RIA Compliance and Practice Management Blog

Top RIA compliance news articles for the week of Oct. 14, 2022

Posted by RIA in a Box

Oct 21, 2022 2:39:16 PM

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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 impact midterm elections could have on adviser issues, the surge in scams targeted at elderly investors, and what advisers can learn from the significant record-keeping fines levied by regulators such as the Securities and Exchange Commission (SEC).

Here are our top investment adviser compliance articles for the week of Oct. 14, 2022:

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    1Republicans, Democrats could agree on some adviser issues after midterm elections (Author Mark Schoeff Jr., Investment News)

Upcoming elections may cause significant changes to critical adviser issues. Despite the two parties’ difference of opinion on the SEC agenda and priorities, there remain common points of rule-making which could call for new or amended policies.

“If there is an area for bipartisan rule-making and legislation, it’s in capital formation,” said Christopher Lacovella, chief executive of the American Securities Association.

Another area in which both Democrats and Republicans will likely agree? Retirement savings. However, it seems obvious, not all issues will fall into the expected bipartisan agreement, with topics like ESG remaining hotly contested.

    2. Ex-comptroller’s prison term leaves lingering hybrid RIA compliance questions (Author Tobias Salinger, Financial Planning)

A recent sentencing of an ex-comptroller highlighted the potential risk when bad actors work with or for a hybrid RIA.

“The [hybrid] RIAs often serve as recruiting and growth engines for the wealth managers. The ability to conduct advisory business outside the national firms' directly owned RIAs enables more flexibility and often higher payouts for advisors' practices. However, that setup can also give alleged bad actors more openings for harmful sales tactics or fraud.”

With the sentencing of those involved in the fraud, regulators are putting out a clear message that bad actors will be prosecuted to the fullest extent possible.

Scams targeting older investors are on the rise, with the Federal Trade Commission (FTC) reporting a whopping 213% increase year over year in the dollar amount lost by older investors between 2020 and 2021. What is the cause?

“This increase was driven in large part by a surge in reports of losses to cryptocurrency investment scams.”

However, cryptocurrency isn’t the only outlet for scammers looking to defraud elderly investors. Other tactics included:

  • Stocks and commodities.
  • Art
  • Rare coins. 

Even with the significant increase in monetary losses by the elderly, the FTC believes these scams are underreported. In order to help combat this issue, they plan to hold a webinar Nov. 3 to help educate the public on this very real concern.

   4. Is Reg FD Unconstitutional? – SEC Roundup (Authors – Nick Morgan and Tom Zaccaro, Think Advisor)

Join Nick Morgan and Tom Zaccaro as they sit down with Florida International University College of Law Professor Dean Antony Page to discuss the impact and enforcement of Regulation Fair Disclosure.

“This is an unusual regulation,” Page says, “because it either prevents or burdens or compels speech.”

Watch the full episode in the link above.

   5. 5 Top Lessons From the WhatsApp Crackdown: Law Firm (Author – Melanie Waddell, Think Advisor)

Regulators, including the SEC and FINRA, are putting their money where their mouth is when it comes to Record-Keeping rules and policies, with combined fines reaching just over $2 billion thus far.

“We expect this to be a continuing focus of the SEC and FINRA staff on examinations, so the time to correct any record-keeping deficiencies relating to off-channel communications is now,” Issa Hanna, partner at Eversheds, told ThinkAdvisor Tuesday in an email.

To help mitigate risk, Eversheds recommended advisers follow these five guidelines:

  1. Managers should “practice what they preach.”
  2. Clearly define what is and is not acceptable practice in your policies.
  3. Ensure your policies are in line with the capabilities of your surveillance and technology platforms.
  4. Prioritize training and education.
  5. If a breach has occurred, report it.

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Don't forget to check out last week's top RIA compliance news articles that focus on the SEC new marketing rule, the SEC’s record-keeping regulations, the Financial Industry Regulatory Authority’s (FINRA) new continuing education (CE) requirements, and the succession of a financial advisor.

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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