topics. Given the goal of limiting the length of the
relationship summary so that investors remain engaged and are not
overwhelmed by the information, we decided to prioritize requiring
other information in the relationship summary.
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    \287\ Item 2.C. of Form CRS.
    \288\ In the proposed instructions, assistance with developing
or executing the retail investor's strategy and monitoring the
performance of the retail investor's account were characterized as
additional services for broker-dealers. The final instructions do
not make this distinction and instead permit firms more flexibility
to describe their services accurately. See Proposed Item 2.B.3. of
Form CRS.
    \289\ Item 2.B.(iv) to Form CRS (``Explain whether or not you
have any requirements for retail investors to open or maintain an
account or establish a relationship, such as minimum account size or
investment amount.'').
    \290\ See, e.g., NASAA Letter (``Form CRS should specify minimum
account size and include information on miscellaneous fees different
categories of investors can expect to pay.''); Cetera Letter I (Form
CRS should include ``[w]hether or not the firm has established
standards for the minimum or maximum dollar amount of various
account types.'').
    \291\ See, e.g., Primerica Letter and Cetera Letter I.
    \292\ See Proposed Items 2.B.1. (broker-dealers) (``If you open
a brokerage account, you will pay us a transaction-based fee,
generally referred to as a commission, every time you buy or sell an
investment.''); and 2.C.1. (investment advisers) (``State the type
of fee you receive as compensation if the retail investor opens an
investment advisory account. For example, state if you charge an on-
going asset-based fee based on the value of cash and investments in
the advisory account, a fixed fee, or some other fee arrangement.
Emphasize the type of fee in bold and italicized font. If you are a
standalone adviser, also state how frequently you assess the fee.'')
of Form CRS.
    \293\ See infra footnotes 373-375 and accompanying text.
    \294\ See Proposed Items 2.B.3. (broker-dealers) and 2.C.2.
(investment advisers) of Form CRS (``Briefly describe any regular
communications you have with retail investors, including the
frequency and method of the communications.'').
---------------------------------------------------------------------------

    Monitoring. The final instructions require both broker-dealers and
investment advisers to explain whether or not they monitor retail
investors' investments, including the frequency and any material
limitations of that monitoring, and if so, whether or not the
monitoring services are part of the firm's standard services.\295\ In
the proposal, different instructions concerning monitoring applied to
broker-dealers and investment advisers. Broker-dealers would have
stated whether they monitored the performance of retail investors'
accounts, and if so, how frequently they performed such monitoring,
whether it constituted additional services or was part of the broker-
dealer's standard services, and whether a retail investor would pay
more for it.\296\ Investment advisers

would have stated how frequently they monitor retail investors'
accounts.\297\
---------------------------------------------------------------------------

    \295\ Item 2.B.(i) of Form CRS.
    \296\ Proposed Item 2.B.3. of Form CRS.
    \297\ Proposed Item 2.C.2. of Form CRS.
---------------------------------------------------------------------------

    One commenter objected to the requirement for broker-dealers to
describe additional services, including monitoring, on the basis that
the information would add little value.\298\ On the other hand, several
commenters suggested that understanding the degree to which firms
monitor the performance of their investments can be important to
investors.\299\ One of these commenters noted that broker-dealers and
investment advisers have different legal obligations to monitor
accounts, and that differences would remain even under Regulation Best
Interest.\300\ Observations from surveys and studies indicated that
investors are interested in or may benefit from clarification of
monitoring services.\301\ For example, an overwhelming majority of
participants in the OIAD/RAND study believed that a financial
professional required to act in an investor's best interest would
monitor the investor's account on an on-going basis.\302\ In
qualitative interviews in the RAND 2018 report, participants seemed to
distinguish brokerage and investment advisory accounts and assess which
type of relationship was a better fit for different investors based on
assumptions concerning monitoring.\303\ Other surveys and studies also
showed that participants varied in their understanding of monitoring
and whether they should expect firms to monitor their account.\304\
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    \298\ See Wells Fargo Letter (recommending elimination of
broker-dealer description of additional services because it could
take up substantial space and adds little value for the investor).
    \299\ See, e.g., Comment Letter of the St. John's Law School
Securities Arbitration Clinic (Aug. 7, 2018) (``St. John's Law
Letter''); CFA Letter I (discussing investors' expectations of a
fiduciary duty based on whether and to what degree a firm or
financial professional provides monitoring services); Comment Letter
of the Commonwealth of Massachusetts (Aug. 7, 2018) (``Massachusetts
Letter'') (suggesting that the payment of ongoing compensation, such
as a trail commission, indicates an ongoing relationship and should
carry ongoing duties to monitor the investment); IAA Letter I
(stating that, just as an adviser's duty to monitor extends to all
personalized advice it provides a client, so should investors expect
a similar duty from broker-dealers when providing monitoring
services).
    \300\ See CFA Letter II.
    \301\ See, e.g., RAND 2018, supra footnote 13 (in qualitative
interviews, ``participants were sometimes unclear on how a financial
professional would monitor an account'' and ``some participants were
unclear on how frequently monitoring would occur'').
    \302\ See OIAD/RAND (finding that 69% of all participants in the
survey, 75% of a specialized group defined as ``investors,'' and 86%
of a specialized group defined as ``investment advice consumers''
believed that best interest required ongoing monitoring).
    \303\ See RAND 2018, supra footnote 13 (in qualitative
interviews, ``some felt that brokerage accounts are better for those
with investment expertise and time to dedicate to investing, whereas
advisory accounts are better for those who have less expertise and/
or less time to monitor investments''; one participant was confused
by a statement that the firm could provide ``additional services to
assist you and monitor performance'' and wanted to know up front
which services would be included and which would cost extra.).
    \304\ See Kleimann I, supra footnote 19 (``Participants assumed
that the level of advice and monitoring provided in the two accounts
would be the same. They defined monitoring as constant looking at
the market and their accounts and making sure their accounts were
making money''); Betterment Letter I (Hotspex) supra footnote 18
(among survey participants reviewing a standalone adviser
relationship summary designed to follow the proposal sample, only
37% correctly identified as ``false'' a statement that broker-
dealers typically monitor client's portfolios and provide advice on
an ongoing basis).
---------------------------------------------------------------------------

