RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of June 26th, 2020

Posted by RIA in a Box

Jul 2, 2020 2:39:31 PM

Top_Compliance_Articles_of_the_week-17Each 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 Securities and Exchange Commission ("SEC") Regulation Best Interest ("Reg BI") rule, a risk alert issued by the SEC for private fund advisers, and the rising interest from brokers in transitioning to the RIA model.

Here's our top investment adviser compliance articles for the week of June 26th, 2020:

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          1. SEC's Reg BI Takes Effect (Author - Patrick Donachie, Wealth Management)

Even with the many obstacles and criticism, the SEC's Reg BI is upon us, and the June 30 deadline has passed. In ordinance with Reg BI, advisors must complete a relationship summary (“Form CRS”) to provide their clients with an overview of their available services, “fees and cost, conflicts of interests, and prior disciplinary history”. From the June 30 deadline advisors have one month to distribute their Form CRS to clients and must provide proof of distribution. Since this is the first year for Reg BI and Form CRS, “Regulators have stressed that they will be inquiring about good faith efforts to comply with the new rule, and are not looking to play ‘gotcha’ with advisors and brokers. Instead, firms should expect a harder look at compliance in 2021”, Patrick Donachie explains.

2. SEC Finds Private Fund Advisor Compliance Snafus (Author - Melanie Waddell, ThinkAdvisor) 

On June 23rd, SEC released a risk alert regarding “a host of compliance concerns related to private fund advisors”. Melanie Waddell states, “In a recent risk alert, the agency’s Office of Compliance Inspections and Examinations observed in recent exams that RIAs that manage private equity funds or hedge funds have deficiencies when it comes to conflicts of interest, fees and expenses, and policies and procedures relating to material nonpublic information.”

         3. House Approves PPP Loan Extension (Author - Billy House and Erik Wasson, ThinkAdvisor)

The ability to apply for Paycheck Protection Program loans (“PPP”) for small businesses has been extended to August 8th, thanks to the approval of the House of Representatives and the Senate this past Tuesday and Wednesday. The PPP program was created back in March as of part of the coronavirus relief package and has been providing small businesses with financial relief ever since. “The $669 billion program approved more than 4.8 million loans totaling $520.6 billion by Tuesday night”, the Small Business Administration (“SBA”) said. However, moving forward lawmakers are asking for more information on how businesses having been spending the funds so far.

         4. Broker Interest In RIA Channel Remains High, TD Survey Says (Author - Jacqueline Sergeant, Financial Advisor Magazine)

In today’s landscape we are starting to see the transition from broker to the RIA channel become much more common. In a recent article by Jacqueline Sergeant discusses how brokers are seeking more control over their business, more money and the ability to work with the clients of their choice; they feel that transitioning to the RIA channel gives them the best opportunity to do this. Brokers are becoming much more confident in making the move, according to a study done by TD Ameritrade, “more than four in five (87%) believe they will make more money; 80% said they do not need the national brand to grow; 72% are not worried about giving up their securities licenses and 70% are not concerned about being sued by their employer”. We are seeing the fear of losing their clients while making the transition is no longer a big concern as the study indicated that 99% of brokers believed their clients are loyal to them, not their company’s brand. As the study shows we can expect to see many more brokers make the transition to the RIA channel.

           5. DoL proposes a fiduciary rule replacement that would buttress SEC’s Reg BI (Author - Andrew Welsch, Financial Planning

Two years ago, the Department of Labor ("DOL") made the decision to vacate the fiduciary rule, they have now proposed a replacement for the defunct regulation. The fiduciary rule came into effect in 2016, however it was met with several lawsuits. The new proposal which governs advice in retirement accounts goes hand in hand with the SEC’s Reg BI. Secretary of Labor, Eugene Scalia stated that the proposal “would add to the tools individuals need to make the right decisions for their financial future.” This proposal will abide by a best interest standard while providing more options in regards to investment advice for Americans. According to the Department of Labor we can expect the new proposal to be published in the Federal Register in the near future.

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Don't forget to check out last week's top RIA compliance news articles focus on SEC's Reg BI rule, a recent risk alert issued by the SEC for private fund advisers, and the use of virtual meetings.

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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