RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of May 24th, 2019

Posted by RIA in a Box

May 31, 2019 3:09:47 PM

SEC cybersecurity exam request list

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 ("SEC") finalizing their Regulation Best Interest ("Reg BI") proposal, cybersecurity-focused regulatory exams, and the SEC's emphasis on establishing a robust RIA compliance program. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of May 24th, 2019:

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1. Do Or Do Not, There Is No Try (With Third-Party Data Security Features (Author- Samuel Steinberger, Wealth Management)

In a recent risk alert issued by the SEC, the Office of Compliance Inspections and Examinations (“OCIE”) noted it has observed incomplete oversight and configuration in both in-house and cloud-based storage at RIA firms. Often firms are purchasing storage systems, however, are not fully utilizing the security features as intended. As Samuel Steinberger quotes, “’Simply utilizing a network storage solution with robust security capabilities is not enough,’ explained GJ King, president at RIA in a Box. ‘Firms need to ensure there is an available system security feature not being utilized by the firm, the firm needs to be prepared to explain why it hasn’t been implemented.’”

2. SEC to tackle thorny topic: How much advice brokers can give without being an adviser  (Author- Mark Schoeff. Jr., InvestmentNews)

On June 5th, four SEC members will meet to decide on an approval of Reg BI and Form CRS. A new agenda item includes the definition of “solely incidental.” As the rule stands today, “Language in the Investment Advisers Act of 1940 exempts brokers from registering as investment advisers- and being fiduciaries- if their advice is ‘solely incidental’ to their work,” states Schoeff. This term and its ambiguity has caused a lot of uncertainty among brokers and advisers, therefore it will be revisited. Industry experts weighed in on the topic as many emphasized the importance of getting clarity on the historically subjective issue.

3. What Fiduciaries Should Expect from Regulation Best Interest  (Author - Scott MacKillop, Wealth Management)

Scott MacKillop walks through the history of Reg BI and outlines the upcoming changes that advisers can expect as a result of the final ruling. Potential challenges that MacKillop expects to arise is the lack of harmonization between the regulation of brokers and RIAs, marketing, the labeling of brokers, and more. “Of course, the final form of Reg BI could contain some surprises, but for now Reg BI looks like a loss for fiduciary advocates, RIAs, and individual investors, and business as usual for brokers,” Scott MacKillop states.

4.  An Insider look at the SEC's cyber exam (Author - Wes Stillman, Financial Planning)

While the risks and focus areas for cybersecurity have become more clear, Wes Stillman writes that examination expectations for cybersecurity are still relatively uncertain. Stillman offers an inside look at regulators' questions and expectations to help advisors understand what they should have prepared in the case of a regulatory exam. Those requirements include policies and procedures related to protection of client information, unauthorized access, logins, and authenticity verification. Furthermore, the SEC is looking for a list of all cyber incidents. According to Stillman, “Other questions might cover policies, protocols and oversight of third-party vendors, data loss prevention policies, or the firm’s usage of multifactor authentication.”

5.  SEC Exam Chief Warns: Don't Skimp on Compliance  (Author - Melanie Waddell, ThinkAdvisor)

Melanie Waddell highlights regulators such as Pete Driscoll, Director of OCIE, Robert Cook, FINRA CEO, and SEC Chair Jay Clayton and their take the upcoming Reg BI ruling. Driscoll primarily emphasizes the importance of a robust compliance program, the role of the Chief Compliance Officer, and a top-down approach to establishing and implementing a compliance program at your firm. Cook focuses on the implications that Reg BI will have on the industry. Finally, Clayton defends the upcoming rule and focuses on the benefits that it will have for investors.

Learn More About Our Cybersecurity Platform

Don't forget to check out last week's top RIA compliance news articles focusing on the new model cybersecurity rule, the SEC finalizing their Regulation Best Interest proposal, and the Department of Labor's ("DOL") new fiduciary rule. Be sure to check back next Friday for next week’s top articles! 


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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