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 Form CRS, the Securities and Exchange Commission's ("SEC") upcoming vote on modern advertising rules, and continuing education amendments. Here's our top investment adviser compliance articles for the week of December 4th, 2020:
Thomas D. Giachetti sits down with his colleague Ryan Walter to discuss the disciplinary history section of the Client Relationship Summary ("Form CRS") for a firm’s annual Form ADV. The SEC added four question and answers to their FAQs page for Form CRS to leave no room for doubt on what the document should and should not contain. These are particularly important for firms trying to add descriptive, qualitative, or quantitative information when disclosing any disciplinary history. The question “Do you or your financial professionals have legal or disciplinary history” cannot be altered or omitted and can only be answered with a “yes” or “no”. Additionally, if a firm makes a distinction between a firm and its representatives’ disciplinary disclosures, they can only do so within a separate concise response differentiating between firm and representatives indicating “yes” or “no” for the respective disciplinary disclosure. Providing explanatory details regarding their disciplinary history anywhere in the Form CRS is not permissible.
2. SEC to Vote on Long-Awaited Ad Rule Changes Next Week (Author – Melanie Waddell, Think Advisor)
Melanie Waddell corresponds with Karen Barr, Investment Adviser Association ("IIA') president and CEO, on the upcoming SEC meeting where they will be discussing changes to its advertising and marketing rules. The Investment Advisers Act of 1940, Form ADV, and the Advisers Act would be among the amended to update these rules, some of which predate the internet and other technology developments. Barr said she is “pleased to see that the SEC will be able to adopt rules before year-end to modernize the advertising rules for advisors — which have not been updated substantively since 1961.” The meeting will take place on Wednesday the 16th, 2020.
3. SEC Member Crenshaw says Agency Should Provide Guidance on Reg BI (Author – Mark Schoeff Jr., InvestmentNews)
Mark Schoeff Jr. reports on Caroline Crenshaw, SEC member, looking for understanding and clarification of Regulation Best Interest ("Reg BI"), which includes Form CRS, before revisiting the rule. Looking at the impact of Reg BI so far in policies and procedures is at the top of her mind. For RIAs, Crenshaw backs investor testing of Form CRS, although she wants to understand if the documents requirements and rules are in the best interest of investors. She reiterated “I think a strong fiduciary standard of conduct that clearly requires investors to come first is critical”, regardless of whether a broker or investment adviser is the wealth manager.
4. SIFMA hopes SEC Adapts Regulatory Framework for Remote Work (Author – Patrick Donachie, Wealth Management)
In the Securities Industry and Financial Market Association’s (SIFMA) state of the industry briefing on Tuesday, CEO Ken Bensten discussed how SIFMA will work with the SEC in the coming year to reexamine regulations for a likely remote workforce in the post Covid world. In march 90% of the securities industry began remote work. 30% are now back in the office in some capacity. Bensten addressed their involvement with the SEC so far, noting “We’ve been engaged both with our members and then with our regulators to work on how would they adopt a regulatory framework in terms of things like examinations and compliance, overlaying some form of permanent remote working or split shifts.” Additionally, e-delivery documents are a growing trend that have even increased throughout the year and SIFMA will work with the SEC to reexamine their regulation.
During the FINRA's December board meeting, their Continuing Education (CE) Program was among the topics discussed. Currently FINRA’s CE program requires continuing education every three years under Rule 1210 and 1240. In the meeting they approved filing amendments with the SEC for individuals FINRA-registered to complete continuing education program requirements yearly. Those who maintain CE requirements can also individuals who terminate their registrations to reregister for an extended period without retaking the required exams during the period. These regulatory requirements apply to all who are FINRA-registered.
Don't forget to check out last week's top RIA compliance news articles that focus on the North American Securities Administrators Association's ("NASAA") most recent model rules, the importance of succession planning, and successful SEC exams during the pandemic.