RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of April 17th, 2020

Posted by RIA in a Box

Apr 24, 2020 3:33:07 PM

Top_Compliance_Articles_of_the_week-17Each 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's ("SEC") shareclass disclosure initiative and disclosure of loans through the Paycheck Protection Program, the North American Securities Administration Association (“NASAA”) continuing education requirement, and regulation for robo-advisors. 

Here's our top investment adviser compliance articles for the week of April 17th, 2020:

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1. Some seek SEC guidance on whether RIAs must disclose COVID-19 loans (Author- Mark Schoeff Jr., InvestmentNews) 

It is unclear to registered investment advisory firms who apply and secure loans through the Paycheck Protection Program ("PPP"), established by the Coronavirus Aid, Relief and Economic Security Act, whether or not the loan must be disclosed on the Form ADV. Many compliance experts weigh-in on the topic and come to the general consensus that while it is still not completely clear, disclosure should be specific to the firm’s unique circumstances. As quoted by Mark Schoeff Jr., Chris DiTata, Vice President and General Counsel at RIA in a Box states, “Until there’s further SEC guidance, it still has to be viewed as an evolving regulatory topic. Firms should consider whether disclosure is warranted on a case-by-case basis at this juncture.”

2. Advisers want CFP continuing education to count toward state requirements  (Author-Mark Schoeff Jr., InvestmentNews)

In February, NASAA released a model rule proposal which would implement a continuing education requirement for investment advisers. Comments on the proposal were due April 13th and have been posted by NASAA. “One theme running through the comment letters posted on the NASAA website is that advisers should get credit for CE they must complete to retain a credential as a certified financial planner,” Mark Schoeff Jr. states. In this article, compliance experts offer their views on the proposal and continuing education requirements for advisers.

         3. Breakaway Advisors Drawn to RIA Channel For Bigger Payouts (Author - Jeff Schlegel, Financial Advisor Magazine)

A recent report published by research and consulting firm Cerulli Associates titled, “The Ceruilli Edge- U.S. Asset and Wealth Management Edition” revealed that independent broker-dealers who would prefer to transition to the independent or hybrid RIA channels, among other factors, are primarily driven by higher pay and marketing flexibility. On the other hand, breakaway advisors do have concerns adopting the RIA model including regulatory responsibilities, cost, and client loss. “But as noted in Cerulli’s report, a growing number of outlets exist to help breakaway advisors ease their transition to RIA life by providing platforms, technology, and overall operational and regulatory support that breakaway IBD (and wirehouse) advisors had at their previous companies,” Jeff Schegel states.

         4. Robo-Advisors: Regulators May Be Closer Than You Think (Author- Kurt Wolfe, ThinkAdvisor)

As Robo-advisors have experienced tremendous growth in recent years, regulators have not kept up in creating adequate rules to align with robo-advisors’ practices and growth. While there has been enforcement action against robo-advisors, the actions have involved charges typical of any investment advisory firm and have not been unique to robo-advisors indicating a lack of expertise of the robo-advisory space from regulators. “Given the growth of the industry and the number of new market entrants, firms that offer robo-advisory services could be increasingly likely targets for regulatory scrutiny when the SEC and FINRA resume normal service. From compliance with Reg BI, to the new advertising rule, to nuts-and-bolts record-keeping requirements, regulatory scrutiny of robo-advisory platforms is closer than you think,” Kurt Wolfe states.

           5. Financial industry opponents remain wary of SEC's crackdown on share-class disclosure (Author - Mark Schoeff Jr., InvestmentNews)

On Friday, the SEC concluded its Share Class Selection Disclosure Initiative with final orders. Launched in February 2018, the SEC had returned more than $139 million to investors as part of the initiative, according to Mark Schoeff Jr. Despite the closure of the program, the industry remains skeptical of future enforcement related to the initiative as the share-disclosure is still an examination priority this year. In this article, Paul Atkins, chief executive of Patomak global partners is quoted stating “The Commission lost a lot of credibility by browbeating advisors through make-it-up-as-you-go disclosure requirements and never-before-enunciated duties imposed on an entire industry.”

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Don't forget to check out last week's top RIA compliance news articles focusing on business continuity plans and pandemic preparedness, The North American Securities Administrators Association (“NASAA”) moving forward with continuing education requirements, and key steps for working from home.

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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