RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of November 30, 2018

Posted by RIA in a Box

Dec 7, 2018 5:25:02 PM

SEC Form CRS finalized

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 Commissions ("SEC") Regulation Best Interest ("Reg BI") Proposal, the SEC's 2019 regulatory agenda, and RIAs firms attempting to conceal mutual fund share class violations. Check back each week for the latest list of top stories.

Here's our top investment adviser compliance articles for the week of November 30, 2018:

Download Our Free RIA Cybersecurity Compliance Checklist

  1. IAA: SEC's Test of Relationship Summary Are Flawed (Author- Tracey Longo, Financial Advisor Magazine)

As reported by Tracey Longo, and according to a comment letter from the Investment Advisor Association ("IAA"), "The Securities and Exchange Commission’s national testing of the proposed customer relationship summary (CRS) is flawed and underscores the need for the forms to be shortened and rewritten." The article further details how the IAA said that "the RAND testing is flawed in three important respects, which inherently limit its usefulness in determining whether the summary works." To read the three aspects mentioned by the IAA, click here

  1. SEC Chairman Clayton Lays Out 2019 Regulatory Agenda (Author - Diana Britton, WealthManagement.com)

Earlier this week, SEC Chariman, Jay Clayton officially laid out his 2019 regulatory agenda. As reported by Diana Britton, Clayton mentioned his top initiatives include, "finalizing the agency’s proposed Regulation Best Interest and standards of conduct for financial advisors and expanding investor access to private offerings." Clayton stated, "the agency plans to improve, harmonize and streamline its private offering system," and that, "A concept release is in the works that will seek comments on the current definition of an accredited investor, the threshold for investing in private placements." It is no surprise that Reg BI is going to be top the the SEC's regulatory agenda for 2019. As mentioned by Britton, "the staff is currently reviewing all this information as it develops final recommendations."

  1. Many Hybrid RIAs Are Hiding 12-b Fees (Author- Tracey Longo, Financial Advisor Magazine)

According the SEC's recently released 2018 enforcement report, "Investment advisors, and particularly hybrid RIAs, are still attempting to conceal mutual fund share class violations—specifically 12b-1 charges—that result in higher investor costs." During the first half of 2018, the SEC encouraged investment advisors and brokers to participate in a "voluntary program allowing advisors to self-report the fact that they sold investors more expensive mutual fund shares and received higher fees as a result." The SEC's report further states, "those advisors caught up in violations, now that the voluntary self-reporting deadline has passed, are subject to antifraud charges, an agreement to pay disgorgement to harmed investors and a penalty. Penalties are generally not being sought against advisors who self-reported."

  1. SEC Custody Rule Up For Review (Author- Melanie Waddell, ThinkAdvisor)

As part of the Regulatory Flexibility Act, the SEC is required to review it's rules every 10 years. According to Melanie Waddell's post, industry officials anticipate that the Securities and Exchange Commission will receive lots of feedback on the Custody Rule, which is among the list of 12 rules that the agency is currently seeking comment on as part of its retrospective review of rules." Waddell's article goes on to state, "the SEC wants comments on whether the rules should be continued without change, or should be amended or rescinded." To read more on the subject, click here

  1. Best the SEC can do or huge step backwards? Industry leaders tussle over advice reform (Author - Mark Schoeff Jr., InvestmentNews)

As reported by Mark Schoeff Jr., "The Securities and Exchange Commission's proposal to raise investment advice standards for brokers doesn't represent a big change from current regulations but is about as far as the agency can go right now, the leader of an brokerage trade association said Wednesday." According to Dale Brown, president and chief executive of the Financial Services Institute, "Is Reg BI as proposed a substantial improvement over the current suitability standard? No. It's not." Mr. Brown continued on and said, "I think it's probably what Chairman Clayton feels that he can get at least two other … commissioners on the SEC to agree to." To read more on thoughts around the SEC's Reg BI rule, click here

Download Our Free RIA Wire Fraud Prevention Checklist

Don't forget to check out last week's top RIA compliance news articles on SEC Reg BI Proposal, increased sophistication around phishing scams, and a year-end action list for advisors. Be sure to check back next Friday for next week’s top articles! 


Topics: RIA Compliance

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.

RIA Compliance & Practice Management

Stay up to date on the latest RIA compliance, operations, and technology topics.

Hear from industry experts as they keep you up to date on the latest regulatory developments and practice management topics.

Subscribe to Email Updates

Recent Posts