More Compliance Issues to Come

Financial advice firms face a growing list of compliance chores in 2018, including spillover effects of the Department of Labor’s now-delayed fiduciary rule, cybersecurity issues, advisor exam changes and tighter scrutiny of bad brokers, according to ThinkAdvisor.

Despite the 18-month delay the DOL put in place last year, the provisions of the rule purporting to require retirement account advisors to put clients’ interests first will still weigh on advisors’ time and resources, George Michael Gerstein, counsel with Stradley, Ronon Stevens & Young, tells the publication.

He says the DOL is likely to unveil a revised proposal this year, according to ThinkAdvisor. On the other hand, the delay of the final compliance date from Jan. 1, 2018 to July 2019 means the SEC could roll out its own version of a best-interest standard, Brian Hamburger, head of regulatory consulting firm MarketCounsel, tells the publication.

The SEC is likely to propose its fiduciary rule this year as well, David Tittsworth, counsel at Ropes & Gray and former CEO of the Investment Adviser Association, tells ThinkAdvisor. But SEC Chairman Jay Clayton said in October the SEC would not “supplant” the DOL’s rule, the publication writes. And varying standards from the SEC, the DOL and the states will cause “confusion and inefficient allocation of capital,” according to Gerstein.

Meanwhile, cybersecurity is now “a business imperative,” Tittsworth tells ThinkAdvisor. Cybersecurity is also one of the top priorities for Clayton, Tittsworth says, adding that one concern advice firms have is whether the SEC will bring enforcement actions against firms it deems haven’t taken appropriate steps to protect themselves against data breaches. 

The other objective topping Clayton’s list is cracking down on brokers with disciplinary records, according to the publication. Brad Bennett, a partner at Baker Botts and former head of Finra’s enforcement unit, suggests both advisors and broker-dealers watch the SEC’s Retail Strategy Task Force, ThinkAdvisor writes.  MORE