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 focuseson RIA in a Box's new Cybersecurity Insurance offer, Paycheck Protection Program ("PPP") loan disclosures, and a second state requiring Form CRS.
Here's our top investment adviser compliance articles for the week of June 12th, 2020:
1. RIA in a Box Launches Cybersecurity Insurance for Advisors: Tech Roundup (Author - Jeff Berman, ThinkAdvisor)
RIA in a Box partnered with ProWriters and AssetSure to help protect advisors from financial losses in case of breaches by providing RIA firms centralized access to cybersecurity insurance. RIA in a Box stated that “Via the MyRIACompliance platform, RIA in a Box clients can access the ProWriters platform, which provides cyber insurance quotes from multiple carriers based on each RIA firm’s individualized needs”. AssetSure will then guide the RIA’s through selecting a carrier, answering advisors questions and securing coverage. Advisors will also have access to detailed plan information that they can view through a client portal provided by AssetSure. The partnership features insurance carriers that include Acis, At-Bay, CFC, Chubb, Coalition, Corvus, Hiscox, HCC and Tokio Marine.
2. Few Advisors Plan for Their Own Demise (Author - Patrick Donachie, WealthManagement)
According to a 2018 study by the Financial Planning Association, “73% of RIA firms did not have a succession plan in place for the leadership transition from founders to the next generation of principals”. Firms of all sizes, but particularly smaller firms risk putting their clients, staff and beneficiaries in an extremely difficult spot should the unexpected death or disability occur. Chris DiTata, general counsel and vice president at RIA in a Box, suggests, "that firms start by consulting with an independent valuation expert, and while they may not want to discuss the issue, it’s particularly important for smaller practices and solo practitioners to begin creating a plan if they haven’t done so." To address the succession planning problem, LPL recently launched “Assurance Plan”. According to LPL’s senior vice president and head of advisor solutions, Jeremy Holly, the plan is “all about minimizing disruption, that business would pass to the buyer while giving continuity to the clients. We have a good number of qualified buyers in our network, which makes this actionable.” In addition to working with the staff to find appropriate buyers, the plan includes a guaranteed payment to the RIA’s beneficiaries from LPL.
3. Just 2 states require their investment advisers to file Form CRS (Author - Mark Schoeff Jr., InvestmentNews)
With the upcoming June 30th deadline for Form CRS, advisors registered with the Securities and Exchange Commission (“SEC”) are working to create the document for the first time. Advisors registered at the state level do not have to comply with the Form CRS implementation, unless you are registered in Oklahoma and now Rhode Island as well. Most of the other 48 states are hesitant to require the Form CRS since they are sure just how effective the document will be. Andrea Seidt, Ohio securities commissioner stated, “We’re really concerned it’s going to be another boilerplate form that is not going to be useful to investors. If that’s the case, we would not require it in our state. It may exacerbate investor confusion. We want to make sure it delivers the value that is promises.”
4. Will RIAs disclose the repayment of PPP laons? (Author - Ian Wenik, CityWireUSA)
Advisors who received a Paycheck Protection Program (“PPP”) loan are now faced with two big decisions – to pay back the loan in full or ask for government forgiveness, and whether or not they should disclose the information to their clients. Many industry experts have differing opinions, especially regarding whether or not a firm should disclose their PPP loan. Daniel Wiener, Chairman of Adviser Investments, said “If you’re not going to simply return that PPP loan today (which would be the right thing to do) then revise your ADV one more time, tell your clients just how much money you took and what your plans are for repayment, rather than forgiveness.” Chris Ditata, general counsel and vice president at RIA in a Box, provides a different perspective, “Advisors are required to make full and fair disclosure. If, however, there are non-material details relating to the advisory practice, then advisors typically would not include those.”
5. SEC nominee Crenshaw brings deep knowledge of agency, Reg BI (Author - Mark Schoeff Jr., Investment News)
On Thursday, Caroline Crenshaw was nominated to be a member of the SEC to replace former member Robert Jackson Jr. According to Mark Schoeff Jr., "Crenshaw has been at the agency since 2013. She also served as a counsel to former Democratic SEC member Kara Stein and worked in the Office of Compliance Inspections and Examinations and in the Division of Investment Management." Her previous role was heavily involved in Regulation Best Interest ("Reg BI") and will be able to shape SEC enforcement of the rule moving forward.
Don't forget to check out last week's top RIA compliance news articles focus on the rise of RIA firm registration during COVID-19, different industry perspectives on Paycheck Protection Program ("PPP") loans, and succession planning.