Top RIA Compliance News Articles for the Week of October 1st, 2021

    1. Advisors, Brokers Do ‘Bare Minimum’ On Conflict Disclosures, Morningstar Says (Author – Tracey Longo, FinancialAdvisor)

Tracey Longo discusses the recurring issues associated with Form CRS. With findings from Morningstar’s recent survey “Evaluating Form CRS Relationship Summary”, firms are described to be “doing the bare minimum”, and leaving out important details which investors need to make informed decisions. The information often omitted includes details or examples about compensation models, rewards programs, bonuses, profit sharing or other compensation programs. A senior analyst at Morningstar conveys how the SEC should update the instructions for Form CRS and use enforcement to push firms in the direction of improving their disclosures. 

    2. State Securities Regulators Report Tripling of Digital Asset Enforcement Actions (Author – Melanie Waddell, Think Advisor)

This article highlights the high volume of enforcement actions taken by state securities regulators in 2020. The NASAA published their 2021 Enforcement Report on 2020 data, which revealed regulators took 2,202 enforcement actions last year, leading to $306 million in restitution orders and $42 million in fines. The most common schemes investigated were associated with precious metals and other commodities, digital assets, self-directed IRA scams, and internet and social media fraud. 

    3. What’s coming for RIAs from Washington: New regs (InvestmentNews)

RIAs can expect several regulatory changes coming soon. The Department of Labor’s “DOL” Fiduciary Rule, which is aimed to improve retirement investment advice, will become effective on December 21, 2021. Industry experts show concern that firm’s, small and large, are not fully prepared to be in compliance by December. 

The Marketing Rule goes into effect in November 2022, changing the marketing and advertising rules for the first time in 60 years. The article points out there is a significant amount of work in overhauling marketing plans, compliance procedures, and training staff on the new rule. 

    4. 8 Tips for Advisors to Avoid Digital Asset Legal, Compliance Headaches (Author – Jeff Berman, Think Advisor)

Jeff Berman provides tips and best practices for advisors dealing with digital assets. To avoid compliance headaches, Berman begins with the recommendation that firm’s pay close attention to their policies and procedures manual, along with legal compliance requirements. Other takeaways from this article include the recommendation for advisors to do due diligence and be aware of the volatility of digital assets, do not stray from fiduciary duties, follow proper record-keeping obligations, and pay close attention to custody rules (which are often ambiguous).

    5. Defining Who Is a Fiduciary Is Central to ERISA, Biden’s DOL Pick Says (Author – Melanie Waddell, Think Advisor)

Following the DOL’s previous comments regarding plans to issue a new fiduciary rule making, the new nominee to lead of the Employee Benefits Security Administration “EBSA”, Lisa Gomez, recently echoed the need for a revised definition of a fiduciary. The five-part test currently in place to determine if an individual should be labeled a fiduciary has reportedly been a topic that has led to much disagreement. Melanie Waddell adds that a proposal for the new rule making is likely to come by December 2021. 

Don’t forget to check out last week’s top RIA compliance news articles that focus on findings from the North American Securities Administrators Association “NASAA” annual report, Form CRS, calls to push back the compliance date for the Fiduciary Rule, and the Securities and Exchange Commission’s “SEC” proposed rule on proxy voting disclosures for asset managers.