Top RIA Compliance News Articles for the Week of October 12, 2018

1. State regulators take aim at RIAs – broker-dealers, not so much (Author- Kenneth Corbin, FinancialPlanning)

According to a recent post by Kenneth Corbin, “State securities regulators have their sights trained on RIAs, with enforcement actions last year seeing major increases compared to previous years as well as those brought against broker-dealers, according to a new report from the North American Securities Administrators Association.” In addition to an increase in enforcement’s against RIAs, NASAA also noted an increase in “the number of cases brought against unregistered individuals and firms.” According to the NASAA’s enforcement report, “as for unlicensed firms and individuals, states brought 675 enforcement cases against last year, a 24% increase from the year before.”

2. SEC Does Not ‘Dictate’ Cyber Controls, Cyber Chief Says (Author – Melanie Waddell, ThinkAdvisor)

According to Melanie Waddell’s recent article, NASAA had a cybersecurity roundtable in Washington earlier this week. At the roundtable, Waddell quotes Robert Cohen, head of the agency’s cyber unit, saying “that it’s not the ‘SEC’s approach to dictate specific `cyber` controls’ on regulated entities. ‘I don’t know that that’s the most effective way to ensure compliance. We do more, especially for the financial industry, through exams, to see what they’re doing and see if they’re prepared.'” So what does the SEC look for when assessing a firms preparedness? According to Cohen, the SEC is ‘looking for firms that have significant risks that they aren’t disclosing.’ To read more about the cyber roundtable, click here. 

3. Can investment advisers disclose away all conflicts? Can brokers? (Author- Blaine F. Aikin, InvestmentNews)

Blaine F. Aikin writes, “with the release of its regulatory package on April 18, the Securities and Exchange Commission drew an important distinction between disclosure obligations for investment advisers versus those for brokers.” As the fiduciary debate drags along, “the SEC is clear that disclosure is effective in addressing conflicts only when advice is absent from the relationship.” Aikin goes on to say, “the SEC tackles head-on the question of whether investment advisers can disclose away all conflicts, even conflicts that would effectively violate the fiduciary adviser’s duty of loyalty.”

4. Advisor compliance in the age of the emoji (Author- Kerri Anne Renzulli, FinancialPlanning)

As reported by Kerri Anne Renzulli, “In the past, advisors met their clients in person, made a phone call or maybe sent an email, but now clients and brokers can communicate anytime across a far wider variety of mediums. Text messages, Facebook, WhatsApp, Twitter, Skype, WeChat, Instagram: All these channels can be used to conduct business. They can also be used for other nefarious activities, presenting financial services companies with the daunting task of ensuring that all staff interactions meet compliance obligations.” According to Robert Cruz, senior director of information governance practice for Smarsh,”Rather than trying to limit the communication forms clients and brokers or salespeople can use, firms need to think about how they want to conduct business and how they’re going to communicate, and then ensure they can govern that by expanding their supervisory circle.”

5. Mobile Technology Compliance Still an Issue (Author – Davis Janowski, WealthManagement.com)

According to Smarsh’s eighth annual Electronic Communication Survey Report, “email continues to be the single largest piece of the overall electronic communications landscape in financial services, but social and mobile platforms are rapidly growing in importance and many firms are probably not doing enough to keep themselves fully compliant if they go under the regulatory microscope.” Of the 191 respondents, 50 percent “reported concern around those communications channels that together include social media, instant message / collaboration platforms, and SMS / text messaging.” According to Marianna Shafir, Smarsh’s corporate counsel and a regulatory advisor, “This year’s survey reveals that firms are focusing too much energy on older technologies and not enough time on the mobile and social communication channels that are growing in popularity among their customers and their advisors.” To read more about the findings from the survey, click here.

Don’t forget to check out last week’s top RIA compliance news articles on the increased number of RIA enforcement actions in 2017, budget challenges with the SEC’s RIA examination program, and the benefits of financial planning. Be sure to check back next Friday for next week’s top articles!