Top RIA Compliance News Articles for the Week of February 16, 2018

1. Interesting Angles on the DOL’s Fiduciary Rule #80 (Author- Fred Reish, FredReish.com)

Reish’s latest input on the DOL fiduciary rule raises the question, “Is the new fiduciary rule enforceable during the transition period?” Short answer: yes. The DOL’s enforcement policy indicates that only “requirements of the fiduciary regulation and prohibited transaction exemptions” won’t be enforced, which the IRS has supported. However, the DOL does expect industry professionals to operate in good faith and to comply during the transition period. Reish also warns that state regulators may also file claims for failure to properly comply with policies and procedures including a recent example “against a broker-dealer on the basis that it violated its policies and procedures concerning sales contests.”

2. SEC Puts Advisors on Notice Around Robo Advice (Author- Kenneth Corbin, FinancialPlanning.com)

“The SEC is taking a hard look at how financial advisory firms are handling disclosures and investment recommendations as part of its policy framework for the fast-developing digital advice space,” Corbin reports. The specific focus for the SEC is onboarding questionnaires, and making sure the expectations of the client are met and are “in line with online disclosures and marketing materials”. Robert Shapiro of the SEC Division of Investment Management states that if these items aren’t in sync, trouble can arise. He points out that the client needs to be in full comprehension of the services received. RIA firms should also review robo adviser regulatory guidance issued by the SEC on February 23, 2017.

3. State Securities Regulator Says States Can Enforce DOL Fiduciary Rule (Author- Mark Schoeff Jr., InvestmentNews)

Mark Schoeff Jr. writes that the state of Massachusetts is already enforcing the DOL fiduciary rule by filing an action against a broker dealer earlier this week. claiming that it “violated state law and internal policies by conducting sales contests that failed to adhere to the impartial conduct standards of the DOL rule.” Joseph Borg, Director of the Alabama Securities Division, agreed with the decision to enforce the implemented portion, stating protecting citizens was priority one. He believes other states will follow suit, as will he, if those steps become necessary. Though most states aren’t actively seeking violators, if an issue is brought to their attention, they will pursue it.

4. 3 Types of Cyberattacks and How to Avoid Them: FINRA Conference (Author- Bernice Napach, ThinkAdvisor)

“Protecting against cyberattacks requires both high-tech and low-tech efforts by financial firms, according to presentations at the 2018 FINRA Cybersecurity conference in New York on Thursday,” writes Napach. A retired FBI agent, Jeff Lanza, highlighted four questions each advisor should ask themselves, among them being, what at your firm is subject to attack, and can you detect an attack in real time? Lanza stated that if these four questions cannot be answered satisfactorily, an advisor is missing the mark on protecting themselves and their client data. Napach reports that Lanza discerned three major types of cyberattacks: account takeovers via malware, unauthorized fraudulent wire transfers, and ransomware. To combat malware for example, you simply have to be careful. Don’t click on unfamiliar emails and pay attention to the sender’s domain name. 

5. Maryland Jumps into Fiduciary Fray with Legislation Requiring Brokers to Act in Best Interests of Clients (Author – Mark Schoeff Jr., InvestmentNews)

In lieu of the DOL fiduciary rule’s delay, the state of Maryland is attempting to pass a bill that requires advisors to act in the best interests of their clients. Though the timing seems to coordinate with the DOL rule, Democrat James Rosapepe states that the bill is also to preserve responses to the financial crisis of 2008. The bill has its opponents, however. “The Financial Services Institute `FSI`, which represents independent broker-dealers and financial advisers, opposes the fiduciary-duty provision of the Senate bill and was able to get it removed from the House version of the legislation,” Schoeff relays. The FSI argues that the federal government should be the one handling the fiduciary rule.

Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule, the SEC’s Share Class Selection Disclosure (“SCSD”) Initiative, and the T3 Advisor Conference.  Be sure to check back next Friday for next week’s top articles! 

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.