Top RIA Compliance News Articles for the Week of August 6, 2016

1. Interesting Angles on the DOL’s Fiduciary Rule #15 (Author- Fred Reish, FredReish.com)

Fred Reish has written fifteen articles on observations he has found in the new Department of Labor (DOL) fiduciary rule. This most recent pieces expands on his previous statement that “the prudent process requirement would apply to many, but not all, advisers.” One of the major elements in the fiduciary rule is the Best Interest Contract Exemption (BICE) which requires advisers to make all decisions with the intention that they are in the best interest of their clients. Pure level fee advisers do not have financial conflicts and will not need to use the BICE. Such advisers, since they “won’t commit a prohibited transaction” will only be subject to “conduct standards in the securities laws.” Read more on this latest key insight that is highly relevant to many traditional RIA firms.

2. RIAs Must Mind Details When It Comes to Advertising (Author- S. Brian Farmer and Brian J. Daly, InvestmentNews)

Something not every adviser may know is they have to be careful about the way they use advertising materials. Advertisements that are untrue, false, or misleading are prohibited by the Investment Advisers Act of 1940. Advisers should assume any written materials sent to current or future clients are subject to advertising rules. The Securities and Exchange Commission (SEC) has provided some guidance on appropriate advertising practices which cover testimonials, prior recommendations, past performance, model results, gross vs. net returns, and backtesting. However, these are only a few topics that are subject to these rules and as we’ve written before, RIA firms need to exercise great caution when marketing performance results. Check out this insightful article for more detail. 

3. QuickTake Q&A: Regulating Wall Street Is on the Ballot This Fall (Author- Laurence Arnold and Jesse Westbrook, Bloomberg)

According to this Bloomberg article, “critics of the Dodd-Frank Act are signaling how they would try to rewrite and revise a law they say does little to prevent a repeat of the financial crisis that prompted it.” The law took effect almost six years ago and the rules needed to carry it out are still being written. One reason for the lack of progress is that only three Republicans in the Senate (none in the House) approved the act in 2010. This article describes some of the changes Republicans wish to make to the act. While there are many critics of the act, it also has its defenders. Republicans would need 60 votes in the Senate and a sympathetic president for any effort to roll back Dodd-Frank to be successful.

4. Who Are You Again? (Author- Alan Jackson, Ashland Partners Blog)

In this article Alan Jackson provides his insight on Access Control and identifying and authorizing people who access an RIA firm’s systems. He uses the National Institute of Standards and Technology (NIST) to describe elements of the policy and to cover practical topics such as how to identify people who physically enter secure areas. For example, a receptionist can be used to ensure only authorized individuals enter the firm or make sure they have appropriate identification cards. Jackson also covers basic information security, including acceptable standards for usernames and passwords. Other topics Jackson covers include key inventory, identifying devices on your network, public kiosks or shared computers, and how to handle non-organizational users who want to connect to the firm’s network. Writing these policies down, keeping this list in order, and continually enforcing it will help to ensure that an RIA firm’s identity and information security practices are effective.

5. SEC Names Snyder Co-Head of Advisor Exams (Author- Melanie Waddell, Think Advisor)

On Wednesday, Kristin Snyder was named co-national associate director of the investment advisor/investment company exam program for the SEC. Previously she was the associate regional director for examinations in the SEC’s San Francisco office, a position she will continue to hold along with her new role. Jane Jarcho, who has been the leader of the program in the Office of Compliance Inspections and Examinations (OCIE) since August 2013 will work with Snyder to oversee more than 520 examiners. OCIE’s director, Marc Wyatt, believes that “with her experience in examinations and enforcement, she is well-positioned to develop and lead national initiatives in our investment adviser and investment company program that support OCIE’s mission to improve compliance, prevent fraud, monitor risk and inform policy.”

Don’t forget to check out last week’s top RIA compliance news articles on the benefits of using an RIA compliance consultant and regulatory AUM. Be sure to check back next Friday for next week’s top articles!