Regulatory Considerations When Hiring a Non-Advisor Employee or Independent Contractor

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A few months ago, I wrote an article about the regulatory considerations that an RIA should keep in mind when hiring a new individual advisor into its business. Because that article was specific to new investment adviser representatives (“IARs”), it focused on disclosure, licensing, registration, documentation and insurance matters. But what if an RIA wants to hire a new employee or retain an independent contractor that is not licensed or registered, and will not be providing advisory services?   Background Check When hiring an IAR, that person will almost always have background and disclosure information that is searchable through the […]

Another Twist in the Continuing Custody Rule Saga

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The SEC’s custody rule has proved to be a real pain in the ass. But then again, so too did Bernie Madoff (and that is perhaps the most generous of monikers). Lest we forget, the SEC’s laser focus on the custody rule as we know it today is borne in large part out of the actions of inmate #61727-054 at the Butner Federal Correctional Institution just outside of North Carolina’s research triangle. His multi-billion dollar Ponzi scheme was unearthed in December 2008, and the SEC overhauled its custody rule a year later in December 2009. To underscore the rule’s importance […]

Regulatory Considerations When Bringing On a New Advisor

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If you own an investment advisory business, growth is a good problem to have. It can become such a big problem, however, that you may consider hiring another you… another financial advisor to help serve your existing clients and prospect for new ones. There are many legal and compliance considerations to keep in mind when doing so, the most salient of which are described below. IAPD Review “Fit” and technical aptitude are clearly important considerations when entrusting another advisor to represent your business, but disclosure history is equally important. This public disclosure history can be reviewed through the Investment Adviser […]

The Importance of Supervision and the Failure to Supervise

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“Supervision” is one of those compliance buzzwords that gets tossed around without much explanation, like its meaning is taken for granted and assumed to be obvious. I submit to you that it is not, especially when it comes to demonstrating that adequate supervision of a person, process, product, or policy has occurred. But why should advisers care about supervision at all? The concept of supervision is sprinkled throughout the regulatory sandbox that the SEC has built for advisors to play within. The foundation of this sandbox is the Investment Advisers Act of 1940, which introduces the definition of both a […]

New York RIA Registration Quirks

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As I described in a prior article, the duality of the state and federal registration regime for investment advisers has resulted in a bit of a regulatory maze – especially for new advisers seeking registration at the state level. Determining when and where registration is required is not always intuitive, and state investment adviser regulations can vary rather dramatically from state to state. Yet one state stands out as perhaps the quirkiest: New York. First of all, New York does not register investment adviser representatives. This means that it does not participate in the Form U4 filing process administered by […]

How to (Legally) Settle Disputes with Clients

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A little less than a year ago, I wrote an article about alternatives to mandatory arbitration for resolving disputes between advisors and their clients (see, Beyond Mandatory Arb: 4 Options for Advisor-Client Dispute Resolution). Consider this article the prequel. Indeed, there is an even more attractive means to resolve a dispute before suiting up for court or arbitration… Just settle the damn thing. Settlement between quarreling adversaries is statistically the most common resolution. According to FINRA’s 2016 Dispute Resolution Statistics, 50% of all FINRA arbitrations are settled independently between the parties; only 21% of arbitrations are actually decided by an […]

A Few Thoughts on the SEC’s Robare Decision

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There’s a State Farm commercial currently on TV that depicts Green Bay Packers quarterback Aaron Rodgers attempting to kill a fly in his house using a golf club. He swings wildly at the fly, loses his grip on the club, and sends it crashing through his bay window and into the side of a truck parked outside. With shattered glass everywhere and the truck’s alarm blaring, teammate Clay Matthews asks Rodgers “Well, did you get it?” Rodgers shrugs unknowingly. The more I think about it, the more I see a parallel to the SEC Commissioners’ November 6th opinion, In the Matter of […]