Author: Chris Stanley
On The Docket – The Beneficial Ownership Information Reporting Rule
On The Docket – An RIA’s Standard of Care; Anatomy Of An RIA Sale, Merger Or Acquisition; When a ‘Financial Coach’ May Need to Register as an Investment Adviser; and More
When Does A Financial Coach Need To Register As An Investment Adviser? The “ABCS” Test To Determine Status
Anatomy Of An RIA Sale, Merger Or Acquisition: 5 Important Legal & Compliance Steps
Extracting Actionable Takeaways From The SEC’s Staff Bulletin Regarding An RIA’s Standard Of Care
On The Docket – Annual Compliance Reviews, Hypothetical Performance, A Few Practice Tips, and More
A Guide To Conducting And Documenting An Annual Compliance Review
On The Docket – The SEC Rulemaking Firehose Continues Unabated, 2024 Registration Renewal Program Calendar Available, and More
On The Docket – Code of Ethics, Form U4, IAR CE Day, and More
RIA Code Of Ethics: Important Nuances To Note In Relatively Straightforward Requirements
Form U4: Common Missteps And Best Practices For RIAs
Switching Between State And SEC Registration: Evaluating Options (And Requirements) For RIAs Nearing $100 Million RAUM
Form ADV Part 1: Common Missteps And Best Practices For RIAs
Paid Solicitation Under The SEC Marketing Rule: Using Third-Parties For Lead Generation And Prospecting
Performance Advertising Guidelines For Investment Advisers Under the SEC’s New Marketing Rule
SEC vs State Registration & Notice Filing Logistics
Advisory Agreement Requirements & Best Practices
Rollover Advice FAQs – Complying with PTE 2020-02
Hedge Clauses; Cybersecurity Proposal; Form CRS
Legal & Compliance Considerations When Hiring Into an Advisory Firm
Just One Slide #5 – Large Trader Obligations
Just One Slide #4 – SEC Risk Alert (Compliance Programs)
Just One Slide #3 – SEC Risk Alerts
Just One Slide #2 – New York (finally) Requires Form U4
Just One Slide #1 – Intro
Advertising With Testimonials And Endorsements Under The New SEC Marketing Rule
How Rising ETF Investing By RIAs Triggers The SEC’s 13F Reporting Requirements
Compliance Reminders For Advisers Offering College Funding Services
Cash for Clients: The Patchwork of State and Federal Solicitor Rules
Do All Investment Advisers Really Have a Fiduciary Duty to Seek “Best Execution”?
When Does a Financial Planner Need to Register as an Investment Adviser?
Advisor. Broker. Wealth Manager. Financial Advisor. Investment Advisor. Financial Consultant. Financial Planner. Savings Coach. Budget Doctor. Wealth Architect. Money Ninja. Cash Llama. The regulatory approach to financial professional titles to-date has pretty much been “Pick one and have at it.” Hyperbole aside, I’m far from the first person to observe […]
Regulatory Considerations When Hiring a Non-Advisor Employee or Independent Contractor
Another Twist in the Continuing Custody Rule Saga
Regulatory Considerations When Bringing On a New Advisor
The Importance of Supervision and the Failure to Supervise
How to (Legally) Settle Disputes with Clients
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 […]
A Few Thoughts on the SEC’s Robare Decision
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 […]
Adviser Changes of Control: An Elusive Definition
In some form or another, nearly every registered investment adviser will at some point be involved in a merger, acquisition, sale, or restructuring. Whether it’s a simple equity ownership stake by a new financier, the addition of a new partner, a union of two practices, the death of a major […]
State De Minimis Registration Considerations for Advisors
Federalism can be a real pain in the neck sometimes. While the duality of both state and federal government has endured and served our country well, it has made investment adviser registration at the state level a mix of hard-to-find statutes, non-intuitive exceptions and revenue grabs. The most notable of […]
The Implications of Investment Discretion
