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 Securities and Exchange Commission's ("SEC") examination program and forthcoming guidance, the SEC's Regulation Best Interest ("Reg BI") rule, and why RIAs should expect examiners to scrutinize fees. Check back each week for the latest list of top stories.
Here's our top investment adviser compliance articles for the week of March 1st, 2019:
1. Advisor Exam Rate Likely to Drop in 19' Due to Shutdown: SEC (Author- Melanie Waddell, ThinkAdvisor)
Due to the government shutdown at the beginning of the year, “the Securities and Exchange Commission’s (“SEC”) exams of investment advisors and investment companies will ‘take a hit’ this year”, said Dan Kahl, deputy direction of the SEC’s Office of Compliance Inspections and Examinations (“OCIE”). Kahl also stated that a soon to be released OCIE risk alerts will focus on Regulation SP ("Reg SP") and compliance policies. He suggests taking “a look at your Reg SP policies and procedures that address such things as confidentiality of client information.”
2. SEC Examiners Come After Fee Abuses (Author- Tracey Longo, Financial Advisor Magazine)
Tracey Longo writes, “Advisors should expect examiners to drill down into the fees they’re charging clients, the adequacy of their fee disclosures and how investment choices impact investors’ bottom lines.” This is to ensure that advisors are acting on what is in the best interest of their client, as Dan Kahl stated, “The SEC’s goal is to ensure that advisors are choosing the lowest-cost, most appropriate investments for investors.” To help reach this goal, the SEC created the Voluntary Settlement Program which “allowed firms to self-report transgressions to the SEC and make clients whole in exchange for an elimination in penalties.”
3. Congressional Legislation Not the Answer a Fiduciary Standard (Author - Diana Britton, Wealth Management)
According to Phyllis Borzi, former assistant secretary of labor for the Employee Benefits Security Administration and who oversaw the creation and implementation of the Department of Labor’s fiduciary rule, the public need to educate themselves and learn to recognize when they are working with a fiduciary. Many industry groups including the Committee for the Fiduciary Standard and the National Association of Personal Financial Advisors (“NAPFA”) have teamed up to create an online resource center called Advisor On My Side. The site includes educational tools and materials the public can utilize to make sure they are working with a fiduciary.
4. NASAA distances itself from state fiduciary efforts, wants RegBI to succeed (Author- Mark Schoeff Jr., InvestmentNews)
As state lawmakers work toward state-level fiduciary standards, the North American Securities Administrators Association (“NASAA”) wants to make their stance known and help the SEC in anyway they can. Michael Pieciak, president of NASAA stated, “We have been as an association focused on engaging with the SEC, trying to provide as many comments, as much direction as to how we think it can be improved as possible because we think that’s the most valuable use of our time right now.” Moving forward, Pieciak wants the SEC to be clearer on their overall goal and provide realistic examples.
5. What Makes a Financial Advisor a 'True' Fiduciary? (Author- Mindy Diamond, Wealth Management)
Mindy Diamond writes, “While wirehouse advisors may have every intention of action as a fiduciary and making decisions with their clients’ best interests in mind, the very nature of working for a big brokerage firm often makes it impossible for them to do so.” Depending on the situation, it may be hard for advisors to make the fiduciary-focused decision. Mark Tibergien, CEO of BNY Mellon Pershing Advisor Solutions, discussed what it means to be a “true” fiduciary, “As we look at the evolution of the financial services profession, consumers investors and clients are demanding a different relationship – that is , not just about what product is going to be sold to them, but what their advisor is going to do that will be transformative in their lives.”
Don't forget to check out last week's top RIA compliance news articles on SEC's Regulation Best Interest, brewing state fiduciary-related legislation, and the possible secession of local FPA chapters.. Be sure to check back next Friday for next week’s top articles!
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..