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 March 5, 2016:
- Tips for Improving Your Online Security: “Out-of-wallet” Security Questions Are Not As Secure As You Think (Author- Alan R. Sumutka, CPA CGMA; and Andrew M. Sumutka, Ph.D., Financial Planning Association)
Cyber criminals continue to steal extensive amounts of personal data regularly. It is reported they can access substantial volumes of data of millions of people. This stolen data can include: names, addresses, social security numbers, birth dates, employment data, email addresses, bank account information, and much more. Criminals will make unauthorized credit card purchases and file false tax returns with this stolen data. This article offers some action items for advisors to consider when it comes to securing sensitive client information related to security questions and passwords.
- Advisor Exams Top Priority at SEC (Author- Kenneth Corbin, Financial Planning)
While only 10% of advisors are being examined each year, the Securities and Exchange Commission (SEC) has prioritized its efforts on focusing on the largest firms resulting in around 30% of the industry’s total regulatory assets under management (AUM) being audited annually. The SEC has also reallocated its existing budget with the intention of hiring more examiners. Furthermore, Kenneth Corbin reports that the agency plans to invest in more technology and personnel to make better use of the industry data that it currently gathers and monitors.
- Regulators Grapple with How a Robo-Adviser Can Be Fiduciary (Author- Mark Schoeff Jr., InvestmentNews)
SEC Commissioner Kara Stein recently commented that the current regulations guiding the industry were developed long before the advent of automated online investment platforms. New technology is raising new questions in regards to whether a software program has to act in the best interests of a client as a fiduciary and whether the developers behind the software program need to be licensed as investment adviser representatives. Mark Schoeff Jr. covers this evolving issue and more.
- SEC Execs Butt Heads Over Third-Party Advisor Audits (Author- Melanie Waddell, ThinkAdvisor)
Melanie Waddell reports that Mark Wyatt, head of the SEC’s Office of Compliance Inspections and Examinations (OCIE), claims third party investment adviser audits can provide “additional information to help us sharpen our risk-based focus.” In particular, Mr. Wyatt notes that even with additional examiners being allocated to audit investment advisory firms, the agency still does not have enough resources to significantly improve on the percentage of firms being audited on an annual basis. On the other hand, SEC Commissioner Kara Stein has not taken “any sides” as it relates to 3rd party RIA audits, but states she will look at any proposal and use her best judgment in regards to how to proceed. Some questions that continue to arise in relation to third party audits are: costs, who would would perform the audits, and scope of the exams.
- SEC Creates New Office to Help Oversee Financial Advisers (Author- Christine Idzelis, InvestmentNews)
On Tuesday, March 8, 2016, the SEC announced it has created a new office within the OCIE to help bolster the risk analysis and surveillance capabilities of the division tasked with overseeing RIA firms. The Office of Risk and Strategy named Peter Driscoll to lead the office as its first Chief Risk and Strategy Officer. Check out this article and the SEC’s official statement to learn more about Driscoll’s plans to more effectively use data to prioritize advisory firms that should be audited.
Be sure to check back next Friday for next week’s top articles!