Top RIA Compliance News Articles for the Week of April 2, 2016

1. How the DOL Fiduciary Rule Will (and Won’t) Affect RIAs (Author- James J. Green, ThinkAdvisor)

Some investment advisory firms may be growing tired of hearing about the final Department of Labor (DOL) fiduciary rule that was released earlier this week. They feel as if their firm will not be impacted since RIAs already have a fiduciary duty to put their clients’ interest ahead of their own. While true, it’s important to note that the new DOL fiduciary rule may still impact investment advisers. While investment advisers are accustomed to dealing with the fiduciary standards set forth by the Securities and Exchange Commission (SEC) and local state statutes, the DOL’s fiduciary standard is a bit different and stricter. James Green does a terrific job of surveying industry experts like Skip Schweiss to determine how the new fiduciary rule may or may not impact RIA firms.

2. Critics Say DOL Fiduciary Rule Makes Too Many Industry Concessions (Author- Jeff Benjamin and Liz Skinner, InvestmentNews)

Some fiduciary advocates believe the final DOL rule may not go far enough and is quite “watered down” compared to the original rule proposal. In particular, Knut Rostad argues that “the final rule has moved significantly away from the assumptions consistent with trust law and ERISA.” In particular, some are disappointed that the final rule “clarified that there is no bias against selling proprietary products.” In addition, the best interest contract exemption (BICE) has been streamlined. This debate is likely to continue in the coming weeks, but it’s also important to note that some RIA industry experts are very impressed with the thoughtfulness of the final rule. For example, Michael Kitces recently tweeted “The more I read of the final DOL fiduciary rule, the more impressed I am. This is not the watered down rule critics have suggested.” Be sure to check out this article for a good recap of both sides of this debate.

3. Panama Papers Show Advisors Need Treasury’s AML Rule, Groups Argue (Author- Melanie Waddell, ThinkAdvisor)

After the recent release of the Panama Papers, advocacy groups such as Americans for Financial Reform are putting pressure on the U.S. Treasury Department to finalize the proposed ant-money laundering (AML) rule that would apply to RIA firms. In August 2015, the Financial Crimes Enforcement Network (FinCEN) proposed a new rule that would require investment advisers to establish AML programs and file suspicious activity reports (SARs) pursuant to the Bank Secrecy Act (BSA). There is a continuing debate as to whether investment advisory firms do pose an actual risk with the the Investment Adviser Association (IAA) arguing that they do not believe that RIA firms provide an easy entry point for potential criminals to bypass traditional financial system protections. Melanie Waddell has the full story and it’s definitely an important read for all SEC-registered RIA firms that would be impacted if this new rule was to be implemented.

4. Regulators’ Secret Weapon Against Cyberattackers (Author- Brendan McGarry, ThinkAdvisor)

Both the Financial Industry Regulatory Authority (FINRA) and the SEC have made it well known that cybersecurity is one of their top regulatory concerns for 2016. In addition, Brendan McGarry presents the case that Rule 30(a) SEC Regulation S-P is being utilized in recent enforcement cases in regards to investment adviser cybersecurity issues. McGarry provides a detailed run-down of many of the recent SEC and FINRA enforcement actions in regards to information security and is a worthwhile read for all RIA firm principals.

5. Wall Street Dodged a Bullet on the Retirement Fiduciary Rule (Author- Joshua Brown, Fortune)

Advisor Joshua Brown presents the case that the new DOL fiduciary rule does not change very much like many expected it would. Brown notes that “all things considered, and in comparison with the rules as originally proposed last summer, they (brokerage firms) got off incredibly easy.” However, he does concede that “you’ll probably see fewer annuity sales.” Overall, he states that he believes the “biggest winners here are lawyers, followed by some consumers, followed by the advisory firms who want to go fiduciary (they all do) but just needed to buy more time to make the transition.” In response to Brown’s piece, industry expert Bob Veres acknowledges Brown’s critiques, but also presents the case that the “DOL rule writers seem to have been very careful to make sure that Wall Street firms and sales agents cannot disclose away, disclaim away or have their customers contractually sign away fiduciary responsibility.” Both pieces by Brown and Veres are worthwhile reads.

Also, make sure you check out The 5 DOL Fiduciary Rule Experts Every RIA Firm Should Follow and check back next Friday for next week’s top articles!