RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of February 8, 2019

Posted by RIA in a Box

Feb 15, 2019 3:03:54 PM

joel bruckenstein cybersecurity

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 cybersecurity, the Securities and Exchange Commission's ("SEC'") Regulation Best Interest Proposal ("Reg BI"), and RIA custody rules. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of February 8th, 2019:

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1. Cyberattacks the 'Single Greatest Threat' to Advisors' Business: Joel Bruckenstein (Author- Melanie Waddell, ThinkAdvisor)

Joel Bruckenstein, head of Technology Tools for Today ("T3"), discusses the importance of cybersecurity and the risk that it poses to investment advisors. While the topic isn’t something that advisors enjoy discussing, Bruckenstein refers to cybersecurity as a “necessary evil.” As quoted by Melanie Waddell, Bruckenstein states “cyber security is the single greatest threat to your business. Best-case scenario, if you have a serious incident, you’re looking at six figures; worst-case scenario you’re looking at the health of your business and you’ll probably be out of business.”

2. SEC commissioner Pierce wants to move ahead on advice reform quickly (Author- Mark Schoeff Jr., InvestmentNews)

SEC member, Hester Pierce, said on Tuesday that she wants the SEC to finalize its investment advice reform rule as soon as possible, indicating that Reg BI could be implemented sooner rather than later. She did not specify an exact timeline, however, she did note that the recent government shutdown has slowed down regulatory movement on the matter. Given the support of Pierce, SEC Chairman, Jay Clayton, only needs one more vote to approve the final rule. Although Reg BI is a priority for SEC members, the rule remains controversial sparking vocal support and sharp criticism from various constituents. 

3. NASAA Stays Above Fiduciary Rule Fray- For Now  (Author - Tracey Longo, Financial Advisor)

With individual states beginning to take their own initiative on regulating the standards for brokers, the North American Securities Administrators Association ("NASAA") has not weighed in on a standard set of regulations. Instead, NASAA has allowed states to create their own laws in regards to broker conduct. With many states like Maryland, Nevada, and more furthering their efforts regarding fiduciary standards, a domino effect is likely to occur given that many brokers operate in more than one state. NASAA President Mike Pieciak has stated, “I think there is a benefit to having a national fiduciary standard and working with the SEC to get that, but states still have the responsibility to protect investors.”

4. Custody Status Continues to perplex RIAs (Author- Jeff Benjamin, InvestmentNews)

Rule 206(4)-2, or more commonly known as the Custody Rule, continues to cause confusion for investment advisers. The rule was last updated in 2009 and a decade later many argue there is still not total clarification on the rules. As it stands today, an RIA firm deemed to have custody must generally subject themselves to an independent audit which leads many RIAs to avoid holding custody status whatsoever. Jeff Benjamin writes that Skip Schweiss and the Investment Adviser Association are working with the SEC to try and provide more clarity, “While there is no formal effort in place, Mr. Schweiss said the major custodians are working with IAA to push the SEC for more clarification on the custody rule.”

5. SEC's Regulation BI under fire from ex-officials (Author- Ben Bain, Financial Planning)

A recent criticism of the SEC’s Reg BI proposal comes from a group of former SEC economists. These 11 former SEC officials released a comment letter dated February 6th which criticized the rule calling the economic analysis related to the proposed rule “weak and incomplete.” According to Ben Bain, the letter states, “We find it worrisome that the proposal’s economic analysis does not fully consider some potentially important dimensions of the retail client-adviser relationship.” SEC Chairman Jay Clayton has made it clear that a finalizing Reg BI is a top priority for the SEC.

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Don't forget to check out last week's top RIA compliance news articles on cybersecurity, the SEC's Reg BI proposal, and advisor fee strategies. 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..

Topics: RIA Compliance

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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