RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of July 26th, 2019

Posted by RIA in a Box

Aug 2, 2019 3:17:37 PM

Capital One data breach impact to RIA firms

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 focus on the Capital One data breach, why Regulation Best Interest (“Reg BI”) matters for RIAs, and strengthening enforcement of fiduciary duty. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of July 26th, 2019. 

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1. Capital One data hack puts financial advisers on high alert  (Author- Jeff Benjamin, InvestmentNews)

Following the Capital One data breach that affected more than 100 million people earlier this week, advisors are emphasizing the importance of cybersecurity more than ever before. Jeff Benjamin cites many industry experts throughout the article, and all agree that this breach is a wake-up call and can happen at any time. “When this can happen to an entity like Capital One that has a reputation for making lots of investments in cybersecurity, it shows that regardless of the size and scope of the organization, everyone is a target. We’re under attack whether we know it or not”, stated Tim McSherry, cybersecurity expert and managing partner at EverSec Group.

2. State Regulators Urge Heightened Supervision of Inverse, Leveraged ETFs  (Author- Diana Britton, WealthManagement)

As a result of multiple customer complaints, the North American Securities Administrators Association (“NASAA”) has looked into the process that broker dealers go through to “allow clients to hold leveraged and/or inverse exchange traded funds (“ETFs”)”. Michael S. Pieciak, NASAA president, states, “Broker dealers should carefully consider whether to permit purchases of leveraged and/or inverse EFTs in retail customer accounts. Registered representatives who recommend these products without fully understanding them and without receiving appropriate supervision by their firms pose a great risk to investors.”

           3. Kitces: Why Reg BI matters for RIAs  (Author- Michael Kitces, FinancialPlanning)

Michael Kitces breaks down the effect Reg BI has on RIAs and how to differentiate your RIA firm from a broker-dealer. Even though Reg BI stops short of holding broker-dealers to a full fiduciary standard, they are still able to state that they too have a best interest standard when providing advice and recommendations to their clients. However, the Securities and Exchange Commission (“SEC”) has stated that their overall goal was not to make broker-dealers and RIAs one in the same but rather “recognizing instead that each role fulfills separate functions for consumers and should remain separate choices for consumers.”

 4.  CFP Board's effort to strengthen enforcement could sharpen teeth of fiduciary duty (Author- Mark Schoeff Jr., InvestmentNews)

The Certified Financial Planners (“CFP”) Board delayed enforcement of its expanded fiduciary standard for financial planners which was originally set for October 1st to June 30, 2020. The new rule will always require CFP holders to act as fiduciaries to their clients. In the wake of a recent Wall Street Journal article, the CFP board has created an independent task force to give recommendations to improve enforcement practices. According to Mark Shoeff. Jr, “Moving enforcement back to June aligns the Certified Financial Planner Board of Standards Inc. with the implementation date of the SEC's new investment advice standard, the centerpiece of which is Regulation Best Interest for brokers.”

5. Five Steps to Prepare Clients in Case Alzheimer’s Hits (Author- Ken Florian, Wealth Management)

As Alzheimer’s disease effects an extremely large number of people over 65 years old in the United States, Ken Florian suggests that it is inevitable the some RIA clients will be affected by the disease and offers suggestions on how to prepare yourself, your clients, and their families in the event that they are affected by Alzheimer’s disease. Florian states, “Prepare them now, and let them know you care about their lives and health, not just their money.” Florian offers suggestions including providing educational resources on Alzheimer’s disease, make sure they have updated living wills, and making donations in their name, to name a few.  

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Don't forget to check out last week's top RIA compliance news articles focusing on a new risk alert from the SEC related to employee supervision, how to plan for the new Form CRS, and the growing risk posed to client data from cyber breaches.


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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