RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of July 12th, 2019

Posted by RIA in a Box

Jul 19, 2019 2:30:07 PM

SEC Robare case use of the word may in Form ADV

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 top compliance concerns, Form CRS, alternative investment due diligence, and the Securities and Exchange Commission's ("SEC") share-class focus. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of July 12th, 2019. 

Download our Infographic Outlining the 5 Form CRS Requirements

1. Cybersecurity Tops List of Compliance Concerns in New Survey (Author- Patrick Donachie, Wealth Management)

A recent study survey conducted by the Investment Adviser Association ("IAA") revealed that cybersecurity remained a top concern among investment advisors for the sixth-straight year in a row. According to Patrick Donachie, "Among respondents, 83% considered cybersecurity the 'hottest' topic in compliance, far outpacing advertising (at 28%) and privacy (at 23%)." Donachie highlights major cybersecurity incidents that occurred in the past year, likely fueling the ongoing cybersecurity concerns. 

2. Form CRS- What advisors need to know (Author- Jessica Matthews, Financial Planning)

Impacted SEC-registered RIA firms have until June 30, 2020 to create a brief customer relationship summary document known as the Form CRS. This document is intended to help eliminate confusion for retail investors around fees, services, conflicts of interest, differences between broker-dealers and investment advisors, and more. Jessica Matthews walks through constructing the form including upcoming deadlines, submitting the form, to whom and when to distribute the form, and what should be included in each section of the form. In addition, Sanjay Lamba, associate general counsel at Investor Adviser Association, offers advice in constructing the document. 

3. Will the Form CRS Reduce Investor Confusion or Add To It? (Author- Tracey Longo, Financial Advisor)

While the new Form CRS rule approved by the SEC on June 5th is intended to alleviate confusion for investors, Tracey Longo argues that the form's effectiveness in doing so is still uncertain. While the effectiveness of Form CRS may still be unknown, SEC Chairman Jay Clayton recognizes that Form CRS, “is a substantial improvement over existing retail disclosures, which are often lengthy, framed in legal terminology and dispersed among many documents." Holly Smith, former SEC attorney, advises that "firms will want to move quickly and begin implementation so that questions can come to the surface and be communicated and addressed by the SEC well in advance of the transition period."

 4. 4 ways to Assure Due Diligence Is Up To Par (Author- Jean Merriman, ThinkAdvisor)

As the popularity of retail alternative investments increases, Jean Merriman emphasizes the importance for investment advisers to perform their due diligence on these products. Understanding that this can be a complex task, Merrimen offers four main points of advice to advisors interested in alternative investments. This includes dedicated product strategy expertise, sponsors' commitment to retail, unfavorable distribution rules, and fair distribution of final waterfalls. "There’s little doubt that alternatives bring important opportunities to the table and, when deployed wisely, can fit well within a sophisticated, diversified portfolio. Investors need advisors, however, to help them to make informed decisions on such products — many which do not offer much publicly available information," states Merriman.

5. Critics concerned with pending second wave of SEC share-class crackdown  (Author- Mark Schoeff Jr., InvestmentNews)

Critics of the SEC's share-class investigations argue that the SEC is unfairly establishing a new disclosure by enforcement. In an SEC initiative launched last year, firms avoided fines and self-reported. According to Mark Schoeff Jr., "Now compliance lawyers are anticipating enforcement focused on firms that did not turn themselves in. The SEC is likely to examine revenue sharing and other payments beyond 12b-1 fees, and violators likely will incur civil penalties in addition to restitution, the lawyers say." Opponents such as Paul Atkins, former SEC commissioner, "wants the agency to halt its share-class initiative because it is establishing a new disclosure standard through enforcement rather than a regulation. He said it is unfair because the industry didn't have a chance to adjust."

Download our 3 Elements of Cybersecurity Infographic

Don't forget to check out last week's top RIA compliance news articles focusing on top RIA compliance concerns, Chairman Jay Clayton's reaction to criticism on Regulation Best Interest, and states working with the SEC on individual regulations.


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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