Archive for the ‘MarketCounsel’ Category

“Whatever you do, don’t call them brokers.” @Think_MelanieW @ThinkAdvisor highlights @HDelux

Tuesday, October 3rd, 2017

As Brian Hamburger, CEO of regulatory consulting firm MarketCounsel, noted on the recent webcast, in 1999 — under what is commonly referred to as the broker-dealer exemption — the SEC said that brokers’ fee-based advice “did not have to include a fiduciary responsibility as long as the broker wasn’t making the final investment decision,” sparking a proliferation in the early 2000s of fee-based brokerage accounts.  Brokerage firms then started to “dress up” as independent advisors and started to “rebrand” the broker role — with firms applying different titles to registered reps like financial consultant, financial representative and wealth manager — with the message from the firms being: “‘Whatever you do, don’t call them brokers.’”

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#MSUM17 Themes Announced: identity, purpose and protection of independent wealth management firms.

Wednesday, September 27th, 2017

Read the press release here.


“Technology is the catalyst,” @HDelux to @Mike_Thrasher @wealth_mgmt on what fuels the move to independence.

Wednesday, September 27th, 2017

Phil Shaffer, a co-founder of Graystone Consulting, Morgan Stanley’s wealth management business that caters to institutions and wealthy individuals, has left the group to start his own independent advisory firm. “We have long said that technology is the catalyst for these departures,” said Brian Hamburger, president and CEO of MarketCounsel. “It’s what’s enabling them to leave and go toe to toe with the firms that they left.” MarketCounsel is an Englewood, N.J.-based firm that specializes in helping brokers transition to independence.

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SEC Statement on Cybersecurity Reveals EDGAR System Hacked

Thursday, September 21st, 2017

The SEC announced that its EDGAR system for storing documents filed by publicly traded companies was hacked last year.  The SEC further admitted that the information, which included filings that had not yet been made public, may have been used to trade on inside information.  The information about the hack was buried in an eight page “Statement on Cybersecurity” (the “Statement”) from Chairman Jay Clayton.  In the Statement, Mr. Clayton noted that “In August 2017, the Commission learned that an incident previously detected in 2016 may have provided the basis for illicit gain through trading.”  This potentially harmful breach was not disclosed by the Commission previously and warranted only five sentences in the Statement which ended with “Our investigation of this matter is ongoing, however, and we are coordinating with appropriate authorities.”

Cybersecurity is an important area for investment advisers and not just for regulatory purposes.  Advisers must protect their data, including client data that they have access to, for business and trust reasons.  It is worth noting, however, that the SEC has not said what they are going to remediate the breach, or for not disclosing the breach for a year or so after they became aware of it.  Yet that is the position that the Commission has taken with some broker-dealers and investment advisers.  We can only hope that the Commission will show the same compassion when looking at the technical compliance oversight of small investment advisers using good faith and best efforts in their compliance programs.

In the meantime, advisers should work with their information technology providers, either internal or third-party, to ensure that the firm is properly protecting data based upon the latest cybersecurity tools and guidance from within and outside the securities industry.  As always, members of MarketCounsel’s compliance management programs can find more information on cybersecurity guidance by going to this article on RIAglass and then searching numerous other cybersecurity articles.

“Investors have been very apathetic [about] the distinction between advisors and brokers and so long as that’s the case…” @HDelux @finplan

Monday, September 11th, 2017

Fee-only advisors often struggle to impress upon investors the fundamental differences between their fiduciary business model and that of, say, a commission-drive brokerage shop operating under the suitability standard.  “Investors have historically been very apathetic about really entrenching themselves with regards to the distinction between advisors and brokers, and so long as that’s the case, it’s going to be tough to imagine the SEC immediately changing tack given the issues that are backlogged on its docket today,” says Brian Hamburger, president and CEO of MarketCounsel, a business and regulatory consulting firm for entrepreneurial investment advisors.

