RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of August 27th, 2021

Posted by RIA in a Box

Sep 3, 2021 1:54:12 PM

RIA Archiving, SEC regulation

Each week we are 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 regulatory focuses, new Security and Exchange Commission ("SEC") hires, an SEC public comment request, and Environmental, Social, and Governance Investments ("ESGs"). 

Here's our top investment adviser compliance articles for the week of August 27th, 2021:

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     1. Regulators Get Serious (Author – Tracey Longo, FinancialAdvisor)

In this article, Tracey Longo discusses how regulators are struggling to keep pace with rapid changes in technology, the SEC's aggressive work with Regulation Best Interest ("Reg BI") enforcement, and tough challenges that advisors are facing with the Department of Labor (“DOL”). Noteworthy advisor regulatory rules and requirements discussed in the article include Reg BI being implemented properly and reaching its intended goals, the examination focus on fiduciary duty and Form CRS, the recent risk alert on wrap fee programs, and the DOL's fiduciary rule. Details and opinions on these are further discussed in the article with industry professionals Karen Barr, Fred Reish, Robin Traxler, Jason Berkowitz, and Aron Sxapira.

    2. What do recent SEC Hires Say About Commissioner's Direction? (Author – Patrick Donachie, Wealth Management)

Gensler has quickly filled open positions since he was nominated. Hiring Barbara Roper’s as a senior advisor is the latest move that indicates a directional shift at the commission under the new chair. Many of the hires over the previous months have some background in litigation. In Tyler Gellasch’s opinion, head of the nonprofit organization Healthy Markets, the hires demonstrate Gensler is naming key staff with robust background in policy as well as professional experience as investor advocates. Stating, “They’re very engaged in the policy and regulatory debates, but they’re very much not the traditional industry insiders who often staff up agencies,” he said. “It’s a strong statement that the Chair is focused on restoring the commission to what it has long claimed to be, the investors’ advocate.” Other recent hires include, Renee Jones as Director of the Division of Corporation Finance, John Coates as the SEC’s General Counsel, and Gurbir Grewal’s appointment as the commission’s Enforcement Division Director.

    3. SEC Requests Public Comment on Digital Brokers and Robo Advisors (Author – Ryan W. Neal, Financial Planning)

The SEC issued a request for information and public comment on so-called “digital engagement practices” used by the financial services industry as to take a closer look at how firms use digital tools to engage investors. SEC chairman Gary Genlser said these include behavioral prompts, marketing techniques, gamification features and the design elements of retail-facing websites, portals, and apps. The SEC is additionally concerned with potential conflicts that arise from predictive analytics and optimization practices employed to increase revenues, data collection and time spent on digital investment platforms. Firms need to think about how the technology they use collects, stores and shares client data, as the SEC could be looking to hold advisors accountable for how that data is used to inform product recommendations and financial advice. The public comment period will be open for 30 days following the publication of the request in the federal register. In addition is a questionnaire for retail investors to share their experiences with digital investing services.

     4. SEC Gensler Orders Review of Funds' ESG Disclosures (InvestmentNews)

After a recent allegation of a firm overstating its ESG asset, a resulting investigation has shaken an industry that’s struggling to adapt to a much stricter regulatory environment. The SEC is considering more stringent disclosure requirements for investment funds as concerns rise of unfounded ESG claims. SEC Chairman Gary Gensler said in a speech he delivered to the European Parliament Committee on Economic and Monetary Affairs this Wednesday, “Many funds these days brand themselves as ‘green,‘ ‘sustainable,‘ ‘low-carbon,’ and so on. . . I’ve directed staff to review current practices and consider recommendations about whether fund managers should disclose the criteria and underlying data they use to market themselves as such.” This is the most recent warning to the asset management industry to avoid inflated language around its environmental, social and governance allocations. Read the article for additional insight on the developing investigations and ESG regulation.

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Don't forget to check out last week's top RIA compliance news articles that focus on the Securities and Exchange Commission's ("SEC") warning to advisors on wrap fee accounts, trends in financial technology, and compliance with the SEC's Marketing Rule

Topics: RIA Operations, RIA Compliance, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does 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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