Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Registered Investment Advisor’

Better Late than Never: SEC Implements the Switch

Posted by William Byrnes on January 10, 2012


As anticipated, the SEC will delay implementation of the RIA transition. On June 22, the SEC approved rules that will transition thousands of advisors from SEC to state regulation, but the new rules won’t be effective until June 28, 2012, almost a year later than initially expected.

Under the regulatory structure in place before the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, investment advisors with $25 million or more in assets under management (AUM) were regulated by the SEC, and those with less than $25 million in AUM were regulated by the states. Dodd-Frank changed the registration threshold so that advisors with between $25 and $100 million in AUM—so-called “midsize advisors”—will be required to withdraw their registration from the SEC and register with state regulators.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the planned switch and in Advisor’s Journal, see Disarray at the SEC is Complicating the “Switch” (CC 11-83), Hedge Funds Must Now Register with the SEC under the New Wall Street Reform Act (CC 10-45) & Dodd-Frank Wall Street Reform and Consumer Protection Act (CC 10-35).

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FINRA Rule 45-30: Expansive new Complaint Report Requirements

Posted by William Byrnes on September 2, 2011


FINRA is digging deep into your customer comment box, and starting July 21, nothing will be off limits to the regulator.

Brokerages often expand beyond securities activities to diversify their income streams and broaden the scope of services they offer their clients. Keeping up with the assorted regulators and what are often cumbersome and confusing combinations of rules has always been a chore for those firms.

Not long ago, firms at least have been able to keep their professions separated, dealing, for instance, with securities and insurance regulators as isolated entities with little overlap in their bailiwicks. But increasingly, regulators like FINRA are erasing this dichotomy, peaking into all of a firm’s activities, even activities that are unrelated to the subject of the regulator’s jurisdiction.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of FINRA rulemaking in Advisor’s Journal, see FINRA Plans New Power Grab as SEC Falter (CC 11-67), Broker Bonus Arbitration Bottleneck Forces FINRA to Reconsider Arbitrator Qualification Standards (CC 11-08), and SEC Approves FINRA Suitability and Know-Your-Customer Rules (CC 11-17).

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The Pitfalls of Transitioning Between Firms

Posted by William Byrnes on August 26, 2011


If you’re considering transitioning your book of business to a new firm, maintaining the confidentiality of client information should be your principle concern. Accomplishing  a move without becoming the target of a lawsuit can be a daunting task. However, there is a protocol of best practices that if followed correctly can significantly lower the risk of violating confidentiality.

In 2004, three wirehouses – Citigroup Global Markets, Inc. (“Smith Barney”), Merrill Lynch, and USB Financial Services, Inc. – created the Protocol for Broker Recruiting (the “Protocol”). The Protocol’s objective is to protect clients’ privacy and flexibility when choosing Registered Representatives (“RRs”) – especially RRs who are switching firms. By reducing litigation over RRs transitioning to new firms, the high costs associated with competitive recruiting efforts can be minimized and client information can remain protected.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber)

For previous coverage of broker-dealer issues in Advisor’s Journal, see  Is a Hybrid Practice Model Right for You? (CC 11-46), What’s Driving the Increasing Appeal of the RIA Model? (CC 11-69).

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What’s Driving the Increasing Appeal of the RIA Model?

Posted by William Byrnes on August 4, 2011


A large majority (86%) of advisors who are with an independent broker-dealer find the idea of life at an independent registered investment advisor (RIA) appealing, according to a Schwab Advisor Services study released on March 29th. And when the advisor knows someone who has already made the switch, the number who like the idea of making a move to the RIA model jumps to 95%.

One significant consideration for advisors considering a switch to an RIA is regulatory. Those who fully transition to the RIA model will dump FINRA for the SEC. But whether that’s an advantage or downside to the transition is open for debate.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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FINRA Plans New Power Grab as SEC Falters

Posted by William Byrnes on August 2, 2011


FINRA is continuing its recent power-grab in the face of a largely impotent and underfunded Securities and Exchange Commission. As the next stage in an increasing series of regulations and information reporting requirements, plans are in the works for a new-and-improved examination program that could further increase the information reporting requirements of member firms and significantly increase their compliance burden.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of FINRA regulatory action in Advisor’s Journal, see Broker Bonus Arbitration Bottleneck Forces FINRA to Reconsider Arbitrator Qualification Standards (CC 11-08),  SEC Approves FINRA Suitability and Know-Your-Customer Rules (CC 11-17), & New FINRA Rule Restricts Brokers’ Outside Business Activities (CC 10-110).

