Top RIA Compliance News Articles for the Week of August 10, 2018

1. ‘Rubbish’: Advisors, firms trade barbs over SEC’s best interest rule (Author- Tobias Salinger, Andrew Welsch, Kerri Anne Renzulli, Sean Allocca, and Jessica Mathews, FinancialPlanning.com)

Earlier this year, the SEC released their Reg BI proposal and comments and opinions have been rolling in ever since. According to an article on FinancialPlanning.com, “several industry trade groups and firms threw their support behind the SEC’s proposed regulation, but indicated areas where the commission should rethink its approach. Restricting titles, they said, would do little to reduce client confusion about the intricacies of the industry.” Over the course of the comment period, the SEC received over 3,800 letters from investors, advisors, and advocacy groups. To see samples of the feedback submitted to the SEC, click here. 

2. SEC ponders creating video to help investors decide between investment adviser and broker (Author- Mark Schoeff Jr., Investment News)

According to a recent article by Mark Schoeff Jr., “one thing the Securities and Exchange Commission officials have heard over and over at recent investor roundtables is that the agency’s proposal for helping them parse the differences between investment advisers and brokers needs to be improved.”  A general reaction to the client relationship summary “Form CRS” is people are still at a loss about the terms “fiduciary duty” and “best interest”. To help provide clarity on on terms, the SEC is considering making a video to help provide some clarity.

3. SEC Reg BI Must Include Rollovers: Morningstar (Author- Melanie Waddell, ThinkAdvisor)

According to a recent article by Melanie Waddell, Moringstar stated, “The Securities and Exchange Commission’s proposed Regulation Best Interest for brokers must be revised to ensure that rollover recommendations are in an investor’s best interest.” In a comment letter to the SEC, Aaron Szapiro, director of Policy and Research for Morningstar, “told the agency that Reg BI needs to identify rollovers ‘as specifically requiring a prudent process and documentation to ensure they are in retirement investors’ best interests.” While the SEC’s advice standards package ‘makes it clear that rollover recommendations are covered by the rule, the final regulation should specifically identify broker/dealer’s responsibilities when recommending a rollover,” according to Szapiro. 

4. Will Consumers Understand The SEC’s Disclosure Documents? (Author- Tracey Longo, Financial Advisor Magazine)

Tracey Longo states in a recent post, “Will investors actually understand proposed disclosure forms that are supposed to help them understand key differences between brokers and investment advisors? Will they understand what conflicts their financial professional may have? What they’ll pay for the services?” Since the understanding of the previous terms is so vital to consumer and financial planning groups, “they’ve hired their own ‘plain English’ expert to test the SEC’s dense four-page customer relationship (Form CRS) proposal to see if it actually helps investors make informed choices about which type of professional best meets their needs.”

5. Wall St. Group Leads SEC Visitor List on Broker Conflict Plan (Author – Andrew Ramonas, Bloomberg BNA)

Since the SEC introduced their Reg BI rule in April of this year, “representatives of the Securities Industry and Financial Markets Association have met with the Securities and Exchange Commission officials six times,” according to a Bloomberg Law analysis of agency records. According to an article by Andrew Ramonas, “the association told the SEC in an Aug. 7 letter it’s generally supportive of the proposal that would direct brokers to act in the ‘best interest’ of their clients, instead of just offering their customers ‘suitable’ investments as current regulations require.” However, not all groups are not completely sold. SIFMA said in it’s letter “there were ‘necessary areas for improvement and clarification,’ such as the suggested broker care and disclosure obligations.”

Don’t forget to check out last week’s top RIA compliance news articles on the likely choice for the SEC’s new commissioner, the SEC’s Reg BI proposal, and the declining number of broker dealer firms. Be sure to check back next Friday for next week’s top articles!