RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of November 8th, 2019

Posted by RIA in a Box

Nov 15, 2019 2:44:33 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 success of the Securities and Exchange Commission's (“SEC”) whistleblower program, the SEC's proposed rewrite of the advertising rule, and the financial exploitation of senior citizens.

Here's our top investment adviser compliance articles for the week of November 8th, 2019:    

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1.  The SEC brings its adviser advertising rules into the internet age  (Author - InvestmentNews Staff, InvestmentNews)

As the use and popularity of social media has grown over the years, the SEC has failed to keep up with the evolution of communication. As the SEC works to rewrite its advertising rules, the aim is to allow advisors and firms to utilize social media to the best of their ability. In addition to social media usage, advisors will now be allowed to “post testimonials, endorsements and third-party ratings on social media”. The article continues to explain, “The SEC’s proposed rule would also let firms share their investment performance while requiring them to adhere to certain standards, such as including one-, five- and 10-year comparisons.”

2. SEC received a record number of whistleblower claims (Author - Paola Peralta, FinancialPlanning)

With the release of the SEC Division of Enforcement’s annual report, a record amount of whistleblower claims is being showcased along with the highest number of enforcement actions since 2016. Steven Peikin, co-director of the enforcement division, stated, “We are proud of the work enforcement staff did in enabling the SEC to punish misconduct, deter future wrongdoing, and obtain relief for harmed investors.” Possibly the most notable action of the fiscal year, the commission “ordered Facebook to pay a $100 million penalty as part of a settlement into allegations that misled investors regarding the misuse of user data.”

         3. SEC Cracks Down on Hybrid RIAs’ Sweep Money Market Accounts (Author - Tracey Longo, Financial Advisor Magazine)

Tracey Longo dives deeper into the SEC's move to pay closer attention to dually registered advisors’ use of sweep money market accounts. Longo explains, “Since the interest started to rise in 2016, sweep money market accounts that pay far less than other money market funds have been a huge source of profits for broker-dealers, banks and custodians At some BD’s, sweep accounts could be generating more than 25 percent of profits. Many fiduciary advisors view them as suitable only as a place to park very short-term cash.”

          4. SEC highlights enforcement actions involving advisers and brokers (Author - Mark Schoeff Jr., InvestmentNews)

The SEC's annual enforcement report puts a spotlight on retail investor protection, pointing to several cases involving investment advisory and brokerage firms to emphasize the importance. The report states, “Retail investors are often particularly vulnerable to bad actors in the securities markets, and we have made addressing misconduct against them a top enforcement priority. One area of particular focus was on misconduct that occurs in the interactions between investment professionals and retail investors.”

           5. Regulators can do more to protect vulnerable, senior investors (Author - Michelle Oroschakoff, InvestmentNews) 

Michelle Oroschakoff discusses how the wealth management industry has evolved and become more aware of the vulnerability of senior investors. Oroschakoff goes onto to explain that the “recent actions by regulatory bodies, coupled with the ongoing efforts by firms and advisers, have effected change by providing tools and resources to help identify and resolve threats of fraud and exploitation.” The North American Securities Administrators Association (“NASAA”) created The Model Act to Protect Vulnerable Adults from Financial Exploitation in 2016 that requires “reporting to regulatory agencies and allows firms and advisers to enlist the assistance of state securities regulators to review any red flags” if and when an investor raises the alarm.

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Don't forget to check out last week's top RIA compliance news articles focusing on proposed changes by the SEC to the advertising rule, 2019 SEC enforcements, and proposed proxy rule changes.

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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