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Republicans Balk at RIA User Fees

Posted by William Byrnes on July 25, 2011


Republicans on the House Financial Services subcommittee are retracting the issue of Registered Investment Advisor user fees, referencing the cost to small businesses. But the SEC maintains that it cannot conduct adequate RIA examinations without either charging user fees or delegating examination authority to an SRO that will charge user fees. The argument over user fees was prompted by the release, earlier this year, of the Dodd-Frank mandated SEC study on enhancing RIA examinations. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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SEC Says “Not so Fast” to Advisor Social Media marketing

Posted by William Byrnes on April 11, 2011


Social media marketing is quickly becoming many industries’ go-to medium for low-cost, high-yield advertising, but the Securities and Exchange Commission (“SEC”) may be saying “no so fast” to investment advisors.  But the SEC isn’t just asking for general information about advisors’ use of social media. Advisors are also being asked to provide a copy of “communications” made by the advisor on social media sites, including the text of postings, tweets and other messages sent by the firm.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of SEC initiatives and rulemaking in Advisor’s Journal, see SEC Waffles in Study on Improving RIA Oversight (CC 11-24)Advisors Hit with Another Round of SEC Reporting Rules (CC 11-30)SEC Approves FINRA Suitability and Know-Your-Customer Rules (CC 11-17).

For marketing tips, see the “Soft Skills” segment of Advanced Markets AdvisorFX: The 7 Deadly Sins of Chief Marketing OfficersTo the Moon, Alice!—How to Market Even Though People Are Fed Up with Marketing, & Marketing to the Millennials.

 

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SEC Fiduciary Standard Study Answers Few Questions

Posted by William Byrnes on March 13, 2011


The SEC has finally released its anxiously awaited study of whether a fiduciary standard of care should be applied to broker-dealers; but, like the study on adviser examinations, the report leaves as many questions as it answers. The fiduciary standard study recommends that brokers be held to the same standard as register investment advisers (RIAs).  Although the study doesn’t provide details on how the switch to the fiduciary standard will be implemented, there are hints as to what brokers can expect.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the fiduciary standard in Advisor’s Journal, see Study Finds that Universal Fiduciary Standard Will Hurt Investors (CC 10-97) and What You Don’t Know Yet Might Hurt You: A Broker’s Duties under the Financial Reform Act (CC 10 40).  Comments are welcome below.

 

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SEC Waffles in Study on Improving RIA Oversight

Posted by William Byrnes on March 11, 2011


The SEC has finally released its Dodd-Frank mandated study on enhancing registered investment adviser (RIA) examinations, but the study is more a tale of SEC budgetary distress than a concrete plan to improve examinations. Although the study hints at the regulatory framework that is likely to emerge for RIAs in the coming months, it doesn’t conclude with a definitive solution to the problem. Although the study does not conclude with a specific plan for improving adviser examinations, the scope of the RIA examination problem and the funding problems revealed make it clear that change is coming for RIAs—change likely to be paid for by increased user fees.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

 

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SEC Approves FINRA Suitability and Know-Your-Customer Rules

Posted by William Byrnes on February 26, 2011


The SEC recently approved FINRA proposed rules—FINRA Rules 2090 and 2011—that amend and consolidate know-your-customer and suitability obligations for broker-dealers and their authorized representatives.  The new rules are based on, and replace in-part, similar NYSE and NASD rules. According to FINRA, the amended know-your-customer and suitability rules are intended to protect investors by “promoting fair dealing with customers and ethical sales practices.”

The new rules are effective as of October 7, 2011.  For previous coverage of the suitability standard and the debate over the proposed fiduciary standard in Advisor’s Journal, see What You Don’t Know Yet Might Hurt You: A Broker’s Duties under the Financial Reform Act (CC 10-40) and Study Finds that Universal Fiduciary Standard Will Hurt Investors (CC 10-97).

Under the know-your-customer rule, firms are required to use reasonable diligence respecting the opening and maintenance of every account and to know essential facts about every customer. “Essential facts” are facts required to …. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

 

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Study Finds that Universal Fiduciary Standard Will Hurt Investors

Posted by William Byrnes on December 6, 2010


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The Wall Street Reform Act1—signed into law by President Obama on July 21, 2010— grants the SEC the power to impose a fiduciary duty on broker-dealers. Although the SEC has not yet moved to apply the fiduciary standard—already applicable to registered investment advisors—to broker-dealers, both sides of the argument have made their voices heard, commissioning studies and sending volleys of comments to the SEC.

Holding broker-dealers to a higher standard would seem, at first glance, to be a positive for their customers.  But a November 1, 2010, Securities Industry and Financial Markets Association (SIFMA) commissioned study calls into question whether applying a fiduciary standard of conduct to all brokerage activities would help investors.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the fiduciary standard of conduct in Advisor’s Journal, see What You Don’t Know Yet Might Hurt You: A Broker’s Duties under the Financial Reform Act (CC 10 40).

We invite your questions and comments by posting them below or by calling the Panel of Experts.

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