RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of August 23rd, 2019

Posted by RIA in a Box

Aug 30, 2019 2:21:48 PM

Capital One data breach impact to RIA firms

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 what to expect during a Securities and Exchange Commission ("SEC") cyber exam, proposed safe harbor language for job titles, and the Form CRS.

Here's our top investment adviser compliance articles for the week of August 23rd, 2019: 

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1.  An inside look at the SEC’s cyber exam (Author- Wes Stillman, FinancialPlanning)

Even with the strong focus on cybersecurity this past year, it is still hard to predict what the SEC is looking for when evaluating a firm. Wes Stillman, CEO of RightSize Solutions, provides an inside look at what the regulators request when evaluating a firm. Four sample requests are provided with a detailed description of what is expected of the firm. The first three requests focus on the different policies and procedures the firm has in place for protecting client information, addressing unauthorized users, and many other topics. The fourth request focuses on all the cybersecurity breaches, how the firm responded, and how many clients were lost as a direct result.

2.  New Study Calls for Safe Harbor Approach to Job Titles  (Author- Erick Bergquist, WealthManagement.com)

A recent study done by the Mercatus Center of George Mason University has taken a closer look at how consumers understand certain terms in the wealth management and financial industries. Derek T. Tharp, author of the report, is pushing for the creation of “safe harbor” language, approved terms that describe advisory work and will hopefully be less confusing for consumers searching for financial advice. Tharp stated, “this could provide the same consumer and firm clarity with less burdensome requirements with respect to regulatory foresight or ongoing requirements to maintain lists of restricted terminology.”

           3. Demystifying RIA/IAR Legal Requirements  (Author- Thomas D. Giachetti, ThinkAdvisor)

Thomas D. Giachetti has outlined the requirements for investment advisor representative registration. An “investment advisor representative” is a supervised person of the investment advisor and registered exclusively with individual states. Giachetti explains in further detail, “if a supervised person falls within the Advisers Act definition of an investment advisor representative, then the state, subject to the below analysis, can license, register, or otherwise qualify that individual."

 4. Fiduciary Rule Questions Dog Scalia After Nomination to Head DOL  (Author- Tracey Longo, Financial Advisor Magazine)

Now that Eugene Scalia has been nominated as the next secretary of the U.S. Department of Labor (“DOL”), many are questioning what his involvement will look like concerning fiduciary matters, and if he should even be involved at all. Scalia was the lead attorney going against the DOL’s 2018 fiduciary rule, so he would be an interesting component to the revision process of Regulation Best Interest (“Reg BI”). Fred Reish of Drinker Biddle stated, “For example, some people are saying that he should be required to recuse himself under the law. That may be a close question. But I think it is clear that it appears to be a conflict of interest, and for appearances purposes at least, he should recuse himself.”

5. Reg BI, Form CRS Status Check: Is Your Compliance Where it Should Be? (Author- Melanie Waddell, ThinkAdvisor)

With fall quickly approaching, now is the time to check in and have a good understanding of where your compliance is and if you are on track to stay compliant with Reg BI and the new Form CRS. Micah Hauptman, financial services counsel with the Consumer Federation of America, said earlier this month, “going forward, firms will need to assess whether their current practices comply with Reg BI or whether they need to make changes. There may be some firms that see business benefits to adopting less conflicted menus that use clean shares, level compensation, for example. Time will tell whether firms will decide to eliminate conflicts that they themselves create, including the broader categories of sales contests, trips, bonuses.”

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Don't forget to check out last week's top RIA compliance news articles focusing on cybersecurity, impacts of the SEC's Reg BI, and new legislation protecting senior investors.


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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