On the heels of the SEC’s recent approval of the “Reg BI Package,” on June 26, 2019 the U.S. House of Representatives passed a bill that would prevent enforcement of Reg BI. Specifically, Rep. Maxine Waters included a last minute amendment to an appropriations bill that would prevent any funds from being used to “implement, administer [or] enforce” Reg BI.
While the bill was comfortably passed in the House, its prospects to pass in the Senate seem unlikely. Senators will have the opportunity to introduce their own version, which will then need to be reconciled with the House’s. As always, we will continue to closely monitor any developments concerning Reg BI, and will publish any updates.
To nobody’s great surprise, on June 5, the SEC approved the “Reg BI Package,” which includes a series of new standards governing the fiduciary responsibilities of broker-dealers and investment advisers. The approved items consisted of the Regulation Best Interest – Standard of Conduct for Broker-Dealers; Form CRS Relationship Summary; Standard of Conduct for Investment Advisers; and Interpretation of “Solely Incidental,” all of which seem likely to have considerable impact on the industry going forward.
Drinker Biddle’s Best Interest Compliance Team issued an alert summarizing the June 5th meeting, certain statements made by the commissioners, and examining the potential effects of the new standards.
Read the full client alert.
On June 5, the SEC will hold an Open Meeting to consider whether to adopt certain measures to reform retail investment standards. In this alert, the Best Interest Compliance Team provides a brief preview of the key topics and potential concerns about the proposed standards.
Read the full client alert.
The SEC continues to intensify its focus on investment advisers’ disclosures on Form ADV, including issues such as revenue sharing arrangements. A recent D.C. Court of Appeals decision finding that the use of the word “may” in such a disclosure violated the Investment Advisers Act of 1940 could have significant ramifications for investment advisers and the SEC’s Division of Enforcement going forward.
Read the full blog post.
The SEC’s OCIE recently issued a Risk Alert focusing on compliance issues related to Regulation S-P, the primary SEC rule governing compliance practices for privacy notices and safeguard policies for investment advisers and broker-dealers. The Risk Alert summarizes the OCIE’s findings from two-year’s worth of issues identified in deficiency letters to assist investment advisers and broker-dealers in adopting and implementing effective policies and procedures for safeguarding customer records and information pursuant to Regulation S-P.
In this alert, partner Jim Lundy outlines the Regulation S-P requirements, the OCIE’s Regulation S-P findings and key takeaways for SEC registrants.
Jim Lundy and Ben McCulloch authored an article entitled “The First SEC Share Class Selection Disclosure Settlements: What We Learned & What’s Next?” for the Investment Adviser Association’s IAA Newsletter Compliance Corner. In the article, Jim and Ben discuss the first wave of settlements under the SEC’s SCSD Initiative as well as lessons learned. They also explore the agency’s ongoing efforts regarding the remaining participants, consequences for firms who opted not to self-report, and the Division of Enforcement’s continued scrutiny of revenue sharing arrangements, disclosures, and conflicts.
Read the full article.
*Originally published in the IAA Newsletter, April 2019
The SEC recently announced its first round of settlements with registered investment advisors (RIAs) who had self-reported pursuant to the agency’s Share Class Selection Disclosure Initiative (SCSD Initiative). Additional RIA settlements pursuant to the SCSD Initiative are expected, and RIAs who did not self-report face additional scrutiny from the Division of Enforcement. Industry reaction has involved frustration, but the SEC’s focus on RIA conflicts of interest, disclosures, and more recently revenue sharing is increasing. Jim Lundy and Mary Hansen discuss these developments in this article, SEC Releases SCSD Self-Reporting Initiative Settlements.
Last month the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued its “2019 Examination Priorities.” The release of OCIE’s 2019 Priorities this year was earlier than in years past. In retrospect, the date of issuance being the last day before the vast majority of the SEC staff was furloughed may just be coincidental, but the federal government shutdown allowed the industry more time to study OCIE’s 2019 Priorities for compliance planning for the upcoming year. Another impact of the shutdown and furloughs in an area directly related to OCIE’s first priority is that the SEC’s efforts and the timing of the finalization of the Reg BI proposals have very likely been slowed as well. The recent ending of the SEC furloughs and OCIE’s continuing prioritization of retail and retirement regulatory issues presents us with an opportune time to re-visit these important topics.
Continue reading “The Continuing Convergence of Retail and Retirement Regulatory Oversight”
On May 24, 2018, President Trump signed into law the Senior Safe Act, which is aimed at curbing elder financial abuse. The Senior Safe Act is the latest effort to protect senior investors, as both FINRA and the SEC included protecting senior investors among their 2018 priorities. This blog has previously covered, at length, the SEC and FINRA 2018 exam priorities. Elder protection was also one of the SEC’s 2017 priorities and has been a FINRA priority since 2016.
Continue reading “Make Senior Investing Safe Again? President Trump Signs Into Law the Senior Safe Act in an Attempt to Curb Financial Abuse of Seniors”
In a previous post, we discussed why broker-dealers and their representatives will likely still be fiduciaries to ERISA plans and IRA investors in many cases despite the DOL Fiduciary Rule’s impending death (we say “impending” because, while the Fifth Circuit’s ruling in mid-March vacates the Fiduciary Rule in its entirety, the court’s official order implementing this decision has yet to be issued). To review, this is because broker-dealers and their representatives often satisfy all the prongs of the soon-to-be reinstated 1975 fiduciary regulation’s “Five-Part Test” defining when investment recommendations rise to the level of “fiduciary” advice. Previous industry assumptions that brokers and other “sellers” of investments generally were not fiduciaries under the 1975 regulation should no longer be relied upon. In this post, we’ll examine how the Fiduciary Rule’s impending demise will affect prohibited transaction and compensation issues for broker-dealers in light of their likely continuing status as fiduciaries. Continue reading “Why Fiduciary Status Still Matters in a Post-Fiduciary Rule World: A Look at Prohibited Transactions And Compensation”