RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of October 18th, 2019

Posted by RIA in a Box

Oct 25, 2019 3:05:42 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 ("SEC") share-class initiative, private funds enforcement, and proposed changes to the whistle-blower program. 

Here's our top investment adviser compliance articles for the week of October 18th, 2019:    

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1.  SEC suggests advisers rebate revenue-sharing payments  (Author - Mark Schoeff Jr., InvestmentNews)

On Friday, the SEC posted a seven-page document of frequently asked questions (“FAQ”) focusing on 12b-1 and revenue-sharing related investment products. This document stems from observations from SEC exams in which investment advisers are not properly disclosing conflicts of interest. Mark Schoeff Jr. explains, “The document outlines examples of conflicts and how advisers should disclose and address them, reminding advisers that telling clients they ‘may’ have a conflict knowing they are already receiving revenue-sharing payments is inadequate ‘when the conflict actually exists.’” Industry experts weigh in on the FAQ document offering their advice to advisors on the issue.

2.  SEC to Continue Private Funds Focus in 2020 (Author - Melanie Waddell, ThinkAdvisor)

During a panel on Wednesday at Securities Docket’s 2019 Securities Enforcement Forum, Adam Aderton co-chief of the SEC Enforcement Division’s Asset Management Unit, said that the agency will continue to investigate private funds in 2020. Aderton also believes the Retail Strategy Task Force has been very effective. According to Melanie Waddell, “The Retail Strategy Task Force is a ‘relatively small group that does a lot of data cranking,’ Aderton said, stating the task force is also ‘doing work’ in the asset management space as well as with the agency’s cyber and complex instruments units.” The SEC will also focus on initiatives protecting retail investors, in particular, teachers and military members.

           3. The ‘Behaviorally-Enlightened’ Fiduciary’s Dilemma In Serving Clients Best (Author - Derek Tharp, Kitces.com)

In this article, Derek Tharp revisits an ethical issue printed in a 2018 paper published in the Journal of Personal Finance, “The Behaviorally-Enlightened Fiduciary: Addressing Moral Dilemmas Through a Decision-Theoretic Model of Moral Value Judgment.” This paper explores a financial advisors’ moral dilemmas that are derived from advising clients from a “behaviorally-informed” perspective, versus a “behaviorally-enlightened” prospective. 

4. SEC official pushes back against criticism of share-class crackdown (Author -Mark Schoeff Jr., InvestmentNews)

While there has been much industry criticism against the SEC’s share-class initiative, the SEC says advisors should “know better” regardless if the agency had provided a formal disclosure rubric or not. Critics of the initiative, on the other hand, argue that the SEC is engaging by rule-making by enforcement by taking enforcement action without setting clear expectations or allowing for public comment. Steven Peikin, co-director of the SEC Enforcement Division, however, says he is “perplexed” by this criticism and states, “I don't feel like you need the SEC to tell you that as a fiduciary that's something you shouldn't be doing," according to Mark Schoeff Jr. In relation to conflicts of interest, the SEC released a frequently asked questions document last week addressing the issue.

5. SEC Cancels to Vote To Change Whistle-Blower Program As Opposition Mounts (Author -Tracey Longo, Financial Advisor Magazine)

The SEC cancelled its previously scheduled meeting for October 23rd where they were slated to vote on rule changes to its whistle-blower program. According to Tracey Longo, “The cancellation comes amidst steep opposition to the proposed rule changes, which whistle-blower attorneys and other critics say would diminish the likelihood that whistle-blowers would report financial malfeasance and fraud.” Members of the National Whistleblower Center welcome the postponement of this meeting and encourage the SEC to reject the proposed changes. 

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Don't forget to check out last week's top RIA compliance news articles focusing on  the SEC's Inspector General report, the new president of the Financial Planning Association ("FPA"), and the latest trends in new wealth management technology.


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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