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. Check back each week for the latest list of top stories.
Here’s our top investment adviser compliance articles for the week of October 8, 2016:
- SEC Ramps Up Scrutiny of RIAs and It Shows (Author- Diana Britton, Wealth Management)
The Securities and Exchange Commission (SEC) has been working hard to frequently review and monitor more registered investment adviser (RIA) firms. While looking at the SEC’s enforcement results for the 2016 fiscal year, which ended September, there is a significant uptick in the number of cases. With a record setting160 cases brought against RIA firms and 98 independent or standalone cases, there is further indication that the SEC continues to attempt to prioritize investment adviser oversight. While currently the agency is only able to perform exams on 12% of RIAs each year, the SEC hired 100 new examiners in an attempt to increase RIA exam frequency. Check out more of the stats from the 2016 fiscal year in this great overview from Diana Britton.
- Cybercrime 2016: The New Frontier (Author- Michelle Wraight, ThinkAdvisor)
Technology is rapidly evolving along with the threat of cybercrime. For 2015, the U.S. Director of National Intelligence ranked cybercrime as top national security threat. This is even higher than the threat of terrorism. Most of the attacks are happening through clicking a “malicious link” or answering a “phishing phone call”. Author Michelle Wraight, chief privacy officer at Pershing, shares that these types of threats “can be mitigated through better training and policy enforcement at all levels of the organization.” Taking vital steps to strategically be cautious of potential threats is something that the entire organization should be practicing and should be a priority in a firm’s risk management program. Wraight claims “having an action plan and trained responders is a big step in the right direction” when it comes to protecting an investment advisory firm from a cybercrime.
- How One Adviser Coped as Hurricane Matthew Bore Down (Author- Carolyn McClanahan, Financial Planning)
Having a plan should a natural disaster occur, such as Hurricane Matthew which struck last week, is crucial to all RIA firms of all sizes. Carolyn McClanahan, advisor at Life Planning Partners in northern Florida, shares her firm’s business continuity plan that went into action in preparation for Hurricane Matthew. A large part of it had to do with deciding to convert to using only web-based software. The office manager backed up everything to a thumb drive and also mentioned they had 3 backups on different web-based software programs. In case the hurricane wiped everything out, they had four pieces of paper with them that had a plan should everything be destroyed. McClanahan states, “I have never been so grateful for compliance.”
- T-Minus Six Months Until the DOL Rule (Author- Anthony M. Stich, Wealth Management)
On April 10, 2017, the Department of Labor’s (DOL) fiduciary rule will officially go into effect. Anthony Stich, direct of global marketing at Advicent, shares three strategies to consider as advisors work to comply with the rule and fulfill their fiduciary responsibility. These strategies include: “1. maintain diligent records tracking the rationale behind investment advice, 2. reassess all existing financial plans for fiduciary compliance, and 3. reposition the business model of the firm, with financial planning at its core.” Stich further presents the case that technology will be play a crucial role in helping to comply with the new DOL fiduciary rule.
- SEC Busts RIA for Failing to Conduct Compliance Reviews (Author- Kenneth Corbin, Financial Planning)
Staff Reporter Kenneth Corbin reports on a settlement the SEC has reached with an advisory firm that specializes in retirement advice. According to the settlement, the firm failed to conduct mandatory compliance reviews for a four-year span and also appointed a Chief Compliance Officer (CCO) that had no prior experience and failed to receive proper training. This is yet another reminder that the SEC takes Rule 206(4)-7 rule violations seriously and that regardless of a firm’s size, it needs to ensure that it is properly implementing a compliance program and empowering a qualified CCO.
Don’t forget to check out last week’s top RIA compliance news articles on employees often pose the greatest IT security risk to RIA firms. and how an RIA firm should always be ready for an exam at all times. Be sure to check back next Friday for next week’s top articles!