CRM-2 Preparing Now for 2016

Transcription

1 CRM-2 Preparing Now for nd Annual PMAC Compliance Forum September 18, 2013 Prema K.R. Thiele Rebecca A. Cowdery

2 CRM was big but CRM-2 is massive 100+ new and revised requirements Complex (and not always intuitive) rules and high regulatory expectations, coupled with the rise of investor advocates Multiple transition dates Affects everyone in your firm - dealing and advising reps, compliance staff, senior executive and boards CRM-2 preparation cannot be developed as needed Bottom Line: Done right, CRM-2 can enhance your clients experience Done without a plan or sufficient knowledge and understanding, CRM-2 could be costly and increase regulatory risk 2

3 WHAT S CRM-2 ALL ABOUT? 3

4 The essence of CRM-2 Giving retail investors tools to help them make better investment decisions and to assess how well their chosen service provider [dealer, rep., PM] is serving them Not so concerned with institutional investors ( permitted clients ) Five major elements Clearer and more complete conversations between clients and reps Amended RDI (before account opening) Amended account statements (quarterly) New report on costs and charges New report on investment performance 4

5 THE ART OF CONVERSATION 5

6 Expectations on your reps Enhancing the relationship and client understanding through discussion Taking clients through the RDI before account opening Pre-trade disclosure (as of July 15, 2014) [non managed accounts] Discussion of various (new and enhanced) annual reports and content Challenges How much time do you need to spend? The art of conversation how to train reps to comply, but also to convey information What if a client doesn t want to hear? And doesn t hear? And doesn t get it? How do you document that the conversation took place? And monitor that conversation? 6

7 AMENDED RDI WHAT NEEDS TO BE IN WRITING? 7

8 Enhanced expectations Clarity on relationship, with some additional education Now: Charges and fees your firm charges, plus an explanation of mutual fund fees (as applicable) 2014: Benchmarks how you use them and how a client should read/use them to assess account Now to 2016 Explanations of the various reports clients will get Important document combo of a regulatory document and a way to differentiate your firm 8

9 AMENDED ACCOUNT STATEMENTS 9

10 Enhanced requirements July 15, 2015 NOW: At least quarterly more frequent if client asks Are you doing this now and, if asked, could you provide monthly statements? 2015: Nominee name v.s. client name must be split out Does this apply to you? How will you determine and obtain the information? How will you create the new account statements? 2015: New market value determination 2015: New position cost information Original cost or book cost? What will you provide? Now 2015 How will you deliver account statements? 10

11 NEW REPORT ON CHARGES AND COMPENSATION 11

12 New Report July 15, 2016 Total operating charges, transaction charges, trailing commissions and other payments charged to the client over past 12 months Can you get this information? What will this include? Systems enhancements Who will write the report (template)? Client name v.s. nominee name does this apply to you? When will you provide this report? Same date for all? Anniversary date of opening account How will you provide it? How can you make this information meaningful? 12

13 NEW REPORT ON INVESTMENT PERFORMANCE 13

14 New Report July 15, 2016 Includes: Market value at beginning and end of period, and annual change and cumulative change in market value Market value of money and securities transferred in/out of account during period and since account opening Annualized total percentage return at 1, 3, 5 and 10 years periods Challenges in choosing the inception date Money weighted rate of return Why was this chosen? What can you do about it, if you feel it s not the right measurement? Coordination with other statements How will you disseminate and coordinate with other statements? How can you make this information meaningful? 14

15 HOW WILL YOU PLAN YOUR PROJECT FOR CRM-2 COMPLIANCE? 15

16 Project Plan 16

17 Project Plan 17

18 What s the Reality? For you? Who is doing what now? How can the regulators assist? What can the industry do? PMAC? What should your clients be doing? 18

19 Thank you! Prema K. R. Thiele Partner Borden Ladner Gervais LLP Rebecca A. Cowdery Partner Borden Ladner Gervais LLP