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 Securities and Exchange Commission (“SEC”) regulatory exams, fee disclosures, and fiduciary standards. Check back each week for the latest list of top stories.
Here’s our top investment adviser compliance articles for the week of March 29th, 2019:
1. SEC Exams are on the rise (Author – Kenneth Corbin, FinancialPlanning)
After a setback due to the government shutdown early this year, the SEC investment adviser audit rates are increasing and investment advisory firms that haven’t been examined in several years should be prepared to hear from a regulator. In the event that a regulator does appear at your firm’s door, Kenneth Corbin offers advice from experts on how to respond. Corbin suggests that establishing a good relationship with examiners from the beginning of the process can be key to a smooth exam process.
2. Trump Nominates New SEC Commissioner (Author- Melanie Waddell, ThinkAdvisor)
President Donald Trump has nominated Allison Herren Lee to serve a five-year term as a commissioner of the SEC. If confirmed by the Senate, Lee, a Democrat, will replace Commissioner Karen Stein who left her post with the SEC in early January. According to Melanie Waddell, “Lee’s previous roles include serving as a special assistant U.S. attorney, and prior to government service, was a litigation partner at Sherman & Howard LLC in Denver.”
3. Massachusetts Beats SEC To Punch With One-Page Fee Disclosure (Author – Tracey Longo, Financial Advisor)
In an attempt to help investors better understand advisor fees, which have become increasingly complex, the state of Massachusetts has proposed a one-page fee disclosure requirement. This requirement is designed to make it easier for investors to compare advisor fees and make informed decisions when selecting an advisor. As stated by Tracey Longo, “The SEC has proposed a four-page customer disclosure, which is the centerpiece of its ‘best interest’ proposals to improve investors’ comprehension when they are selecting advisors. But the disclosure has been shown to increase investor confusion instead, according to several nationwide surveys and studies.”
4. Maryland fiduciary bill killed in committee (Author- Mark Schoeff Jr., InvestmentNews)
This past Wednesday, the Maryland Senate Finance Committee voted down the Financial Consumer Protection Act creating an obstacle for advice reform in the state. The act included a provision which would enact a fiduciary standard on financial professionals. Those who opposed the act agreed with that outcome citing existing regulatory activity on this issue by the SEC and the National Association of Insurance Commissioners.
5. Should Index Funds Be Bound by a Fiduciary Standard? (Author- Diana Britton, Wealth Management)
There is rising concern that index funds might be using shareholder votes to advance political, social, and other issues rather than in the best interest of shareholders. According to Dana Britton, “Gramm suggested index funds be subject to a fiduciary duty, as Vanguard founder Jack Bogle urged, so the funds vote in the interest of shareholders. He also suggested the Securities and Exchange Commission require funds to poll investors and vote their shares as specifically directed.”
Don’t forget to check out last week’s top RIA compliance news articles focusing on the progress of Regulation Best Interest (“Reg BI”) and share class selection. Be sure to check back next Friday for next week’s top articles!