Each week, we are 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 compliance with the new rollover rule, ComplySci's Pay-to-Play guidebook, movement on regulatory cryptocurrency oversight, and the Securities and Exchange Commission's (SEC) financial fraud tip program. Here are our top investment adviser compliance articles for the week of July 22nd, 2022:
This article provides an overview of the requirements set by the DOL's PTE-2020-02 and outlines actions advisors must take to comply. Thomas Giachetti reiterates the purpose of the new rule, emphasizing the DOL's intent to ensure that advisors act in their best interests and mitigate conflicts of interest. Advisors who plan to make a recommendation to roll over client assets are required to conduct an analysis, document and disclose the reasons the recommendation is in the client’s best interest. The article discusses the alternative route to making a rollover recommendation by providing educational material to the client instead. Giachetti also touches on frequently asked questions about complying with the rule, including whether a rollover analysis needs to be shared with the client. He reminds advisors they must provide a written disclosure to the client to support the recommendation.
2. Guide To Election Contributions Published By ComplySci (Author – FA Staff, Financial Planning)
This week, regulatory technology and compliance provider ComplySci released the Ultimate Guide to Pay-to-Play Compliance. The Financial Planning staff discuss how financial firms can use this comprehensive guide to review recent regulatory changes and discover the implications of federal, state and local pay-to-play rules. The guide points out how direct political contributions present the most straightforward risks, but firms must consider hidden risks within indirect contributions. Compliance officers can mitigate risk and avoid triggering the pay-to-play rule by applying ComplySci's guidance and best practices for tracking, detecting and reviewing political contributions made by the firm and its covered associates.
3. Secrets to success for RIAs (Investment News)
Investment News covers the findings from Schwab's recent study on advisory firms in an informative slideshow. Described as "secrets to success", strategies such as hiring advisors with a book of business and M&A are key elements of inorganic growth. The implementation of written marketing plans and ideal client profiles was also attributed to high performance, as the surveyed firms had 42% more clients and 45% more new assets in 2021.
4. SEC's Gensler Steps Up Push To Get Crypto Exchanges To Register With Regulator (Author – Lydia Beyoud, Financial Advisor)
Lydia Beyoud discusses the latest movement on potential cryptocurrency regulation. SEC Commission Chair Gary Gensler has asked agency staff to work with digital asset exchanges on registration and regulation. The agency is also reportedly reviewing conflicts of interest associated with crypto platforms. The article also shares how markets watchdog officials are working to get specific coins registered as securities.
5. SEC tip line was meant to stop another Madoff. Is it working? (Author – John Holland, Financial Planning)
In this article, John Holland explores the workings of the SEC program, designed to collect tips for potential financial wrongdoing. Industry experts are calling out the program for the massive undertaking of Congress oversight required to actually measure the effectiveness. There is a level of secrecy from the public, combined with federal discretion, which industry experts believe causes inconsistencies within the program. The agency doesn't disclose names of companies involved in fraud, or identify all law firms that received money for their clients. The public is also unaware of the program's official budget. To date, the SEC has received roughly 60,000 tips since 2012, and paid more than $1.3 billion in awards.
Don't forget to check out last week's top RIA compliance news articles that focus on the RIA industry outlook, navigating cryptocurrency oversight, a potential increase of regulation of Form CRS, and the SEC latest stance on gamification of digital trading.