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 February 20, 2016:
- Outside Advisor Exams Are No Substitute for SEC Oversight (Author- Kenneth Corbin, Financial Planning)
The Securities and Exchange Commission (SEC) continues to work on a proposal to outsource RIA exams to third party auditors. Diane Blizzard, Associate Director for Rule Making at the SEC Division of Investment Management, notes that “the reviews would not replace the exams done by the Office of Compliance Inspections and Examinations (OCIE), but they are designed to improve overall compliance by registered investment advisors.” Kennetch Corbin has the full update on the challenge that the SEC OCIE faces as the number of RIA firms continues to grow each year.
- SEC director says assuming 10% of advisers are reviewed each year is wrong (Author- Mark Schoeff Jr., InvestmentNews)
Marc Wyatt, Director of the OCIE, is stressing that the 10% annual examination rate for investment advisers does not mean the SEC only reviews 10% of advisers every year. As Mr. Wyatt notes at a recent conference, the SEC is doing quite a bit of analysis to target firms for examinations that potentially pose a higher risk. He also stressed that if third party RIA audits were to be implemented, such audits would “supplement, rather than supplant, the work that the OCIE does.” Mark Schoeff Jr. has the full story including the reaction from Norm Chap, former Director of the SEC Division of Investment Management, in regards to the concept of third party investment adviser examinations conducted by “unaccountable third parties.”
- Boost in SEC Examiners to Enable Closer Scrutiny of RIAs (Author- Bruce Kelly, InvestmentNews)
Continuing along the topic of the SEC’s plan to increase its examination staff in order to perform more audits, Bruce Kelly notes that in the 2015 fiscal year, the agency conducted 1,221 exams across the approximate 11,500 RIA firms the SEC currently oversees. Mr. Kelly further also goes on to write that the SEC is now more closely scrutinizing issues that in prior years may have been overlooked such as properly following a firm’s internal procedures and properly mitigating and disclosing potential conflicts of interests.
- Vermont Beefs Up Cyber, Elder Abuse Safeguards (Author- Megan Leonhardt, WealthManagement)
On Friday, Vermont’s financial regulator proposed new securities rules requiring advisors to adopt increased safeguards around cybersecurity and elder financial abuse. The new rules will impact some 1,000 investment advisory firms under the jurisdiction of the Vermont Securities Commissioner. These new rules in Vermont are largely based upon recently released North American Securities Administrators Association (NASAA) model rules.
- FINRA’s 5 Biggest Fine Categories in 2015 (Author- Melanie Waddell, ThinkAdvisor)
It was found that even though fines decreased last year, they were still the second-highest dollar amount since the financial crisis. The law firm, Sutherland Asbill & Brennan, reported sanctions imposed by the Financial Industry Regulatory Authority (FINRA) jumped to $190 million in 2015 as opposed to $166 million in 2014. The Chief Compliance Officer (CCO) of every RIA firm should also take note of the top five categories for FINRA fines which are: trade reporting, anti-money laundering, suitability, Forms U4, U5, and 3070, and advertising. Often, SEC and state regulators target similar areas of focus for RIA firms.
Be sure to check back next Friday for next week’s top articles!