RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of August 30th, 2019

Posted by RIA in a Box

Sep 6, 2019 9:00:26 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 a recent risk alert issued by the Securities and Exchange Commission ("SEC") on principal trading, elder abuse legislation, considerations in starting an RIA firm, and a new lobbying initiative around the SEC's share class selection initiative. 

Here's our top investment adviser compliance articles for the week of August 30th, 2019: 

Schedule a Demo of the MyRIACompliance Cybersecurity Platform

1. FSI: SEC Should Stop 'Regulating Without Rules' (Author- Tracey Longo, Financial Advisor)

The Financial Services Institute (“FSI”), which represents many of the industry's largest independent broker dealers, has launched a lobbying initiative calling attention to what it calls the SEC’s “drive-by regulation without rules” which alleges that the SEC takes enforcement actions without being able to cite specific violation of rules. Tracey Longo gives the example of the recent “Share Class Selection Initiative” stating that according to the FSI, the SEC “‘could not cite a clear rule or regulation that had been violated. Instead the SEC relied on previous settlements and past published guidance (which are statements of the staff’s view on a topic at a given time) to squeeze settlements from businesses today.’” 

2. SEC warns advisers to get client consent before trading from own accounts (Author- Mark Schoeff Jr.), InvestmentNews)

The Office of Compliance Inspections and Examinations (“OCIE”) released a risk alert on Wednesday warning advisers of the regulatory issues associated with principal trading. According to Mark Schoeff Jr., “…the agency said that it has noticed advisers engaging in principal trading without following the strict rules governing such transactions. Problems also have cropped up when advisers arrange trades between clients and affiliated brokers, which is known as agency cross-selling.” Regulatory experts weigh in on the topic including RIA in a Box President, GJ King, who states, "systems and controls need to be in place to ensure personal accounts for advisers are closely monitored and reviewed to identify potential principal trading issues."

           3. SEC Warns Advisors to Watch Principal  Trading Activity (Author-Melanie Waddell, ThinkAdvisor)

Melanie Waddell walks through the written rules around principal trading under the Investment Advisors Act and the SEC's recent observations of advisory firms which engaged in principal trading discussed in a recent risk alert. The alert states, according to Melanie Waddell, “Thus, these advisers did not make the required written disclosures to the clients or obtain the required client consents.” Waddell expands on the topic giving specific examples in which advisors were found in violation of the rules stated in Section 206(3).

 4. 'Fear Gap' A Big Hurdle For Breakaway Advisors (Author- Karen Demasters, Financial Advisor Magazine)

In this article, Karen Demasters speaks with Robert Barnstein, CEO of Kestra Financial Private Wealth Services, who explains that fear is a major hurdle for financial advisors to start their own firm. While Barnstein recognizes that transitioning from a wirehouse to an independent practice can be overwhelming, he argues that fear should not be an overpowering deterrent to starting a firm as there is room for both independent and wirehouse firms in the market. Furthermore, Barnstein offers his advice of what to consider after going independent.

5. Advisors may be first to notice elder abuse. Why don’t more delay disbursements? (Author-Bernadette Berdychowski, Financial Planning)

Bernadette Berdychowski reveals alarming statistics of elder abuse in the United States and offers insight into the current legislation in place to help advisors combat the issue. New Hampshire is the most recent state to adopt model legislation against elder abuse. According to Berdychowski, “The bill, which takes effect on Sept. 8 permits broker-dealers and investment advisors to delay disbursements from accounts when they have reason to believe the request may result in financial exploitation.”  The North American Securities Administrators Association's ("NASAA") Model Act to Protect Vunerable Adults from Financial Exploitation has been adopted in some form in 23 states. 

Download our Form CRS Requirements Infographic

Don't forget to check out last week's top RIA compliance news articles focusing on what to expect during a SEC cyber exam, proposed safe harbor language for job titles, and the Form CRS.


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.

RIA Compliance & Practice Management

Stay up to date on the latest RIA compliance, operations, and technology topics.

Hear from industry experts as they keep you up to date on the latest regulatory developments and practice management topics.

Subscribe to Email Updates

Recent Posts