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 the Securities and Exchange Commission's ("SEC") Regulation Best Interest ("Reg BI") rule, brewing state fiduciary-related legislation, and the possible secession of local Financial Planning Association ("FPA") chapters across the country. Check back each week for the latest list of top stories.
Here's our top investment adviser compliance articles for the week of February 22nd, 2019:
1. As States Clash with Feds Over Fiduciary, Regulation Jitters Rise (Author- Kenneth Corbin, FinancialPlanning)
Kenneth Corbin writes, "The federal government's failure to rally behind a uniform fiduciary standard for brokers and advisors left a vacuum that lawmakers in a variety of states are looking to fill with their own rules for the wealth management sector." However, this is creating a potential standoff. Investment Adviser Association CEO Karen Barr notes, "For more than 20 years, federal law has prohibited states from adopting any rules, interpretations or guidance that would have the effect of substantively regulating SEC-registered advisors." This will be an interesting development to watch and follow in the coming weeks and months as the SEC moves potentially closer to releasing its finalized Reg BI rule.
2. NAPFA Battles Back Against 'Misleading' SEC Best-Interest Rule (Author- Tracey Longo, Financial Advisor)
The National Association of Personal Financial Advisors (“NAPFA”) is leading an initiative to help investors better understand the difference between fiduciary and the term “best-interest” used by the SEC. NAPFA President Geoffrey Brown said, “the regulation creates a ‘false equivalency’ in investors’ minds between registered investment advisors, who do have a fiduciary standard, and hybrid or dually-registered advisors and brokers, who will instead be held to an undefined “best-interest" standard under the proposal."
3. Top Democrat on Senate Panel Wants Hearing on SEC's Reg BI (Author - Melanie Waddell, ThinkAdvisor)
Melanie Waddell writes that Senator Sherrod Brown, the top Democrat on the Senate Banking Committee, recently "called for a hearing on the Securities and Exchange Commission's proposed Regulation Best Interest." With a number of potential new laws moving forward, Senator Brown stated more generally, "the list of today’s bills, I see a lot of rollback and very little protection, and very little for ordinary investors. I hear some people say we need these bills to facilitate capital formation. I’m not really sure what problems they are attempting to solve."
This past week the Senate Committee on Banking, Housing, and Urban Affairs has been focused on the collection of bills known as the JOBS Act 3.0. These bills have been brought forward with the overall goal of sparking capital formation and expanding the public’s opportunities to invest rather than solely relying on an individual’s net worth. Diana Britton also highlights that the Securities Industry and Financial Markets Association "voiced support for the Small Business Audit Correction Act of 2018, also under consideration, which would exempt smaller noncustodial broker/dealers from having to hire a Public Company Accounting Oversight Board–registered audit firm for annual reporting. Industry groups argue that bill would provide relief to small b/ds."
With the Financial Planning Association (“FPA”) aiming to dissolve 88 chapters affiliation agreements to expand the reach of the Denver headquarters, Bob Veres writes that many chapters around the country may be contemplating seceding from the FPA and operating as their own organization. Michael Ross, FPA member and financial planner, states “The FPA tries to be both a professional and a trade organization, but the big tent approach doesn’t work for those of us who aspire to create a real profession”.
Don't forget to check out last week's top RIA compliance news articles on cybersecurity, regulatory exams for dual registrants, choosing office space when starting an RIA firm, and advisory fees. Be sure to check back next Friday for next week’s top articles!
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..