RIA Compliance and Practice Management Blog

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

Posted by RIA in a Box

Mar 6, 2020 2:17:00 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 the Securities and Exchange Commission's ("SEC") proposed advertising rule, the importance of an Advisor Preparedness Plan ("APP"), and an update on the Regulation Best Interest ("Reg BI") lawsuit. 

Here's our top investment adviser compliance articles for the week of February 28th, 2020:

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1. SEC member: Advertising rule overhaul may be too vague  (Author- Mark Schoeff Jr., InvestmentNews) 

This past November, the SEC released their proposed changes to the advertising rule that regulates financial advisers. If the changes go into effect, the new rule would allow advisers to post testimonials, endorsements, and third-party ratings on social media. However, the past week at the Investment Adviser Association ("IAA") conference in Washington, D.C., Commissioner Allison Herren Lee voiced concern about the proposal, stating, “If rules are too broad or vague, we may end up circumscribing conduct that we never intended to capture. The current proposal may rely too heavily on high-level principles, which can certainly exacerbate this issue.”

2. Does Your Practice Have a Plan for the Unexpected? (Author- Jarrod Upton, ThinkAdvisor)

No matter the situation, hindsight is always 20/20. Circumstances can change in a second, and it is important to be proactive rather than reactive. Jarrod Upton discusses the importance of having an Advisor Preparedness Plan (“APP”), a plan that lays out what will happen and the steps to take if the business owner were to leave or pass away. The Securities and Exchange Commission (“SEC”) provides templates on their website to create business continuity plans. Upton goes on to list four steps to follow after reviewing the templates, “Step 1: Accept that you can’t stop change., Step 2: Be true to yourself., Step 3: Identify the core components responsible for business success., Step 4: Communicate.”

         3. Regulations Will Be Biggest Shaper of Advice Industry: Poll  (Author - Melanie Waddell, ThinkAdvisor)

Melanie Waddell discusses the CoreData Research poll of 218 U.S. advisers taken in November 2019 to find out what advisers thought would be the biggest impact on their industry. The number 1 area of impact was Regulation, with 53% of advisers saying that “regulation will have a ‘severe impact’ on their industry over the next three to five years”. Second and third were demographic change at 50% and technological innovation at 49%. Waddell also mentions the results from Coredata that explain what advisers would like from asset managers. The most popular option, with 56% of advisers in favor, was new risk management products and strategies. Coming in at second was informative educational materials with 53% and market commentary/updates content at third with 40%.

         4. The DOL’s Fiduciary Rule: Will We Get a New Rule? (Author- Brad Campbell and Fred Reish, FredReish.com)

Brad Campbell and Fred Reish discuss the current state of the Department of Labor’s (“DOL’s”) fiduciary rule and the potential for changing the rule dependent on the results of the upcoming presidential election. Campbell and Reish suggest that if the current administration remains in office, the rule will likely not change and will be adopted in its final form. If a new party is elected in November’s election, however, the incoming administration could develop a new proposal. Campbell and Reish walk through the process of stopping regulation from a prior administration and a timeline of initial proposal to final regulation. “Our broader point is simply that the later a final regulation emerges in the last year of a term of a Presidential Administration, the more risk exists that circumstances may permit the next Administration to undo their work,” Cambell and Reish state.

           5. SEC Argues Reg BI Lawsuit Lacks Standing (Author - Patrick Donachie, WealthManagement)

After XY Planning Network (“XYPN”) and several states filed a lawsuit against the SEC arguing that the Regulation Best Interest rule (“Reg BI”) offers an unfair competitive advantage to broker/dealers over RIAs, SEC attorneys submitted a brief Tuesday to federal court claiming that the opposing parties lack substantiality in their arguments.  According to Patrick Donachie, the brief read, “Indeed, they barely engage with the rule text itself, generally ignoring the rule’s enhancements over suitability and the extent to which it aligns with the fiduciary standard at the time a recommendation is made.” The next step will be a response from XYPN and states involved, which is expected by the end of the month.

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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") Regulation Best Interest Rule ("Reg BI"), including Form ADV Part 3 ("Form CRS"), the SEC's upcoming compliance seminar, and new data privacy regulation in California. 

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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