Top RIA Compliance News Articles for the Week of October 19, 2018

1. For the first time, state regulators pursue more against of RIAs than against broker-dealers (Author- Mark Schoeff Jr., InvestmentNews)

According to the North American Securities Administrators Association (“NASAA”) 2018 Enforcement Report, “for the first time, state regulators pursued more registered investment advisers in disciplinary cases than broker-dealers.” Per the article by Mark Schoeff Jr. of Investment News, “The crackdown on RIAs makes sense, given that the total number of RIA firms has grown by 20% — from 25,073 in 2008 to 30,193 in 2017 — while the number of brokerage firms has declined by 24% — from 3,969 to 3,132 — over the same period, according to an analysis by the consulting firm RIA in a Box based on an industry snapshot by the Financial Industry Regulatory Authority Inc.” GJ King, president of RIA in a Box, also notes “This is unlikely to be a one-year anomaly, but more likely a continuing trend.”

2. What to do when regulators come knocking (Author – Ed Cofrancesco, FinancialPlanning)

Does your RIA firm have a plan for when a regulator comes knocking on your door? According to Ed Cofrancesco, “there are concrete steps to take to minimize the severity of any punishment meted out by FINRA, the SEC or state securities administrators.”  He continues to say, “As you may have noticed regulators don’t have a standard protocol for informing advisors of a formal investigation. Frankly, regulators are not obligated to disclose the nature or subject of their investigation and may simply request a sweep of information on a particular matter. In that case, it may even be your compliance department that initially breaks the news.”

3. Dealing with IAR Rollovers Post-Fiduciary Rule: Part 1 (Author- Ed McCarthy, WealthManagement,com)

According to Ed McCarthy, “The Department of Labor’s (“DOL”) fiduciary rule is in limbo, and while some advisors and financial services firm welcome that change of status, it can cause compliance problems for others who handle IRA rollovers from 401(k) plans.” In McCarthy’s article, he asks Joan Neri, counsel with law firm Drinker Biddle & Reath LLP in Florham Park, N.J., for her advice on how plan consultants and advisors should proceed in the post-fiduciary rule environment. Neri shared her thoughts over a phone interview. To hear what she had to say, click here. 

4. RIA Anger Build over SEC’s Best Interest Proposal, Lawsuit Expected (Author- Tracey Longo, Financial Advisor Magazine)

As reported by Tracey Longo, “Anger over the Securities and Exchange Commission’s proposed Regulation Best Interest bubbled over during a recent one-day event for registered investment advisors, with some professionals even calling for SEC Chairman Jay Clayton to step down because of what they say is his willingness to prop up broker-dealer industry at investors’ expense.” Longo continues that many critics believe the new rule may “overstep the SEC’s legal authority, which does not extend to granting brokers’ “advisory” status with a preferential carveout; from required fiduciary regulation.” To read more on the unfolding situation, click here. 

5. 3 moves advisers can take now to stair-step their succession (Author – Ron Carson, InvestmentNews)

According to a post by Ron Carson, “the Financial Planning Association revealed that 73% of financial advisers don’t have a written succession plan. The more surprising fact to me, however, is that 60% of the advisers who didn’t have a written plan are within five years of retirement.” Carson proceeds to outline three simple steps advisers can take to start succession planning. A couple of the steps include, “examine your role as adviser CEO” and “introduce equity for key stakeholders.” To read his complete article, click here. 

Don’t forget to check out last week’s top RIA compliance news articles on cybersecurity, compliance supervision responsibilities around archiving mobile communication with clients, and the latest RIA enforcement report. Be sure to check back next Friday for next week’s top articles!