Each Friday, we are 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 why RIAs are embracing compliance, crafting an annual compliance calendar, a new fiduciary rule, preparing for the SEC’s upcoming cybersecurity rules and rules regarding share repurchases.
Here are our top investment adviser compliance articles for the week of May 19, 2023:
RIAs Are Embracing Compliance as a Necessary Evil (Author – Jeff Benjamin, Investment News)
The growing number of independent financial advisors are facing new challenges and opportunities as entrepreneurs. Compliance is an important aspect that cannot be ignored, although it may not generate revenue directly. RIAs are realizing the importance of compliance in a complex regulatory environment. Many firms, including Kaufman Rossin Wealth and Settanni Financial, rely on outsourced compliance support to meet regulatory requirements. Compliance is seen as a necessary investment to protect the business and maintain client trust.
Crafting an Annual Compliance Calendar for a Solo RIA (Author – Ben Henry-Moreland, Financial Planning)
When advisors consider starting their own solo RIA firm, compliance becomes a major concern. Unlike advisors working for established firms, solo advisors are responsible for setting and implementing compliance policies for their entire company. They must fulfill personal compliance duties, such as documenting investment recommendations and reporting personal securities transactions, while also overseeing firmwide compliance. The solo advisor takes on the role of the chief compliance officer and must ensure that the firm follows regulations, document compliance efforts and be prepared for periodic examinations by regulatory bodies.
DOL’s Apparent U-Turn in Court Hints at New Fiduciary Rule in Works (Author – Emile Hallez, Investment News)
The Department of Labor (DOL) has decided not to defend its guidance on a Trump-era fiduciary rule in court, signaling a potential shift in its approach to retirement account financial advice. The DOL had previously filed an appeal against a court decision that favored the American Securities Association, who had sued the DOL over its guidance. The lawsuit pertained to the DOL’s interpretation that a single recommendation to roll money from a defined-contribution plan to an individual retirement account could trigger fiduciary status. While this change in direction does not imply a complete abandonment of a higher fiduciary standard, experts suggest that the DOL is likely racing to propose a new fiduciary rule before the end of President Biden’s term.
The Board is Set: Preparing for the SEC’s Upcoming Cybersecurity Rules (Author – Paul Hastings, JDSUPRA)
The SEC is expected to finalize the Proposed Rule for Public Companies (PRPC) on cybersecurity disclosure, governance and risk management soon. The PRPC will impose new requirements and expand existing cybersecurity disclosure obligations for public companies. Key requirements include a four-day disclosure timeframe for “material” cybersecurity incidents, disclosure of aggregated non-material incidents, disclosure of board cybersecurity expertise and disclosures on risk management, oversight and cybersecurity policies. To prepare for the PRPC, boards of directors should integrate cybersecurity into their overall business strategy, develop cybersecurity expertise at all levels, establish clear escalation processes, create and update incident response and notification guidelines and consult with experienced legal counsel throughout the process.
A Disclosure in Days Keeps the SEC Away (Author – Rebecca Fike, JDSUPRA)
The SEC has adopted new rules to enhance disclosure requirements for share repurchases. Under the new rules, corporations must disclose daily share repurchase information on a quarterly basis in their Forms 10-Q and 10-K, providing more detailed information than the previous monthly aggregate disclosures. The rules also require disclosure of the number of shares repurchased intended to qualify for the Rule 10b-18 safe harbor and insider trading affirmative defense conditions. These changes enable the SEC to monitor compliance with the safe harbor more effectively. Companies should be prepared for the potential impact of the new rules on SEC enforcement and ensure accurate disclosure of share repurchases and compliance with the safe harbor.
Don’t forget to check out last week’s top RIA compliance news articles recapping the SEC’s new proposal regarding cybersecurity, the importance of growth for RIA firms and more.