RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of June 5th, 2020

Posted by RIA in a Box

Jun 12, 2020 3:47:15 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 rise of RIA firm registration during COVID-19, different industry perspectives on Paycheck Protection Program ("PPP") loans, and succession planning.

Here's our top investment adviser compliance articles for the week of June 5th, 2020:

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          1. Now Is the Right Time to Start an RIA Firm, Industry Execs Say (Author - Jeff Berman, ThinkAdvisor)

Even during these unprecedented times, industry experts are saying now is the time to venture into independence and start your own registered investment advisor (“RIA”) firm. During a webinar held by RIA in a Box last week, James Carney, head of independent advisor software at Morningstar, stated, “I think any time is a good time … If you know who you want to serve and how you want to serve them. It is also important that you have a vision, you have a strategy, you have a plan and you know how to execute it.” On that same webinar GJ King, president of RIA in a Box, discussed the rising numbers of new RIA firms wanting to register and how he believes history may repeat itself. “Our industry saw a record number of new RIA firms created during the 2008-2009 financial crisis, and early signs indicate it’s possible we may see a similar theme emerge out of this challenging time as well,” King said.

2. What an RIA should think about if it’s considering disclosing a PPP loan (Author - Matt Boos, InvestmentNews) 

Investment management lawyer Matt Boos dives deeper into Paycheck Protection Plan (“PPP”) loans and whether or not a registered investment advisor (“RIA”) firm needs to disclose the loan to clients. Many advisors have been asking the question “If I receive or have received a PPP loan, what are my regulatory reporting obligations under the Investment Advisers Act of 1940 to my firm’s clients?”, and The Securities and Exchange Commission’s (“SEC”) Division of Investment Management has now issued a response. Boos discusses what the language in the response could mean and comes the conclusion, “…if the loan is necessary – essential – to pay the salaries of employees who are primarily responsible for performing advisory functions for clients, disclosure is appropriate. If the loan is not essential for this purpose, then I believe the SEC response does not mandate disclosure”.

         3. RIAs may be heading for a ‘succession planning crisis’ (Author - Nicole Caperson, InvestmentNews)

With the release of the DeVoe RIA Next Gen Transitions Survey this past Monday, it has become abundantly clear that firms and advisors have not put in the time to adequately train the next generation to transition into leadership smoothly. The survey found that “more than half (57%) of the 118 RIAs surveyed responded that a transition from founders to the next generation would be ‘bumpy’ or worse and 13% said it would be a severe challenge”. David DeVoe, founder and CEO of DeVoe & Co added, “There needs to be some urgency here. The industry is on the precipice of a succession planning crisis. RIAs are aging and advisory owners are moving towards retirement, and still, two-thirds of firms don’t have a succession plan in place.”

         4. Latest PPP Loan Bill Has Not Reduced Confusion: Attorney (Author - Melanie Waddell, ThinkAdvisor)

Since the introduction of the Paycheck Protection Plan (“PPP”) loan, there has been confusion surrounding the stipulations and how advisors who have received a PPP loan should move forward. Even with The Paycheck Protection Program Flexibility Act being signed into law last Friday, former Joint Tax Committee lawyer Veena Murthy is calling for immediate guidance on whether or not firms that are already receiving a PPP loan are able to keep their initial requirements rather than the new requirements introduced in The Paycheck Protection Program Flexibility Act. “It doesn’t clarify that existing borrowers can keep the June 30 end date for the rehire safe harbor, rather than the law’s change to Dec. 31. There are many borrowers who want to keep the 8-week period and it’s critical for them to keep the June 30 rehire date”, Murthy explains further.

           5. RIAs taking PPP loans is not so black and white (Author - InvestmentNews Staff, Investment News

When the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, was implemented and included the Paycheck Protection Program (“PPP”) loan, the intent was to provide small businesses and workers with financial relief during COVID-19. However, many advisors and firms across the industry have applied for and received a PPP loan, causing many to question if “it is appropriate for registered investment advisers with fee-based business models to accept forgivable loans made available through the Paycheck Protection Program”.

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Don't forget to check out last week's top RIA compliance news articles focus on PPP loans, the Securities and Exchange Commission's ("SEC") Regulation Best Interest ("Reg BI"), and a recent RIA in a Box partnership with Morningstar, Redtail, and Riskalyze.

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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