Top RIA Compliance News Articles for the Week of May 11, 2018

1.  Data Aggregators Develop “Open Data Access” Standards (Author- Samuel Steinberger, WealthManagement.com)

While cybersecurity remains a major RIA compliance focus area, Envestnet’s Yodlee, Quovo, and Morningstar ByAllAccounts, are pushing for open data, as long as it’s secure. As such, they’ve created the “Secure Open Data Access” framework, or “SODA”. They argue that it will promote “data access, transparency and security for U.S. firms and clients,” Steinberger writes. The companies want consumers to be able to share financial information to helpful investing applications, but align that with security. They hope the standards they’ve formulated will do that. Another goal is to eliminate the need to share passwords in order to exchange financial data. This is a great initiative for the RIA industry given the increasing importance of data aggregation technology.

2. Interesting Angles on the DOL’s Fiduciary Rule #90 (Author- Fred Reish, FredReish.com)

Reish’s 90th article is subtitled: “Parallels Between the SEC Regulation Best Interest and the DOL Best Interest Contract Exemption (Part 1)”. While the original DOL rule, which included the Best Interest Contract Exemption (“BICE”) was recently vacated, the Securities and Exchange Commission (“SEC”) has since proposed something similar. This is known as “Regulation Best Interest” or Reg BI. Reish notes one difference however, stating, “Reg BI applies to securities recommendations, while BICE would have covered any investment or insurance recommendation by a fiduciary advisor.” Furthermore, “while the proposal would require best interest for recommendations of securities transactions, it would not mandate a duty to monitor. That is significantly different from the role of an investment adviser (RIA), where best interest monitoring is generally expected.” 

3. States Trying to Save DOL Fiduciary Rule Appeal Rejection of Effort to Intervene (Author- Mark Schoeff, Jr., InvestmentNews)

In the wake of the DOL fiduciary rule being vacated, some states have tried to step up to save it. According to Schoeff, the battle may prove futile. CA, NY, and OR would like the case re-heard in the 5th District, which also told the states they could not enter the case as defendants. Joining the states in their efforts is the AARP. “The states’ motion asks the court’s clerk to permit them to seek a review of their request for intervenor status by the full 5th Circuit, if the three-judge panel declines to reconsider it,” Shoeff states. Experts are speculating that the situation is not hopeful, listing the hurdles of being admitted into the case in the first place.

4. Congressman to SEC on ICO Market: “Shut It All Down” (Author- Melanie Waddell, ThinkAdvisor)

 The co-directors of the SEC Enforcement Division testified before a House oversight panel on Wednesday. Representative Brad Sherman of CA, expressed his distrust of initial coin offerings. SEC co-director Steven Peikin responded, saying the SEC Cyber Unit is on the case. Their targets include: market manipulation schemes involving false information spread through electronic and social media; misconduct perpetrated using the dark web; and violations involving distributed ledger technology and initial coin offerings. The SEC has taken steps to help protect investors, even setting up a mock website to show consumers what to look for.

5.  SEC Tries to Scam ICO Investors to Show Them How Easy It Is (Author – Matt Robinson, Financial Advisor Magazine)

The SEC wants to make sure Investors know what they’re getting into, and how to identify a potential fraud. They’ve set up their own ICO to show us how. “The bogus digital currency, called HoweyCoins, has a sleek website, complete with a white paper, and pictures of made-up celebrity promoters and luxurious destinations,” says Robinson. If you fall too far down the rabbit hole and select the option to buy coins, you’ll be redirected to a warning stating that HoweyCoins are fake, and that you were nearly fooled. Several ICOs are currently under investigation by the SEC, with SEC staff expecting some to result in enforcement action.

Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule, NASAA’s state-registered RIA statistics, and the resignation of SEC Commissioner Michael Piwowar.  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.