SEC Risk Alert – Wrap Fee Programs

July 26, 2021

SEC Risk Alert on Use of Wrap Fee Accounts by Investment Advisers

On July 21, 2021, the Division of Examinations (the “Division”) of the U.S. Securities and Exchange Commission (“SEC”) released a Risk Alert about its assessment of investment adviser firms associated with wrap fee programs.SEC Building The SEC identified multiple areas where the investment advisers examined were deficient in their policies, procedures, and practices related to wrap fee programs, and further noted a range of industry practices that investment advisers might consider adopting to meet their fiduciary duty when recommending and managing wrap fee programs.

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New Guidance on New York IAR Registration

July 14, 2021

The Investor Protection Bureau of the State of New York’s Office of Attorney General recently issued new guidance clarifying the state’s new process for registering investment adviser representatives (“IARs”). This guidance will be of particular interest to new and existing investment adviser representatives seeking registration in New York. Existing investment adviser representatives have until December 2, 2021 to comply with the registration requirement but must submit a Form U4 requesting investment adviser representative registration in New York on or before August 31, 2021.

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Increasing Client Participation in Designating Trusted Emergency Contacts

June 14, 2021

logo of the Ontario Securities CommissionThe Ontario Securities Commission recently published research findings focused on improving investment advisory client participation in designating a trusted emergency contact (referred to in the report as a “trusted contact person” or “TCP”). Although designating a trusted emergency contact is an important tool for investment advisers to protect a senior or vulnerable client’s investments against financial exploitation or losses due to diminished capacity, many clients decline to do so. This new report aims to help investment advisers and broker dealers utilize behavioral science to encourage its senior and vulnerable clients to name a trusted emergency contact. Despite having an intended audience in Canada, the report highlights a number of useful insights and strategies that can be implemented by investment advisers across the United States. To read the full report, click here.

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RIA Phishing Email Alert – Posing as FINRA

June 09, 2021

Recently, several of our RIA clients have received suspicious emails claiming to be from FINRA. The suspicious emails used the subject line “New FINRA Request – (Firm Name),” and came from an email address with the domain, “@gateway-finra.org” Below is a screenshot of one of these suspicious emails.

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South Carolina Adopts Financial Exploitation Law to Help Protect Vulnerable Adults

June 02, 2021

On May 18, 2021, South Carolina enacted new legislation intended to help investment advisers and broker-dealers protect clients who areBlue image of South Carolina vulnerable adults (such as seniors with diminished capacity) from financial exploitation. Similar to financial exploitation laws adopted by other states, South Carolina’s new law permits state registered investment advisers and broker-dealers to delay disbursements and transactions under specified, limited circumstances for a vulnerable client who is an “eligible adult” as defined by the statute. In addition, a registered investment adviser firm may contact other third parties previously designated by the vulnerable client, such as a trusted emergency contact, regarding the suspected financial exploitation. Firms are also permitted to report suspected financial exploitation to South Carolina’s Adult Protective Services and Securities Division on a voluntary basis. In the event that an investment adviser firm delays a transaction or disbursement, reporting to the specified agencies is mandatory. Click here to read South Carolina’s new financial exploitation law.

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NASAA Publishes Handbook for Prospective IAR CE Content Providers

May 14, 2021

The North American Securities Administrators Association (“NASAA”) recently published a new handbook to guide investment adviser firms and other professionals that are interested in becoming content providers under NASAA’s Model Rule on Investment Adviser Representative Continuing Education (“Model Rule”). The handbook is the most recent resource published by NASAA as it works to implement the compliance and logistical framework needed to facilitate the Model Rule. To view NASAA’s Investment Adviser Representative Continuing Education Program Handbook, click here.

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DOL Clarifies Fiduciary Advice Exemption for IRA Rollovers

May 09, 2021

Investment adviser firms advising plan participants on IRA rollovers should review the recently published guidance of the U.S. Department of Labor (“DoL”) regarding PTE 2020-02, a new fiduciary advice prohibited transaction exemption. Compliance with PTE 2020-02 now permits investment advisers to provide advice regarding IRA rollovers without violating Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and the Internal Revenue Code of 1986 (“IRC”), both of which prohibit investment advisers from receiving payments that create a conflict of interest when providing fiduciary investment advice to plan sponsors, plan participants, and IRA owners. The adoption of PTE 2020-02 follows several years of rulemaking, court actions, and DoL guidance regarding the definition of fiduciary investment advice and clarifies that advice regarding IRA rollovers is considered a fiduciary activity, in contrast to the DoL’s prior interpretation.

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