In a rush to complete investment advice reform next year, the Securities and Exchange Commission might not pause to absorb investor testing on a key part of the proposal, according to an adviser advocate.
The SEC included in the package a so-called client relationship summary, or Form CRS, that is designed to help investors understand the differences between investment advisers and brokers — in terms of services, standards of care and costs — so they can make an informed decision on which type of financial professional to use.
The four-page model form included in the advice rule proposal has come under widespread criticism for being confusing. The SEC has said it is conducting investor testing to determine what kind of disclosure would work best for investors.
Advice reform is a top SEC priority, and Karen Barr, president and chief executive of the Investment Adviser Association, predicts the agency will issue a final rule by the middle of next year. She worries the agency will leave investor testing of Form CRS behind.
"In the desire to get this done quickly, they might not wait for rigorous investor testing and really absorb those results," Ms. Barr said Monday during a session at Schwab IMPACT in Washington.
"They've gotten sort of informal results from roundtables, but that's not the same as rigorous testing," Ms. Barr said.
The SEC has said it will release results of the Form CRS testing. But just making them public isn't enough, according to Ms. Barr.
"Given how quickly they want to do this, I'm worried they'll post it but not give folks enough time to submit additional comments on it," she said.
Jeff Brown, Schwab head of legislative and regulatory affairs, agreed that SEC chairman Jay Clayton wants to release a final advice rule soon and asserted he is willing to pass it on a 3-2 vote among the five commissioners.
"Chair Clayton wants this done," Mr. Brown said. "He wants it behind them."
An SEC spokesperson declined to comment.
But even commissioners who approved putting it out for comment expressed reservations about the package. Those doubts might still remain.
"He has a struggle within his own building whether he can get enough votes to adopt this rule," Mr. Brown said.
Another complicating factor is that Democratic commissioner Kara Stein must leave the agency by the end of the year. The Trump administration has not nominated her replacement, and Senate Republicans may not be interested in moving it forward because a new Republican commissioner, Elad Roisman, has already been confirmed.
A Democratic nominee "may move slowly in the political process," Mr. Brown said.
The SEC could have only four out of its normal five members as it votes on a final advice regulation.