RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of September 30, 2017

Posted by RIA in a Box

Oct 6, 2017 12:44:18 PM

Uniform SEC DOL fiduciary rule

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 a uniform Securities and Exchange Commission ("SEC") fiduciary rule, Department of Labor ("DOL") fiduciary rule, and compliant texting. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of September 30, 2017:

Download the SEC 2017 RIA Top 10 Exam Priorities Checklist

  1. SEC Begins Working with DOL on Fiduciary Rule (Author- Kenneth Corbin, FinancialPlanning.com)

Kenneth Corbin writes, "the SEC has begun to work with the Department of Labor on a fiduciary rule proposal to harmonize the standards of conduct for advisors and broker-dealers." The House Financial Services Committee spoke with SEC Chairman Jay Clayton this week and Clayton confirmed, "the next step in anything like this would be a rule proposal. We're working on such a proposal." In addition, Rep. Ann Wagner (R-Missouri), a leading critic of the current DOL fiduciary rule, "plugged legislation that she introduced last week that would repeal that regulation, and then set a best-interest standard of advice for brokers and impose new disclosure requirements," writes Corbin. 

  1. Interesting Angles on the DOL’s Fiduciary Rule #64 (Author- Fred Reish, FredReish.com)

Fred Reish's latest article on the DOL fiduciary rule focuses on the best interest standard of care. Reish does his best to break down the clause in layman's terms, providing bullet points and direct quotes from various applicable rules include the Best Interest Contract Exemption ("BICE"). An example of a requirement included in BICE is: "A prudent process by a hypothetical knowledgeable person who obtains and evaluates the information needed to make a careful and skillful decision." Furthermore, Reish writes, "IRA owners and plan participants should be advised to invest in a portfolio with asset allocation based on their needs, objectives and circumstances," and, "IRAs should be invested in a manner consistent with retirement investing, which suggests, among other things, the avoidance of large losses."

  1. Brokers Violating DOL Rule by Shifting Clients to Fee Accounts: Roper (Author- Melanie Waddell, ThinkAdvisor)

Apparently in the wake of new DOL regulations, some fear that broker-dealers have been "shifting retirement savers into fee-based accounts from less expensive commission accounts," Melanie Waddell reports. Barbara Roper, Director of Investor Protection at the Consumer Federation of America has been investigating this extensively. Roper recently wrote, "industry lobbyists have repeatedly claimed that brokerage firms are responding to the rule by shifting retirement savers into fee accounts when they would be better off in commission accounts, exposing them to increased costs in the process." Furthermore, "it reflects not a problem with the DOL rule itself, as industry lobbyists have tried to suggest, but an enforcement failure on the part of DOL and its fellow regulators at the SEC and FINRA," said Roper.

  1. Borg Puts Cybersecurity, Unpaid Arbitration Claims on NSAA Agenda (Author - Mark Schoeff, Jr., InvestmentNews)

Joe Borg, Alabama securities director, is now leading the North American Securities Administrators Association ("NASAA") for the third time after his recent election on September 26. three times in his life. On the topic of information security, Mark Schoeff reports that Borg has stated that, "NASAA would consider a model cybersecurity rule for investment advisers." Borg believes especially that smaller advisers should be meticulous in securing client information. Schoeff points out that though FINRA and the SEC have been focusing on cybersecurity during examinations, neither has put forward cybersecurity standards or rules. If NASAA were to put forth a model rule, it would be the first of its kind.

  1. Redtail Launches Compliance-Approved Text Messaging Service (Author- Ryan Neal, WealthManagement.com)

Redtail Speak, a new product from Redtail Technology has officially launched. The application is designed to be a regulatory-compliant text messaging service which allows financial advisors to communicate directly with their clients. It includes notification customization, no additional software, and automatic recording. Redtail CEO, Brian McLaughlin, states, "Speak eliminates all the difficulties of gathering information or having quick conversations." In addition, McLaughlin highlights the need for a compliant texting solution by noting, "if advisors are already texting their clients, chances are they’re doing it out of compliance, and if they aren’t, they’re missing out on a huge opportunity."

 Download Our Free RIA Cybersecurity Compliance Checklist

Don't forget to check out last week's top RIA compliance news articles on third party RIA exams, cybersecurity, and the DOL fiduciary ruleBe 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.

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