RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of May 21st, 2021

Posted by RIA in a Box

May 28, 2021 3:44:25 PM

Top RIA compliance articles focus on the SEC's scheduled rule reviews, tips for remote exams, and possible anti-money laundering policy plans for RIAs. 

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 the reintroduction of The Sustainable Investment Policies Act, the foreseeable changes to regulatory exams, requests for the Securities and Exchange Commission ("SEC") to address critical adviser issues, broker-dealers' shifting to RIA models, and anticipated SEC oversight on cryptocurrency regulation.  

Here's our top investment adviser compliance articles for the week of May 21st, 2021:

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     1. Legislation would require ESG factors in investment decisions (Author – Mark Schoeff Jr., InvestmentNews)

Mark Schoeff Jr. discusses the recent reintroduction of The Sustainable Investment Policies Act, which would require financial advisors to consider environmental social and governance (“ESG”) factors during investment making decisions.

Under this legislation, investment advisors would need to file a Sustainable Investment Policy with the SEC, describing how their investment making decisions align with the ESG framework, which includes corporate political spending, worker and collective bargaining rights, climate and other environmental risks, global human rights, diversity and inclusion practices, and proxy voting practices.

Additionally, Mark informs readers that Representative Andy Levin, also reintroduced the Retirees Sustainable Investment Opportunities Act, that would allow retirement plans to adopt a sustainable investment policy as well.

     2. How Will the Pandemic Change Regulation? (Author – Thomas D. Giachetti, Think Advisor)

This article provides an overview on the impacts of the pandemic on the wealth management industry, as well as an outlook on how industry regulation could be moving forward. The industry quickly adapted to the remote world, with advisory firms servicing their clients from home and regulators conducting remote examinations, both with the assistance of technology.

The author emphasizes how remote regulatory exams proved effective and efficient, and suggests that regulators could continue with a mix of remote and in-person exams in the future. Giachetti points out that regulators have been focusing more on critical issues vs routine issues, including verifying a firm’s services are reasonably consistent with their Form ADV.

     3. IAA Asks SEC Chair To Assess Reg-BI Client Disclosure Form (Author – Tracey Longo, Financial Advisor Magazine)

Last week, the Investment Advisor Association (“IAA”) sent a letter to SEC Chairman, Gary Gensler, with requests related to a list of “critical adviser issues”. These requests included the following, 1) test Form CRS, 2) create meaningful ESG disclosure for advisors and their clients, and 3) encourage e-delivery of investor materials. The call for testing on Form CRS follows reports of the disclosure form causing investor confusion, after testing was done by organizations such as AARP and the Consumer Federation of America.

     4. Trendspotter: Why Reg BI Will Push More BDs Into RIA Model (Author – Melanie Waddell, Think Advisor)

Melanie Waddell discusses the accelerated trend of Broker-dealers’ moving to RIA models due to compliance costs associated with Reg BI. Earlier this month, SEC Chairman, Gary Gensler confirmed that the SEC will be conducting exams and enforcing Reg BI as it is written.

Amy Lynch, President of Frontline Compliance, shares that under the Best Interest standard, Broker-Dealers’ are faced with more responsibility to complete customer and transaction due diligence, like the fee-based model. It is also noted Reg BI is said to have less of an impact on investment advisory firms, who already have fiduciary standards and disclosures in place.

     5. Crypto may ‘force’ SEC to modernize rules: Hester Peirce (Author – Nicole Casperson, InvestmentNews)

Nicole Casperson covers the regulators’ role in structuring custody rules for cryptocurrency. With cryptocurrency becoming increasingly popular with investors, the SEC has admitted that there is a need for institutional infrastructure to be put in place for advisers to feel more comfortable dealing with crypto assets. The article reveals industry concerns around ETF’s being approved, as advisers could recommend crypto assets for their client portfolios without having first completed the fiduciary duty of becoming well-versed in the complex crypto asset space.

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Don't forget to check out last week's top RIA compliance news articles that focus on the call for the Securities and Exchange Commission ("SEC") to conduct investor testing on Form CRS, starting an RIA firm, the return of in-person conferences, and the Department of Labor's ("DOL") withdrawal of the independent contractor rule. 

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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