RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of October 2nd, 2020

Posted by RIA in a Box

Oct 9, 2020 4:14:38 PM

Top_Compliance_Articles_of_the_week-17Each 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 continued complications with the Form CRS, the Securities and Exchange Commission ("SEC") seeing increased enforcement actions during the pandemic, and what is still unknown about Regulation Best Interest ("Reg BI"). Here's our top investment adviser compliance articles for the week of October 2nd, 2020:

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          1. SEC Warns Firms Not to Omit Disciplinary History from Form CRS (Author – Mark Schoeff Jr., InvestmentNews)

Mark Schoeff Jr. discusses the SEC's warning to firms regarding missing information on the client relationship summary (“Form CRS”). Considering the June 30th deadline and ample time for firms to distribute the document, the SEC has found many firms have completely disregarded the disciplinary history section. “In connection with its review of Form CRS filings, the staff Standards of Conduct Implementation Committee has observed examples of relationship summaries where firms did not provide a response in the disciplinary history section. The staff also observed examples where firms’ responses in the disciplinary history section appear to lack required information or otherwise could be improved,” stated jointly by SEC Chairman Jay Clayton, Division of Investment Management director Dalia Blass, and Division of Trading and Markets director Brett Readfern.

2. Clayton Touts SEC Enforcement Achievements Despite Pandemic (Author – Mark Schoeff Jr., InvestmentNews)

During the SEC Speaks Virtual Conference, SEC Chairman Jay Clayton speaks positively of the high number of enforcement actions the agency has reported even during the pandemic, stating that “while the pandemic significantly impacted how we do our work, it did not negatively impact the work itself.” However, SEC Commissioner Elad Roisman believes that high numbers do not necessarily mean success. Roisman stated that his rubric for evaluating firms “centers on whether they advance the SEC’s mission. The pillars of that mission are protecting investors, maintain orderly markets and promoting capital formation,” rather than ‘regulation by enforcement’, which he says, “hurts the investors more than the firm being targeted.”

         3. With Social Distancing and Remote Work, Many Advisors Embraced Social Media (Author – Asia Martin, WealthManagement)

Asia Martin points to multiple sources that have reported an uptick in advisors using social media, and the positive outcome that has resulted. Kantar, a data and consulting company, reported that overall social media engagement has “increased by 61% during the pandemic” with even adults 35 years and older increasing their usage by 40%. Putnam Investments took a closer look in its “Social Advisor Survey: 2020 Pulse Edition”, released earlier this week. Overall, the firm surveyed 252 advisors and “found that during the first few months of the pandemic, 74% of advisors who use social media were able to obtain a lead or onboard a new client and 55% of advisors who received a lead from social media did so by ramping up their social media usage.”

         4. Human Capital: Ron Rhoades Unpacks Reg BI Unknowns (Author – Melanie Waddell, ThinkAdvisor)

Melanie Waddell is joined by Ron Rhoades on the Human Capital podcast to discuss the many unanswered questions that linger surround the SEC's Reg BI. Rhoades speaks to the confusion that Reg BI has caused with the use of ‘Best Interest’, saying that all firms under the SEC must act in their client’s best interest but are not necessarily subject to the fiduciary rule. “Basically the SEC is taking this phrase ‘best interest,’ which has an established legal meaning, and is redefining the English language. The question is: how are they going to redefine?” Waddell and Rhoades also discuss the future of 12b-1 fees, with Rhoades stating that the original purpose for 12b-1 fees is now gone, and that he believes within the next decade we will see these fees “fall by the wayside”.

           5. SEC Moves to Allow Unregistered ‘Finders’ to Solicit Investors for Private Placements (Author – Tracey Longo, Financial Advisor Magazine)

The SEC has approved a proposal with a 3-2 vote that would “permit so-called ‘finders’ to solicit and recruit accredited investors to invest in private placements”. SEC Chairman Jay Clayton stated that this proposal “is intended to be narrowly tailored to address the capital formation needs of entrepreneurs and certain smaller issuers while preserving investor protection,” and that it “will help small businesses grow and thrive, particularly when they are located in places that lack established, robust capital raising networks.” The approved proposal will be up for comment for 30 days.

Download the Top 10 Social Media Compliance Guidelines for RIA Firms

Don't forget to check out last week's top RIA compliance news articles that focus on the new Private Fund Platform released by RIA in a Box, the SEC's concerns surrounding credential stuffing, and why RIA are reluctant to use the term 'fiduciary'.s

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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