Top RIA Compliance News Articles for the Week of September 9, 2017

1. SEC Warns RIAs to Review Advertising Programs (Author- Kenneth Corbin, Financial-Planning.com)

Advisors need to keep a careful eye on their firm markets performance in order to stay compliant with Securities and Exchange Commission (“SEC”) advertising rules, Kenneth Corbin warns. Some examples of deficiencies found by the SEC include misleading performance results; misleading one-on-one presentations; and cherry-picked profitable stock selections, among others. “I think this means, especially when it comes to investment performance, advisors need to be especially careful in making sure they are using the appropriate benchmarks and in terms of using social media,” says Duane Thompson, senior policy analyst at Fi360.

2. How Advisors Can Prepare For Disaster (Author- Karen DeMasters, FA Magazine)

Given the recent hurricanes, it should be clear that advisors need to have a plan in place should the worst occur, Karen DeMasters from FA Magazine says. Recovery plans are essential, and can make the trauma already experienced by client and advisor alike, seem a bit easier. Things are exacerbated especially in an advisor’s situation, where client information is sensitive. Risks should be identified, and things like loss of power need to be planned for. Communication to clients is also necessary. DeMasters also points out the importance of insurance and planning for loss of important staff members.

3. Re-Framing Cyber-Security (Author- Salvador C. Orofino, WealthManagement.com)

In light of the Equifax hack, cyber-security is taking center stage in the business and personal spheres, says Salvador Orofino. However, he argues that “complete cyber-security isn’t possible,” and therefore, even the term “cyber-security” is obsolete. He says the key is education on the technology industry, not cyber-security itself. He points out, “how the technology industry infuses, without regulatory oversight, maximum addiction into their products. They then limit, as much as possible, any risk to them through contracts that unfortunately are never read,”. He proposes training on the matter that spans the entire financial industry in order to combat this.

4. Provision of House Spending Bill Would Kill DOL Fiduciary Rule (Author-Mark Schoeff, Jr., InvestmentNews)

As many know, spending bills presented by our government often include several amendments not directly related to the main issue addressed by the bill. Though this $1.23 trillion bill includes a “rider” to kill the DOL rule. The bill, which includes a rider to “kill” the DOL fiduciary rule, is expected to pass the House, but has less prospects in the Senate. Even though the bill could ultimately fail, Schoeff acknowledges that even the rule simply coming into play in legislation could be impactful. Currently, the government will be funded until December, and this is when we will discover if the DOL rule lives or dies.

5. Interesting Angles on the DOL’s Fiduciary Rule #61 (Author- Fred Reish, Fred Reish.com)
   

Fred Reish’s sixty-first post on the DOL rule covers distributions, rollovers into IRAs and transition exemptions. The requirements to allow participants to do so are lengthy and complicated. According to Reish, ERISA regulates this, and requires that advisors follow the “prudent man rule” and “duty of loyalty”. Aside from this, a hefty amount of information must be acquired from the participant in order to comply with the Impartial Conduct Standards requirement. Things like “services, investments, and fees and expenses in the plan” are needed. In the absence of these, Reish says, Form 5500 can be used. In essence, there are many ‘what ifs’ that cloud this portion of the fiduciary rule, which seems to be a recurring theme.

Don’t forget to check out last week’s top RIA compliance news articles on the DOL fiduciary rule, the new Form ADV changes, and the increasing number of new RIA registration. Be sure to check back next Friday for next week’s top articles!