RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of January 1st, 2021

Posted by RIA in a Box

Jan 8, 2021 5:10:38 PM

Top RIA Compliance ArticlesEach 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") new modernized marketing rule, tougher industry regulations expected in the new year, and Paycheck Protection Program ("PPP") loans.

Here's our top investment adviser compliance articles for the week of January 1st, 2021:

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           1. New SEC Marketing Rule May Bring Fresh Scrutiny to Advisors (Author – Kenneth Corbin, FinancialPlanning)

With the long-awaited changes to the Securities and Exchange Commission’s (“SEC”) Marketing Rule now approved, many registered investment advisors (“RIAs”) are figuring out how to adapt to the new rule requirements. The changes made allow firms to advertise on social media and incorporate endorsements and testimonials into their marketing strategies. Outgoing SEC Chairman Jay Clayton describes these changes “as a long-overdue, principles-based modernization intended to allow advisors to incorporate new technologies into their advertising programs as they emerge.” However, with this exciting new development comes additional compliance responsibilities. GJ King, president of RIA in a Box, states that the firms who decide “to utilize these new forms of advertising will have to carefully follow the rule’s requirements and also be prepared for an increased likelihood of audit – and additional scrutiny during the audit – based on the firm’s responses to the new Form ADV sections.”

         2. Advice Firms ‘champing at the bit’ Over new Advertising Rule (Author – Jeff Benjamin, InvestmentNews)

Since the approval of the SEC's new Marketing Rule in late December, registered investment advisors (“RIAs”) have been working to understand the rule more and how their firm should address the change and move forward. Under the new rule, firms now have access to more marketing channels than ever before, which poses its own challenge. Mazi Bahadori, vice president of securities at Altruist, explains further, “If advisers are not careful, they could find themselves in hot water a lot easier than under the previous rule. They’re broadening the scope of what advertising means and putting the onus on advisers to define policies and procedures that are appropriate for their business. Until it’s clear what they can and can’t do, those advisers that have the resources to experiment and try news things will do that, and others might be learning by example.” The next few months to a year will be treated as a testing period, with full implementation of the rule not expected until 2022.

       3. Tougher Advisor Regulation Coming in New Year (Author – Melanie Waddell, ThinkAdvisor)

Now that 2020 is officially behind us, it is time to look forward to the coming year. With the Biden administration moving into the White House, tougher regulatory enforcement and swift action at the SEC is expected, focusing mostly on Regulation Best Interest (“Reg BI”). Moving forward, “I don’t expect the SEC to scrap Reg BI and start from scratch. I do expect the SEC under Biden to move relatively quickly to clarify the meaning of best interest, and to do so in a way that represents a clear enhancement over suitability, and to clarify how it determines whether policies and procedures mitigate conflicts of interest,” stated Barbara Roper, director of investor protection for the Consumer Federation of America.

         4. 3 Ways to Step Up Cybersecurity in Wake of Solarwinds Breach (Author – Jeff Berman, ThinkAdvisor)

Jeff Berman spoke with several industry experts concerning the recent security breach of SolarWinds software. Joel Bruckenstein, head of Technology Tools for Today (“T3”), stated that “many firms in the industry have some sort of SolarWinds product that either they are using directly, or that a vendor is using as part of their ‘cyber’ package. Every advisory firm should be asking their vendors about this, but few if any are so far.” In addition to this massive breach, 2020 had a much higher rate of cybersecurity attacks than any year before, with email phishing being the most popular avenue. Firms need to have cybersecurity as a top priority, provide education to employees, and always perform proper due diligence. Scott Lamont, a senior manager at F2 Strategy, said, “I would tend to use every one of these events as a learning opportunity and strive to make my data more secure.”

        5. Latest Relief Law Refines PPP Loans Conditions (Author – Jeff Stimpson, Financial Advisor Magazine)

A few days before the New Year, the Consolidated Appropriations Act, 2021, was signed to address problems that arose with the Paycheck Protection Program (“PPP”) loans. This new Act aims to address rules on “eligibility, forgiveness and tax responsibilities of borrowers.” The Act also lists many clarifications and requirements for a business to receive the loan such as “business gross receipts must have declined at least 25% in any quarter in 2020 compared with the corresponding quarter in 2019, and businesses must have 300 or fewer workers.” Moving forward, “additional PPP funding will be available for certain smaller qualified businesses, including some business owners who received PPP funds in round one,” said Robbin E. Caruso, a CPA, partner and co-leader of the National Tax Controversy Department. The second round of PPP loans will have a much more restrictive criteria in hopes of avoiding the same confusion caused by the first round.

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Don't forget to check out last week's top RIA compliance news articles that focus on the SEC's amendments to the advertising rule, the recent SEC risk alert, and firms' adoption of digital tools.

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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