Monday, March 5, 2018

Do you have licensed insurance agents in New York?

Failure to File Certification of Compliance

On March 3rd, 2018, a notification was sent to those individuals who are licensed with the New York State Department of Financial Services ("DFS"). The DFS is the regulatory body that supervises banks, mortgage originators, and insurance companies/agents, among others. However, the DFS does not supervise registered investment advisors or broker-dealers.

Therefore, if you received the notification of “Failure to File Certification of Compliance”, it is most likely because you or a member of your firm are insurance licensed in New York.

The vast majority of the recipients of the Failure to File Certification of Compliance are licensed insurance agents. As a licensed insurance agent in New York, you are subject to the regulations of the DFS. The notification was a reminder to complete the online DFS certification of compliance to their cybersecurity regulations.

We suggest that you review the implemented cybersecurity rules provided by DFS (LINK). This rule does provide a number of exemptions, where you would not be subject to the full scope of the rule (See Section 500.19 Exemptions). However, you will still be required to certify to the state of New York whether you are in full adherence to the rule or you rely on the exemption, by filing through the DFS portal (LINK).

Lastly, we suggest that you reach out to your insurance affiliates and their compliance departments to discuss the details of the DFS cybersecurity rules. They may be able to provide further assistance and guidance to this rule and how it applies to your insurance business.

AdvisorAssist Team

Wednesday, February 14, 2018

Share Class Selection Disclosure Initiative

Share Class Selectrion Disclosure Initiative

On February 12, 2018, the U.S. Securities and Exchange Commission ("SEC") released their Share Class Selection Disclosure Initiative. This communication is right on the heels of its 2018 Examination Priorities [issued February 7, 2018], where the SEC noted its focus on investors being in higher cost share classes or those with a conflict of interest not fully disclosed.

Under the Share Class Selection Disclosure Initiative, the SEC is offering amnesty to Advisors that self-report that they failed to disclose conflicts of interest related to recommendations of funds with a 12b-1 fee when lower cost share classes were available to the investor. Please note the following from the SEC’s announcement:

“The investment adviser "received" 12b-1 fees if (1) it directly received the fees, (2) its supervised persons received the fees, or (3) its affiliated broker-dealer (or its registered representatives) received the fees.”

Advisors have until June 12, 2018 to self-report as part of this initiative. By self-reporting, eligible advisors will have to pay back the difference of the 12b-1 fees versus the fees of the lower cost share class. The SEC will conduct a look back of fees earned since January 1, 2014. In return, the SEC will not impose civil penalties related to the lack of disclosures for any Advisor that self-reports.

It is important to note that Advisors already involved in an enforcement action do not qualify for this initiative. If Advisors are subject to a pending SEC examination, you are still eligible to self-report, however.

Advisor Insights:

  • Run a report of all recommendations of mutual funds where you earned a 12b-1 fee (since 2014).
  • Identify if a lower cost share class was available for the same fund at the time of the recommendation. If yes:
    • Were explicit disclosures provided to the client of the conflict of interest that you recommended a more expensive share class when a lower fee share class was available.
    • Consider conducting an analysis to calculate the difference of the 12b-1 fees earned versus the lower cost share class.
  • Investments in share classes other than the lowest share class is not necessarily an issue. For example, the Advisor may use “no transaction fee” or “NTF” funds in certain instances. As a fiduciary, it is important to evaluate what is in the best interest of the client. A smaller position or more frequently-traded position may be best suited to an NTF product. However, the SEC has raised concerns of Advisors in wrap fee programs [that absorb fees] utilizing NTF funds in a more costly wrap structure.

If Advisors have any questions on whether to self-report, AdvisorAssist recommends that you contact legal counsel. Self-reporting is done with the SEC’s Enforcement Division, who will then recommend a settlement in which the Advisor neither admits nor denies the findings. However, the Advisor will be required to consent to the institution of an administrative and cease-and-desist proceeding under Sections 203(e) and 203(k) of the Advisers Act for violations of Sections 206(2) and 207 of the Advisers Act based on the adviser's failure to disclose the conflict of interest.

If you would like additional information about the SEC’s Share Class Initiative, please refer to the SEC’s Share Class Selection Disclosure Initiative announcement or contact your Compliance Consultant or

AdvisorAssist Team

Tuesday, January 16, 2018

2018 Annual FINRA Entitlement User Account Certification

FINRA requires that the Super Account Administrator ("SAA") for your advisory firm log into your account to validate the users that have access to your filing, billing and related information. AdvisorAssist serves as the "Alternate Administrator" for your FINRA account. Typically, your Chief Compliance Officer ("CCO") serves as the SAA.

The AdvisorAssist team has emailed our instructions to certify and how to communicate back with us. If you have any questions, please contact us at

Thank you.
The AdvisorAssist Team

Below is the email you would have received from FINRA:
Subject: Annual FINRA Entitlement User Accounts Certification - [Your Firm]
Start Date: 1/8/2018
Due Date: 2/8/2018
One of the responsibilities of FINRA Super Account Administrators (SAAs) is to ensure that users in their organization who require access to applications in the FINRA Entitlement Program to perform their job responsibilities are properly entitled to these applications and the sensitive data that these applications may contain. While FINRA encourages administrators to review user accounts periodically throughout the year and to delete accounts when user terminate, FINRA conducts an annual user accounts certification program to enhance this review process. The purpose of this email is to notify you that today begins FINRA's 2018 Entitlement User Accounts Certification Period.

