Top RIA Compliance News Articles for the Week of May 27, 2017

1. SEC Jumps Into Fiduciary Rule Fray, Seeking Comments on Future Action (Author- Melanie Waddell, ThinkAdvisor)

ThinkAdvisor’s Melanie Waddell reports, “Securities and Exchange Commission Chairman Jay Clayton said Thursday that the agency is seeking comment on a possible laundry list of issues to inform ‘possible future actions’ by the agency on fiduciary duty rulemaking.” Waddell rights that Chairman Clayton “says he ‘welcomes Labor’s’ invitation to engage constructively as the Commission moves forward with its examination of the standards of conduct applicable to investment advisers and broker-dealers, and related matters.” Barbara Roper, director of investor protection for the Consumer Federation of America (“CFA”), also comments that the CFA has, “long supported SEC action to ensure that broker-dealers who provide personalized investment advice are held to the fiduciary standard appropriate to that role. And we appreciate that Chairman Clayton, like his four immediate predecessors, has pledged to address this issue.” This will be an interesting development to watch to see if the SEC makes any progress on a potential uniform fiduciary standard.

2. Interesting Angles on the DOL’s Fiduciary Rule #48 (Author- Fred Reish, Fredreish.com)

Fred Reish, one of our top 5 DOL fiduciary rule experts to follow, published his 48th article about his observations on the DOL fiduciary rule. In this particular article, he discusses the rule’s June 9 applicability date and reflects on the latest round of FAQs recently released by the DOL regarding the fiduciary rule’s transition period. Two questions Reish discusses are: “Is the recommendation prudent and loyal?” and “Does the recommendation result in a prohibited transaction and, if so, are the conditions of an exemption satisfied?” Reish informs, “financial Institutions (including broker-dealers, RIAs, banks and trust companies, and insurance companies) need to institute policies and procedures for compliance with these rules, including training of their representatives about how to satisfy the duties of prudence and loyalty.”

3. How a Personal Capital Exec Electrified the NorCal FPA Crowd With the DOL Details, Relegating Jeff Gundlach and Other Stars to a Dimmer Sparkle (Author- Timothy D. Welsh, RIABiz)

At this week’s Financial Planning Association NorCal Conference, John Castelly, chief compliance officer for Personal Capital, spoke to conference attendees on the fast approaching June 9 DOL fiduciary rule applicability date. RIABiz guest columnist, Timothy Welsh, notes that Castelly states, “the real ‘gotcha’ with the DOL rule is that for the first time ever, third parties, and not the government, will be the ones being able to use a Private Right of Action to enforce the rule and collect damages.” He tried to ease some concerns by also reminding attendees that DOL Secretary Alexander Acosta has announced that the DOL will not take an active enforcement stance until January 1, 2018. 

4. DOL’s (Possible) Loss Could Be Your Gain (Author- Bob Clark, ThinkAdvisor)

Bob Clark writes that the Trump administration’s decision on revoking the fiduciary rule allows independent RIA firms to gain a competitive advantage against the broker dealer industry. Clark opines, “today’s challenge, and opportunity, for independent fiduciary advisors is how to clearly and effectively differentiate themselves from the brokerage crowd and demonstrate their full-time fiduciary status to clients and prospects.” He provides suggestions on why and how RIA firms can promote their fiduciary knowledge during this time when public awareness of fiduciary investment advice is in the spotlight. 

5. As Fiduciary Debate Slogs On, Both Sides Will Be Dragged Through the Mud (Author- Mark Schoeff Jr., Investment News)

In this editorial, Mark Schoeff Jr. writes that the never ending debate on the DOL fiduciary rule will continue on through at least the end of the year. He states, “an industry leader and some advisers worry that both sides will be dragged through the mud.” Blaine Aikin, executive chairman of Fi360, is quoted on his opinions as well in Schoeff’s article. Aikin believes the fiduciary rule effects everyone involved in financial services as well as their reputations. David Roberts, director of fiduciary and investment compliance at Unified Trust, believes that consumers do not follow the concept of the rule. Roberts says, “the consumer doesn’t understand the minutiae about the debate. Why does it take 400 pages of federal code to explain the right thing to do? They don’t know who to believe, so they throw up their hands.”

Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule, texting, and cybersecurity. Be sure to check back next Friday for next week’s top articles!