RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of August 28th, 2020

Posted by RIA in a Box

Sep 4, 2020 3:54:27 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 Form CRS, The North American Securities Administrators Association’s ("NASAA") Continuing Education rule, and the increasing importance of a business continuity plan ("BCP".). Here's our top investment adviser compliance articles for the week of August 28th, 2020:

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          1. Hundreds of Firms Failed to Disclose Misdeeds on Forms CRS, WSJ Says (Author - Diana Britton, WealthManagement)

Now that the Form CRS deadline is a couple months behind us, ample feedback and other findings are rising to the surface. The Form CRS is meant to supply clients with an easy-to-understand summary of the services provided by the advisor, any conflicts of interest, and other relevant information. However, The Wall Street Journal’s newest investigation has found that several hundred firms did not properly disclose certain information on their Form CRS. The Wall Street Journal “found nearly 1,300 firms failed to disclose misdeeds for any of their current employees. It also found about 2,300 individual employees who had regulatory infractions on their records – 70% of which were customer complaints, but their firms failed to report those on the disclosure.”

2. State Regulators Seek Input on Advisor Rep Continuing Education (Author - Tracey Longo,  Financial Advisor Magazine)

Tracey Longo discusses The North American Securities Administrators Association’s (“NASAA”) survey that asks for input regarding what the curriculum should look like for continuing education requirements for investment advisors. The survey asks advisors to rank several industry topics that they would want included in the requirements, such as “conflicts of interest, fiduciary duties, fraudulent practices, suitability and performance reporting requirements.” Longo explains further, “under the proposed rule, investment advisor reps would be required to complete 12 hours of continuing education annually. Half of the hours would focus on products and practice and the other half on ethics and professional responsibility.” With the results of this survey and additional industry feedback, NASAA’s Investment Adviser Continuing Education Committee plans to propose a final rule later this fall.

         3. Does Your Business Continuity Plan Have Holes? (Author - Alan J. Foxman, FinancialPlanning)

During these unprecedented times, it is more important than ever to have a solid BCP. The recent article emphasizes the importance of a BCP and points to the Financial Industry Regulatory Authority’s (“FINRA”) having “an entire page devoted to all things COVID-related, including business continuity planning.” Foxman also mentions FINRA Rule 4370, “which requires member firms to have a written BCP identifying procedures relating to an emergency or significant business disruption. Note that the rule requires that the plan be reasonably designed to enable the member to meet its existing obligations to customers. This is important because it means there is no one-size-fits all plan. You cannot, and should not, simply use an off-the-shelf plan and expect that is will be acceptable without customizing it specifically for your firm’s needs.”

         4. What Have Advisors Learned from the Pandemic? (Author - Angela Sarver, InvestmentNews)

Angela Sarver dives deeper into some of the most important lessons advisors have learned as a result of COVID-19 and how they plan to apply them in the future. Among these top lessons is the importance of a BCP and how “a remote team can be a successful team”. Due to the disruption COVID-19 has caused, many firms have had to adapt quickly and efficiently to avoid any business interruptions. This has provided a unique opportunity for firms to either test their BCP or create one from experience if they did not already have a BCP in place. A remote workforce holds its own challenges, but many firms have made the necessary changes and “have learned to function at an even higher level and have remained tightly connected to their teams and clients”, Sarver said.

           5. Advisers Wary of Becoming Gatekeepers to Private Markets (Author - Mark Schoeff Jr., InvestmentNews)

As of last week, the SEC “expanded the pool of investors who can purchase private equity, hedge fund and start-up company shares, as well as other private placements”, Mark Schoeff Jr. explains. Advisers are generally on edge when it comes to discussing private markets with clients, but many are coming around to the idea of offering this service. In addition, Gail Bernstein, general counsel of The Investment Adviser Association (“IAA”), stated that “investment advisers’ fiduciary duty to their clients ensures they will be good Sherpas for their entry into the private market. The adviser’s sophistication should be good enough to be able to put the client in an investment that the adviser thinks is in the client’s best interest.”

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Don't forget to check out last week's top RIA compliance news articles that focus on how COVID-19 has highlighted the importance of succession planning, updates on the Department of Labor's ("DOL") new Fiduciary Rule, and increased technology adoption during the pandemic.

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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