Archive for the ‘MarketCounsel’ Category

@BarronsOnline features @danbernstein on “Firms Hitting the Brakes on Fiduciary Work”

Monday, August 21st, 2017

Barron’s writes:

With a lengthy delay likely for the DOL fiduciary rule’s next set of requirements, brokerages are set to delay some of the compliance adjustments they’d planned, writes InvestmentNews.  Specifically, steps around broker compensation and product lineups are likely to be delayed, industry experts tell the publication.  “They now get to push [compliance] off into the horizon, and the horizon is kind of beyond vision,” says Daniel Bernstein, chief regulatory counsel at MarketCounsel.  MarketCounsel is an Englewood, N.J.-based firm specializing in business and regulatory consulting services for investment advisers.

Read more.

UBS Fails to Block RIA’s Client Solicitation

Thursday, August 17th, 2017

The Protocol for Broker Recruiting is a well-worn path to independence, permitting advisors to leave one Protocol member firm to join another.  So long as they follow the rules of the Protocol and act in good faith, the payoff is big – advisors can leave their firms with limited client information tucked under their arms, and use it to solicit their clients.  But UBS v. Fiore, et al. (DCT) illustrates one of many recent wirehouse tactics to aggressively police use of the Protocol – a trend that shows no signs of stopping.  It highlights the value of an authentic planning process and experienced transition counsel.

UBS’ bid for a court order to bar Fiore, his team and their new RIA from soliciting certain of their UBS clients was largely a test of the Protocol’s amorphous good faith standard.  Fiore, fired by UBS six months before launching his new RIA, did not claim the Protocol applied to him.  But, when his team resigned to join him upon launch of the new firm, they used the Protocol, provoking UBS’ aggressive effort to stop them in their tracks.  Relying on text messages and personal email account exchanges, UBS claimed the team knew Fiore was soliciting clients during his six-month hiatus, yet failed to inform UBS management of Fiore’s activities, in breach of their duties to UBS.  As is common, immediately upon launch of the new RIA, Fiore and the team sent their clients a blast email with the news.  Importantly, the email was also sent to clients not on the team’s Protocol list, in direct violation of the Protocol’s rules.

Rather than simply attack this conduct as an express breach of the Protocol, UBS argued their conduct proved they acted in bad faith in using the Protocol.  “Some courts have found that a showing of bad faith in serious violation of the spirit, if not the text, of the Protocol by a departing financial advisor will prevent the Protocol and its protections from applying, allowing non-solicitation provisions to apply and leading the courts to find possible trade secrets-related violations.”  Recognizing breaches of the Protocol had likely occurred, the court was unwilling to extend those breaches and find they were committed in bad faith.  Instead, it found the Protocol’s main policy goal of clients’ interests of privacy and freedom of choice had not been violated because the team did not do anything that actually prevented UBS from “immediately contacting” clients upon their resignation, nor had they acted with “contempt for [their] clients’ right to freely choose” between the new RIA or UBS.

While the court denied UBS’ request for an injunction, the dispute now continues before a FINRA arbitration panel, where it will proceed to trial in 12-18 months, unless the parties reach a settlement.

Through our Transition Intelligence program, we provide strategic guidance to our clients so they may choose to accept or avoid risks related to their proposed employment transition, and gain a clear understanding of how their conduct may impact those risks.

UBS Fails to Block RIA’s Client Solicitation

Thursday, August 17th, 2017

The Protocol for Broker Recruiting is a well-worn path to independence, permitting advisors to leave one Protocol member firm to join another.  So long as they follow the rules of the Protocol and act in good faith, the payoff is big – advisors can leave their firms with limited client information tucked under their arms, and use it to solicit their clients.  But UBS v. Fiore, et al. (DCT) illustrates one of many recent wirehouse tactics to aggressively police use of the Protocol – a trend that shows no signs of stopping.  It highlights the value of an authentic planning process and experienced transition counsel.

UBS’ bid for a court order to bar Fiore, his team and their new RIA from soliciting certain of their UBS clients was largely a test of the Protocol’s amorphous good faith standard.  Fiore, fired by UBS six months before launching his new RIA, did not claim the Protocol applied to him.  But, when his team resigned to join him upon launch of the new firm, they used the Protocol, provoking UBS’ aggressive effort to stop them in their tracks.  Relying on text messages and personal email account exchanges, UBS claimed the team knew Fiore was soliciting clients during his six-month hiatus, yet failed to inform UBS management of Fiore’s activities, in breach of their duties to UBS.  As is common, immediately upon launch of the new RIA, Fiore and the team sent their clients a blast email with the news.  Importantly, the email was also sent to clients not on the team’s Protocol list, in direct violation of the Protocol’s rules.

Rather than simply attack this conduct as an express breach of the Protocol, UBS argued their conduct proved they acted in bad faith in using the Protocol.  “Some courts have found that a showing of bad faith in serious violation of the spirit, if not the text, of the Protocol by a departing financial advisor will prevent the Protocol and its protections from applying, allowing non-solicitation provisions to apply and leading the courts to find possible trade secrets-related violations.”  Recognizing breaches of the Protocol had likely occurred, the court was unwilling to extend those breaches and find they were committed in bad faith.  Instead, it found the Protocol’s main policy goal of clients’ interests of privacy and freedom of choice had not been violated because the team did not do anything that actually prevented UBS from “immediately contacting” clients upon their resignation, nor had they acted with “contempt for [their] clients’ right to freely choose” between the new RIA or UBS.

While the court denied UBS’ request for an injunction, the dispute now continues before a FINRA arbitration panel, where it will proceed to trial in 12-18 months, unless the parties reach a settlement.

