Did you know RIA regulatory compliance rules are becoming more complex with each passing year? Investment advisors must stay in compliance to prevent lawsuits for professional services performed. Here are a few regulatory compliance updates for 2019 that RIAs should review.
Securities and Exchange Commission (SEC) Chairman, Jay Clayton, recently discussed the regulatory agenda for financial advisors for 2019. The “Regulation Best Interest and standards of conduct for investment advisors” is being finalized. Expanding access to private offerings is one item included in the standards.
With this change, investment advisors will have access to a broad range of investment products outside of 401(k) plans and IRAs to help clients plan for retirement. This is referenced in the JOBS Act. 3.0, a bipartisan bill introduced to help spur capital formation and initial public offerings. The bill was passed by the House of Representatives in July.
Also included in this legislation is an expanded definition of an accredited investment advisor and includes job experience and education as qualifying factors. Other initiatives included are Reg BI which helps ensure advisors act in the best interest of clients.
The SEC has also issued a warning to RIAs to ensure they are complying with the “cash solicitation rule.” This rule prohibits advisors from paying cash fees to any person who solicits clients for the advisor unless certain requirements are met. The requirements are more stringent for third party solicitors.
You can also expect changes regarding state advisor examinations, with more enforcement pertaining to fraud in emerging markets and protection of senior investors. The North American Securities Administrators Association (NASAA) reportedly received 7,998 complaints–2,105 of which resulted in enforcement actions.
With today’s litigious society, RIAs need professional liability insurance including errors & omissions insurance. CalSurance has cost-effective insurance solutions for your RIA firm. Contact us for a consultation.