Top RIA Compliance News Articles for the Week of September 14, 2018

1. Five social media cybersecurity updates you can address now (Author- Scott Kleinberg, InvestmentNews)

Scott Kleinberg, social media expert at InvestmentNews, shares several simple steps your firm can take to “keep your social media and general web use as safe as possible.” Cybersecurity remains a top SEC RIA regulatory focus area. Some best practices shared by Kleinbergsec include: taking stock of all passwords and consider using a password manager tool; train your staff to never click on unknown links, and this is not just limited to links sent to you via email; and make sure your software is updated. To view a more comprehensive list and explanation, click here. 

2. Best Interest and Best Practices: Improving Retirement Outcomes #2 (Author- Fred Reish, FredReish.com)

After completing his series titled, “The Interesting Angles of the Department of Labor’s (DOL) Fiduciary Duty,” Fred Reish moves on to a new series called “The Bests.” This new series focuses on “Best Interests and Best Practices.”  This is his second article in the series that picks up where the first one left off. In the first article, Reish concluded that the Best Interest standard requires “careful and skillful professional process measured by the objective standard of a knowledgeable and experienced advisor and a duty of loyalty to the investor.” In his second article, “discusses the type of process that would satisfy the Best Interest standard for all of those rules. However, since the process is not well defined (other than in guidance under ERISA), some of the suggestions in the post may, in fact, be Best Practices.” To read his detailed analysis, click here. 

3. After settling with the SEC for $250,000 over two compliance issues, Peter Mallouk explains what he quietly and painfully experienced as his RIA grew from $15 billion to $36 billion (Author- Peter Mallouk, RIABiz)

Peter Mallouk, CEO of Creative Planning in Leawood, Kansas, leads one of the largest and fastest-growing RIA firms in the country. However, in 2016 after a routine SEC audit, Mallouk writes that Creative Planning “had a few issues that garnered more attention from the SEC.” According to Mallouk, “Our story begins after considerable time had passed from a routine audit. Months after we received and addressed our deficiency letter, one issue was escalated and a new one appeared.” He further states “the bigger issue, and one we are now much more sensitive to, related to advertising.” Although his firm had regularly advertised on the radio, most of the advertising had been pre-approved recorded messages. Until one day when Mallouk writes that the local radio host added “his own color commentary” that went outside of Creative Planning’s outlined talking points and led to regulatory issues related to prohibited client testimonials. To learn more about Peter Mallouks experience, and his advice for other RIA firms, click here. 

4. Reg BI Disclosure Does Not Pass Readability Test (Author- Diana Britton, WealthManagement.com)

According to a study conducted by Dr. Deborah Bosley, owner of The Plain Language Group, “The Securities and Exchange Commission has circulated a mockup of its Customer Relationship Summary form, a disclosure requirement in its proposed Regulation Best Interest, which is meant to alleviate client confusion about the differences between brokers and registered investment advisors. But the mockup didn’t pass a simple readability test.” According to Dr. Bosley, in addition to the Form CRS not passing the readability test, there were issues with the way information was displayed.

5. Regulators Warn of Hurricane Florence Related Scam (Author – Melanie Waddell, ThinkAdvisor)

According to a recent article by Melanie Waddell, “Regulators are warning investors to be on the lookout for opportunistic investment or charitable scams in the aftermath of Hurricane Florence.” The Financial Industry Regulatory Authority (“FINRA”) released an Investor Alert earlier this week stating, ‘Beware of Stock Fraud in the Wake of Hurricane Florence,’ and further detailing, “how investors can spot and protect themselves from investment scams associated with the cleanup and rebuilding of devastated areas.” A couple of the recommendations offered by FINRA  for investors to help avoid the scams include to “investigate before they invest” and “determine where the stock trades.”

Don’t forget to check out last week’s top RIA compliance news articles on business continuity plans, the proposed Reg BI, and three types of succession strategies. Be sure to check back next Friday for next week’s top articles!