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 Commissions (“SEC”) proposed advice plan, succession planning, and a new SEC risk alert on best execution . Check back each week for the latest list of top stories.
Here’s our top investment adviser compliance articles for the week of July 5, 2018:
- SEC Exam Unit Highlights Advisors’ Best Execution Failures (Author- Melanie Waddell, ThinkAdvisor)
Earlier this week, OCIE released its list of most common compliance issues related to best execution by investment advisers. As reported by Melanie Wadell, “the agency’s Office of Compliance Inspections and Examinations states that when selecting broker-dealers and execution client trades, advisors must seek to obtain ‘best execution’ of client transactions., considering the circumstances of the particular transaction.” Per OCIE’s risk alert, SEC staff, “found that advisors not only failed to perform best execution reviews but that they also failed to consider ‘materially relevant factors’ during best execution reviews.” In addition, Wadell notes from the issued risk alert that “while some advisors did not have adequate best execution policies and procedures, others failed to disclose their best execution practices.” To read the risk alert in it’s entirety, click here.
- House panel approves bills to adjust regulations for small RIAs, protect senior investors (Author- Mark Schoeff Jr., Investment News)
This week the House Financial Services Committee approved two bills, one that could adjust regulations for small RIA firms and another was passed which would require the SEC to establish a team to protect senior investors. As reported by Mark Schoeff, “the House committee approved the Investment Adviser Regulatory Flexibility Improvement Act, which would require the SEC to revise its definition of a “small business” when assessing the impact of its regulations. Under the bill, the SEC must look beyond assets under management and include other factors, such as employment at an advisory firm.”
- Investors Tell SEC Best Interest Proposals Are Misleading (Author- Tracey Longo, Financial Advisor Magazine
During the month of July, the SEC has scheduled and conducted several roundtable meeting to seek comment on their proposed best-interest regulation. According to Tracey Longo, “investors roundtables in Atlanta and Washington, D.C., met directly with SEC staff to express their opinions on the SEC’s best interest and customer relationship summary proposals — specifically to give feedback on whether the proposals are effective in helping them understand the different legal standards of care brokers and advisors must provide to investors.” In short, they said the distinction between the two is “downright confusing.” According to one attendee, Brian Smith, an AARP member and retired Naval officer, “the SEC proposals’ use of the term ‘best interest’ to describe brokers’ standards of care is ‘very misleading and confusing.'”
- Is Succession Planning the Next Practice Management Crisis? (Author- Matt Brinker, WealthManagement.com)
What is your firm’s succession plan? As reported by Matt Brinker, “a recent Cerulli study found nearly one-third of advisors who plan to retire in the next 10 years are unsure of their succession plans.” So why are so many firms unsure of their firms succession plan? Brinker believes, “for some advisors, an inability to plan for their firm’s future ties directly to their inability to understand the value of their own business in the present. In other words, retiring principals can over-value their firms to the point where successors don’t want to take the reins.” To help solve for this, Brinker suggests investing in next-generation hires and finding a strategic partner to weed through the tough choices and ensure the continuity of their business.
- Interesting Angles on the DOL’s Fiduciary Rule #97 (Author – Fred Reish, FredReish.com)
Reish’s 97th article picks up where his 96th article left off. His third and final installment of this series centered around regulation best interest (“Reg BI”) recommendations made by broker-dealers “gives examples of how the proposals will differ when applied to common scenarios.” To read his scenario on what would and would not fall subject to the best interest standard of care for Jim and Joan, a married couple who start their own successful business and later opened personal accounts through their broker-dealer, click here.
Don’t forget to check out last week’s top RIA compliance news articles on the SEC’s proposed advice plan, tips to improve compliance efficiency, and the broker protocol. Be sure to check back next Friday for next week’s top articles!