14 INVESTMENT ADVISOR NOVEMBER 2020 | ThinkAdvisor.comincluding more than 1,200 new funds —an increase of 7% over last year.
ENSURE REG BI LIVES UP TO ITS
SEC Commissioner Caroline Crenshaw, aDemocrat, who joined the agency in mid-August, said during the SEC Speaks eventthat her priorities in the coming yearincludes focusing “on investors, particularly retail investors. Investor protectionis one of our core, and basic, mandates.”Crenshaw noted her particular interest in Reg BI.
“We need to make sure that it does
FINRA GUIDANCE ON REG BI
live up to its potential; I’m thinking
about it and how to develop its poten-
tial — mitigation is one of the areas
that’s important. We need to make sure
that financial professionals aren’t get-
ting paid to give bad advice.”
Then the disclosure piece of Form
CRS —“Do disclosures enable informed
decision making by retail investors?”
Meanwhile, expect guidance from theFinancial Industry Regulatory Authorityin the coming months on areas that BDsshould focus on regarding Reg BI compliance, FINRA CEO Robert Cook saidin late September.
The BD regulator also is mullingsome exam changes, Cook said.
Three months into Reg BI taking hold, FINRA is assessing what it’snoticed recently during exams “with aview to develop a response to this question: What are we seeing early days,and what guidance would we suggest tothe industry about areas to focus on?”Cook said during the Securities Industryand Financial Markets Association’sCompliance & Legal virtual event.
“There are some areas that we’veidentified where we see some trends orpatterns where firms might think aboutspending some more time” in terms ofReg BI compliance, Cook said.
“We recognize this was put into place
in the middle of a pandemic or the final
stages occurred during the middle of a
pandemic,” he explained. “A lot of effort
by firms went into coming into compli-
ance. There may be some areas where,
now that it’s up and running, [we can] go
back and make sure things are working
as well as they could.”
Cook said FINRA will partner with
the SEC on its guidance.
Also pre-COVID, FINRA’s “cycle
exams almost always included some in-
person element,” he said. “It might be
quite short, but there’s almost always an
in-person element to a cycle exam.”
(FINRA conducts up to 2,000 risk-
based cycle examinations each year to
assess identified risks and controls and
determine whether firms are in compli-
ance with laws, rules and regulations.)
Going forward, Cook continued,
FINRA will take a look “at doing the in-
person component more on a risk-based
framework. So decide on a case-by-case
basis whether or not it makes sense to
include an in-person component.”
Also, as FINRA has pushed the 2020branch inspections to March 2021, “wecan work through with the SEC to allowfirms to conduct remote inspections for2020 and 2021.”
Washington Bureau Chief Melanie Waddell canbe reached at firstname.lastname@example.org.
CFP Board Restructures to Improve Brand,
The Certified Financial Planner Board of Standards has approved changes to itsgovernance, enforcement and risk management practices to help the organizationenforce its new code of ethics and standards of conduct.
The efforts build on shifts the group has been making over the past 14 months
in the wake of a Wall Street Journal report on how the CFP Board website for
investors, LetsMakeAPlan.org, omitted “that thousands of the planners bearing
the board’s seal of approval have had customer complaints or faced criminal or
regulatory problems — often directly related to their work with clients.”
In a statement, Jack Brod, 2020 chair of the organization’s board, explained,
“Over the last few months, and with the assistance of consultants from a global
consulting firm, the Board discussed and agreed on essential actions to improve
our governance of CFP Board.”
The changes were shaped by members of CFP Board’s Independent Task Force
on Enforcement, announced last September.
Michael Kitces, an industry blogger and head of planning strategy atBuckingham Wealth Partners, noted that the governance — and appeals committee changes — are positive. “Much of it simply appears to be a formalization ofwhat were already informal or existing processes, though,” he explained.
The most notable aspects “are the expansion of the Appeals Committee to havea broader scope of Code and Standards Enforcement (which is consistent with theCFP Board’s indications that it intends to take enforcement of its standards moreseriously now that its new ‘more fiduciary’ standard is in place),” Kitces said.
The transition of the Audit Committee “to also be responsible for assessing enterprise risk” makes sense, he explained, “given the CFP Board’s recent PR challenges,such as the … Journal article last year highlighting CFP certificants who had disciplinary records on BrokerCheck but a ‘clean’ record on the CFP Board’s website.”