RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of October 30th, 2020

Posted by RIA in a Box

Nov 6, 2020 4:22:16 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 the Securities and Exchange Commission's ("SEC") drop in enforcement actions, whether we should hold chief compliance officers ("CCOs") personally liable, and the importance of cybersecurity for investment advisors. Here's our top investment adviser compliance articles for the week of October 30th, 2020:

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           1. SEC Enforcement Actions Fall 17% in 'Most Challenging Year' (Author – Tobias Salinger, Financial Planning Magazine)

The coronavirus made a challenging 2020, and a 17% fall in SEC enforcement actions. The SEC Division of Enforcement released their annual report Nov 2. The report shows staff “carried out fewer enforcement actions even as it ordered record fines and disgorgements”. With a 17% fall in SEC enforcement actions and an 8% increase in money ordered in the regulator’s actions, the divisions adjustment to remote work impeded aspects of pre-covid enforcement processes. Noted enforcements involved failures to disclose conflicts of interest, conflicts in cash sweeps, and providing misleading information to clients using wrap advisory accounts. Tobias Salinger goes deeper into the report, the challenges the division faced amid COVID-19, and various SEC cases throughout the year.

         2. Should Compliance Officers Be Held Personally Liable? SEC's Peirce Weighs In (Author – Melanie Waddell, Think Advisor)

The New York City Bar Association recently released a report that “offers some ‘sensible recommendations’ on how to move the CCO liability conversation forward.” Melanie Waddell overviews a recent speech from SEC Commissioner Hester Peirce, and her concerns for an increase for CCOs personal liability. In the speech, Peirce noted three types of actions the agency currently takes against CCOs. Increased liability causes concern that talented individuals will forgo careers in compliance.

        3. The Importance of Cybersecurity as a Financial Advisor (Authors – Succession Link, Financial Advisor Magazine)

Succession Link, a financial networking marketplace, discusses the importance for Financial Advisors to take measures for their firm’s cybersecurity needs. SEC and state regulators are also aware of the need to keep firm and client data safe and are performing cybersecurity examinations for firms. They recognize the need for “administration, technical, and physical controls as they pertain to cybersecurity.” They state for firms to consider phishing prevention, establishing best practices for electronic communication, and engaging employees to alert the company when they see vulnerabilities. The firm’s cybersecurity education should be ongoing for latest technologies and as guidelines and processes are updated.

         4. Five Questions to Ask (And Answer) Before You Go Independent (Author – Tom Prescott, Financial Advisor Magazine)

Since Covid-19 financial advisors have been forced to adapt in their current firm and are increasingly considering going independent. Tom Prescott, founder and managing member of with Advisory Services Network, discusses five questions to ask yourself before going independent. He states, “Creating a plan and answering the tough questions before you make the move can give you confidence that the decision you’re making is the right one.” There are challenges that come with going independent and considering these questions could help prevent regret or failure when deciding to take the leap.

       5. New SEC Amendments Expand Access to Private Markets (Author – Patrick Donachie, Wealth Management)

In the latest move by the SEC this year, comes the approval of rule changes to expand investors’ access to exempt securities offerings and retail investors to invest in private markets. Patrick Donachie states, “SEC Chairman Jay Clayton lauded commission staff for their overview of the complicated history of private securities offerings regulation and argued that the new amendments to the Securities Act of 1933 would serve to harmonize what he called a “patchwork” of different rules and regulations.” Throughout the article, Donachie shares various commissioner statements regarding the rule changes and when the amendments will go into effect.

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Don't forget to check out last week's top RIA compliance news articles that focus on the SEC's Reg BI roundtable, cybersecurity, and what a post-COVID world may look like for registered investment advisors.

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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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