Financial Advisors Editing and Proofreading Services

Form CRS does not leave the phrase plain English undefined. General Instruction 2.A tells a firm to "Write your relationship summary in plain English, taking into consideration retail investors' level of financial experience."¹ It then says the summary "should be concise and direct," and enumerates five points.¹ Three of them are "use short sentences and paragraphs", "use definite, concrete, everyday words", and "use active voice".¹ The other two ask a firm to "avoid legal jargon or highly technical business terms unless you clearly explain them" and to "avoid multiple negatives."¹

A length limit measured in pages

The limit is stated for paper and then carried across. "In paper format, the relationship summary for broker-dealers and investment advisers must not exceed two pages."¹ A dual registrant that puts brokerage and advisory services in one summary works to four pages in paper format.¹ Delivered electronically, the summary must not exceed the equivalent of the applicable paper limit.¹ Inside that space the items run in a fixed order: Introduction; Relationships and Services; Fees, Costs, Conflicts, and Standard of Conduct; Disciplinary History; and Additional Information.²

Some of the words are chosen for the firm. The guide says firms "must generally use their own wording to address the required items, as well as prescribed language in some instances."² Prescribed headings appear as written, among them "What investment services and advice can you provide me?" and "What fees will I pay?"¹ Firms must also use text features to make the conversation starters required by Items 2, 3, 4, and 5 "more noticeable and prominent in relation to other discussion text."¹

What the staff found in the words

Firms had to file an initial relationship summary beginning on May 1, 2020 and no later than June 30, 2020.² On December 17, 2021, the Standards of Conduct Implementation Committee published what its review had found.³ The statement carries the usual note that it is not a rule and has no legal force or effect.³

The first observation concerns technical language. Firms used terms without explaining them, and the statement names "riskless principal", "in arrears", "markups", and "markdowns" as examples.³ Some summaries added hedging the staff calls impermissible, stating that the relationship summary "does not create or modify any agreement, relationship or obligation" between the investor and the firm or its financial professionals.³ A document written under an instruction to avoid legal jargon had acquired a disclaimer about its own legal effect.

The second concerns firms working from the proposal rather than the adopted instructions. The staff reports summaries carrying the proposed standard of conduct language, "We are held to a fiduciary standard that covers our entire investment advisory relationship with you," rather than the required language as adopted.³ The adopted wording reads "we have to act in your best interest and not put our interest ahead of yours."³ Which sentence a firm owes its clients is a securities-law question. Which sentence the form asks for is not.

The third concerns conflicts. Some summaries "used vague phrasing to suggest the firm 'may' have a particular conflict without also explaining when the conflict could exist."³ The sentence turns on a modal verb.

The same agency, a longer list, a different document

The Form CRS list is close to one the SEC wrote for prospectuses. Under 17 CFR 230.421(d)(1), the filer preparing a prospectus "must use plain English principles in the organization, language, and design of the front and back cover pages, the summary, and the risk factors section."⁴ Paragraph (d)(2) asks that the drafting substantially comply with six principles, adding a preference for "Tabular presentation or bullet lists for complex material, whenever possible."⁴ That rule governs prospectuses rather than relationship summaries.

Delivery runs on its own schedule, and separate rules cover the two kinds of firm. A firm registered under the Investment Advisers Act delivers the current relationship summary to each retail investor before or at the time of entering into an advisory contract.⁵ The firm posts the summary prominently on its website if it has one, and delivers a copy within thirty days of a request.⁵ Changes go to existing clients within sixty days after the amendments are required to be made.⁵

A registered broker or dealer offering services to retail investors works to a parallel rule with three triggers.⁶ Delivery comes before or at the earliest of a recommendation, the placing of an order for the retail investor, or the opening of a brokerage account.⁶ The recommendation trigger covers an account type, a securities transaction, or an investment strategy involving securities.⁶

Where an editor stops, and where the firm's own advisors begin

What a firm owes a client, which conflicts it has, and how its fees are arranged are settled by the firm and by its compliance and legal advisors. None of those determinations is ours, and we do not tell a firm whether a document satisfies a rule. Those answers are settled inside the firm.

The questions left over are answerable from the page. A summary uses a term, and its explanation belongs where the term appears. A prescribed heading has particular words, so a paraphrase is a substitution. A sentence about a conflict names a circumstance, and a sentence saying a conflict may arise names none. Client files are held privately.

A relationship summary is read by somebody deciding whether to hire the firm, and later by an examiner holding it against the form. One of those readers wants the wording the form asks for. The other wants an answer.