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 impacts of the coronavirus ("COVID-19") on RIA firms, business continuity plans ("BCP"), and the latest in Financial Technology ("FinTech").
Here's our top investment adviser compliance articles for the week of March 6th, 2020:
1. Advisers working from home increases compliance risks (Author- Mark Schoeff Jr., InvestmentNews)
As the coronavirus pandemic continues, many businesses and financial advisory firms are asking their employees to work from home. For RIA firms, this can lead to challenges in cybersecurity, compliance, and employee supervision. RIA in a Box President GJ King is quoted in this article stating, “Advisory firms must ensure they’re able to supervise staff members who are working outside the office and must be able to archive communications between staff and clients, Mr. King said.” Firms who adopt cloud-based compliance and other technology systems to manage business operations are more likely to overcome these challenges and easily adapt to a remote workforce.
On Wednesday, RIA in a Box President GJ King hosted a webinar walking through potential challenges RIA firms may face in light of the coronavirus and how to prepare for business disruption. This article addresses client communication, employee supervision, cybersecurity, and regulatory considerations. In addition, the ability to adopt to a remote workforce through proper technology infrastructure now becomes increasingly important. Jeff Berman quotes King stating, “This is a very unique circumstance. Although the sector has faced market downturns and extreme volatility before, this time there is a ‘convergence of a number of issues at once,’ he pointed out.”
As a Securities and Exchange Commission ("SEC") employee is being tested for coronavirus, the agency advised all of its Washington D.C. employees to work at home until further notice. According to Melanie Waddell, “’Even with increased telework, the SEC remains able and committed to fully executing its mission on behalf of investors, including monitoring market function and working closely with other regulators and market participants,’ the spokesperson said.” The Financial Industry Regulatory Authority (“FINRA”) also reminded broker-dealers to revisit their business continuity plans and their effectiveness in periods of extended business disruptions caused by the coronavirus.
Aaron Klein, CEO of Riskalyze, reviews the latest news in the financial tech industry and his personal thoughts on each story. Klein discusses eight different developments within the industry that occurred last month, ranging from the release of new integrations to failed systems that create cybersecurity threats. Right Capital releasing RightPay, an add on to their client portal that allows advisors who are using their financial planning system to bill hourly, one-time, or process a retainer fee, kicks the Fintech Report Card off. RIA in a Box’s announcement of its new open API for MyRIACompliance is also mentioned, explaining how this is important for the firm moving forward and is a positive step “to building the next-generation firm”.
5. COVID-19 Could Be a Harsh Test for Advisors’ Business Continuity Plans (Author - Diana Britton, WealthManagement)
As COVID-19 continues to spread and push companies into unfamiliar situations, a plan of action is more pertinent than ever before. Diana Britton explains, “In 2016, the Securities and Exchange Commission proposed a rule that would require investment advisors to put business continuity and transition plans in place. But the rule was never finalized. So there’s no clear guidance on what a business continuity plan for an investment advisory firm needs to include, of the contingencies it needs to cover, or the level it needs to go to when detailing how the plan is put into motion”. Moving forward, advisors need to consider all possibilities and scenarios and how their firm could best respond.
Don't forget to check out last week's top RIA compliance news articles focusing on the SEC's proposed advertising rule, the importance of an Advisor Preparedness Plan ("APP"), and an update on the Regulation Best Interest ("Reg BI") lawsuit.