Top RIA Compliance News Articles for the Week of February 18, 2017

1. SEC Issues No-Action Letter on Advisors’ ‘Imputed Custody’ (Author- Melanie Waddell, Think Advisor)

Melanie Waddell of Think Advisor reports on a recent no-action letter issued by the SEC regarding whether “an advisor has regulatory custody of client assets where a client grants even limited authority to transfer assets to a designated third party.” Assistant general counsel at the Investment Adviser Association (“IAA”), Laura Grossman, believes the SEC’s no-action letter “is a significant development that should bring much-needed clarity to the investment advisor industry.” Grossman also adds, “Over the past few years, it became clear that the SEC staff’s view of what constituted imputed custody in the standing letter of authorization (SLOA) context differed from that of many in the industry.” The SEC also issued an updated staff responses FAQ guide on the custody rule. In particular, this no-action letter provides some potential relief for an advisor with custody under this scenario not being required to have an annual surprise examination as normally required with custody.

2. Fiduciary Duty Can’t Be Killed (Author- David Trainer, Wealth Management)

David Trainer addresses the swirling rumors that the Department of Labor (“DOL”) fiduciary rule may be revised or even killed. With the DOL fiduciary rule on its last leg, John Bogle, New York Times Op-Ed writer points out, “while the scrapping of the fiduciary rule may have a short-term impact on the types of investment advice out there, investors have been and will continue to migrate to options that provide a fiduciary level of care.” Regardless of the outcome of the rule, there is a growing consensus that clients are more knowledgeable now than ever and are more likely to choose an advisor that will always put their best interests first. Trainer claims, “With the industry already moving in the direction of fiduciary duty, one could argue that the DOL fiduciary rule is unnecessary.”

3. Advocates Push to Delay DOL Fiduciary Rule Delay; Industry Waits for Likely Stall (Author- Mark Schoeff Jr., Investment News)

Since the DOL sent a proposal to the Office of Management and Budget (“OMB)” to potentially delay the fiduciary rule, Mark Schoeff Jr. writes that it appears only advocates for the rule have met with OMB officials to discuss the agency’s potential decision on the delay of the rule. The OMB website shows all the meetings were with supporters who wanted to protect the DOL rule. Schoeff Jr. reports, “the proponents of the rule are reiterating that it would protect workers and retirees from conflicted advice that leads to inappropriate high-fee investments that erode savings.” Opponents of the rule have not met with the OMB to discuss their opinions on supporting a delay. The OMB is still holding meetings currently to discuss the potential fiduciary rule delay.

4. New SEC Robo Adviser Guidance Spotlights Disclosure, Client Communication (Author- Kenneth Corbin, Financial Planning)

As reported by Kenneth Corbin of Financial Planning, earlier this week, the SEC staff released new regulatory compliance guidance related to robo advisers. Corbin writes that the guidance shows that robo platforms “are here to stay” but at the same time “warning firms about steps they must take to ensure they are in compliance.” In the face of arguments presented by several industry groups “the SEC notes that robos generally are covered under the 1940 Investment Advisers Act, subjecting them to the same regulatory and fiduciary obligations as traditional shops.” Despite being “robo”, they are still held to the same regulatory and fiduciary obligations as traditional advisers.

5. When You Actually Have to Register to Become an RIA, How to Do it and When You Qualify to Sign On (Author- Michael Kitces, RIABiz)

RIA industry guru, Michael Kitces, guest authors a post this week on RIABiz to offer detailed guidance on: How do I become a registered investment advisor (RIA)? Kitces provides insight into the requirements, how, and when to register, and what licenses are needed to become an RIA. He also goes into detail on what it takes to become a financial advisor as well as what exactly is an investment advisor. This article comes from a transcript of a January session from Kitces’ weekly webcasts. 

Don’t forget to check out last week’s top RIA compliance news articles focusing on the potential delay of the DOL fiduciary rule. Be sure to check back next Friday for next week’s top articles!