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  • by Skip Schweiss
  • President, TD Ameritrade Trust Company
    Managing Director of Advisor Advocacy & Industry Affairs

Advocating for You: A Pause in Regulatory Action

TD Ameritrade Institutional’s own Skip Schweiss recently received the 2016 Insider’s Forum Leadership Award—reinforcing our position as a steadfast advocate for independent RIAs.

To ensure you get the most out of the meaningful work Skip does, we’re pleased to introduce his new blog series, Advocating for You. Here we will check in with Skip as he continues to give RIAs a voice in Washington, DC, and supports advisors throughout the country. We want to be sure you hear from him often, and have a way to connect with this great resource. It’s all for you.

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2017: A Pause in Regulatory Action

We’ve had an active regulatory administration for the past eight years. Now the pendulum appears to be swinging in the other direction. Everything slows when there’s an administration change — even more so when there’s a party change, too. That’s why I foresee 2017 as a slow year when it comes to policy changes impacting investment advisers.

It’s crucial to note that the DOL Rule is not a policy change. It’s law.

President Trump and the DOL Rule

There are a lot of rumors and speculation regarding the Trump Administration and the future of the Department of Labor (DOL) Conflict of Interest Rule (DOL Rule, “the Rule”). Other than the general sentiment that he supports reducing regulatory burdens on business, the president-elect has not taken a public stance on the issue.

While some are predicting the Rule’s demise, the DOL purposely pushed to get the Rule finalized during the Obama Administration so a new president can’t easily undo it.

This Rule is final — not a work in progress. I have even heard rumors that President Trump will “issue an executive order” and do away with the Rule. That’s not likely. He doesn’t have that direct power over a finalized DOL regulation.

So while a delay or modification is possible, the bottom line is that there are only 80 days from Inauguration Day to DOL Rule compliance date, April 10. President Trump will be focusing on getting his appointees formally nominated and approved and likely not zeroing in on the DOL Rule just yet.

If I were running an advisory business, I would be ready for April 10. That’s my advice to RIAs, too. Slowing down your preparations hoping for major news is risky and not recommended. We’re hearing that some of your competitors are slowing or even pausing their compliance efforts. This may give you a leg up come April.

Back Burner Getting Crowded

I don’t expect much new activity out of the Securities and Exchange Commission (SEC) for the next few years as the Trump Administration is looking to reduce, not impose, regulatory burden.

Trump appointees will have a major influence on the SEC for the foreseeable future. SEC Chair, Mary Jo White, plans to step down this month. The new President will appoint the Chair, as well as two (of 5) commissioners.

Proposals likely to get “shelved” for now include:

• Mandatory business continuity plans: The SEC released a proposal and it’s in a comment period, but we expect that to get put on hold.

• Third-party exams: The SEC was close to proposing a regulation requiring third-party exams of investment advisory firms. Chair Mary Jo White has said it is off the table for now. While no advisor wants more regulatory exams, the status quo doesn’t do much for investor confidence. In fact, according to the SEC’s FY2016 budget report, exam coverage of the securities market remains limited. The staff examined approximately ten percent of registered advisers in FY 2014 and roughly 40 percent of advisers have never been examined.

Outside the SEC, we’re watching the Financial Crimes Enforcement Network (FinCEN) a bureau of the Department of Treasury. It has a proposal to include RIAs in the definition of “financial institution” for purposes of applying anti-money laundering rules (AML).

This is part of an ongoing, post 9/11, effort to better oversee money movement. Today, banks, insurance companies, and broker/dealers are included — RIAs are not. If RIAs were included it would mean tighter “know your client” rules and a requirement to submit “suspicious activity reports” in certain circumstances. I will stay on top of this and keep you posted.

Some Agreement in Washington

In December, the House of Representatives passed a potentially important piece of financial services legislation by a vote of 391-2. The “Creating Financial Prosperity for Businesses and Investors Act” aggregates six measures that each previously passed the House with bipartisan support.

The measure of most significance to RIAs is the potential expansion of the definition of “accredited investors.”

The bill would amend the definition to add inflation adjustment provisions to the current $1 million net worth and $200,000 ($300,000 jointly) income requirements, and to add two new categories of accredited investors:

1. People with a current securities-related license; and
2. People whom the SEC determines to have demonstrable education or job experience to qualify as having professional subject-matter knowledge related to a particular investment.

In short, this will result in a wider pool of accredited investors. So while we can all agree that it’s important to ensure capital is flowing, by opening the gates wider we could see novice investment professionals in highly sophisticated investments. It will be interesting to see how the industry reacts. Hear more information on the bill and its other components.

National LINC Advocacy Highlights

Finally, I’m looking forward to our annual National LINC Advisor conference, February 1-4 in San Diego. We’ll have a session dedicated to my favorite topic: The DOL Rule. Brad Campbell, a private practice ERISA attorney, will lead the session. Brad preceded Phyllis Borzi as the Assistant Secretary of Labor for Employee Benefits and head of the Employee Benefits Security Administration.

The session will focus on the DOL Rule, including the impact on advising IRA rollovers. It will also touch on retirement policy issues in Washington and provide information you need to stay updated on the issues affecting your retirement plan business.

Also, I’m going to moderate a panel called “Washington Flyover: Policy Coming Your Way.”
Almost a decade since the financial crisis and our industry continues to bear the brunt of regulatory reform. This panel will explore the issues I cover here in “Advocating for You” such as:

• SEC initiatives, including uniform fiduciary standard, third-party exams, and mandatory business continuity plans
• Anti-Money Laundering rules for RIAs
• The DOL Rule
• And, despite the session title, we’ll cover issues pertaining to state-registered investment advisers

Industry leaders joining me include:

• Karen Barr, President & CEO, Investment Adviser Association
• Joseph Brady, Executive Director, North American Securities Administrators Association
• Karen Nystrom, Director of Advocacy, Financial Planning Association

Next month, I’ll be sure to update you on any key information shared at LINC. Until then, please contact me if there’s anything you want to discuss. I’m always happy to hear from you.

TD Ameritrade is separate from and unaffiliated from all third-Parties mentioned above. All parties are not responsible for the other’s services, opinions and policies.

TD Ameritrade Institutional, Division of TD Ameritrade, Inc. member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and the Toronto-Dominion Bank. © 2017 TD Ameritrade
Distributed by: TD Ameritrade, Inc., 200 South 108th Avenue, Omaha, NE 68154-2631

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