Through our Transition Intelligence program, we provide strategic guidance to our clients so they may choose to accept or avoid risks related to their proposed employment transition, and gain a clear understanding of how their conduct may impact those risks.

@newsfromIN features @danbernstein: Broker-Dealers and RIAs change course in anticipation of DOL fiduciary rule delay

Thursday, August 17th, 2017

Broker-dealers and registered investment advisers are pivoting in the wake of news that the Department of Labor is likely to get a lengthy delay in the implementation date of its fiduciary rule.  “They now get to push [compliance] off into the horizon, and the horizon is kind of beyond vision,” said Daniel Bernstein, chief regulatory counsel at MarketCounsel. Mr. Bernstein added, “RIAs are able to side-step some of the more difficult elements of BICE compliance if they receive a ‘level fee’ as defined by the regulation. Assuming the delay occurs, advisers wouldn’t have to complete an analysis to determine if they’d qualify as level-fee fiduciaries, and can continue doing business as usual regarding rollovers.” MarketCounsel is an Englewood, N.J.-based firm specializing in business and regulatory consulting services for investment advisers.

Read more.

@HDelux to @RIABiz: “Our Passion Defines Us”

Wednesday, August 16th, 2017

Recently, Brian spoke with RIABiz and had an opportunity to discuss attorney qualifications:

“If an attorney can’t roll up their sleeves, remove the walls and share their passion about the success of our clients and their endeavors, we just don’t have a place for them here,” says Brian Hamburger, president and CEO of the Hamburger Law Firm. “That’s not to say that a qualified and experienced attorney cannot fulfill their client’s expectations. But passion is an essential element for us; it defines us.” The Hamburger Law Firm based in Englewood, NJ specializes in offering legal counsel to startup investment advisers and managing the employment transition for the industry’s most accomplished advisers.

Read more.

Third-Party Exams: SEC Apparently Drops the Initiative

Thursday, August 10th, 2017

It appears that the SEC will not pursue a third-party compliance examination requirement for investment advisers in the foreseeable future.  In 2016, the SEC staff had recommended that the Commission consider requiring third party examinations of investment advisers as a way to increase the number of advisers examined each year.  Many industry groups had opposed the third party exams for their likely impact on small advisers and uncertainty about quality and cost.  Some also believed a third-party examination rule would give FINRA an opening to push itself as a self-regulatory organization for investment advisers.  Third-party examinations were omitted from the SEC’s most recent regulatory agenda which precludes any realistic chance of a third-party audit rule in the foreseeable future.

As always, members of MarketCounsel’s compliance management programs can find more information on examinations on RIAglass.

DOL Requests to Further Delay Fiduciary Rule

Wednesday, August 9th, 2017

The US Department of Labor (the “DOL”) is seeking to extend the remaining implementation of the Fiduciary Rule that was scheduled to go into effect January 1, 2018 (“Phase 2”) by 18 months.  Phase 2 would include full implementation of the Best Interest Contract Exemption (the “BIC” Exemption).  In addition, certain fiduciaries could avoid the full BIC requirements if they only charge a “level fee.”  Many investment advisers could avail themselves of the level fee exemption, but others would find the requirements challenging (such as those advisers that charge different fees for managing different asset classes).

There is currently limited information on the delay requested by the DOL.  Details are expected shortly, but regardless, it looks as if the full BIC requirements are being pushed back, as we expected.  MarketCounsel believes that the 18 months places Phase 2 in jeopardy, either for SEC intervention or for political fodder.

As always, members of MarketCounsel’s compliance management programs can find more information on the DOL Rule and its implementation on RIAglass by searching for other articles on the topic.

SEC Sends Reminder Regarding Revisions to Form ADV Part 1

Wednesday, August 2nd, 2017

On August 2, 2017, the SEC sent out a reminder email to advisers that beginning on October 1, 2017, all investment advisers filing Form ADV must use the revised version of Part 1A.  Advisers that amend their ADV (Part 1 or 2) after September 30, 2017 will need to answer the new / revised questions.  Keep in mind that all investment advisers must update their Form ADV within 90 days after their fiscal year end.

The changes are substantial and include disclosures about the types of investments made by advisers and the percentages of assets under management invested in each.  Additional disclosures are required of advisers that invest client assets in derivatives (including options).

Members of MarketCounsel’s compliance management programs can find more information on the revisions on RIAglass.

Why RIAs are the future of financial advising. @HDelux talks with @Schwab4RIAs.

Wednesday, August 2nd, 2017

As RIAs have grown in size and number, a booming support system of advanced service providers and consulting firms has matured around them. This robust infrastructure gives RIAs choices, with solutions for just about any need. “We have more service providers than ever before,” says Brian Hamburger, president and CEO of MarketCounsel, a business and regulatory consulting firm for entrepreneurial investment advisors. “More will come online each and every year because this is where the industry is heading.”

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When is an RIA a Custodian? @wealth_mgmt talks with @HDelux at the @Pershing Advisor Solutions Regional Symposium.

Monday, July 24th, 2017

A long-standing point of confusion for many RIAs is whether or not they are subject to the SEC’s custody rules when moving client assets from one account to another. Many consider having a letter of authorization from the client to move money between accounts exempts them from being considered custodians in the SEC’s eyes. “A recent communication from the SEC reminded them that that is not the case, and they could be subject to the rule, which would require them to obtain a ‘surprise examination’ and an audit of those assets by a qualified accountant,” explains Brian Hamburger, president and CEO of MarketCounsel, a business and regulatory consulting firm for independent advisers.

Read more.