Top RIA Compliance News Articles for the Week of September 21, 2018

1. NASAA Seeks Comments on Cybersecurity (Author- Elizabeth Festa, ThinkAdvisor)

Earlier this week, NASAA released a new model rule proposal which would require investment advisers to adopt cybersecurity policies, among other new requirements. “In a request for comment, NASAA proposed a model rule on information security that would encompass both cybersecurity and physical security. Under this model, investment advisors would have to adopt policies and procedures for information security and share their privacy policy annually with clients.” The proposed rule contained two additional components to amend existing model rules including an amendment to the current Record Keeping Requirements for Investment Advisers Model Rule and an amendment to existing Unethical Business Practices of Investment Advisers.The comment period for the proposal ends November 26, 2018. 

2. New Jersey fiduciary rule could be first of many among states post-DOL (Author- Greg Iacurci, InvestmentNews)

According to a recent article by Greg Iacurici, “New Jersey’s push for a fiduciary rule governing brokerage firms in the state could be the first of many similar rules issued by other states following the death of the Department of Labor’s fiduciary regulation earlier this year.” New Jersey Governor, Phil Murphy, announced a “forth coming fiduciary regulation to be proposed and overseen by the state’s Bureau of Securities last week. The rule would create a uniform fiduciary standard for both brokers and registered investment advisers.” While New Jersey is the first to move in this direction, it may not be the last.

3. How Has Trump’s Deregulatory Push Worked in Practice? (Author- Connor Raso, Brookings)

SEC Counsel, Connor Raso, attempts to address two questions in this piece: “First, have agencies under Trump issued new rules with costs? If so, what motivated these rulemaking efforts and how did they justify such rules?  Second, did agencies issue deregulatory rules to offset new rules that impose costs?  If so, were these deregulatory rules meaningful or relatively minor?” Ultimately, Raso concludes that while few regulations have been issued by President Trump’s administration, existing rules have been more likely to be delayed than overturned. In summary, Raso writes, “the picture is one of inaction.”

4. Fully staffed SEC could fast-track best interest regulation (Author- Kenneth Corbin, FinancialPlanning)

According to a recent article by Kenneth Corbin, “Now that the SEC is back with a full complement of commissioners, the regulator could move quickly to finalize the revisions to its standards of conduct and disclosure for broker-dealers and advisors.” Director of investor protection at the Consumer Federation of America, Barbara Roper says, “The confirmation of Commissioner Roisman definitely opens up the possibility for the rule to move forward more quickly.” One element of the new rule could include the introduction of the Form ADV Part 3 more commonly referred to as the Form CRS.

5. Congressman Pushes Back on Regulation Best Interest (Author – Diana Britton, WealthManagement.com)

According to a recent article by Diana Britton, “Representative Stephen Lynch (D-Mass.) pushed back against the Securities and Exchange Commission for its Regulation Best Interest rule proposal during a House Financial Services Committee hearing on Wednesday. Lynch said it was a weak standard, leaving a gap between what was proposed and what was mandated in Section 913 of Dodd-Frank.” According to Dalia Blass, director of the SEC’s division of investment management, “core principles are the same.” She continues by saying, “`The proposal` tailored these principles to the broker/dealer relationship model to preserve that model. That was important to continue to provide choice to investors in the markets with respect to commission accounts.” The SEC received over 6,000 comment letters to the Reg BI proposal and will likely decide whether to make any revisions in the coming months.

Don’t forget to check out last week’s top RIA compliance news articles on SEC’s Reg BI proposal, social media cybersecurity, and potential scams in the wake of Hurricane Florence. Be sure to check back next Friday for next week’s top articles!