The U.S. Office of Management and Budget (“OMB”) recently approved a request by the U.S. Department of Labor (“DoL”) that seeks to postpone implementation of the final portion of the DoL’s controversial fiduciary rule. Originally scheduled to go into effect January 1, 2018, this newest proposal by the DoL would see the fiduciary rule delayed eighteen more months, until July 1, 2019. Click here to view the regulatory review update on the OMB’s website.
On August 7, 2017, the Office of Compliance Inspections and Examinations (“OCIE”) of U.S. Securities and Exchange Commission (“SEC”) released a Risk Alert which details its examination of the cybersecurity preparedness of 75 broker-dealers, investment advisers and investment companies in the U.S. In comparison to prior cybersecurity examinations, this exam involved more active testing and validation of the firms’ procedures and controls related to cybersecurity. Click here to read the Risk Alert.
DoL Proposes Fiduciary Rule Delay
August 11, 2017
The United States Department of Labor (“DoL”) indicated in a court filing yesterday, August 9, 2017, that it would be seeking an eighteen-month delay in implementing the second phase of the fiduciary rule. This phase, originally scheduled to go into effect on January 1, 2018, would require investment advisers who receive variable compensation to comply with the Best Interest Contract Exemption (“BICE”). A signature feature of the Fiduciary Rule, BICE permits investment advisers to receive variable compensation only if they sign a contract with clients promising to put the clients’ interest before their own. The second phase also implements exemptions for principal transactions and insurance agents.
Department of Labor Fiduciary Rule – August FAQs
August 09, 2017
The United States Department of Labor (“DoL”) recently released the latest round of Frequently Asked Questions for the Department’s new Fiduciary Rule. Containing only three sets of questions and answers, the release clarifies issues relating to 408(b)(2) defined contribution plans and other retirement plan advisors. Click here to read the DOL’s August FAQs.
Documenting Client Meetings
July 17, 2017
Is your investment adviser firm consistently covering certain key issues during client meetings and then carefully documenting these discussions and follow-up items?
SEC Fines Investment Adviser for Failure to Disclose Material Conflicts of Interest to Clients
June 20, 2017
The United States Securities and Exchange Commission (“SEC”) recently obtained final judgments by consent against an investment adviser firm and its chief executive officer, who allegedly failed to disclose material conflicts of interest to some of the firm’s clients. The investment adviser firm and its chief executive officer consented to the decree without admitting or denying the allegations in the SEC’s complaint.
The U.S. Department of Labor (“DoL”) recently confirmed that it would not seek to extend the Fiduciary Rule delay. Originally scheduled to go into effect on April 10, 2017, the DoL issued a rule delay earlier this year postponing the applicability date to June 9, 2017 pending a review of the rule ordered by U.S. President Donald Trump. Until this week, it was unclear whether the rule would go into effect on June 9 or be subject to further delay.
The Chief Compliance Officer serves an important role in an investment adviser firm’s business. A role that requires expertise, independent judgment, and dedication, an increasing number of investment adviser firms are choosing to outsource the Chief Compliance Officer position to third party compliance professionals. Despite the potential cost-savings, outsourcing this vital role is generally not a wise business strategy and will likely increase the firm’s risk of exam by the U.S. Securities and Exchange Commission (“SEC”) or affect the depth of inquiry an investment adviser firm is subject to once an exam has begun.
Wyoming Investment Adviser Registration Requirements
May 09, 2017
As of July 1, 2017 the State of Wyoming will require investment advisers to register with Wyoming securities regulators if the investment adviser has less than $100 million of assets under management (AUM) unless it meets another criteria for registering with the U.S. Securities and Exchange Commission (“SEC”). Wyoming had been the only state that did not regulate investment advisers.
The Colorado Division of Securities recently proposed two new rules that would require investment adviser firms and broker-dealers to assess cybersecurity risks and implement written policies and procedures “reasonably designed to ensure cybersecurity.” Click here to read the Rulemaking Notice. Given the sensitive and confidential nature of their work, cybersecurity is an important and evolving concern for investment adviser firms.
