Top RIA Compliance News Articles for the Week of November 5th, 2021

    1. SEC exam sweep shows advisers overcharging clients (Author- Mark Schoeff Jr., InvestmentNews) 

Mark Schoeff Jr. discusses the SEC’s findings from recent examinations on investment advisers billing practices. Following the exam sweep, the SEC issued a risk alert, which cautioned advisers on common deficiencies related to how they bill clients and disclose their fees, and recommended best practices to be in compliance. The lack of internal oversight and insufficient policies and procedures lead to issues such as overbilling, faulty determinations of break points, and incorrect charges to households.

 

The article also mentions a separate risk alert issued by the SEC this week, revolving around deficiencies found for robo-advisory services. 

 

    2. Love or Hate Social Media, Advisors Need to Be Compliant (Author – Marianna Shafir, Think Advisor)

Regarding the SEC Marketing Rule, this article discusses how there are always risks associated with firms and individual advisors using social media. Marianna Shafir shares a list of “need to know” points to mitigate compliance risk. Within the list, firms are advised to carefully follow record retention rules, implement policies and procedures to ensure prohibited platforms are not being used, and have a system to flag high-risk keywords. The article concludes by declaring that all firm’s must monitor, capture, and archive their data to guard against potential violations.  

    3. SEC Under Gensler To Get Tougher On Hedge Funds, Private Equity (Author – Ben Bain Financial Advisor)

SEC Chairman, Gary Gensler has asked the agency’s staff for help with creating ways to strengthen transparency of fees that firms charge investors and fund performance metrics. These requests for transparency speak specifically to the private funds industry, which Ben Bain states has been in the crosshairs of lawmakers. Gensler is looking for the SEC to examine how several focus areas including how Form PF can be modified and if certain practices should be prohibited to prevent conflicts of interest.

    4. Attorney: DOL’s Interpretation of Fiduciary Rule More Expansive Than Ever (Author – Patrick Donachie, Wealth Management)

Industry experts shed light on the upcoming challenge for advisors to recommend rollovers in a non-fiduciary capacity, under the DOL’s new Fiduciary Rule. Foreside Managing Director Jacqueline Hummel, explains that fiduciaries must meet the impartial conduct standards, “which include acting in clients’ best interests, charging reasonable compensation and not making misleading statements”. Firms must also provide disclosures explaining why the rollover is in the client’s best interest. Advisors are recommended to take documentation very seriously, as it is the best proof for regulators. 

    5. RIA fees: from prix fixe to à la carte (Author- Melanie Waddell, Think Advisor)

Melanie Waddell provides a deep dive on the current trends and changes in RIA fee models. The most common fee structure is charging based on AUM, but alternative methods such as charging flat fees are becoming more prevalent. The findings from RIA in a Box’s annual study of over 1,800 firms show that firm’s fees remain around 1% of AUM. One industry expert discusses how the next generation of firms will be considering alternative fee methods and that clients may also expect flexible money management and fees for their interactions with advisors. 

Don’t forget to check out last week’s top RIA compliance news articles that focus on RIA in a Box’s new Virtual Advisor Desktop and Cybersecurity Dashboard, regulation on cybersecurity practices, reduced fees for state-registered investment advisers, the effects of the delay to the Fiduciary Rule, and continued pressure to amend Form CRS.