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Top RIA Compliance News Articles for the Week of June 15, 2018

Jun 22, 2018

Top RIA compliance articles for the week of June 15, 2018 focus on the DOL fiduciary rule, the SEC’s proposed advice plan, and FINRA’s potential overhaul to its registration and disclosure program. 

Each week we’re giving you our weekly report highlighting the top compliance news articles from various industry news publications. We have selected the most relevant and important news articles related to registered investment adviser (“RIA”) compliance and regulatory issues. This week’s recap focuses on the Department of Labor (“DOL”) fiduciary rule, the Securities and Exchange Commissions (“SEC”) proposed advice plan, and FINRA’s potential overhaul to its registration and disclosure program. Check back each week for the latest list of top stories.

Here’s our top investment adviser compliance articles for the week of June 15, 2018:

 

  1. It’s Official: DOL Fiduciary Rule is Dead (Author- Mark Schoeff Jr., InvestmentNews)

The 5th Circuit Court of Appeals has finally issued the mandate that officially puts an end to the DOL’s fiduciary rule. “In the mandate, the court also said the Labor Department has to pay the financial industry plaintiffs the costs related to the appeal,” Schoeff reports. Originally, the rule had been upheld by a Dallas federal court, but the 5th Circuit Court determined that the DOL had acted outside its authority. The mandate officially terminating the rule was expected on May 7th, but was delayed by AARP and several states trying unsuccessfully to save it after the DOL failed to appeal the decision. The SEC is now taking point on conduct standards in the form of the Regulations Best Interest (“Reg BI”) proposal.

  1. SEC’s Clayton: Comment Period on Advice Standards May Be Extended (Author-Melanie Waddell, ThinkAdvisor)

SEC Chairman Jay Clayton was on Capitol Hill this week testifying before a House oversight committee. The main focus appeared to be the agency’s new Reg BI proposal. Clayton relayed that a “lengthier comment period may be needed for the commission’s advice standards proposal.” Clayton also asserted that the crafting of Reg BI was a “truly collaborative effort” between the SEC and the DOL. The deadline for comments on the new standards proposal is August 7th, but Clayton will see during the first week of that month whether or not to extend that period. Clayton promised to “captain the ship” when it came to seeing the project over the finish line.

  1. Interesting Angles on the DOL’s Fiduciary Rule #95 (Author- Fred Reish, FredReish.com)

Reish’s 95th article focuses on the differences between Reg BI for broker-dealers and the interpretation for investment advisers. According to Reish, “the RIA best interest standard applies to all advice to all clients, Reg BI only applies to securities recommendations made by broker-dealers to retail customers. Those are significant differences.” While the standards for RIAs are more defined, Reish argues that the SEC’s language is not clear, stating that the detail is lacking to be sure of how the rules may apply. Even so, any finalization/implementation of the policy is a long way off, so no need to panic yet. However, RIAs “should pay close attention to the RIA Interpretation.”

  1. SEC’s Best Interest Rule Falls Short, House Democrats Warn (Author- Kenneth Corbin, FinancialPlanning.com)

While on Capitol Hill on Thursday, Jay Clayton handled criticism that the Reg BI proposal didn’t go far enough to protect investors. Democrats on the oversight committee praised the fact that the SEC wants to eliminate investor confusion, but pushed for stricter standards. Representative Maloney of New York lamented the lack of a uniform standard for brokers and investment advisors particularly, while Representative Waters of California fretted over the prohibition of the use of the title “advisor”. She claimed it opened the door for use of terms like “financial planner” or “wealth manager”. Clayton argued, “the business models and client relationships of investment advisors and broker-dealers are fundamentally different.” Clayton said he is of course open to suggestions.

  1.  FINRA to Overhaul Broker Information System, Cut Compliance Costs for Broker-Dealers (Author – Bruce Kelly, InvestmentNews)

“The Financial Industry Regulatory Authority Inc. said Thursday it is going to overhaul its registration and disclosure programs, starting with a new web-based system for the data that provides the backbone for BrokerCheck, a database of hundreds of thousands of licensed securities sales people and executives,” Kelly says. The Central Registration Depository (“CRD”) gives potential clients a sneak peek of a possible broker’s work history to make sure they want to work with them. The WebCRD program from FINRA will go live June 30th, but they are anticipating the entire overhaul to take years, possibly extending to 2021. This is all part of their agency-wide review known as FINRA 360.

 

Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule, the SEC’s proposed advice plan, and why hybrid advisory firms are contemplating a move to the RIA-only model. Be sure to check back next Friday for next week’s top articles!