Top RIA Compliance News Articles for the Week of July 23rd, 2021

     1. Regulatory burden complicates decision for RIAs to go independent (Author – Kenneth Corbin, Financial Planning)

This article addresses the regulatory and compliance challenges advisors face when going independent. While advisors often seek to gain the freedoms and autonomy that come with going independent, they will also take on new obligations for reporting, disclosures, registrations, and policy creation. Additionally, this article brings attention to an increase in regulatory scrutiny on RIA firms, including the recent settlements in 27 enforcement cases for firms that did not properly complete and file the customer relationship summary “Form CRS.” An industry expert expresses that going independent is still practical and recommends advisors have a “realistic view on the increasing compliance expectations.”

    2. SEC Raises Alarm About Wrap Fee Program Deficiencies (Author – Jacqueline Sergeant, Financial Advisor)

Jacqueline Sergeant spreads the word about the SEC’s warning of risks associated with wrap fee programs. The recently published risk alert urged investment advisers and broker-dealers to implement effective policies to address the areas of concern found during examinations. Wrap fee programs are an area of regulatory scrutiny, as they have been attracting more investor assets and have common deficiencies around fiduciary duty, conflicts of interest, and inadequate disclosures.

Specific instances cited by the SEC staff include failure to track and monitor the programs were in the clients’ best interests, and failure to disclose additional transaction fees outside the bundle fee.

    3. SEC Charges 27 Firms With Failing to Deliver Form CRS to Clients by Deadlines (Author – Patrick Donachie, Wealth Management)

The SEC recently settled charges with 21 RIA firms for failing to file and deliver their customer relationship summary document “Form CRS” to investors. Patrick Donachie highlights Form CRS was implemented in June 2020 and is meant to provide investors with information in “plain English” to help them understand their relationships with securities industry professionals. The SEC has repeatedly expressed concerns about Form CRS in the past year, including observations of firms failing to properly disclose disciplinary issues.

     4. House panel to vote on increasing family office oversight (Author – Mark Schoeff Jr., InvestmentNews)

This week, the House Financial Services Committee is voting on new legislation that would require family offices with more than $750M in AUM to register with the SEC as “exempt reporting advisers.” Mark Schoeff Jr. points out that the bill is designed to provide the agency with more information on the size, portfolios, and leverage taken on by family offices. The bill will also require family offices with less than $750M in AUM to register with the SEC if they are “highly leveraged or engage in high-risk activities.”

     5. FBI, SEC warn public about fake brokers and advisers (Author – InvestmentNews)

The FBI and the SEC have joined efforts to warn investors of fraudulent brokers and investment advisers. The warning informs investors that the bad actors impersonate real investment professionals or falsely claim to be properly registered. Investors should be on the lookout for unsolicited offers from people they don’t know, as well as brokers or investment advisers that promise high returns. The article shares that the fraudsters are using spoofed websites, impersonating social media profiles, cold calling pretending to be from a real firm, and falsifying documents to make it appear as if they are a registered adviser.

Don’t forget to check out last week’s top RIA compliance news articles that focus on a shift in adviser fee structures, a call for the Securities and Exchange Commission (“SEC”) to evolve its regulation with the increase of technology use, environmental, social, and governance (“ESG”) regulation.