Last month I penned an article that described how the SEC expects advisors to calculate their Regulatory Assets Under Management (“RAUM”) with respect to investment management and financial planning clients. Only securities portfolios for which the advisor provides “continuous and regular supervisory or management services” count toward RAUM, but advisors […]
Financial Planning & Regulatory Assets Under Management
As the financial services industry continues to evolve, so, too, does the distinction between “investment management” and “financial planning” as discreet but complementary services that a registered investment adviser can provide to clients. I’d read two of Michael Kitces’ recent posts for a more fulsome discussion of an “investment-centric” versus […]
Four Useful Hacks for the SEC’s IAPD Disclosure Site
It’s been said that the eyes are the window to a person’s soul, but I’d argue that a person’s internet browsing history is also pretty telling. It can reveal a lot, and in my case it revealed that I am a complete and incorrigible fanboy of the laws, rules and […]
Maintaining Attorney-Client Privilege During a Mock Exam
The principle of attorney-client confidentiality is sacrosanct. In California, for example, an attorney may only reveal a client’s confidential information to the extent the attorney “reasonably believes the disclosure is necessary to prevent a criminal act that the [attorney] reasonably believes is likely to result in death or substantial bodily […]
FINRA Peeks Behind the Algorithm’s Curtain
On the heels of the Financial Industry Regulatory Authority issuing a Report on Digital Investment Advice last month, on April 7 the Securities and Exchange Commission approved a FINRA rule amendment that requires registration of persons that are “primarily responsible for the design, development or significant modification of algorithmic trading […]
A Less Controversial, but Just as Important, Fiduciary Duty
This year will go down in history as the year of the great fiduciary wars: advisors v. brokers, DOL v. SEC, Senator Elizabeth Warren v. the entire financial services industry…the list could go on. Tensions have flared and much ink has been shed. When the dust and rhetoric settles, the […]
Beyond Mandatory Arbitration: 4 Options for Advisor-Client Dispute Resolution
Mandatory pre-dispute arbitration clauses in advisory contracts are all the rage… and I mean that both literally and figuratively. It has become both a popular dispute resolution mechanism between advisors and their clients, and at the same time has enraged critics the likes of which include a cadre of House […]
Review These Sections of Your Employment Agreement Before Breaking Away
If you’re reading this article, my working assumption is that at some point in your life you’ve been employed by somebody other than yourself. Odds are you’re working for somebody else at this very moment, perhaps even plotting the day you jump ship and join a competitor or set out […]
Advisors: When’s the Last Time You Updated Your LLC Operating Agreement?
A limited liability company is as easy to set up as it is to screw up. Though it is justifiably advisors’ favored business structure due to its simplicity, flexibility and liability protections, there are still a select few “corporate formalities” that should be observed. The primary such formality is what’s […]
Five Not-So-Bold Regulatory Predictions for 2016
I can’t guarantee much from my personal crystal ball, but looking across the regulatory horizon into 2016 there is one undeniable certainty: Securities attorneys will be just fine. The sheer volume of complicated rulemaking that is pouring out of Washington bodes well for billable hours but not for bottom lines. […]
Advisor Reliance on Compliance Consultants Hangs in the Balance
October 26th marked the final day of briefing before the SEC in what could be a very precedential case for investments advisors, compliance officers and the independent compliance consulting community. In the Matter of The Robare Group, Ltd. began its life in September 2014 as an order instituting administrative and cease-and-desist […]
What Exactly is “Distribution in Guise” and Why Does the SEC Care?
