Top RIA Compliance News Articles for the Week of January 5, 2018

1. Interesting Angles on the DOL’s Fiduciary Rule #76 (Author- Fred Reish, FredReish.com)

Reish’s 76th article covers common misconceptions regarding Best Interest Contract Exemption (BICE) standards. “If a broker-dealer or RIA firm receives prohibited (or “conflicted”) compensation from an IRA, the compensation may be permissible under the BICE. During the transition period (until July 1, 2019), BICE only requires that fiduciary advisors (such as broker-dealers and RIAs, and their representatives) adhere to the Impartial Conduct Standards,” Reish writes. However, even more importantly, Reish highlights an often overlooked issue for RIA firms as it relates to discretionary management of IRAs and as to “where advisors have discretion, the ‘cleanest’ approach is ‘pure’ level fee advice.

2. SEC Should Define ‘Advisor,’ Says CFA Institute (Author- Kenneth Corbin, FinancialPlanning.com)

After Jay Clayton requested feedback on the fiduciary rule, the CFA Institute has drafted a letter to the SEC asking the agency to clarify the use of the word “advisor.” The organization wants to make it easier to “harmonize standards of care. The CFA Institute is asking the SEC to clarify which types of client services can only be provided by RIAs, who can use the term ‘advisor,’ and to compel registered reps to make plainer disclosures about their conflicts of interest,” Corbin says. The CFA would also like the SEC to make it clear that only RIAs can provide “personalized” financial advice.

3. State Regulators Warn Investors About Cryptocurrency Dangers (Author- Mark Schoeff, Jr., InvestmentNews)

Schoeff begins with a paradoxical sentence: “State securities regulators warned investors Thursday to be careful when putting their real money into virtual money.” The North American Securities Administrators Association (NASAA), has begun to warn consumers about the downsides of cryptocurrency. Examples include lack of oversight and digital vulnerability. The SEC backed the statement wholeheartedly, as well as issued their own statements and guidance regarding currencies like Bitcoin. Schoeff ends with, “Neither the SEC nor state regulators have promulgated a cryptocurrency rule. But last month, NASAA called initial coin offerings an emerging investor threat in 2018, while the SEC put out five investor bulletins and other statements on virtual currencies in 2017.”

4. SEC Planning Best-Interest Standard For Brokers In 2nd Quarter (Author- Tracey Longo, Financial Advisor Magazine)

Making the DOL rule even more complicated, the SEC may release its own version later this year. They’ve been collecting data and feedback from lawyers and large financial institutions to do so. While the DOL rule only covers retirement, the SEC’s guidance could apply to all investment account types. The reason the SEC wants to get this done by the 2nd quarter is because the DOL wants to begin tweaking its rule in June or July. Organizations such as the Financial Planning Coalition are praising the SEC’s involvement, even wondering why it didn’t come sooner. Of course, “there is also legislation in Congress to kill the DOL’s fiduciary rule, as well as a rider to kill the regulation in the spending bill that House and Senate leadership is trying to pass before the temporary budget expires January 19,” Longo says.

5. Regulatory Wrangling: The Year Ahead (Author – Melanie Waddell, ThinkAdvisor)

In this long and informative piece, Waddell writes, “for advisors and broker-dealers, one certainty remains constant from year to year: the challenge of keeping pace with a growing compliance checklist.” Waddell lists cybersecurity, changing exams, and “regulatory shifts” as the some of the biggest concerns. She bases this on SEC Chair Jay Clayton’s own stated priorities. She adds, “For broker-dealers, more changes likely are to be driven by the Financial Industry Regulatory Authority — namely a revamped exam program — as part of the self-regulator’s ongoing top-to-bottom review known as FINRA360.”

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Don’t forget to check out last week’s top RIA compliance news articles on the 2018 regulatory forecast, cryptocurrencies, and the DOL fiduciary rule.  Be sure to check back next Friday for next week’s top articles! 

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.