RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of September 23, 2017

Posted by RIA in a Box

Sep 29, 2017 2:35:44 PM

SEC RIA cybersecurity risk

Each week we’re giving you our weekly report highlighting the top compliance news articles from various industry news publications. We have selected the most relevant and important news articles related to registered investment adviser ("RIA") compliance and regulatory issues. This week's recap focuses on third party RIA exams, cybersecurity, and the Department of Labor ("DOL") fiduciary rule. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of September 23, 2017:

Download the SEC 2017 RIA Top 10 Exam Priorities Checklist

  1. SEC Chairman Jay Clayton Doesn't Intend to Pursue Third-Party RIA Exams (Author- Mark Schoeff, Jr., InvestmentNews)

Mark Schoeff reports that the SEC will not be pursuing a third party investment adviser examination program in the near term. Though SEC Chairman Clayton's predecessor had been open to third-party examiners, he has shot the idea down at least for now. Schoeff writes, " 'It's not a bad idea, but it's not front of my mind right now,' Mr. Clayton said at the Brookings Institution in Washington on Thursday. Schoeff also notes, "Groups representing investment advisers have resisted the idea of a self-regulatory organization , especially FINRA, taking over adviser exams. Legislation to establish third-party exams was introduced in the House in 2012 but died in committee and has not resurfaced."

  1. 6 Cybersecurity Tools to Use in Wake of the Equifax Hack (Author- Ann Marsh, FinancialPlanning)

For this article, Ann Marsh enlists the help of Brian Edelman, founder of cybersecurity consulting firm Financial Computer Services. He admits he's seen that a lot of financial institutions are not doing enough to protect their clients' information online. While its been argued that no information online can ever be truly secure, Marsh and Edelman note that there are steps that should be taken regardless. The list provided by Edelman begins with whole-disc encryption and ends with multi-factor authentication. Edelman states that all six items on the list are meant to be used together.

  1. State-Registered Advisors Need More Cyber Prep (Author- Melanie Waddell, ThinkAdvisor)

After a recent rash of hacks (EDGAR/Equifax), state securities regulators worry that the same thing could happen to state-registered RIA firms across the country. Recent exams uncovered several hundred cybersecurity failings across the states. Some deficiencies listed include: lack of specific insurance, lack of vulnerability testing, and insufficient information security procedures There is hope however. Waddell reports, "The NASAA Cybersecurity Checklist for Investment Advisers includes 89 areas to help state-registered advisors identify, protect and detect cybersecurity vulnerabilities; and to respond to and recover from cyber events".

  1. Clayton: SEC To Double Down On RIA Exams, Work On Fiduciary Rule With DOL (Author - Tracey Longo, FA Magazine)

Tracey Longo writes, "to keep pace with the explosive growth in investment advisory assets -- which have tripled to $70 trillion since 2001 -- the SEC is doubling down on examinations." Better use of technology, additional staffing, and a risk-based examination process has "on track to deliver a 30 percent increase in the number of investment advisor examinations this fiscal year." In regards to the DOL fiduciary rule, SEC Chairman Clayton states, "we are engaging expeditiously and constructively with our colleagues at the DOL to best serve the interests of investors." Going forward, Clayton notes that "the SEC will continue to explore additional efficiencies and improvements to our risk-based examination program.  One way to achieve this is through the continued leveraging of data analysis." On the topic of better data analysis, the new Form ADV requirements for all RIA firms take effect on October 1, 2017.

  1. Interesting Angles on the DOL’s Fiduciary Rule #63 (Author- Fred Reish, FredReish.com)

Fred Reish spotlights Policies and Procedures in this, his 63rd article on the topic of the DOL fiduciary rule. Most people have heard of the Best Interest Contract Exemption or BICE within the DOL rule. "In order to comply with BICE, the supervisory entity and the advisor must satisfy the three Impartial Conduct Standards: the best interest standard of care; no more than reasonable compensation; and no materially misleading statements," writes Reish. He argues though, that there is a fourth requirement for which advisory firms, "need to ensure that their practices, policies and procedures, and supervision are adequate to protect retirement investors from the conflicts arising from advisor compensation that could incent an advisor to make recommendations that are not in the best interest of a retirement investor."

 Download Our Free RIA Cybersecurity Compliance Checklist

Don't forget to check out last week's top RIA compliance news articles on cybersecurity, the DOL fiduciary rule, and the recent Fuse HackathonBe sure to check back next Friday for next week’s top articles! 

Lexington Compliance and RIA in a Box LLC are not law firms, investment advisory firms, or CPA firms. Lexington Compliance and RIA in a Box LLC do not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

Topics: RIA Compliance

RIA Compliance & Practice Management

Stay up to date on the latest RIA compliance, operations, and technology topics.

Hear from industry experts as they keep you up to date on the latest regulatory developments and practice management topics.

Subscribe to Email Updates

Recent Posts