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. Check back each week for the latest list of top stories.
Here’s our top investment adviser compliance articles for the week of October 15, 2016:
- SEC Requires New Social Media Disclosures on Form ADV (Author- Mike Pagani, Wealth Management)
The Securities and Exchange Commission (SEC) recently finalized changes to the Form ADV which include requiring RIA firms to disclose social media accounts. Effective October 1, 2017, any LinkedIn, Twitter, Facebook, or any other social media profiles must be properly disclosed on the firm’s Form ADV. As Mike Pagani of Smarsh writes, one goal of this new rule is to give the SEC a better understanding of a firm’s risk profile. Pagani suggests that, “to avoid the risk of penalties, advisors should complete a thorough review of their social media compliance procedures and risk exposures over the coming year.”
- Hacked: What To Do When Facing a Data Breach (Author- Ingrid Case, Financial Planning)
Cybersecurity is one of the most important and critical things that advisors should have on their priority list. Taking vital steps to ensure a firm is protected and has a plan should a cyberattack take place is crucial. Advisers need to know what to do down to almost the minute the attack happens. Ingrid Case, Financial Planning reporter, shares with us tips and best practices from six industry experts in the event of an attack. Some tips include ensuring that an “incident response plan” is in place that may include contacting a digital forensics firm, a specialized attorney, regulators, and law enforcement.
- Fiduciary Rule Causing Some Advisers to Reconsider Comp Models (Author- Andrew Shilling, Financial Planning)
Advisors are weighing the pros and cons and questioning how they will market their services and themselves to prospective clients when the Department of Labor (DOL) fiduciary rule goes into effect. According to Mike Brady, founder of Michael Brady & Co., his firm is torn between the option of altering their fee-structure or considering how the Best Interest Contract Exemption (BICE) will allows them to still receive commission-based compensation. At the recent NAPFA Fall Conference, Thomas Clark of Wagner Law Group, also notes that when the “DOL provides the FAQs in the next couple of days or couple of months; that will be the next opportunity for everybody to pay attention.” Financial Planning reporter Andrew Shilling takes a deeper look at what may be causing confusion by interviewing a number of impacted advisors.
- The DOL Rule Kicks in. Will Independent Broker Dealers Survive? (Author- Joe Duran, Investment News)
Joe Duran, founder and CEO of United Capital, makes that the case that “full-service brokerage firms have four advantages that very few of the independent brokerage firms possess” when it comes to complying with the new DOL fiduciary rule. These four advantages are: “1) a more profitable and adaptable payout model, 2) less dependency on sponsorship fees, 3) more diversified revenue streams, and 4) stronger balance sheets and profit margins.” As RIA compliance consultants, we continue to see an increasing number of representatives affiliated with independent broker dealers consider starting their own RIA firm in light of the new rule and Duran concurs that “the viability of many of the independent broker-dealers is less certain, especially if their larger advisers decide to become RIAs and go directly to a custodian.”
- How Banks Are Losing Clients to Their Own Employees (Author- Neil Weinberg, Bloomberg)
Neil Weinberg writes that the Protocol for Broker Recruiting originally signed in 2004 by Merrill Lynch, Citigroup, and UBS “has had an unanticipated effect by offering a blueprint to brokers with an entrepreneurial bent: have someone set up a shell company, have the company sign the protocol, and then take over the company without fear of a lawsuit.” Weinberg further notes that advisor defections from large brokerages have helped propelled the growth of the RIA industry. According to a recent Aite Group LLC study, investment advisers have “doubled their assets under management in the eight years through 2015, to $2.8 trillion.”
Don’t forget to check out last week’s top RIA compliance news articles on employees often pose the greatest IT security risk to RIA firms. and business continuity planning. Be sure to check back next Friday for next week’s top articles!