Archive for February, 2017

SEC Provides Guidance to Robo-Advisers and Investors

Friday, February 24th, 2017

The SEC’s Division of Investment Management published a Guidance Update to robo-advisers that provided suggestions for how robo-advisers can address some of the unique compliance considerations and legal obligations they may have under the Investment Advisers Act of 1940.  The guidance focuses on robo-advisers that provide services directly to clients over the internet. The guidance discusses the following main issues: i) the substance and presentation of disclosures; ii) the provision of suitable advice; and iii) effective compliance programs.  In addition to the Guidance Update provided to robo-advisers, the SEC published an Investor Bulletin to educate investors on robo-advisers. Compliance Management members can find out more about this rule on RIAglass.

‘How RIAs Should Respond to Cyber Breaches’ @FinAd_IQ quoting @HDelux

Thursday, February 23rd, 2017

The SEC requires advice firms to have reasonable safeguards to secure clients’ private data, Brian Hamburger, chief executive of compliance consulting firm MarketCounsel, tells Vonnegut. But there’s no definition of what those safeguards are supposed to be, according to Hamburger. At the same time, state regulations on cybersecurity measures vary, Vonnegut writes. That means advisors who suffer a data breach may have to tell their clients in one state something different than what they tell their clients in another state, he writes.  Nonetheless the SEC, FINRA and state regulators have gone after wealth management firms for data breaches, Hamburger tells Vonnegut.

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‘How RIAs Should Respond to Cyber Breaches’ @FinAd_IQ quoting @HDelux

Thursday, February 23rd, 2017

The SEC requires advice firms to have reasonable safeguards to secure clients’ private data, Brian Hamburger, chief executive of compliance consulting firm MarketCounsel, tells Vonnegut. But there’s no definition of what those safeguards are supposed to be, according to Hamburger. At the same time, state regulations on cybersecurity measures vary, Vonnegut writes. That means advisors who suffer a data breach may have to tell their clients in one state something different than what they tell their clients in another state, he writes.  Nonetheless the SEC, FINRA and state regulators have gone after wealth management firms for data breaches, Hamburger tells Vonnegut.

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@HDelux talks about getting proactive on cybersecurity with @NorbVonnegut @barronsonline

Thursday, February 23rd, 2017

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“The issue here is the consumer is confused,” @RIABiz recaps @Hdelux session at #T32017

Thursday, February 23rd, 2017

While the conference yielded a smorgasbord of announcements, acquisitions and integrations (Strike 1!), Joel Bruckenstein is to be commended for including Brian Hamburger, Ron Carson, Bob Veres and Andy Putterman, RIA dignitaries known less for technology.

Brian Hamburger, CEO, MarketCounsel:  “The Obama Administration was all about harmonizing broker vs. RIA. [England] went the opposite way and it was really the sign of a weak regulator since they bypassed the process versus fixing the real problem. The issue here is the consumer is confused, and that still remains, if not greater! We also expect a delay if not a repeal [of the DOL fiduciary rule.]”

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Debate continues around the fiduciary standard, but independent advisors have already won, @HDelux explains to @newsfromIN at #T32017

Thursday, February 23rd, 2017

Watch here.

SEC Publishes Custody Guidance on Letters of Authorization and Transfers Between Client’s Accounts

Wednesday, February 22nd, 2017

Custody is an important part of an investment adviser’s compliance program.  Over the years, the SEC has revised its custody rule and provided guidance through interpretive releases, deficiency letters and frequently asked questions.  Two areas, in particular, have been unclear over the years.  First, whether an adviser has custody if a client gives it authority to disburse assets to a third party through a standing letter of authorization.  Second, whether an adviser has custody if it can transfer client funds between two or more of the client’s accounts at the same or different custodians.  The SEC recently published guidance regarding these two issue which will help advisers maintain custody compliance.  Each requires advisers and custodians to get client consents and acknowledgments limiting the adviser’s authority.  In addition, the SEC published a Guidance Update to inform advisers about the risk of being given custody inadvertently by a custodian and client.  Compliance Management members can find out more about this rule and other cybersecurity issues on RIAglass.

We’re growing our client engagement team. Know a great candidate in the greater NYC Area? #jobs

Wednesday, February 15th, 2017

Details at https://cnsl.me/engmtmgr

A Cautionary Tale for Indie Brokers? @HDelux @Diana_Britton @wealth_mgmt

Tuesday, February 14th, 2017

“I’ve seen for far too long—b/d’s and insurance companies urging people to set up an S corp or a limited liability company,” Hamburger said.  “There’s nothing inherently bad about having the S corp or having the LLC,” Hamburger said. “What becomes a problem is when they try to use these entities as a way to recharacterize the income and pay less tax.” I know “so many other people do it this way. It doesn’t necessarily make it right. This is not crowd-based regulation.”

SEC Risk Alert: Five Most Frequent Deficiencies in Adviser Exams

Friday, February 10th, 2017

The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) published a risk alert with a list of the five compliance topics most frequently identified in adviser deficiency letters. The alert included examples of each of the typical deficiencies. Members of the Compliance Management program can find more information on RIAglass.

Compliance Rule:

  • Compliance manuals are not reasonably tailored to the adviser’s business practices.
  • Annual reviews are not performed or did not address the adequacy of the policies and procedures.
  • Advisers are not following the policies and procedures.
  • Compliance manuals are not kept current.

Regulatory Filings:

  • Inaccurate disclosures.
  • Untimely amendments.
  • Incorrect and untimely Form PF filings.
  • Incorrect and untimely Form D filings.

Custody Rule:

  • Advisers did not recognize that they have custody due to online access to client accounts.
  • Advisers did not recognize that they have custody due to authority over client accounts.
  • Advisers with custody obtained surprise examinations that don’t meet the requirements of the Custody Rule.

Code of Ethics:

  • Access persons not properly identified.
  • Code of ethics missing required information such as reporting requirements.
  • Untimely submission of holdings/transaction reports by access persons.
  • No description of the code of ethics in the ADV Disclosure Brochure.

Books and Records:

  • Adviser did not maintain all required records.
  • Books and records are inaccurate or not updated.
  • Inconsistent recordkeeping.