This past week the SEC announced a $40 million enforcement action against investment advisor First Eagle Investment Management and its affiliated broker-dealer FEF Distributers for what it touted as the first to arise from its “distribution-in-guise” initiative. Advisors to funds have been anxiously awaiting some sort of guidance since the […]
Boiling Down the Boilerplate in Advisory Contracts
Investment advisory contracts (and most contracts, in general) are typically long, laborious and full of legalese. Paid-by-the-word attorneys have to pay for their silk ties somehow, right? If drafted properly, however, such contracts can also be immensely helpful in clarifying roles and responsibilities between the advisor and the client, and […]
Live By the Code
After Henry Hill took his first pinch in Goodfellas, Jimmy Conway praised young Henry in the courtroom for learning and personifying the Mafia code: “Never rat on your friends and always keep your mouth shut.” While certainly one of the great bro-quotes in movie history, I don’t think I’m venturing […]
Trust No One
As of the writing of this article, 74 of the 129 SEC press releases year-to-date announce enforcement actions, settlements and other financial professional misdeeds. Mind you, these are not press releases of the Division of Enforcement within the SEC, but the SEC as a whole. The other 55 generally speak […]
The Perils of Advisor Sole Proprietorships and Single-Member LLCs
Advisor continuity and succession planning has been written about and talked about ad nauseam, but I would say justifiably so. It is a critical industry-wide issue that warrants industry-wide action. Yet each and every advisor’s individual situation is unique and requires individualized attention to the nitty-gritty details. One such detail […]
SEC to RIAs: Beware the Ides of ‘May’
A recent string of SEC enforcement actions should prompt advisors to carefully review their Form ADV for one potentially dangerous word: “may.” It likely appears many times throughout various sections, and in most instances is likely perfectly appropriate. Where it isn’t appropriate, the SEC has made clear, is when it […]
Gifts and Entertainment: SEC Reminds Advisors of the Rules
The SEC has had a healthy obsession with conflicts of interest as of late, and this week’s Guidance Update from the Division of Investment Management is no exception. The update, entitled “Acceptance of Gifts or Entertainment by Fund Advisory Personnel – Section 17(e)(1) of the Investment Company Act,” may at […]
Investment Advisor Compliance in the Digital Age
Let me get one thing straight right out of the gate: technology is not a compliance panacea. It may afford incredible efficiencies and in certain applications be substantially more accurate and reliable than us mortal humans, but it is not a set-it-and-forget-it prophylactic to all nefarious intentions. After all, technology […]
Six Do’s and Don’ts for Advisor Due Diligence
Due diligence in the advisory world is like an onion: the more layers you peel back, the more it’s likely to stink. The goal, however, is to expose the stink and cook through it to satisfy both regulatory expectations and fiduciary obligations. But enough with bizarre food analogies… Much like […]
Pay-to-Play Compliance Reminders for Advisors at Election Time
This is the time of year when I tend to throw things at my television, yell at my car radio and redirect most of the mail I receive directly to the trash (sorry – the recycling bin for you greenies). The reason is simple: it’s election season, and the amount […]
Anti-Money Laundering and Advisors
It’s important to get one thing out of the way right off the bat: technically there is no requirement imposed upon investment advisors to maintain an anti-money laundering program pursuant to the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986 or the USA PATRIOT Act, as […]
Six Steps to Complying With SEC Email Regulations
Congratulations! You’ve contracted with a vendor to capture and archive all emails sent to and from employees within your advisory firm. Emails are set to be stored for not less than five years pursuant to the SEC’s recordkeeping requirements and are ready to be turned over when requested during an […]
Are You an ‘Internet Adviser?’ A 10-Year-Old SEC Rule Predated Robo-Advisors
The rulemaking phraseology of the SEC can be, at times, somewhat antiquated when it comes to the brave new world of the Internet and technology. To this day, there are references in the Advisers Act and the rules thereunder to, for example, “chat rooms,” “bulletin boards,” and “microfiche.” At the […]
The Limits of Limiting Advisor Liability
If an advisor is able to withstand narcoleptic impulses when reviewing its investment advisory contract, I suggest taking a moment to focus on the section that addresses the advisor’s limitations of liability. In regulatory-speak, this clause of the contract is known as a “hedge clause,” and is typically found near […]
Assigning an Advisory Contract After a Merger: Ask Permission or Beg Forgiveness?
