Broker-dealers (BDs) and investment advisers (IAs) regularly hire compliance consultants to obtain advice about regulatory requirements. A recent Securities and Exchange Commission (SEC or Commission) enforcement proceeding against an investment adviser (IA) calls into question whether firms may rely on compliance consultants as a defense to violating the law.  However, if firms take proper steps, BDs and IAs may still be able to retain consultants and defend themselves based on the advice they receive. Otherwise, “caveat emptor” (as the saying goes) or “caveat compliance” (as the SEC seems to be saying).

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Additional contributors to this post:

Brian L. Rubin, brianrubin@eversheds-sutherland.com

Rebekah R. Runyon, rebekahrunyon@eversheds-sutherland.com

The DOL issued a Field Assistance Bulletin (FAB 2017-01) on Friday, March 10, 2017 to address near-term compliance concerns relating to a proposed 60-day delay of the Fiduciary Rule. As previously reported, the DOL issued a proposal on March 2, 2017 to delay the April 10, 2017 implementation date of the Fiduciary Rule by 60 days. This 60-day delay is not yet final, however, and there has been confusion over what will happen if a decision on the delay is not made until after April 10 or if a decision is made too close to the implementation date to allow time for compliance. Although the DOL has stated that it intends to issue its decision before April 10, it issued the Bulletin to announce a temporary enforcement policy which provides certain limited enforcement relief.

Continue reading DOL Provides Temporary Enforcement Relief on Fiduciary Rule →

In a recent Risk Alert, the staff of the Office of Compliance Examinations and Inspections (“OCIE”) of the Securities and  Exchange Commission (“SEC”) observed that one of the most frequent deficiencies identified in OCIE examinations was the failure of investment advisers to recognize that they might be deemed to have custody of client assets for purposes of Rule 206(4)-2
(“Custody Rule”) under the Investment Advisers Act of 1940 (“Advisers Act”). On February 21, the staff of the SEC’s Division of Investment Management provided additional guidance under the Custody Rule that addressed three situations where there have been significant questions as to whether an investment adviser has custody of client assets:

• when the adviser has limited authority to transfer client assets pursuant to a standing letter of instruction or other similar asset transfer authorization arrangement (“SLOA”) established by a client with a qualified custodian;
• when an agreement between the client and its custodian appears to provide the adviser with access to client assets—even if the investment adviser is not a party to such agreement; and
• when the adviser has the authority to move money between the client’s own accounts (“first-person transfers”).

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Additional contributor to this post:

Gregory T. Larkin,  gtlarkin@debevoise.com