Each week, 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 the Securities and Exchange Commission’s (SEC) enforcement cases, regulatory focus on cybersecurity, enforcement of the Department of Labor’s (DOL) Fiduciary Rule, and the proposed policy change for proxy advisory firms.
Here are our top investment adviser compliance articles for the week of November 12th, 2021:
1. SEC enforcement actions increase, but money to investors declines (Author – Mark Schoeff Jr., InvestmentNews)
Mark Schoeff Jr. provides an overview of the SEC’s enforcement cases over the past two years. While there was a 7% uptick in enforcement cases in 2021, there was a slight decrease in money ordered to be paid as penalties. Another notable finding for 2021, the SEC gave $564M in whistleblower awards to 108 individuals. Several investment advisers were fined for failing to file or missing filing deadlines on Form CRS.
2. Cybersecurity for Retirement Plan Advisors (Author – Ed McCarthy, Wealth Management)
This article highlights the overlapping priorities and guidelines of both the DOL and the SEC, related to cybersecurity. Cybersecurity was a focus area on the list of the SEC’s 2021 exam priorities, and proved to be an area providing both opportunities and challenges for advisors. Regulators look to verify whether firms have implemented appropriate measures to protect their customers information and prevent intrusions, if they are properly monitoring vendors, responding to incidents, and managing risks related to remote employees.
Ed McCarthy discusses how advisors can present a value-add opportunity to their clients by making them aware of their firms cybersecurity practices and educating them on industry standards.
3. DOL Rule Violators Could Get 10-Year Rollover Advice Suspension, Attorney Says (Author – Tracey Longo – Financial Advisor)
Regarding enforcement of the DOL’s Fiduciary Rule, industry experts discuss potential sanctions for misconduct, including a 10-year suspension on rollovers, a 100% excise tax, and an order requiring the firms to make investors whole. The article recommends advisers be aware that they are still subject to ERISA when providing rollover advice, and they are only outside of ERISA when the money moves over to the IRA.
The delay of the nonenforcement policy will help data providers improve their systems to provide plan information to financial institutions for rollover evaluations.
4. Adviser recruiting stays cold while breakaway RIAs heat up (Author – Devin McGinley, Investment News)
Recent data indicates a continued rise in breakaway RIAs, with total moves of experienced advisers up 10% year over year for the first three quarters of 2021. The RIA channel shows a recorded growth of 1,274 advisers from other channels. Wirehouses show a significant decrease in adviser retention, comparable to the 2009 financial crisis. Devin McGinley also shares how the pandemic delivered challenges for actually transitioning offices and networking.
5. SEC Moves to Reverse Trump-Era Restrictions on Proxy Advisory Firms (Author – Ben Bain, Think Advisor)
Ben Bain outlines the SEC’s plans to remove a policy that requires proxy advisory firms to share their recommendations with corporate executives and shareholders simultaneously. Shareholders and activists have expressed their concerns with the current policy, stating that it makes it difficult to hold companies accountable for poor performance and “impairs the independence and timeliness of proxy voting advice.” The newly proposed policy would also omit language about consequences for not disclosing information around proxy voting advice.
Don’t forget to check out last week’s top RIA compliance news articles that focus on the SEC’s risk alert on investment advisers billing practices, compliance with the SEC Marketing Rule, anticipated regulatory changes for the private fund industry, and current trends for RIA fee models.