Top RIA Compliance News Articles for the Week of July 30th, 2021

     1. The Latest In Financial #AdvisorTech – August 2021 (Author – Michael Kitces, Kitces.com)

This article highlights the latest announcements and trends in technology for the wealth management industry. The list includes Vanguard’s announcement of an acquisition of a direct indexing platform, JustInvest, and Harness Wealth’s success in raising funds for a new advisor lead generation service.

Kitces also shares an analysis of RIA in a Box’s newly released Archiving and Review solution, which expands their compliance offering to RIA firms. He states that RIA in a Box is on “the path to helping advisors consolidate many compliance-related functions into one solution.” By limiting numbers of third-party vendors, firms reduce their integration points of failure, like contract renewals, cybersecurity risk, and time spent with tech support.

    2.  Breakaway advisor’s dilemma: Tuck in or go solo? (Author – Mark Elzweig, Financial Planning)

Mark Elzweig digs deep into the pros and cons of the two paths for advisors seeking to transition into the independent RIA model. Regarding “tucking in” to an existing firm, advisors can avoid tasks associated with starting brand-new like developing a compliance program and selecting a technology stack. Yet, advisors are encouraged to consider compensation differences, technology, and personnel resources, as well as target client profiles when looking at joining an established RIA firm. The article concludes with another major piece of advice on joining a firm, which is for advisors to have a clear agreement that certifies the advisor owns all their current and future accounts and can transport them elsewhere with the firm’s assistance, if needed.

    3.  Gensler Wants SEC To Beef Up Whistleblower Program (Author – Tracey Longo, Financial Advisor)

SEC Chairman, Gary Gensler has directed the agency staff to assist in strengthening the whistleblower program and empowering those made aware of misconduct to step forward. Gensler emphasized the importance of appropriately compensating whistleblowers in a timely manner and providing them with protection from retaliation.

The article also sheds a light on the continued efforts of state securities regulators to improve their whistleblower programs. The North American Securities Administrators Association “NASAA” approved its Model Whistleblower Award and Protection Act in August 2020, providing state regulators with the authority to award up to 30% of the monetary sanctions collected.

     4.  Companies are increasing ESG reporting: US Chamber of Commerce (Author – Mark Schoeff Jr., InvestmentNews)

Environmental, social, and governance “ESG” disclosures are currently a prevalent topic of discussion in the wealth management industry. SEC Chairman, Gary Gensler has directed his staff to produce a climate risk disclosure rule proposal by the end of 2021.

Mark Schoeff Jr. references findings from a survey conducted by the U.S. Chamber of Commerce, showing that over half of public companies already publish voluntary corporate social responsibility and ESG related reports outside of their SEC filings. The article mentions industry concerns about overburdening public companies and their shareholders with strict ESG disclosure rules. With findings from the survey, it is evident that public companies believe ESG is a “subjective term” which applies “to different companies in different ways.”

     5.  House Panel Passes Bills on Family Offices, Payment for Order Flow (Author – Melanie Waddell, Think Advisor)

Last Friday, the House Financial Services Committee passed a series of bills related to senior financial exploitation, family office registration, and direction for the SEC to consider banning payment for order flow practices. Melanie Waddell provides the key details on these bills and how they will affect the wealth management industry. The Family Office Regulation Act of 2021 would require family offices with more than $750M in assets under management “AUM” to register with the SEC. Additionally, within this bill is a component that would prevent persons barred for fraud, manipulation, or deceit from being associated with any family office.

Don’t forget to check out last week’s top RIA compliance news articles that focus on the Securities and Exchange Commission’s (“SEC”) wrap fee program risk alert, enforcements for firms that failed to file and deliver the customer relationship summary (“Form CRS”), and potential legislation that would have an impact on family offices.