MIAMI BEACH, Fla. - Expect more regulatory scrutiny.
That was the blunt warning delivered to advisory top executives gathered at the influential MarketCounsel Summit.
Noting that the SEC is becoming more familiar with the RIA business, MarketCounsel’s chief regulatory counsel Andrew Wels predicted an "increasing adversarial relationship between industry and regulators" in the next few years. Wels made his comments during the summit's opening address.
The increasing savvy and nimbleness of state regulators is also forcing the SEC’s hand, added MarketCounsel’s David Mrazik, also speaking at the opening session.
SEC ‘MORE EDUCATED’ ABOUT RIAS
As the SEC conducts more examinations of RIA firms and accumulates more information, it will become “more educated and sophisticated about potential regulatory issues, such as conflict of interest and regulatory disclosure,” Wels said in an interview with Financial Planning.
Advisors should be especially wary of recurring regulatory infractions, said Brian Hamburger, MarketCounsel CEO.
“Firms are being tagged with recidivist behavior, and the language being used is particularly scathing,” Hamburger said.
Wels agreed: “If the SEC finds a similar issue the second time around,” he said, “they are more likely to refer that issue to enforcement.”
After an initial examination, advisors should “make sure to have addressed every issue cited by the SEC,” Wels emphasized. They should also make sure to follow compliance procedures and stay up to date on new regulatory developments, he added.
Most importantly, warned Hamburger, when it comes to the SEC, “don’t make the same mistake twice.”
In an afternoon session on emerging regulatory oversight, former Congressman Spencer Bachus, who served in the House of Representatives for 22 years and authored several key financial legislative acts, urged the advisors to pro-actively call regulators.
Calling and getting guidance first can save headaches later, Bachus said.
In fact, Marty Bicknell,CEO of one of the country’s fastest growing RIAs, Mariner Wealth Advisors, said he welcomed frequent visits from the SEC.
“We’ve had multiple visits [from the SEC] and our level of understanding is much improved because of the questions and guidance we’ve gotten from the SEC,” Bicknell said in an interview with Financial Planning. “I’d tell any advisor to work with the SEC. They’re giving you guidance on how to run your business.”
And as bigger teams leave wirehouses, advisors should also expect more scrutiny of the protocol for broker recruiting, the set of industry guidelines governing registered representatives switching firms or creating new ones, said Sharron Ash, MarketCounsel’s chief litigation counsel.
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