The purchase, sale or merger of an advisory practice involves a whirlwind of tightly-coordinated efforts by a myriad of different parties. In the shuffle of negotiating the deal terms, settling on a valuation methodology, coordinating with custodians and integrating technological systems, when does the client get a say, if any? […]
When and Why to Make Form ADV Updates
By this point, all advisors with a Dec. 31 fiscal year-end should have filed their annual updating amendment to Forms ADV Part 1 and 2 with the Securities and Exchange Commission through the Investment Adviser Registration Depository. If any material changes occurred since the last annual updating amendment, advisors should […]
Three Tests for Whether an Advisor Compliance Issue Is Hot or Not
The notion of “regulatory hot topics” has become somewhat of a misnomer given the “broken-windows” approach of today’s SEC [see footnote below]. To say that some regulatory topics are “hot” naturally implies that some regulatory topics are…not hot. I don’t think I’m too far afield to suggest that SEC Chair […]
Cash for Clients: How to Stay Compliant When Paying for Referrals
Client referrals are arguably the lifeblood of the financial services industry, and understandably so. They are perhaps the greatest compliment a financial professional can receive, and it sure beats a random LinkedIn endorsement from that guy you had a fleeting interaction with at a conference five years ago. Some financial […]
Staying SEC-Compliant on Books & Records: Electronic Recordkeeping
The last time I used a microfilm reader was in the dusty depths of my college library, reviewing newspaper clippings from the 1960s for some God-forsaken reason. The windowless bunker looked and smelled as if it had been vacuum-sealed since the very period in history I was researching. Fast forward […]
Advisor Conflicts of Interest: Finding and Mitigating Them
Conflicts of interest are inherent and at times inescapable in the financial services industry. The entire brokerage and commission-based industry was arguably built on one: a broker getting paid per transaction to sell certain products to clients (i.e., the broker is arguably incentivized to trade an account and recommend securities […]
Get Ready for Your Annual Review: Part 2
Although the SEC may have hemorrhaged senior staff this year, its rules and regulations remain in full force and effect. For RIAs, this means that the end of the year should be a time to prepare for and tackle the annual regulatory requirements imposed upon them. In the first part of our […]
Get Ready for Your Annual Review
Malls are starting to be overrun with holiday shoppers, temperatures are dropping and congressional members will soon take a recess from fulfilling their civic duty of wearing power suits and hemorrhaging taxpayer dollars. Ah yes, all the signs of a coming winter are upon us. Although the SEC may have […]
Warning to RIAs: Don’t Let Your Privacy Policy Stay Private
On November 17, 2009, an act of God occurred: eight federal agencies agreed on something. That something was a set of four model privacy notice forms that could be delivered to consumers (including investment advisory clients) to satisfy the information disclosure requirements of the Gramm-Leach-Bliley Act (GLB). Said another way, use of […]
How RIAs Can Show SEC Examiners They Adequately Manage Risk
One of the tenets of Modern Portfolio Theory is that risk and return are related; that is, a higher degree of risk in a client’s investment portfolio is expected to generate a higher return. Conversely, less risk is expected to generate a lower return. More risk in a compliance program, […]
Getting Your CCO Hat to Fit: Tips for the Smaller RIA
Not all registered investment advisers are afforded a Manhattan zip code, enough vice presidents to annex France, or a travel budget the size of our national debt. Quite to the contrary, it’s more the norm for the smaller RIA to have a Des Moines area code, a combined CEO/CFO/CCO/Office Manager […]
SEC Examination Priorities for 2013: Translated into Plain English
On February 21, 1878, the first telephone book was issued in New Haven, Connecticut. On the same date in 1925, the New Yorker published its first issue. And on the same date in 2013, the SEC published its examination priorities for the year.1 Some have called it the literary trifecta […]
The Custody Rule: It’s Not Just for Custodians
When it comes to custody, most registered investment advisers avoid it like you avoid the obnoxious coworker at the company party. Both require careful maneuvering to evade, are easy to confront if you’re not paying attention, and can be extremely challenging to understand when engaged. Suffice it to say, accidental […]
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