RIA Compliance and Practice Management Blog

Top RIA Compliance News Articles for the Week of October 9th, 2020

Posted by RIA in a Box

Oct 16, 2020 5:11:54 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 firms not disclosing disciplinary history on Form CRS, the Certified Financial Planner ("CFP") Board of Standards offering remote testing for the November exam, and a push for consistent regulation of the fee-for-service model. Here's our top investment adviser compliance articles for the week of October 9th, 2020:

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          1. SEC Clarifies Form CRS Rules on Reporting Disciplinary History (Author – Melanie Waddell, ThinkAdvisor)

To address the growing number of firms who failed to report their disciplinary history on the customer relationship summary (“Form CRS”), the SEC has updated their frequently asked questions guidance (“FAQ”). SEC Chairman Jay Clayton, head of Investment Management Division Dalia Blass, and director of the Trading and Markets Division Brett Redfearn released a joint statement saying, “Firms do not have discretion to leave the answer blank or to omit reportable disciplinary history from the relationship summary. Firms should review their reportable disciplinary history and that of their financial professionals to ensure that their relationship summaries are accurate, complete and consistent with those other forms.”

2. SEC Offers More Guidance on Form CRS Disciplinary Disclosures (Author – Patrick Donachie, WealthManagement)

Patrick Donachie discusses the guidance the SEC has provided due to the surprising number of firms that did not disclose their disciplinary history on the customer relationship summary (“Form CRS”). SEC Chairman Jay Clayton, head of Investment Management Division Dalia Blass, and director of the Trading and Markets Division Brett Redfearn jointly stated that firms are not able to choose whether or not they disclose this information and “when responding to the disciplinary history heading in their relationship summaries, firms may not add descriptive or other qualitative or quantitative language. Adding such language might, intentionally or unintentionally, obfuscate or otherwise minimize the disciplinary history.”

         3. Firms Are Omitting Disciplinary Problems from Form CRS, SEC Warns (Author – Tracey Longo, Financial Advisor Magazine)

The fact that firms are not disclosing disciplinary history on Form CRS undermines the purpose of the document and ultimately hurts both the customer and the firm. Tracey Longo explains, “For the first time, Form CRS allows retail investors to view at a glance whether or not a firm or its financial professionals have a reportable disciplinary history, so leaving off the required information will be red flag for SEC examiners.” Longo adds, “Firms must direct the retail investor to visit Investor.gov/CRS for a free and simple search tool to research the firm and its financial professionals. Additionally, a firm must include a conversation starter that will allow a retail investor to assess his or her financial professional’s disciplinary history and engage in further discussion about those events or any events applicable for the firm.”

         4. CFP Board Offers Remote Testing for Next Exam (Author – Melanie Waddell, ThinkAdvisor)

Due to COVID-19, the CFP Board of Standards has had to make multiple adjustments over the last year. The July exam period was postponed to September and with the November exam period approaching, the CFP board will be offering remote testing options for those who qualify. Kevin Keller, CEO at CFP Board, stated, “The health and safety of those taking the CFP exam remains paramount to CFP Board. The remote proctoring option reflects our careful assessment of recommendations from national and state health organizations.” The registration deadline for the November exam period is October 20th.

           5. XYPN Advocates for Consistent Regulation of fee-for-service Advisory Model (Author – Mark Schoeff Jr., InvestmentNews)

XY Planning Network co-founder, Michael Kitces, is calling for consistency of advisory service fees across state securities departments. As a part of its lobbying program, XYPN plans to push for both fee-for-service regulation and fiduciary advice policies at the state level. On the other hand, state regulators have been scrutinizing the fee-for-service model and have raised concerns “about advisers charging a monthly fee without providing specific services during the month. Ohio Securities Commissioner Andrea Seidt explained further, “Feeds need to be reasonable and, so far, states have not warmed to the idea of advisers charging feeds for availability alone. As a legal matter, advisers need to deliver services according to the contractual term they set with their clients – whether that be one month, one quarter, or one year.”

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Don't forget to check out last week's top RIA compliance news articles that focus on continued complications with Form CRS, the SEC seeing increased enforcement actions during the pandemic, and Reg BI.

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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