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 July 30, 2016:
- How to Comply (and Why) With SEC Rules on Regulatory AUM (Author- Chris Stanley, ThinkAdvisor)
The Securities and Exchange Commission (SEC) requires advisers to report its regulatory assets under management (RAUM) in response to Item 5F of the Form ADV Part 1. As Chris Stanley writes, this section of the Form ADV has clear instructions on what should and should not be included in an investment adviser’s RAUM. According to Stanley, part of the instructions include “securities portfolios for which you provide continuous and regular supervisory or management services” and constitutes two prongs that are detailed in this article. In addition, RAUM instructions state that advisers cannot count assets if they do not provide advice on a constant basis. Check out this article to read more on this very important compliance topic.
- Adviser’s Consultant: Outsourcing Many Compliance Duties Best Move for CCOs (Author- Liz Skinner, InvestmentNews)
After Ryon Beyer had a difficult experience gathering all the information the SEC needed for a routine exam, he realized there had to be a different way to go about this. Once he started his own company, he decided to outsource this process to compliance experts to make this experience much easier. With the help of compliance experts, Beyer still serves as the firm’s Chief Compliance Officer (CCO), but is now able to spend much less time on compliance-focused tasks. Without hiring compliance experts, Liz Skinner writes the cost of hiring a full-time CCO to keep track of all the rule changes and adapt the firm to those rules can be as expensive as $200,000 a year or more.
- Ex-SEC Commissioner ‘Hopeful’ Fiduciary Rule Will Be Brought to SEC Vote (Author- John F. Wasik, Financial Planning)
Luis Aguilar, a former SEC commissioner, states “the SEC has yet to offer a fiduciary rule for public comment” and he’s “hopeful that the commission will adopt a fiduciary standard for all advisers who are providing personalized investment advice.” Aguilar is said to have a history of supporting and looking out for the individual investor. While serving as a SEC commissioner for seven years, he also had opinions on whether clients of broker-dealers should or shouldn’t be forced into arbitration to resolve disputes. Check out this article to learn more.
- How Far-Reaching is the DOL Fiduicary Rule? (Author- Sheryl Rowling, InvestmentNews)
While the Department of Labor’s Fiduciary Rule impacts investment advice provider to retirement plans, it also impacts individual retirement account (IRA) advice and as Sheryl Rowling writes, “can reach into unanticipated areas not obvious at first glance.” The new rule required advisers to act in the best interests of clients and proper documentation will be paramount. Rowling breaks down these possible services/tools advisors should consider into three categories: pre-investing, investing, and advice. Advisors should be cautious when providing advice (retirement and non-retirement) to make sure they are staying compliant once the DOL rule goes into effect next year.
- How to Let Go: Best Practices for Succession Planning (Author- Michelle Zhou, Financial Planning)
For individuals managing their own RIA firm, having a long term succession plan is critical to the firm’s future success as well as the success for the clients they serve. As emotional as the process of preparing for succession can be after years of building a successful company, author John Burns writes that it should also still make the firm look attractive to prospective buyers. Foremost, he suggests that the advisor focus on building a business that is less about the owner and more about the client service experience. This article, while not compliance focused, has particular relevancy given the recently proposed SEC rule which would require SEC-registered RIA firms to have a written business continuity and succession plan.
Don’t forget to check out last week’s top RIA compliance news articles on the DOL rule and cybersecurity. Be sure to check back next Friday for next week’s top articles!