RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of February 7th, 2020

Posted by RIA in a Box

Feb 14, 2020 3:13:31 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 proposed continuing education requirements for Investment Advisor Representatives ("IARs"), frequently asked questions ("FAQs") on the Securities and Exchange Commission's ("SEC") regulation best interest rule ("Reg BI"), and cybersecurity. 

Here's our top investment adviser compliance articles for the week of February 7th, 2020:

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1. NASAA Proposes CE Requirement for Investment Advisor Reps (Author- Melanie Waddell, ThinkAdvisor) 

Comments will be taken until March 30th on a proposed plan by the North American Securities Administrators Association's ("NASAA") Investment Adviser Representative Continuing Education ("IAR CE") Committee for implementing a continuing education program for investment adviser representatives (“IARs”). According to Melanie Waddell, “NASAA is proposing an annual IAR CE requirement under which IARs would be required to complete 12 total hours of CE — 6 hours focused on Products and Practice and 6 hours focused on Ethics and Professional Responsibility.” NASAA welcomes input and feedback from the public on the proposed program.

2. SEC Issues Updated FAQs on Reg BI, Form CRS (Author- Melanie Waddell, ThinkAdvisor)

On Tuesday, the SEC released updated FAQ guidance on Reg BI from the original guidance released on January 13th, 2020. According to Melanie Waddell, “In its updated FAQ on Reg BI, the Divisions of Investment Management and Trading and Markets state that Reg BI does apply to limited purpose broker-dealers that make recommendations of private offerings to accredited investors.” The SEC further clarifies the definition of “retail customer” and the application of Reg BI on broker-dealer activity with retail customers, including Form ADV Part 3 ("Form CRS").

         3. Cybersecurity rules can create compliance challenges (Author - Dale Brown, InvestmentNews)

Dale Brown, President and CEO of Financial Services Institute (“FSI”), argues that a uniform approach to cybersecurity regulation is more effective than individual state efforts. Brown gives examples of inconsistencies across states which lead to not only cybersecurity risks but compliance challenges for advisers. FSI intends to work with lawmakers to creating national standards to address cybersecurity issues. “While cybersecurity is a large, evolving challenge involving complex and disparate laws and regulations across the country, we are working to bring a coordinated approach to the key legislation and rules that impact our members most,” Brown states.

         4. SEC provides Further Guidance on Reg BI Compliance (Author- Patrick Donachie, Wealth Management)

This week, the SEC released an updated set of FAQs on Reg BI. The updates addressed issues such as “waiving” protections of Reg BI, submission of Form CRS, and modifying existing compliance programs. Patrick Donachie walks through the highlights of the updated FAQ’s and offers clarification on client relationships between brokers and accredited investors.  In regards to Form CRS, “… the SEC confirmed that firms would have to supply clients with a new Form CRS if they converted an investment advisory account into a brokerage account, even if an earlier CRS detailed both the advisory and brokerage services offered by the firm,” Donachie states.

           5. SEC Advertising and Solicitation Proposal Still Too Onerous, Says IAA President (Author - Tracey Longo, Financial Advisor Magazine)

In this article, Tracey Longo discusses the proposed SEC advertising and solicitation rule changes with president of the Investment Adviser Association ("IAA"), Karen Barr. According to Tracey Longo, “IAA generally supports the SEC’s efforts to modernize the advertising rules originally created and unchanged since 1961 and 1979, respectively—'we are concerned that certain elements of the proposal would impose significant operational and compliance burdens and unduly impede important communications with investors,’  IAA President Karen Barr said in a letter sent to the SEC last night.” While there is a general consensus among the industry that the 1961 advertising rule needs updating, the Institute for the Fiduciary Standard opposes completely lifting the ban on testimonials and endorsements."

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Don't forget to check out last week's top RIA compliance news articles focusing on how to avoid Form CRS pitfalls, steps to take when creating your succession planning, and industry trends to keep an eye on.

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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