RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of May 13th, 2022

Posted by RIA in a Box

May 20, 2022 1:25:06 PM

This week's recap focuses on the Securities and Exchange Commission's ("SEC") examination priorities, cryptocurrency, and a recent SEC bulletin emphasizing serving clients' best interest.

Each week, we are 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 compliance with the Securities and Exchange Commission's ("SEC") Marketing Rule, an investment adviser's fiduciary duty, and industry concerns on arbitration clauses.


Here are our top investment adviser compliance articles for
the week of May 13th, 2022:

Best Practices for Third-Party Vendor Management Compliance

    1. Nearly Two-Thirds of RIAs Have Not Adopted SEC's Marketing Rule (Author – Patrick Donachie, Wealth Management)

This article highlights the large proportion of RIA firms who left the marketing rule compliance section completely blank in their Form ADV. The section prompts RIAs to answer yes or no questions about their use of testimonials, endorsements, and third-party ratings. 

Indyfin President and CEO Akshay Singh shares he expects most of these firms to file ADV amendments in the coming months, as they have a grace period until November 2022. A small percentage of respondents reported using testimonials and endorsements. Singh suggests these numbers will grow significantly, given that advisors are just now trying out these new marketing tactics. 

    2. SEC May Issue Further Guidance On Reg-BI Compliance, Gensler Says (Author – Tracey Longo, Financial Advisor)

In a recent industry conference, SEC Chairman Gary Gensler noted that the SEC is considering releasing bulletins to provide further guidance on expectations regarding Reg-BI for the financial industry. Gensler emphasized the importance of an adviser's duty to act in the best interests of their clients, recommending they eliminate any conflicts of interest or avoid giving advice if a conflict cannot be eliminated. A key takeaway from the conference is that lengthy disclosures will not be enough to meet the requirements of Reg-BI. 

Tracey Longo also points out that it was made clear to firms to take compliance obligations seriously, and to carefully consider costs and risks to investors, whether the advice comes from a person or technology. 

Patrick Donachie covers the White House's 2023 budget expansion request for SEC operations, which will positively impact the regulators ability to keep up with the growing financial industry. In his testimony before the Subcommittee on Financial Services and General Government, SEC Chairman Gary Gensler called for a need to increase capacity in the Division of Examinations. He addressed the growing number of RIAs, sharing that the number of registered investment advisors has increased 25%, to 15,000 in the past 6 years. 

    4. Consumer Groups Call for SEC Probe of RIAs’ Use of Mandatory Arbitration (Author – Mark Scheoff Jr., Investment News)

This article sheds light on the use of mandatory arbitration clauses in clients' contracts by investment advisory firms. These practices have been called into question, with consumer and investor advocacy groups calling on the SEC to investigate if the use of pre-dispute arbitration clauses is consistent with an adviser's fiduciary duty. The groups have pointed out several concerns, like RIAs using private arbitration forums, which typically cost investors large sums of money to hear an arbitration case, and lack of uniform disclosures to report investor complaints. The article reports the SEC has not responded to the request for comment.   

    5. DOL Provides Fiduciary Rule Update (Author – Melanie Waddell, ThinkAdvisor)

Melanie Wadell discusses the DOL's ongoing work to issue a new Fiduciary Rule. The financial industry can expect the final rule to reflect the collaborative efforts of regulators like the SEC. However, there is no official date announced for when the rule will be published.

The acting assistant secretary for Labor’s Employee Benefits Security Administration, Ali Khawar, considers the recently enacted fiduciary advice exemption to be a significant development, and he shared the organization's intentions to ensure that the new rule does not disadvantage firms that choose to implement PTE 2020-02. 

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Don't forget to check out last week's top RIA compliance news articles that focus on potential anti-money laundering regulation, compliance with the Fiduciary Rule, the SEC's comment period before rule making, and a House bill aimed at preventing elder abuse.

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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