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“The SEC may have permitted this practice to proliferate, but it was the private sector that continued to allow this,” @HDelux @wealth_mgmt

Monday, September 11th, 2017

Brian Hamburger, president and CEO of MarketCounsel, joined Former SEC Commissioner Aguilar on a webinar sponsored by TD Ameritrade Institutional. Aguilar called it an “embarrassment” that the SEC still hasn’t come out with a uniform fiduciary standard. He blamed politics and a bandwidth issue. Hamburger, however, believes it’s unfair to blame just the SEC.  “[The SEC] may have permitted this practice to proliferate, but it was the private sector that continued to allow this,” Hamburger said. “And at the end of the day, it also was investors. Investors have historically been very apathetic about really entrenching themselves with regards to the distinction between advisors and brokers. So long as that’s the case, it’s going to be tough to imagine the SEC immediately changing tack given the issues that are backlogged on its docket today.” MarketCounsel is an Englewood, N.J.-based firm specializing in business and regulatory consulting services for investment advisers.

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The Value of Greater Transparency in FINRA Expungement Awards @newsfromIN @MarkSchoeff

Tuesday, August 22nd, 2017

CRD records are like credit reports for financial advisors – you want them to be as clean as possible, and at least where there is derogatory information reported, it needs to be accurate to avoid doing unnecessary harm.   As FINRA continues to push for widespread use of its BrokerCheck tool to background check brokers, and expansion of increased disclosures, the drive to ensure one’s BrokerCheck report is accurate has never been stronger.  To have inaccurate or misleading entries removed from their records, representatives must file an action against the firm that reported the information, or the customer whose complaint was reported.

Under pressure to protect the integrity of BrokerCheck and CRD record reporting,    FINRA’s Rules  require the panel provide a written explanation of the reason(s) for granting expungement.  Even then, it reserves for itself the right to challenge a panel’s decision to grant expungement of any customer complaint.  Even still, this has seldom resulted in detailed reasoned awards that provide meaningful guidance for future expungement actions, leaving brokers asking, “what are my chances that I’ll be able to prove this is just wrong?” The opaque nature of FINRA expungement awards may be changing.  Recent data from the Securities Arbitration Commentator requested by InvestmentNews found a slight but noticeable increase in the number of reasoned expungement awards in settled cases, from 15% through the first quarter of 2016 to 22% through the first quarter of 2017, as well as the issuance of reasoned awards in some recent high-profile cases.  See  Wood vs. Merrill Lynch, Arbitration No. 16-00246, award issued on March 31, 2017; Caputo, et al vs. Kathleen Tarr, Arbitration No. 14-03557, award issued on March 28, 2017.

This increase seems to be attributable to two primary factors.  First, in October of 2013 FINRA issued the “Notice to Arbitrators and Parties on Expanded Expungement Guidance, which was then amended in 2015.  The Amended Notice instructed panels to “ensure that the explanation is complete and is not solely a recitation of one of the Rule 2080 grounds or language provided in the expungement request. Specifically, arbitrators should identify in the award the reason(s) for and any specific documentary or other evidence relied on in recommending expungement.”
Panels now appear to be applying this guidance with greater emphasis and consistency.  Second, FINRA seems to be responding to call for greater transparency in its expungement process by the Public Investors Arbitration Bar Association, particularly after it released its own report in 2013, by explaining the rationale underlying their expungement awards.

The result of this greater emphasis on reasoned awards is that representatives now have the opportunity to review expungement awards, find similar or analogous fact patterns, and identify the facts and legal arguments that the panels found dispositive.  While not precedential in a legal sense, the ability to tailor an expungement application by focusing on elements that proved successful in prior proceedings should increase the likelihood of a successful expungement.

While the addition of some measure of insight into the arbitration panels’ decision making may be a useful tool for evaluating the viability of a potential expungement application, there is no substitute for the guidance provided by experienced FINRA counsel, and the attorneys at the Hamburger Law Firm are available to answer your questions about the FINRA expungement process.

@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.

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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.

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