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 a series of new Securities and Exchange Commissions (“SEC”) rule proposals that would impact broker dealers and RIA firms and Department of Labor (“DOL”) fiduciary rule. Check back each week for the latest list of top stories.
Here’s our top investment adviser compliance articles for the week of April 20, 2018:
- SEC Advice Rule May Give RIAs Leg Up Over Broker-Dealers (Author- Mark Schoeff Jr., InvestmentNews)
Making the rounds in financial news this week has been the SEC’s new conduct standards, released last week. At it’s core, Shoeff says, it’s “a new client relationship summary for brokers and advisers; and an interpretation of the fiduciary standard of care that advisers currently owe to their clients”. He believes what most people were expecting was a “uniform standard” for brokers and advisers, but the SEC’s proposal delineates the two. For brokers, a new best interest standard could replace a more traditional suitability standards. On the other hand, RIAs would still be held to a separate fiduciary standard. The SEC is currently accepting feedback on the proposal, noting concerns about disclosure forms and licensing.
- Interesting Angles on the DOL’s Fiduciary Rule #88 (Author- Fred Reish, FredReish.com)
Fred Reish’s 88th article is the 4th and final portion of what is next for the DOL fiduciary rule. In his own words, Reish states, “This post discusses conflicts of interest for fiduciary advisors under ERISA and the code-and what the future may hold.” Reish argues two main points for why this point is the stickiest point in the DOL rule’s future. One, the SEC and DOL are operating separately on this matter. In a subset, the DOL is also responsible to ERISA and the IRS. Secondly, are simple disclosures of conflicts of interest enough to protect investors? The SEC Chairman has also mentioned a “shorter, more transparent disclosure document for the conflicts of interest of RIAs and broker-dealers. Reish predicts that the DOL will follow suit and release their own set of standards and advice for fiduciaries.
- SEC Standard of Conduct Proposal Faces ‘Arduous Path’: Fi360’s Aikin (Author- Melanie Waddell, ThinkAdvisor.com)
Fi360 recently held its annual conference in San Diego at which Blaine Aiken spoke. While he praised the SEC’s proposed conduct standards as a positive step, he understands the initial proposal has issues. In his mind, even if the SEC could ultimately please everyone involved, Aikin says, any implementation wouldn’t likely happen for years. He sees the largest problem being the “Regulation Best Interest for Brokers.” Even some SEC Commissioners had reservations about its labeling. Some critics actually say the proposal needs more, noting that standards aren’t noticeably changing with this set of guidelines.
- The SEC’s ‘Best Interest’ Proposal Just Prolongs the Status Quo (Author- Elliot Weissbluth, WealthManagement.com)
Weissbluth argues, “Establishing a fiduciary duty for financial advisors should not be this complicated. While it’s commendable that the SEC is making an effort to address this problem, a 1,000-page proposal is a disheartening outcome.” He notes that if it takes that many pages to explain things, you need to go back to the drawing board. He also believes only adding to the confusion is the long set of guidelines is the lack of definitions. He notes that nowhere in the proposal is “best interest” defined, though he does state that “fiduciary” shouldn’t need defining.
- Should More CPAs Become Financial Planners? (Author – Lyle Benson, FinancialPlanning)
Because of recent tax law changes, the financial industry was very busy this January through April. Benson argues that instead of simplifying the code, it may have further complicated matters. Even so, this is good news for advisors, and especially CPAs. The main reason? Conduct. “CPAs follow a strict code of conduct that requires us to act with integrity, objectivity and competence at all times,” he says. Add this to taxation knowledge and you’ve practically got a built-in financial advisor. He notes the misconception that advising requires a sales aspect of investment products. Not so, says Benson. He encourages anyone considering a slight career switch to also embrace technology and automation.
Don’t forget to check out last week’s top RIA compliance news articles on a series of new SEC rule proposals that would impact broker dealers and RIA firms. 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.