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 Securities and Exchange Commission (“SEC”) Share Class Selection Disclosure Initiative, the proposed SEC advise rule and FINRA’s hybrid RIA oversight plans. Check back each week for the latest list of top stories.
Here’s our top investment adviser compliance articles for the week of April 27, 2018:
- As time runs out, SEC guides advisors on reporting share-class overcharges (Author- Kenneth Corbin, FinancialPlanning)
Time is quickly running out on the SEC’s share class self-reporting initiative. With the June 12th deadline around the corner, “the SEC is offering guidance on how advisors can receive favorable settlement terms if they overcharged clients” as reported by Kenneth Corbin. “Much of the new guidance details the eligibility for the program, which offers a set of uniform settlement terms for advisors who self-report that they sold clients high-cost fund shares when comparable, lower-fee shares were available. For starters, the Share Class Disclosure Initiative only applies to RIAs, the SEC states. Dually registered advisors and brokers can participate in the program, but only if they were acting as an investment advisor when making the mutual find recommendation.” The SEC also notes in its latest FAQ release that it doesn’t anticipate extending the deadline past June 12.
- As curtains close on DOL fiduciary rule, SEC advice rule takes center stage (Author- Mark Schoeff Jr., Investment News)
With the demise of the DOL fiduciary rule, all attention is turning towards the investment advice proposal from the SEC released on April 18th. As reported by Mark Schoeff, “The financial industry plaintiffs in the 5th Circuit couldn’t be happier that the SEC is now firmly in the lead on investment-advice policy. They argued that the DOL didn’t have authority to promulgate the regulation, which requires brokers to act in the best interests of their clients in retirement accounts, and that the SEC was the appropriate regulator to tackle the issue.” According to an analysis released by the Bates Group, “the SEC proposal is a ‘compromise between the regulatory status quo and the now-deceased fiduciary-rule.” The report continues to state, “but the firm noted that the ‘disparate reaction by the `SEC` commissioners, market participants and political leadership’ ensure a challenging SEC rulemaking process that may not end until 2020.” Time will only tell if the SEC proposal will keep momentum with the DOL rule fizzles out.
- SEC IM Chief Offers Clarity on Broker Conduct Standards (Author- Melanie Waddell, ThinkAdvisor)
Dalia Blass, the head of the SEC’s Investment Management Division, took the time to answer some questions that have been streaming in about the new standard of conduct proposal. As reported by Melanie Waddell, Ms. Blass said, “questions have been posed about the new disclosure form, called the ‘Relationship Summary’ which is designated to educate investors about ‘whether they are talking to a broker-dealer, an investment advisor, or both and why that matters.” As we have previously written, the SEC appears committed to ensuring the Form CRS is designed in a concise, retail investor-friendly format that is easy to understand and written in plain language
- 6 big questions about the SEC advice rule (Author- Greg Iacurci, InvestmentNews)
It’s only been two weeks since the SEC proposed their overhaul to the investment advise standards, and some big questions are already swirling. According to Greg Iacurci of InvestmentNews, there are six pressing issues. They are as follows:
- Is the best interest standard a fiduciary standard
- Enforcement
- Conflict mitigation
- ‘Unconscious’ conflict of interest
- Definition of ‘recommendation’
- Cost benefit analysis
To read more about each of the above questions, read the entire article on InvestmentNews here.
- Finra Gets Cool Reception On Hybrid Oversight Plan (Author – Dan Jamieson, Financial Advisor)
In February of this year, FINRA proposed an updated hybrid oversight plan that would revamp their rules on “outside business activities (OBAs), private securities transactions, and dropping the supervision requirement if a B-D determines it is unnecessary.” Comments for the proposed rule were due Friday, April 27th. According to a comment letter from the North American Securities Administrators Association (“NASAA”), “the proposal would undermine investor protection.” As reported by Dan Jamieson, “as the SEC moves to create a best-interest standard for brokerage firms and clarify the roles of brokers and RIAs, the NASAA said, the proposal to segregate oversight ‘is generally out of sync with the needs of investors and current trends in broker-dealer regulation.”
Don’t forget to check out last week’s top RIA compliance news articles on new SEC rule proposals that would impact broker dealers and RIA firms, the DOL fiduciary rule, and why CPAs might consider establishing an RIA firm. 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.