RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of December 6th, 2019

Posted by RIA in a Box

Dec 13, 2019 11:46:02 AM

RIA Compliance Regulatory News

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 ("relationship summary") requirements, tension between the Securities and Exchange Commission ("SEC") and the brokerage industry, and investor's lack of knowledge regarding investment fees.

Here's our top investment adviser compliance articles for the week of December 6th, 2019:    

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1. Best Interest Standard of Care for Advisors #20 (Author - Fred Reish, FredReish.com)

In the 6th installment of his series about transitioning to the SEC Regulation Best Interest (“Reg BI”) and Form CRS, Fred Reish focuses on the disclosure requirements for broker-dealers and investment advisers in the new Form CRS Rule. This new rule will go into effect in June 2020 and is thought of as a “relationship summary” between adviser and client and covers “recommendations of securities and investment strategies involving securities”. Reish explains further, “In addition to delivering a relationship summary to new retail investors, broker-dealers and investment advisers must also, in three specified situations (including rollover recommendations), deliver a summary to existing customers”.

2. SEC member Robert Jackson calls out critics of agency ‘rulemaking by enforcement’  (Author- Mark Schoeff Jr., InvestmentNews)

Advocates for the brokerage industry have been speaking up against the SEC's Share Class Selection Disclosure Initiative which is the SEC’s attempt to regulate firms “that fail to disclose to clients that they recommend high-fee mutual fund share classes – those with 12b-1 fees – when less expensive classes were available in the same fund”. Those in disagreement with the Initiative are accusing the SEC of regulation by enforcement and they are not backing down. However, the SEC is getting tired of the push back and criticism. SEC member Robert Jackson Jr. is especially fed up saying, “What they’re in favor of, I think, is fundamentally less protection in the marketplace for American investors.”

         3. SEC to Take Up Accredited Investor Definition Changes on Dec 18  (Author - Melanie Waddell, ThinkAdvisor) 

The SEC Chairman Jay Clayton stated last month that a discussion regarding the definition of accredited investor would happen soon and would involve the feedback the SEC had received. That discussion and vote will take place middle of next week and will address revisions that “are intended to update and improve the definition in order to identify more effectively investors that do not need the protections of registration under the Securities Act of 1933.”

         4. Investment Fees? Some Investors Don’t Think They Pay Any  (Author -  Karen Demasters, FinancialAdvisor Magazine)

According to a recent study complied by the Finra Foundation, “Investors in the United States: A Report of the National Financial Capability Study,” a large number of investors do not know that they are paying investment fees or are unaware of how much. According to Karen Demasters, “Fourteen percent of all respondents did not think they pay any kind of fee for investing and another 17% acknowledged they did not know how much they pay. Among mutual fund investors, 32% believed they do not pay fees or expenses” The study further breaks down the types of investors and their knowledge of investment performance.

           5. How Tech Could End Conflicted Financial Advice (Author - Jane Wollman Rusoff, ThinkAdvisor) 

In this article, ThinkAdvisor interviews Steve Lockshin, founder of AdvicePeriod on the SEC’s Reg BI Rule, the Schwab-TD Ameritrade merger, and the future of fintech and its impact on the financial services industry. Lockshin was the founder and CEO of Convergent Wealth Advisors, who sold to City National Bank in 2007. In addition, he also started Fortigent, a provider of outsourced wealth management and reporting solution, which was acquired by LPL Holdings in 2012. “A decade from now, major tech companies, like Google, who have butted into the financial services industry big-time might be putting an end to the ‘great train robbery”’ that characterizes advisors’ conflicted advice,” Lockshin states.

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Don't forget to check out last week's top RIA compliance news articles focusing on the Securities and Exchange Commission's ("SEC") proposed amendments to the advertising rule, impacts of the Reg BI, and the future of robo advice.

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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