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, recent custody guidance, and the decline in broker dealers over the last 15 years. Check back each week for the latest list of top stories.
Here’s our top investment adviser compliance articles for the week of October 14, 2017:
- State Regulators Warn: If You Don’t Handle Your Client Complaints, We Will (Author- Kenneth Corbin, FinancialPlanning.com)
Kenneth Corbin writes that according to the director of the Illinois Securities department, every client complaint is investigated. The director, Tanya Solov, states that cases are separated, and smaller ones that encompass customer service issues are sent along to the advisor themselves. Sometimes however, these complaints can lead to the discovery of much deeper, more serious issues. Corbin writes, “In contrast to the SEC and FINRA, which have massive market surveillance programs to identify risks, Solov says that her state’s investigations of brokers and advisors are very much ‘complaint-driven.'” The recommendation is that advisors stay ahead of possible customer complaints.
- RIAs Face New Custody Risks, Reporting (Author- Dan Jamieson, Financial Advisor Magazine)
In addition to a number of Form ADV changes which took effect on October 1, 2017, new guidance on the Custody Rule could also trigger additional Form ADV updates. Dan Jamieson writes, “beginning this month, advisory firms preparing their annual ADV updates will have to calculate and report assets held in accounts that have a standing letter of authorization to move money or pay bills to third parties.” Jamieson notes one concern for advisory firms is standing Powers of Attorney, etc., that allow third-party transfers. However, even the term “third party” will require some clarification.
- Fostering a Culture of Compliance for the DOL Fiduciary Rule (Author- Tina Lorenz, WealthManagement.com)
Tina Lorenz argues, “Firms should focus on two key areas to create a unified approach to compliance and risk—surveillance monitoring and the design and control of investments.” Lorenz believes compliance monitoring tools are going to be essential. Compiling information in order to prove an advisor acted in his or her client’s best interest can almost only be done with the help of technology. The automation and reporting capabilities of technology alone increases efficiencies exponentially. Combined with documented workflows, technology empowers all individuals at the firm to understand the requirements of the rule.
- Exclusive Interview: Barbara Roper Says Mere Disclosure Inadequate for Fiduciary Advice (Author – Chris Carosa, FiduciaryNews.com)
The Director of Investor Protection for the Consumer Federation of America (CFA) is Barbara Roper, and she has recently been given the 2017 Frankel Fiduciary Prize, writes Carosa. Roper states that though she doesn’t have a classic Hollywood moment to relay about finding out about the award, she was honored to receive it. She delves into the background of the CFA and how it became relevant to fiduciaries. She says, “the first focus of our advocacy efforts was on getting financial planners to acknowledge a fiduciary duty to their customers throughout the planning process, including during implementation of their recommendations.” Carosa, of course, also asks Roper about the much-discussed DOL rule, which she argues is under attack.
- FINRA Data Shows 15-Year Decline in BDs (Author- Melanie Waddell, ThinkAdvisor.com)
Melanie Waddell reports on the recent release of FINRA statistics. CEO of Finra, Robert Cook, pointed out that there has been a decline in available broker-dealers. Waddell writes, “There were 635,902 registered reps at the end of 2016, down from 643,322 in 2015, according to the data. A total of 50,641 individuals, or 8%, left the industry in 2016 while 43,221, or 7%, were new entrants.” Cook noted that while this shouldn’t effect FINRA directly, the downward trend should also not be ignored. He is also particularly worried about smaller broker-dealers, knowing the important role they play. Cook encouraged regulators to consider these when trying to pass sometimes overwhelming broker dealer regulatory standards.
Don’t forget to check out last week’s top RIA compliance news articles on Form ADV changes and the fiduciary rule. Be sure to check back next Friday for next week’s top articles!