    We disagree with the comment that requiring broker-dealers to
describe monitoring services would add little value. As we also state
in the Regulation Best Interest Release, we believe that it is
important for retail customers to understand (1) the types of
monitoring services (if any) a particular broker-dealer provides, and
(2) whether the broker-dealer will be monitoring the particular retail
customer's account.\305\ We also agree with commenters that monitoring
is an important distinguishing feature of different investment services
and believe that retail investors should have accurate expectations of
the types of monitoring firms offer. We are therefore requiring firms
to explain whether or not they monitor retail investors' investments,
and if so, the frequency, material limitations, and whether or not
monitoring is offered as part of the firm's standard services.\306\
---------------------------------------------------------------------------

    \305\ See Regulation Best Interest Release, supra footnote 47;
see also Solely Incidental Release, supra footnote 47.
    \306\ Item 2.B.(i) of Form CRS.
---------------------------------------------------------------------------

    The proposal provided different instructions for broker-dealers and
investment advisers concerning monitoring, requiring broker-dealers to
discuss monitoring of account performance only if they offered it, and
requiring investment advisers to disclose how frequently they monitor
retail investors' accounts, as monitoring is generally part of ongoing
advisory services.\307\ Even with the different wording for broker-
dealers and investment advisers as proposed, some participants in
investor studies still assumed that the level of monitoring was the
same between broker-dealers and investment advisers.\308\ As discussed
above, we believe it is important for firms to describe more accurately
and precisely the monitoring that they actually do for retail
investors. Therefore, we are retaining, with slight modifications, the
obligation to disclose monitoring services, applying the same
instruction to both broker-dealers and investment advisers, and
eliminating the prescribed wording. The final instructions pertain to
monitoring services generally and are not limited to monitoring for
account performance only; to the extent firms describe monitoring
services, they must include the frequency and any material limitations
on these services and whether or not they are offered as part of the
firm's standard services. We believe that subjecting firms to the same
requirements to describe their own monitoring services, including a
specific statement that they do not provide monitoring, if that is the
case, will better facilitate investor understanding of whether any
monitoring is provided and if so, the scope and type of such service.
This approach also may result in more comparable information so that
retail investors can understand the key differences among monitoring
services by different firms based on firm-specific descriptions.
---------------------------------------------------------------------------

    \307\ See Fiduciary Release, supra footnote 47.
    \308\ See Kleimann I, supra footnote 19, at 10 (``Some
participants assumed that the advice and level of monitoring was the
same.''); Betterment Letter I (Hotspex) supra footnote 18 (among
survey participants reviewing a standalone investment adviser's
relationship summary designed to follow the proposal, only 37%
correctly identified as ``false'' a statement that broker-dealers
typically monitor client's portfolios and provide advice on an
ongoing basis).
---------------------------------------------------------------------------

    Investment Authority. The final instructions require investment
adviser firms that accept discretionary authority to describe those
services and any material limitations on that authority. Broker-dealers
may, but are not required, to state whether they accept limited
discretionary authority. Both investment advisers that offer non-
discretionary services and broker-dealers must explain that the retail
investor makes the ultimate decision regarding the purchase or sale of
investments.\309\
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    \309\ Item 2.B.(ii) of Form CRS.