RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of August 12th, 2022

Posted by RIA in a Box

Aug 19, 2022 2:33:53 PM

This week's recap focuses on the Securities and Exchange Commission's ("SEC") examination priorities, cryptocurrency, and a recent SEC bulletin emphasizing serving clients' best interest.

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 investment advisers role in preventing and detecting elder abuse, RIA in a Box's compliance partnership with LinkedIn, environmental, social, and governance (ESG) regulations, and a recent regulatory sweep over single stock ETFs.

Here are our top investment adviser compliance articles for the week of August 12th, 2022:

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    1. One in Ten Elders Is Abused – You Can Help Them (Author – Jason Vinsonhaler, Wealth Solutions Report)

Elderly investors are particularly vulnerable to targeted financial exploitation, also known as elder abuse. In this article, RIA in a Box's director of compliance Jason Vinsonhaler shares how investment advisory firms can detect and report suspected elder abuse, along with proactive approaches to prevent it. Vinsonhaler reminds RIAs to educate their staff on the warning signs, including the sudden closure of an account, especially when penalties are incurred. Firms should start by assessing their policies and procedures to ensure there are specific processes in place to address suspected elder abuse. If an adviser suspects a threat or scam to their client, they should immediately report the behavior to the state department. 

    2. Fintech Bytes: Envestnet, RIA in a Box and Yieldstreet (Author – Ryan W. Neal, Investment News)

This week's roundup of fintech news includes the success of the Envestnet college program and RIA in a Box's recent compliance partnership with LinkedIn. LinkedIn selected RIA in a Box as a compliance partner, enabling users of RIA in a Box's Communications Archiving and Review solution to simplify the monitoring and storage of social media communications. LinkedIn's business development manager Moza Anthonthy shared how the partnership allows for "industry compliant use of Linkedin's free and paid products." This enhancement to RIA in a Box's product will ensure that investment advisers' bases are covered in meeting the requirements set by the Books and Records rule and complying with new requirements in the SEC's marketing rule.  

    3. IAA Fears SEC’s ESG Rules Could Lead to Client Confusion (Author – Patrick Donachie, Wealth Management)

This article covers the Investment Adviser Association's (IAA) request for the SEC to amend the ESG proposal to include a "materiality" standard for disclosures. While the IAA has voiced its support for the intent of the ESG proposal, the association indicated there are potential impacts to investors that need to be addressed. Such negative impacts include the risk of overemphasizing ESG factors and confusing the investor with information that actually holds no materiality. In the letter to the SEC, the IAA suggests that the disclosure requirements may actually cause "greenwashing", which is exactly what the proposal is aimed at eliminating. The article concludes with a reminder that the proposed rules will likely face litigation and a long time line before any changes are made mandatory.

    4. 'Hating ESG': Advocates are looking to replace the label (Authors - Saijel Kishan and Frances Schwartzkopff, Financial Planning)

This article highlights how controversial the "ESG" label has become, causing the industry to focus less on the meaning of the issue at hand, and more so on political debate. One industry professional suggests the term gets "shelved" and another suggests the industry must find a way to properly define exactly what ESG is to provide clarity for investors. The authors dive into the explanation of how the term was coined and the original intent behind using ESG factors in financial analysis. What is undoubtedly clear is that the request for institutions to shine a light on ESG factors by reporting their greenhouse gas emissions has already been a massive adjustment for the industry. 

   5. Massachusetts securities chief goes after single-stock ETFs (Author – Jeff Benjamin, Investment News)

Jeff Benjamin shares the news on the latest regulatory sweep targeting firms offering single stock ETFs. In a recent announcement, top securities regulator William Gavin, emphasized the risk involved with these types of investments, as there is no "diversity cushion whatsoever." In fact, he compares the investment strategy to gambling at a casino. An investment professional would face challenges in adhering to their fiduciary duty if they were to recommend such a risky product to their clients. The article points out that the biggest risk involves holding on to these types of ETFs for more than one day, which makes it obvious that investors should not choose these products for long term investment strategies. 

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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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