RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of April 19th, 2019

Posted by RIA in a Box

Apr 26, 2019 4:08:59 PM

SEC Robare case use of the word may in Form ADV

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 use of word "may" in the Form ADV, revisions to the Securities and Exchange Commission ("SEC") Regulation Best Interest ("Reg BI") proposal, and the Financial Industry Regulatory Authority Inc. ("FINRA") focusing on technological innovation. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of April 19th, 2019

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1. When disclosing conflicts of interest, wiggle words like 'may' may not be good enough (Author- Mark Schoeff Jr., InvestmentNews)

Mark Schoeff Jr. states, “The SEC’s problem with 'may' revolves around disclosure of conflicts of interest. If the conflict is there, investment advisers better say so, rather than describing the potential conflict as something that 'may' affect their recommendations to clients.” This particular issue is at the center of an ongoing enforcement case which soon reach resolution. This is a case that the entire industry will want to follow closely. In the interim, all RIA firms should be reviewing their Form ADV and other disclosure documents to review for any improper use of the word "may."

2. Should the SEC Require Advisors to Make Actual Fee Disclosures, As the EU Does? (Author- Tracey Longo, Financial Advisor)

When considering the SEC’s Reg BI proposal, Tracey Longo writes that it is hard to ignore that the EU has higher standards and expectations for their advisors. The EU follows the Markets in Financial Instruments Directive II (“MiFID II”) standards, which raise “the transparency bar well above the U.S. SEC’s proposed Regulation BI and Form CRS, which only require a list of the tasks and services which will or may incur costs or change.” A new paper penned by the Institute for the Fiduciary Standard states, “The SEC’s Regulation BI and customer relationship summary ‘should be re-engineered to resemble this MiFLD II requirement.”

3. SEC commissioner calls for major changes to Reg BI (Author- Kenneth Corbin, FinancialPlanning)

As the SEC’s Reg BI proposal moves closer to a potential finish line, Commissioner Robert Jackson is calling for significant reforms, stating that “he is ‘very hopeful’ that the commission can finalize the rule on a unanimous, bipartisan basis.” Jackson believes that even though the idea of “best interest” is the foundation of this proposal, a straightforward definition for the term has yet to be presented. By the end of these revisions, Jackson believes the proposal should be able to pass with a unanimous vote because, “I think this is a unique moment in which we can and should speak with one voice, and I certainly hope we do.”

 4.  NJ Fiduciary Plan 'Far Exceeds' Other Rules: Lawyers (Author- Melanie Waddell, ThinkAdvisor)

After the DOL Fiduciary rule was overturned and while waiting for the SEC’s Reg BI proposal to be finalized, the state of New Jersey has taken matters into their own hands. New Jersey’s proposal is titled “Fiduciary Duty of Broker-Dealers, Agents, Investment Advisers, and Investment Adviser Representatives” and has a uniform fiduciary duty imposed on both brokers and advisers among other topics. Attorneys reported in their Groom Benefits Brief, “It seems likely that the two provisions included in the New Jersey proposal carving out ERISA fiduciaries and stating that no additional recordkeeping requirements are imposed upon brokers were included as an attempt to stave off the two preemption challenges that predominate state fiduciary duty initiatives.”

5. Finra launches office to focus on fintech (Author- Ryan W. Neal, InvestmentNews)

Ryan Neal writes that FINRA has taken great strides to stay on top of their game and cutting edge when it comes to technology. FINRA President and CEO Robert Cook has been working towards this goal with the development of Finra 360, and the Office of Financial Innovation is the latest addition. As Cook states, “innovation continues to pose new opportunities and challenges for our member firms and the broader financial services industry, and it is essential that we as regulators keep pace.”

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Don't forget to check out last week's top RIA compliance news articles focusing on the SEC Regulation S-P risk alert, New Jersey's new fiduciary rule, and Reg BI. Be sure to check back next Friday for next week’s top articles! 


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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