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, tips to improve compliance efficiency, and broker protocol. Check back each week for the latest list of top stories.
Here’s our top investment adviser compliance articles for the week of June 29, 2018:
- SEC proposes new leeway to limit largest whistleblower payouts (Author- Ben Bain, FinancialPlanning.com)
As reported by Ben Bain, “The SEC voted 3-2 Thursday to seek comment on a plan that would let them reduce whistle-blower awards in cases where penalties are $100 million or more. The proposal gives commissioners flexibility to adjust tipsters’ payouts within the legal requirement that they range from 10% to 30% of total fines in the case they aided. SEC members wouldn’t be allowed to push awards below $30 million and they could boost payments that would be less than $2 million.” SEC Chairman, Jay Clayton stated, “Our whistle-blower program is a critical component in our investor-protection toolbox.” Since the creation of the program in 2010 by the Dodd Frank Act, whistle-blowers have collected over $250 million.
- Five Ways to Improve Compliance—And Not Feel Overwhelmed (Author-David Wagner, WealthManagement.com)
With continuous updates to the regulatory landscape, keeping up with compliance responsibilities can be a daunting task. David Wagner writes, “Every year, FINRA evaluates about 10 issues to consider for updated regulation. This year, that list includes both anti-money-laundering initiatives and the issue of suitability. Depending on how new regulations shake out, brokers and financial advisors could face burdensome requirements for data management.” To help better manage compliance, Wagner released a list of 5 ways to improve compliance. A couple of items included on his list are: revised written supervisory procedures regularly, bringing in a outside consultant, and implementing new tools.
- SEC Hits the Road to Hear Investors’ Thoughts on Best-Interest Plan (Author- Bernice Napach, ThinkAdvisor
The SEC is seeking comment on their propsed best-interest regulation. As reported by Bernice Napach, “The commission announced Friday that Chairman Jay Clayton will be holding a series of roundtable discussions with ‘Main Street investors’ around the country in July so they can ‘share their views on key questions about their relationship with their investment professional.’ ” In addition to the roundtables that have already been held in Houston and Atlanta, roundtables in Miami, Washington, D.C., Philadelphia, and Denver have also been scheduled for the month. According the the article, “Before each roundtable, participants will be given a document — Which Type of Account is Right for You – Brokerage, Investment Advisory or Both? — that summarizes a ‘hypothetical relationship‘ between an investors and a dually registered investment advisor, outlining the broker-dealer services on one side and investment advisor services on the other.” The SEC is seeking comments on the proposed rule until August 7, 2018.
- Wealth Advisers Face Obstacle to Job-Hopping After Court Ruling (Author- Neil Weinberg and Katherine Chiglinsky, WealthManagement.com)
Last week, a Georgia state court unleashed a controversial Broker Protocol-related ruling that may no longer allow financial advisors to easily change jobs and take their clients with them. Reported by Neil Weinberg and Katherine Chiglinsky, “in what appears to be the first case in the nation to address the matter, presiding judge Christopher McFadden of the Court of Appeals of the State of Georgia ruled on June 27 that ‘the protocol does not categorically invalidate notice provisions in employment agreements.'” While the rule took place in the state of Georgia, it will be interesting to observe it has broader ramifications.
- Is the head count falling at independent broker-dealers? Not yet (Author – Tobias Salinger, FinancialPlanning.com)
According to Tobias Salinger, “The number of financial advisors dropped by the largest independent broker-dealers has not exceeded the number gained in any of the past five years, in a signal that forecasts of shrinking head counts have not come to fruition. Advisors would still be wise to prepare for the belt-tightening, though.” According to Echelon’s latest annual M&A study, “Since 2007, the number of IBDs has declined by 28% to nearly 850 firms, while the count of SEC-registered RIAs has soared by 57% to nearly 15,000 firms.
Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule, the SEC’s proposed advice plan, and what questions advisors should ask themselves about best execution. Be sure to check back next Friday for next week’s top articles!