Top RIA Compliance News Articles for the Week of May 21, 2016

1. To Disclose or Not to Disclose, That is the Question (Author- Howard Diamond, Diamond Consultants)

When advisors are considering starting their own RIA or moving to a different firm, one of the things that may cross their mind is whether or not they should disclose activities that took place in their past on their Form U4. As Howard Diamond writes, in almost every circumstance, it is always better to disclose, whether it seems appropriate or not, to prevent future regulatory actions. Events that happened in the advisor’s early years that may seem less relevant today, such as shoplifting or writing a bad check, may still need to be properly disclosed or the repercussions can be severe. This piece includes a story of a young advisor who neglected to disclose events from his past and the consequences he suffered. Read on to learn more.

2. House Budgeteers Want $50 Million Cut for SEC (Author- Ted Knutson, Financial Advisor Magazine)

Ted Knutson reports in this article on how the House Appropriations Committee has submitted a budget proposal for a $50 million budget cut for the 2017 fiscal year for the Securities and Exchange Commission (SEC). President Obama’s original budget submission emphasized the importance in allocating more resources to RIA examinations. As Knutston notes, President Obama previously “cautioned Congress (that) failure to add advisor examiners would pose significant risks for investors.” Check out this article to read more about how the reduced budget and other specifications of the proposal could impact the future of the SEC.

3. DOL’s Best Interest Standard May Be Tougher Than It Looks (Author- Bob Clark, ThinkAdvisor)

Bob Clark follows up a recent piece on the Department of Labor (DOL) fiduciary rule with another look into the details of the “best interest standard.” In this particular article, Clark explains some of the conflicts and arguments arising, including opinions by Ron Rhoades, one of our top 5 DOL fiduciary rule experts to follow, and Frank Prazma, in response to his previous article. To address the comments, Clark writes that “the fact of the matter is that many of the transactions that Prazma and others in the securities industry fear won’t be allowed under the new DOL rules probably aren’t permissibly today under common law fiduciary standards, either.” Clark also quotes Rhoades who presents the case that, “FINRA already (incorrectly) has used this term `’best interests’` in describing aspects of the suitability standard,” and furthermore that “the ‘best interests fiduciary standard,’ as set forth by the DOL, is a very tough standard.” Be sure to check out this article for more details on this continuing debate.

4. Senate Approves Resolution to Kill DOL Fiduciary Rule (Author- Mark Schoeff Jr., InvestmentNews)

This past Tuesday, the Senate approved a resolution to overturn the DOL fiduciary rule. However, as Mark Schoeff Jr. writes, this is likely nothing more than political maneuvering as President Obama “has promised to veto the resolution, which was advanced under the Congressional Review Act that gives lawmakers 60 legislative days to vote to halt major regulations after they are finished.” With a 56-41 Senate vote closely mirroring party lines, the Senate does not have enough votes to override a presidential veto. 

5. If You See Elder Abuse, You Can’t Ignore It, Experts Urge Advisers (Author- Andrew Welsch, Financial Planning)

Elder abuse is a hot regulatory topic that recently led to the North American Securities Administrators Association (NASAA) adopting a new elder financial abuse model rule for RIA firms. Andrew Welsch reports on a number of leading experts speaking on the topic of elder abuse at the recent FINRA annual conference. Mary Tucker, manager of elder client initiatives at Wells Fargo Advisors, states that, “Wells Fargo will, in some instances, request that clients get a letter from their doctor stating that they have the mental capacity to manage their finances.” Dr. Nancy Needell, an instructor in psychiatry at Weill Cornell Medicine, also notes that as it relates to advisor trusting his or her gut instinct “if something wasn’t wrong then you wouldn’t be thinking about it.”  Be sure to check out this valuable article on this topic which is likely to continue to receive more RIA regulatory attention in the coming years.

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