RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of July 5th, 2019

Posted by RIA in a Box

Jul 12, 2019 6:48:53 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 the top RIA compliance concerns, Chairman Jay Clayton's reaction to criticism on Regulation Best Interest ("Reg BI"), and states working with the Securities and Exchange Commissions (“SEC”) on individual regulations. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of July 5th, 2019. 

How an RIA Firm Can Create a Culture of Compliance Checklist

1. Cybersecurity Threats Are Top RIA Concern In 2019, IAA Survey Says (Author- Tracey Longo, Financial Advisor Magazine)

According to the Investment Advisers Association’s (“IAA”) annual survey of 369 RIA firms, 83% are calling cybersecurity the “hottest” topic, with marketing and advertising not far behind. And as a result, firms across the board have increased their compliance testing over the past year to strengthen their defenses against hackers and other perpetrators. Karen Barr, President and CEO of IAA stated, “Among the many key takeaways of this year’s survey - beyond the continued importance of cybersecurity - is that firms continue to strengthen their compliance programs.” 

2. Independence Means Different Things to Different People in Wealth Management (Author- Danny Sarch, InvestmentNews)

Depending on who you ask, going “independent” can have different meanings. In this article, Danny Sarch states “…that going to an independent broker-dealer (“IBD”) does not truly lead to independence. IBD advisers are restricted to the offerings of their broker-dealers, while theoretically RIAs can offer the entire universe of products to their clients. So RIA breakaways who file their own ADVs can charge what they want and offer the products that they want.” The challenge, as Sarch points out, “is that business models have evolved to the point where industry pundits use both definitions interchangeably.”

3. SEC’s Clayton Hits Back at Reg BI critics (Author- Kenneth Corbin, FinancialPlanning)

Even with the approval of the SEC's Reg BI last month, SEC chairman Jay Clayton continues to find himself defending the regulation. Clayton brings attention to the “additional steps that Reg BI requires brokers to take regarding their conflicts, which he says are drawn from the well-established fiduciary duty that governs investment advisors.” He also points out that “while Reg BI borrows from fiduciary principles, it appropriately refrains from imposing full-fledged advisor-like regulations on a brokerage industry where client relationships, he argues, are essentially transactional.” Still, critics are skeptical of the defensive tone Clayton took since it was his first time addressing Reg BI since it passed in June. 

 4. Is There Magic in the Term 'Fiduciary’? (Author- Melanie Waddell, ThinkAdvisor)

At a recently held Reg BI seminar, Brett Redfearn, director of the SEC’s Division of Trading and Markets, and Dalia Blass, head of the SEC’s Division of Investment Management, went head to head about the meaning of “fiduciary” to clients and advisors alike in the Wealth Management industry. According to Redfearn, even though the SEC “talked about a uniform standard” of rules for their advice standards package, “it became very clear to me in the early stages these are different forms of advice” being offered by advisors and brokers. Redfearn goes on to add that “There was no magic in the term fiduciary” and that it “was not clear that everybody had a clear understanding of what fiduciary meant.” Blass, on the other hand, states that “the term fiduciary is magic for us in Investment Management” and that it “does mean something…people knew it was a big word and important but had difficulty in describing what it is.”

5. U.S. House Passes Resolution Urging the SEC to Work With State Securities Regulators   (Author- Diana Britton, Wealth Management)

With the passing of Reg BI last month, more and more states have been working to create their own standards for advisors. However, this past Tuesday the House of Representatives passed a bipartisan resolution in hopes of encouraging collaboration between the SEC and the states that want to regulate independently. It all comes down to whether or not the individual state thinks that Reg BI is enough.

Download our 3 Elements of Cybersecurity Infographic

Don't forget to check out last week's top RIA compliance news articles focusing on cybersecurity risks, reactions to Reg BI, and technology focusing on compliance. Be sure to check back next Friday for next week’s top articles! 


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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