Top RIA Compliance News Articles for the Week of June 1, 2018

1. The Legacy of the DOL Fiduciary Rule: Almost Gone, but Never Forgotten (Author-Mark Schoeff Jr., InvestmentNews)

Though the DOL rule is on the edge of a cliff, its impact remains and will remain far-reaching. As we know, parts of the rule are still in effect as we await a final court rulings, but regardless, Schoeff asserts the standards will stay permanently altered. Professionals at Pinnacle Advisory Group agree, saying the debates brought the conversation “mainstream”. Schoeff also points out, “It gave momentum to a market trend toward lower fees, and forced many brokerages to make changes to product lineups and compensation structures that are likely to remain in place long after the DOL rule is gone.” Schoeff states that the DOL rule also brought about a share class type: T shares. These “create level compensation across fund categories and families.” He also argues advisors are more readily tackling conflicts of interest.

2. After Defeating DOL Rule, NAIFA Takes Aim at SEC ‘Advisor’ Title Prohibitions (Author-Tracey Longo, Financial Advisor Magazine)

The National Association of Insurance and Financial Advisors (NAIFA) was recently successful in working to get the DOL fiduciary rule overturned. Now, they’d like to focus on the SEC’s best interest proposal, specifically, who can call themselves an advisor. They say the goal is to ensure growing, not diminished, clarity on terms, which is badly needed. “The association would gear up to battle a proposed SEC ‘titles’ prohibition that ties use of the term ‘advisor/adviser’ to SEC registration and explicit fiduciary duty, like the DOL rule the group just NAIFA just defeated. For one, ‘advisor’ is in the association’s very name,” Longo says. They also want to make sure restricting the use of the term does not restrict “access to advice.”

3. Interesting Angles on the DOL’s Fiduciary Rule #93 (Author- Fred Reish, FredReish.com)

In connection to Reish’s article number 92, which discussed likenesses between the DOL Rule and the new SEC “best interest” proposal, this current article, number 9,3 focuses on “the requirement of the best interest standard of care in Regulation Best Interest (“Reg BI”) and compares it to the standard of care in best interest contract exemption (‘BICE’) (and the requirements of FINRA Regulatory Notice 13-45).” To begin, the SEC’s version of things will indeed apply to broker-dealers, a departure from the original Rule. The best interest standard of care description is also a bit more beefy, reading that it, “requir`es` care, skill, prudence and diligence and making a recommendation that is in the best interest of, loyal to, the participant.” Where the DOL and SEC come together, Reish says, is rollover recommendations, uniting on important factors to consider when recommending a rollover transaction.

4. A Rose by Any Other Name: SEC Clarifies Cryptocurrency Rules (Author- Samuel Steinberger, WealthManagement.com)

Jay Clayton has provided a bit of clarity for cryptocurrenies, dividing them into two categories: “soverign currency substitutes” (bitcoins), and “crypto assets that are securities”. “The second category, which Clayton clarified with an example of a ‘token’ purchased as part of a ‘venture’ that has an expected return, is a security,” Steinberger explains. The fact that the SEC is focusing on cryptocurrency at all is encouraging to its proponents, saying it promotes its “mainstreamness”. However, we still encourage RIAs to be extremely cautious when considering cryptocurrencies. 

5.  Senate Banking Lawyer Nominated as SEC Commissioner (Author – Melanie Waddell, ThinkAdvisor)

In the wake of the departure of SEC Commissioner Michael Piwowar, Elad Roisman has been nominated to replace him. Roisman is an experienced litigator and the Senate Banking Committee’s chief counsel. Republican senators seem to be happy with the pick. Detractors, however, see the decision as political, considering there are already two other former congressional staff members on the commission. Brad Campbell, a partner at Drinker Biddle, sees the strategy here. “Campbell, the former head of the Labor Department’s Employee Benefits Security Administration, added, however, that he sees a “real incentive” for SEC Chairman Jay Clayton as well as the Trump administration to get a rule in place before the next administration, regardless of who’s in office,” Waddell concludes.

Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule and the SEC’s proposed rulemaking package including “Regulation Best Interest.” Be sure to check back next Friday for next week’s top articles!