RIA Compliance and Practice Management Blog

On June 5, 2019, the Securities and Exchange Commission ("SEC") finalized a new rule that includes a new requirement for SEC-registered investment adviser ("RIA") firms to provide a brief relationship summary to retail investors known as the Form CRS. As originally proposed, the new Form ADV Part 3 ("Form CRS") would have been a highly prescriptive four page document with eight sections. However, the new finalized Form CRS is a somewhat prescriptive two page document with five mandated sections:

1. Introduction
2. Relationship and Services
3. Fees, Costs, Conflicts, and Standard of Conduct
4. Disciplinary History
5. Additional Information

In general, the final version of the Form CRS highlights the SEC’s preference to apply the concept of “layered disclosure” which leans heavily on the increased use of hyperlinks and other cross-references to more detailed disclosure. 

RIA in a Box has been named a WealthManagement.com Industry Award finalist for the forth time, but for the first time in the Technology Provider / Cybersecurity category. Almost 500 nominations were received from over 260 companies in 2019, and 176 organizations were announced as finalists.

The WealthManagement.com Industry Awards recognizes the companies and organization that support and propel financial advisors' growth and success.

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 the Securities and Exchange Commission ("SEC") passing their Regulation Best Interest ("Reg BI") proposal, Form CRS, and the SEC's and the North American Securities Administrators Association's ("NASAA") cybersecurity focus. Check back each week for the latest list of top stories.

Yesterday, the Securities and Exchange Commission ("SEC") finalized a new rule that includes a new requirement for SEC-registered investment adviser ("RIA") firms to provide a brief relationship summary to retail investors known as the Form CRS. According to the SEC, the new Form CRS "is intended to inform retail investors about: (i) the types of client and customer relationships and services the firm offers; (ii) the fees, costs, conflicts of interest, and required standard of conduct associated with those relationships and services; (iii) whether the firm and its financial professionals currently have reportable legal or disciplinary history; and (iv) how to obtain additional information about the firm." The new Form ADV Part 3 ("Form CRS") will be in addition to the currently required Form ADV Part 1 and Part 2 Brochure. 

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 the Securities and Exchange Commission ("SEC") finalizing their Regulation Best Interest ("Reg BI") proposal, cybersecurity-focused regulatory exams, and the SEC's emphasis on establishing a robust RIA compliance program. Check back each week for the latest list of top stories.

On May 23, 2019, the Securities and Exchange Commission ("SEC") Office of Compliance Inspections and Examinations ("OCIE") released a new risk alert noting that during recent audits, OCIE staff have "identified security risks associated with the storage of electronic customer records and information by broker-dealers and investment advisers in various network storage solutions, including those leveraging cloud-based storage." In particular, OCIE staff has observed that many firms are not making use of available security features offered by network storage providers. As such, the risk alert highlights, "weak or misconfigured security settings on a network storage device could result in unauthorized access to information stored on the device."

On May 19, 2019, North American Securities Administration Association ("NASAA") members voted to adopt an information security model rule package in an effort to enhance the cybersecurity and privacy practices of state-registered investment advisers. The rule was originally proposed in September 2018 and was open to the public for comments until the end of November 2018.

NASAA's adoption of this new information security model rule package is a clear reminder of continued focus and enforcement around cybersecurity. According to Michael Pieciak, NASAA president and Vermont Commissioner of Financial Regulation, “The new model rule requires investment advisors to adopt policies and procedures regarding information security and to deliver its privacy policy annually to clients.”

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 the new model cybersecurity rule, the Securities and Exchange Commission ("SEC") finalizing their Regulation Best Interest ("Reg BI") proposal, and the Department of Labor's ("DOL") new fiduciary rule.  Check back each week for the latest list of top stories.

Our recent analysis of publicly available private fund data, including detailed private equity and hedge fund data, published by the Securities and Exchange Commission ("SEC") revealed that SEC-registered exempt reporting advisers and private funds are perhaps the fastest growing segment of the investment adviser industry. In this follow-up post, we take a closer look at the private equity segment within the broader private fund industry. In particular, by using Form PF filing data, we analyze the relative growth in the number of mid-size and large private equity funds and advisers over the past six years from 2013 to 2018.

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 RIA in a Box's new cybersecurity platform, the need to invest in compliance, and third-party manager diligence. Check back each week for the latest list of top stories.