RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of February 5th, 2021

Posted by RIA in a Box

Feb 12, 2021 5:00:10 PM

Top RIA compliance articles focus on the Securities and Exchange Commission's Advertising Rule and increased investigative empowerment for SEC staff.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's") advertising rule's impact on small RIA firms, marketing opportunities the rule provides, and the pressure of operational compliance brought on by the increased investigative empowerment for SEC staff.

Here's our top investment adviser compliance articles for the week of January 29th, 2021:

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           1. Small RIAs May Not Benefit From SEC Advertising Changes (Author – Karen Demasters, Financial Advisor Magazine)

Earlier this week, Karen Demasters interviewed GJ King, president of RIA in a Box, discussing the SEC's new rules on advisor advertising and the conflicts the rule will impose. Firms will have varied regulations for advertising based on their firm's AUM and other nuanced jurisdiction registering requirements. This will create a divide between a small state firm's capability to advertise while the SEC registered firm obtains a greater capacity to market towards the same potential clients. Additionally, some small firms won't have comparable resources available to hire for big name endorsements or the resources to meet the recordkeeping requirements needed to remain compliant with the new rule. Although regardless of firm size, any SEC registered firm should be prepared to undergo additional scrutiny from the SEC during an audit. 

         2. Five of Biggest Marketing Opportunities From the Updated SEC Ad Rule (Author – Samantha Russell, WealthManagement.com)

When the adoption of the Advertising Rule was announced in December of 2020, RIA firms registered with the SEC could look forward to the new opportunities for advertising through utilizing endorsements and testimonials. In this article, Samantha Russel, chief evangelist at FMG suite, outlines and discusses five key marketing opportunities for advisors to leverage in their firm's strategy: 1) optimize with google reviews; 2) create videos incorporating clients; 3) interact on social media; 4) use a dedicated testimonial page on the firm website; and 5) repurpose reviews and testimonials in other marketing materials. Additionally she iterates to consult with your firms compliance team or a ria compliance consultant before establishing new marketing strategies. 

       3. SEC Empowers More Staff to Launch Investigations (Author – Mark Schoeff Jr., InvestmentNews)

Earlier this week, SEC Acting Chair Allison Herren Lee "restored the ability of senior enforcement officers to approve a formal order investigation and to authorize staff to subpoena documents and take testimony." The recent trading explosions that occurred with several faltering companies made it clear the SEC needs the ability to act quickly and have real-time enforcement actions in the future. SEC investigators will be able to detect and stop fraud quickly with commission authority more widely delegated. An increase in subpoenas and enforcement actions will likely come with this change, making it evermore important for firms to ensure they are archiving documents and other records. 

         4. Independent RIA Vs. Tuck-In: A Guide for Advisors Seeking Independence (Author – Travis Johnson, WealthManagement.com)

There has been a noticeable shift from brokerages to RIAs over the last decade as advisors seek independence and a better sense of a fiduciary led client-focus. In this article, Travis Johnson discusses the path to independence and the two primary RIA models available to choose from when making the transition: joining a Shared ADV/Tuck-in model or the independent model. With a tuck-in model, advisors can join an existing RIA and retain some institutional structure that's provided at a wirehouse firm while still gaining some freedoms. In an independent RIA model, there are unlimited options to customize the firm. With that in mind, infrastructure, operational practices, and resources all need established while remaining compliant with regulatory authorities as well. Johnson notes the variety of service providers available that offer services and industry expertise to help build a firms practice. 

        5. How the GameStop Short Squeeze Escalates Compliance Risks (Author - Stephen Marsh, ThinkAdvisor)

In this article, Stephen Marsh discusses the GameStop story, and what it will mean for the future of firm reputation, firm risk, and regulation. Marsh points out that, "as the dust begins to settle, a cautionary tale for financial services firms is starting to emerge, along with a clarion call for monitoring employee digital communications, personal trading and outside business activities more closely." As a takeaway, firms need to develop robust supervisory practices to close visibility gaps for their staff. Additionally, firms need to ensure their confidence in the ability to provide visibility into communications and employee activities to prepare for more intense regulatory scrutiny in the future. 

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Don't forget to check out last week's top RIA compliance news articles that focus on the SEC's focus on dually registered firms, the aftermath of the GameStop stock market frenzy, and whistleblowing.

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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