RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of June 14, 2019

Posted by RIA in a Box

Jun 21, 2019 3:03:35 PM

SEC Form CRS use of word fiduciary for investment advisers

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 Form CRS, expansion of the definition of an "accredited investor", and new Massachusetts and New Jersey fiduciary rule proposals. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of June 14th, 2019:

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1. SEC clears up confusion over whether advisers can continue to call themselves fiduciaries (Author- Mark Schoeff Jr., InvestmentNews)

Despite recent confusion related to the new Form CRS requirement, investment advisers are still allowed to refer to themselves as fiduciaries. In fact, Form CRS may give advisers the opportunity to emphasize their fiduciary duties and clarify the differences between each type of investment professional.  “Under the new SEC advice regulations, brokers and advisers will continue to be regulated separately. Brokers will be governed by Regulation Best Interest, which replaces the current suitability standard, while advisers will adhere to fiduciary duty,” Mark Schoeff, Jr. states. Schoeff interviews industry professionals who offer further clarification on form CRS and its impact on investment advisers. RIA in a Box President, GJ King, notes, "The conversation-starter questions embedded throughout Form CRS will provide RIA firms with a more natural opportunity than they have today to discuss their fiduciary obligations with clients."

2. No, RIAs Aren't Banned From Saying 'Fiduciary' on Form CRS (Author- Melanie Waddell, ThinkAdvisor)

After recent debate around Form CRS and its rules around investment advisers’ use of the term fiduciary, Karen Barr, President and CEO of the Investment Adviser Association ("IAA") reached out to the Securities and Exchange Commission ("SEC") for clarification. As quoted by Melanie Waddell, “Barr maintains that advisors ‘are permitted to use the word ‘fiduciary’ in their disclosures, including new Form CRS, contrary to recent press reports that seem to imply otherwise.’” G.J. King, President of RIA in a Box, weighed in on the topic emphasizing the window of opportunity Form CRS now provides investment advisers to emphasize their fiduciary obligations. “He says that since RIAs are allowed to discuss fiduciary duties on different parts of the form, the wording change is ‘unlikely to have a significant impact on how RIA firms more broadly market and position themselves,'” Waddell writes.

3. SEC Considers Expanding the Accredited Investor Definition (Author - Diana Britton, Wealth Management)

On Tuesday, the SEC released a concept release and requested public comment on broadening the requirements to access private securities. As the rule is written today, an “accredited investor” is based on an individual’s net worth. Diana Britton walks through several factors the SEC is taking into account in their attempt to revise the current definition of an “accredited investor.” Those factors include revising financial thresholds, pooled spousal investments, professional credentials, education and job experience, and more.

4. Massachusetts Fiduciary Plan Looks Awfully Familiar, Lawyers Say (Author - Melanie Waddell, ThinkAdvisor)

On Friday, Massachussetts released a fiduciary rule proposal that would apply a uniform fiduciary standard across investment advisors, broker-dealers, and agents in response to gaps that the state believes Regulation Best Interest ("RegBI") may fail to address. In this article, Melanie Waddell interviews attorneys at Stradley Ronon’s Fiduciary Governance Group who say, “Massachusetts’ fiduciary proposal is ‘very similar’ to the one floated by New Jersey and may indicate that 'an emerging model of regulation with respect to uniform standards of conduct is afoot.'" In addition, fiduciary proponents argue that RIAs must find new avenues to distinguish themselves from brokers as “Broker-dealers, he said, ‘can now claim that they are legally required to act in their clients’ best interest,’” Allan Slider states.

5.  FSI: Firms May Flee N.J. If State Approves Fiduciary Rule  (Author - Tracey Longo, Financial Advisor)

The Financial Services Institute ("FSI") has issued a letter to the New Jersey Bureau of Securities regarding its recent fiduciary proposal. FSI argues that the proposal will lead advisors to potentially cease operations ultimately having a negative impact on New Jersey investors. Tracey Longo comments, “While the securities industry lobby has a vast presence in the states and has been able to defeat similar fiduciary legislation two years in a row in Maryland, it is less likely their lobbying will work in New Jersey.” According to Robin Traxler, Senior Vice President and Deputy General Council of FSI, “FSI recommends that the bureau consider aligning its proposal with Regulation Best Interest or alternatively providing that a broker-dealer’s substantial compliance with Regulation Best Interest would satisfy the requirements under the proposal.”

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Don't forget to check out last week's top RIA compliance news articles focusing on reactions to the Securities and Exchange Commission's ("SEC") Regulation Best Interest ("Reg BI") passing, what the meaning of fiduciary will be moving forward, and the latest in Financial Technology ("FinTech").


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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