TRANSITION TALK

Introducing our new web series: Roundtable Talks. We’ll feature FP experts–along with some guests–sharing their opinions on what’s going on in the financial services industry.

Real experts, real opinions, no script.

Our first episode centers around the DOL Fiduciary Rule, SEC Business Continuity Amendments, & other recent regulatory concerns. Marcus Hagood and Douglas Kreft share their thoughts on the regulations themselves as well as the potential impact on the industry. Watch the preview below.

This series is an exclusive benefit to our EMS™ members. Not an EMS™ Member? Click here to learn more about the program and its benefits, including annual Valuation, Continuity, and Benchmarking Reports plus a library of resources only available as part of the Equity Management Solutions®.

What do you want to hear about? Click here to submit topic suggestions for future Roundtable Talks, blogs and resources to our Content and Resource Team.

In past years, the slow and steady migration of independent financial service providers to the independent Registered Investment Advisory (RIA) channel has been well documented. As the number of state and SEC registered advisors continues to swell, the regulatory framework under which they have operated will undoubtedly become increasingly complicated.

For years, it has been the practice of regulators to primarily focus their attention on the largest players in our industry. Broker Dealers, Custodians, and product producers have, by and large, borne the responsibility of complying with our industry rules, if not in actual operation, then through procedural and compliance oversight of the independent producer. Call it the cost of success, but the regulatory bulls-eye is–without question–moving more and more toward the independent financial service provider. A perfect example of this is the SEC proposed Rule 206(4)-4 and amendments to Rule 204-2 for “Business Continuity and Transition Plans.”

DISASTER PREPARATION

After finding that many RIA firms were not well prepared in the aftermath of Hurricanes Katrina and Sandy, the SEC released alerts that practice owners should more closely review their disaster preparedness and continuity plans. Many of the new requirements under the proposed rules were to address shortfalls that were identified by these events in actual practice. Unfortunately, that guidance appears to be ignored by many whether through frustration, inability, or otherwise. Add to this, as FP Transitions has often pointed out, the substantial lack of Continuity Planning (death or disability planning) in our aging industry, and you have a perfect storm for regulatory intervention.

The Proposed SEC Rule 206(4)-4 and the amendments to Rule 204-2 are stepping in to address these apparent short falls in preparedness. Although many of these new regulations are considered within requirements that have long been in place for Business Continuity and Disaster Recovery under SEC Rule 38-1a and FINRA rule 4370, there are significant new requirements that are part of the language in the proposed rules and rule changes. Some of the highlights include: