Bachus Bill – Say NO to FINRA

If you believe that compliance is already challenging enough – then you will want to oppose HR 4624, aka the Bachus bill.

HR 4624 would outsource oversight of IAs to a self-regulatory organization (SRO) which would likely be established by FINRA.

To oppose this, please write or call your Representative.  Go to http://capwiz.com/cfp/home/ to get more information and to find the contact information for your Representative.

I urge you to not only contact them yourself, but to ask your clients, friends and family to contact their Representative.  Click on “Take Action” in the middle of the page.  This will take you to an editable letter you can email to your Representative.

Free Compliance Tool

I am a Mac user. I have an iPad and just bought the iPhone4S (I couldn’t wait any longer for the 5).  While attending a One-to-One class at the Apple store, I “discovered” a great compliance tool for all you iPhone/iPad users – the app Find My iPhone.  This free tool allows you to not just find your phone, but if set up properly (the key here) you can wipe your device remotely of all information.

The remote wipe feature is especially important as most advisers have information on their devices that should be protected.

The key here is to set up your device to allow for remote wipe.  Just search “find my iphone” on www.apple.com and all the information you will need is readily available.

In addition, when you set up the password on your device (you MUST have a password on your device) you can also set the device to automatically lock if the wrong password has been entered ten times.

Social Media Compliance

Social media can be a daily occurrence in many RIA firms.  However, is your social media plan a compliant social media plan?”  Frequently the answer to that question is “no”.

If you are going to use social media, either daily, weekly or not at all, it is important to create, implement and monitor a compliance policy and procedures for your firm’s social media use.

In January, the staff of the SEC’s Office of Compliance Inspections and Examinations, in coordination with other SEC staff created a helpful National Examination Risk Alert titled “Investment Adviser Use of Social Media” (http://www.sec.gov/about/offices/ocie/riskalert-socialmedia.pdf).

Things to consider when preparing your “policy”:

• Will you allow it all? – Still need a policy.
• Will you allow LinkedIn, but nothing else – Still need a policy to define what can be posted and if content needs to be approved prior to posting
• Will you allow Twitter posting – Need a policy, monitoring procedure and record retention

The most often overlooked is the record retention requirements of social media.  RIAs should ensure that all required records are retained (include this in your policy) in compliance with all federal or state securities laws.

ADV Part 2 delivery

Although many of us may be caught up in the tax deadline, for many investment advisers another deadline is rapidly approaching.

Each year an investment adviser must (i) deliver, within 120 days of the end of your fiscal year, to each client a free updated brochure (aka ADV Part 2A) that either includes a summary of material changes or is accompanied by a summary of material changes, or (ii) deliver to each client a summary of material changes that includes an offer to provide a copy of the updated brochure and information on how a client may obtain the brochure.  See SEC rule 204-3(b) for SEC registered advisers.

For state registered advisers, the deliver requirement isn’t as clear.  Many states follow the SEC requirement, but not all.  For example, Oregon requires the delivery of the entire ADV Part 2 each year.

Electronic delivery is allowed.  The SEC has published interpretive guidance on delivering documents electronically (www.sec.gov/rules/concept/33-7288.txt).  Just emailing the Part 2 to clients or uploading to your client portal each year is not allowed-unless guidelines are met.

The client must consent in writing to electronic delivery.  This can be done either by including this in your client agreement or by having the client sign an authorization.  Or the client can sign a document acknowledging receipt of the document.

For specific instructions, please look to the SEC website at www.sec.gov or for state guidelines go to the state’s website or www.nasaa.org.

Growing your RIA Practice

Click on this link to Bob Veres article in Financial Planning “Chicken and Egg: How to Grow Your RIA Practice from Scratch.”  http://www.financial-planning.com/gallery/fp/-2678029-1.html - Hit next a few times and I am featured!  Other great outsourcing solutions as well.

 

More Dodd-Frank changes

SEC Adopts Net Worth Standard for Accredited Investors Under Dodd-Frank Act

The Securities and Exchange Commission has amended its rules to exclude the value of a person’s home from net worth calculations used to determine whether an individual may invest in certain unregistered securities offerings. The changes were made to conform the SEC’s definition of an “accredited investor” to the requirements of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Under the amended rule, the value of an individual’s primary residence will not count as an asset when calculating net worth to determine “accredited investor” status. The amendments also clarify the treatment of borrowing secured by a primary residence for purposes of the net worth calculation. Under certain circumstances, they also permit individuals who qualified as accredited investors under the pre-Dodd-Frank Act definition of net worth to use that prior net worth standard for certain follow-on investments.

SEC rules permit certain private and limited offerings to be made without registration, and without requiring specified disclosures, if sales are made only to “accredited investors.” One way individuals may qualify as “accredited investors” is by having a net worth, alone or together with their spouse, of at least $1 million. The Dodd-Frank Act requires that the value of a person’s primary residence be excluded from the net worth calculation used to determine the person’s “accredited investor” status.

Under the amended net worth calculation, indebtedness secured by the person’s primary residence, up to the estimated fair market value of the primary residence, is not treated as a liability, unless the borrowing occurs in the 60 days preceding the purchase of securities in the exempt offering and is not in connection with the acquisition of the primary residence. In such cases, the debt secured by the primary residence must be treated as a liability in the net worth calculation. This is intended to prevent manipulation of the net worth standard, by eliminating the ability of individuals to artificially inflate net worth under the new definition by borrowing against home equity shortly before participating in an exempt securities offering. In addition, any indebtedness secured by a person’s primary residence in excess of the property’s estimated fair market value is treated as a liability under the new definition.

The amended net worth standard will take effect 60 days after publication in the Federal Register. Beginning in 2014, and every four years thereafter, the Dodd-Frank Act requires the Commission to review the “accredited investor” definition in its entirety and to engage in further rulemaking to the extent it deems appropriate.

SEC has now proposed or adopted more than three-quarters of the rules that the Dodd-Frank Act required the agency to write. (Press Rel. 2011-274)

Cindi obtains designation!

Cindi Hill of Hill Compliance Advisors has completed the requirements of the NRS Investment Adviser Certified Compliance Professional^sm (IACCP^sm) Program.  As a newly certified Investment Adviser Certified Compliance Professional^sm (IACCP^sm), she is authorized to use the IACCP^sm certification marks.

The IACCP^sm designation indicates that Cindi has satisfactorily competed all Program requirements, has agreed to abide by the IACCP Code of Ethics and Professional Standards of Conduct, and is subject to the IACCP Continuing Education requirements.

Congratulations Cindi!