Each week we’re giving you our weekly report highlighting the top compliance news articles from various industry news publications. We have selected the most relevant and important news articles related to registered investment adviser (“RIA”) compliance and regulatory issues. As has been the case throughout the month of December, this week’s recap focuses on the Department of Labor (“DOL”) fiduciary rule and cybersecurity. Check back each week for the latest list of top stories.
Here’s our top investment adviser compliance articles for the week of December 17, 2016:
- Interesting Angles on the DOL’s Fiduciary Rule #30 (Author- Fred Reish, FredReish.com)
Confusion is a common feeling among within the RIA industry as the term “Level Fee Fiduciary” becomes front and center with the potential implementation of the DOL fiduciary rule. Fred Reish, one of our top 5 DOL fiduciary rule experts to follow, attempts to clear common confusion related to this term in one of his most recent blog posts. According to Reish, “the label ‘Level Fee Fiduciary’ has been used for many years for one meaning, but the best interest contract exemption (“BICE”) has used it for a different purpose and, depending on your reading, a different definition.” In particular, Reish describes previous usage of this term in past regulatory settings and how the new definition may defer.
- Interesting Angles on the DOL’s Fiduciary Rule #31 (Author- Fred Reish, FredReish.com)
In a follow up to this previous post, Fred Reish provides information on payments that will “un-levelize” a level fee fiduciary in his 31st article about interesting observations concerning the DOL fiduciary rule and exemptions. Freish elaborates, “if an adviser ordinarily charges a level fee (for example, 1% per year) for non-discretionary investment advice or discretionary investment management for plans, participants or IRAs, and receives any additional benefits or payments attributable to those services, the additional payments will un-levelize the adviser’s compensation and result in a prohibited transaction.” While some forms of compensation may be quite obvious, there are other more subtle types of compensation that “could include trips, gifts, awards, reimbursements, marketing support, conference registrations.”
- Death of the DOL Fiduciary Rule Could Spur SEC Action On Uniform Standard (Author- Mark Schoeff Jr., Investment News)
Mark Schoeff Jr. writes, “almost everyone is anticipating that the incoming Trump administration will try to kill — or at least delay — a Labor Department investment advice rule. If it does, it could be a catalyst for the Securities and Exchange Commission (“SEC”) to finally break out of its stasis on the issue.” This potential outcome has many fiduciary rule advocates nervous about a “watered-down” fiduciary rule passed by the SEC. However, at this point, even if the DOL fiduciary rule is ultimately delayed or repealed, it’s hard to predict if a uniform fiduciary rule will become an SEC priority.
- Defend Client Data From Cybercrime (Author- Kimberly Floss, Financial Planning)
Kimberly Foss, founder and president of Empyrion Wealth Management, writes that witnessing, “an outside cyberattack on a client two years ago prompted me to get a jump on beefing up my firm’s security.” Foss outlines the steps she took including hiring a third party information security auditor. As part of the audit, the outside firm also helped to craft an information security plan for her firm. Some key components of this plan include: training employees and using two-factor authentication. Ultimately Foss concludes, “as cybersecurity becomes more of a focus of compliance exams, it is important to adhere to a comprehensive and disciplined program.”
- DOL Fiduciary Rule Delay Likely and Death Not Out of the Question (Author- Blaine F. Aikin, Investment News)
Blaine F. Aikin, executive chairman of fi360 Inc. and one of our top 5 DOL fiduciary rule experts to follow, reports, “President-elect Trump has not stated a position on the rule” and “at least one of his advisers has confidently stated the fiduciary rule will be repealed.” Despite the various opinions on the future of the rule, most firms are moving forward and complying with the the rule regardless. Aikin believes this rule will be tough to alter or repeal because it is already effective and quickly approaching compliance deadlines. Aikin concludes, “all things considered, certainty trumps uncertainty. Both the knowns and the unknowns associated with the fiduciary rule favor a strategy to continue on the path of compliance with the rule as enacted.”
Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule. Be sure to check back next Friday for next week’s top articles!