RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of November 15th, 2019

Posted by RIA in a Box

Nov 22, 2019 3:29:27 PM

RIA Compliance Regulatory News

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”) proposal to expand the definition of "accredited investor," the impacts of Regulation Best Interest ("Reg BI"), and the future of cyber crime. 

Here's our top investment adviser compliance articles for the week of November 15th, 2019:    

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1. SEC moving toward opening private markets to more ordinary investors (Author - Mark Schoeff Jr., InvestmentNews)

The SEC released its fall regulatory agenda on Wednesday which includes an item to reform the definition of accredited investor thus allowing more investors to enter into private markets. According to Mark Schoeff, Jr., “SEC Chairman Jay Clayton has indicated he wants to allow retail investors to buy private securities, especially for their individual retirement accounts. Currently those sales are limited to investors who meet income and wealth thresholds.” Other industry experts weigh in on the topic supporting the rule proposal. The proposed rules both due by September.

2. Accredited Investor Definition, Custody Rule on SEC's 2020 Reg Agenda (Author - Melanie Waddell, ThinkAdvisor)

The SEC’s Division of Investment Management is considering recommending that the SEC proposes amendments to Regulation D of the Securities Act of 1933 to expand the definition of accredited investor. These proposed changes are eliciting mixed reviews among the industry. According to Melanie Waddell, Gale Bernstein, general counsel for the Investment Adviser Association ("IAA"), “noted Thursday that the IAA is ‘pleased to see that the SEC plans to propose changes to the types of investors that will be able to invest in the private securities markets.’” On the other hand, industry leaders such as Barbara Roper, director of investor protection for the Consumer Federation of America, worry that “this is an SEC that seems to be prepared to ignore evidence of the harmful impact on our public markets of a continued expansion of private markets.”

         3. Regulation Best Interest: Rollover Recommendations for Investment Advisers (Author - Fred Reish, FredReish.com)

In this article, Fred Reish breaks down the SEC’s Reg BI rule, its impact on rollover recommendations, and offers his personal interpretation of the rules. Fred Reish ultimately offers two main points regarding the rule. First, “a rollover recommendation almost always involves a conflict of interest which must be disclosed by the investment adviser. That’s because, in the typical case, the adviser will receive a fee from the rollover IRA, but will not earn a fee if the money stays in the plan.” Second, “the SEC Interpretation, unlike the DOL fiduciary rule, applies to all plans, not just ERISA-governed plans. That means that recommendations of rollovers to participants in government plans, church plans and one-person plans are covered by the RIA Interpretation and best interest standard.”

         4. Legendary Ex-Fraudster Frank Abagnale Says Cybercrime Will Turn Deadly  (Author - Jane Wollman Rusoff, ThinkAdvisor)

In this article, ThinkAdvisor interviews Frank W. Abagnale who inspired the film “Catch Me If You Can” by successfully posing as an airline pilot, physician, attorney, and more cashing $2.5 million in forged checks in every state and 26 foreign countries. When asked the question “Is a devastating cyberattack looming?” Abagnale responds, “We expect to see about $6 trillion worldwide in cybercrime by the year 2020. Now it’s all about stealing money, but technology will get very scary as time goes on because of its capability to perpetrate cybercrime.”

           5. Morningstar probes ‘modern conflict’ that Reg BI must address (Author - Tobias Salinger, Financial Planning) 

According to Tobias Salinger, referring to Morningstar, “The independent investment research giant is calling for greater clarity from asset managers and broker-dealers about revenue sharing — which a new study by Morningstar defines as ‘a variety of opaque arrangements’ posing impacts on advisors’ mutual fund recommendations.” This article walks through the findings of a recent study conducted by Morningstar, “Regulation Best Interest Meets Opaque Practices.” 

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Don't forget to check out last week's top RIA compliance news articles focusing on the whistleblower program, the SEC's proposed rewrite of the advertising rule, and the financial exploitation of senior citizens.

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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