RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of July 29th, 2022

Posted by RIA in a Box

Aug 5, 2022 12:57:39 PM

This week's recap focuses on the Securities and Exchange Commission's ("SEC") examination priorities, cryptocurrency, and a recent SEC bulletin emphasizing serving clients' best interest.

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 the importance of technology in a firm's compliance program, the Securities and Exchange Commission's (SEC) bulletin on conflicts of interest, and tips for advisors to identify suspected financial exploitation of elderly clients. Here are our top investment adviser compliance articles for the week of July 29th, 2022:

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    1. New Requirements Are Coming. ‘Compliant by Design’ Is the Answer (Author – Adrian Johnstone, Think Advisor)

Adrian Johnstone discusses the importance and benefits of embedding technology into a firm's compliance program. It is recommended financial firms implement automated workflows to ensure compliance tasks are set up as repeatable and standardized processes. This strategy proactively mitigates compliance risks and prepares firms for regulatory audits. As the industry has recently seen numerous proposals for regulations, including the Marketing Rule and the Cybersecurity Risk Management Rules, firms should focus on improving their compliance programs without creating extra work for their wealth management teams. 

    2. SEC warns brokers, advisers to make ongoing efforts to identify, mitigate conflicts (Author – Mark Schoeff Jr., Investment News)

This week, the SEC issued guidance for advisers to increase efforts to identify, mitigate, and disclose conflicts of interest. A key takeaway from the bulletin is that advisers must actively work to identify and reduce conflicts in their daily practice, versus a one-time compliance task. The staff provides examples of conflicts of interest and how to create disclosures unique to each conflict. Compensation incentives are one specific practice that the SEC points out, and often cause conflict of interest for advisers. This article also addresses the SEC's intent to bring clarity to a misconception that all conflicts must be eliminated, when in reality there are "no conflict-free business models." 

   3. Advisors Told To Be Wary As Romance Scams Rise Among Seniors (Author - Jacqueline Sergeant, Financial Advisor)

This article offers tips to advisors on identifying common online "romance scams" targeting elderly clients. Jacqueline Sergeant provides an overview of the scams, which have recently escalated, as elderly citizens turned to the internet to find companionship during the pandemic. Fraudsters and scammers use their victims' personal information, found online, to dupe people into giving them money. Advisors are urged to know their clients spending habits to identify any out of character withdrawals, ask about plans to withdraw any additional sums of money, and ensure clients have a trusted contact on file. 

   4. SEC Tells Advisors How to Address Conflicts of Interest (Author – Patrick Donachie, Wealth Management)

Patrick Donachie covers the SEC's recently issued bulletin on conflicts of interest, in conjunction with meeting fiduciary obligations. The SEC addresses advisers with a Q & A, to describe how to deal with conflicts of interest. Once a conflict is identified, advisors must determine the next steps to act in the best interests of their clients, whether they can eliminate the conflict, or potentially walk away from the opportunity to advise or provide recommendations if they cannot provide a "full and fair disclosure". Disclosures should be specific to each conflict, in plain English, and tailored to the firms specific business models, compensation structures, and products offered at different firms. 

5. SEC tells advisors to rein in conflicts of interest under Reg BI (Author – Tobias Salinger, FinancialPlanning)

This week, the wealth management industry received regulatory guidance they've been asking for following Regulation Best Interest, which went into effect over two years ago. The SEC issued a bulletin to investment advisers detailing how the agency expects firms to act in regards to conflicts of interest, furthermore enforcing the obligations under Reg BI. The bulletin addresses aspects of financial advisor compensation, payment agreements, and certain longtime industry practices it says aren't in a client's best interest. The article concludes with a slideshow summarizing key takeaways from the 17-page staff bulletin.

Matching your RIA Firm's Form ADV Parts 1, 2, and 3

Don't forget to check out last week's top RIA compliance news articles that focus on compliance with the new rollover ruleComplySci's Pay-to-Play guidebook, movement on regulatory cryptocurrency oversight, and the SEC's financial fraud tip program.

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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