During this 30-day certification period, you will need to review your organization's user accounts to determine that:
  • each user has a continuing need to access FINRA application(s) on the organization's behalf;
  • each user is entitled only to the applications and privileges needed to perform current job responsibilities; and
  • only users who require access to sensitive data (e.g., Criminal History Record Information, social security or tax identification numbers, dates of birth) are entitled to access this type of data.
For your convenience, you can download your user account information into a report to send to other individuals within your organization to confirm individual's appropriate entitlement, including access to applications, privileges, and sensitive data. FINRA recommends that you certify your users on the same day you request the download to prevent having to perform a subsequent review of your users as the entitlement data may have changed since the download was requested.
If user accounts are not certified within the 30-day certification period, the capability to create, edit and clone accounts within an organization will be disabled for all Administrators and will remain disabled until an organization completes the certification process. Organizations that fail to certify their users will be referred to the appropriate regulator for follow up.
To begin the certification process, please click here. Note: At the beginning of the year while all firms are participating in the SAA certification process, user administration system response time may be a little slower than usual.
Additional entitlement information can be found on the FINRA Entitlement Program page.

For questions concerning the certification process, please contact the Gateway Call Center at:
(301) 869-6699 (Broker/Dealers)
(240) 386-4848 (Investment Advisers)

Thank you.
The AdvisorAssist Team 

Tuesday, December 19, 2017

End of Year Compliance Action Items

End of Year Compliance Action Items

Here are 5 compliance action items to keep in mind as 2017 comes to a close:

1. Renewal Fees

The deadline for the payment of your preliminary renewal fees was yesterday (December 18, 2017). The next deadline to be aware of is December 26, 2017, which is the deadline to submit any registration terminations in jurisdictions where you are no longer required to be registered. Please click here to view our previous Advisor Alert related to the annual renewal process and important deadlines.

2. Annual Compliance Training

If your firm hasn't done so already, now is a good time to conduct a 2017 annual compliance training. It is essential that your firm conducts an annual training for all supervised persons of the firm to establish and reinforce the firm's policies and procedures. Topics should include roles and responsibilities for the CCO and supervised persons, core compliance topics, and industry hot topics.

3. Annual Review and CCO Report

Rule 206(4)-7 of the Investment Advisers Act of 1940 and other state regulations require that Advisors implement (and maintain) a compliance program that is designed to prevent, detect and correct any violations of the securities laws. On an annual basis, the Chief Compliance Officer (“CCO”) is responsible for performing an annual review to determine the adequacy of the compliance program.

SEC Registrants: Details and findings of the annual review are required to be captured and archived in an Annual CCO Report.

4. FINRA Entitlement User Accounts Certification

At the beginning of each year FINRA requires that the Super Account Administrator ("SAA") for your firm validate the users that have access to your filing, billing and related information within 30 days of the notice. Please Note: AdvisorAssist will provide you with reminders and instructions to guide you through the process.

5. ADV Amendment

Advisors are required to file an amended Form ADV1 and Form ADV2A within 90 days of their fiscal year end. For those advisors that use December 31, 2017 as their fiscal year end (which is most of you), the deadline to file your amended ADV is March 31, 2018. Please Note:AdvisorAssist will provide you with questionnaires and reminders to guide you through the data gathering process.

As a reminder, on October 1, 2017 the United States Securities and Exchange Commission (the “SEC”) released revisions to the Form ADV 1. Advisors will need to provide additional information for Item 1 - Identifying Information, Item 5 - Information about Your Advisory Business and Item 8 - Participation or Interest in Client Transactions. For additional information on the changes, please click here to view our post on the Form ADV 1 changes.

SEC Registrants: Additional funding to your E-Bill account will be required for your annual ADV amendment. The fee is debited at the time of filing your firm's ADV and is based on the fee schedule below:

Regulatory AUM Annual SEC Amendment Fee
$100M or More $225
$25M to $100M $150
Less than $25M $40

In the meantime, should you have any questions, please contact us at or reach out directly to your compliance consultant.

AdvisorAssist Team

Friday, November 10, 2017

Annual RIA Renewal Fees Processing and Calendar

It is that time of year when your RIA registrations fees are due on an annual basis regardless of whether an entity or an individual is registered for the entire year or a limited duration.

On Monday (11/13/2017) a notice will be sent to you from FINRA indicating that a preliminary renewal statement is now available through E-Bill on the IARD system. The statement will be based on the firm’s current registrations and calculated to assume they will remain the same in 2018. The amount shown will be the amount an RIA is required to pay by 12/18/2017. There is an opportunity to review the current registrations by 12/26/2017 in order to remove registrations no longer required for a refund on 01/02/2018 or to add additional registrations with a payment due by 01/22/2018.

Please note: AdvisorAssist will take the necessary steps to review and prepare the preliminary statement to facilitate the payment of fees. Our process is designed to complete the renewal process for each client by the end of November to get ahead of any volume related systems issues or other year-end requirements that could lead to a firm not being properly registered going into 2018.

Key dates to note include:

  • November 13, 2017: Preliminary Renewal Fee Statements available to download and review.

  • December 18, 2017: Payment due for Preliminary Renewal Fee Statement.

  • December 19, 2017: FINRA automatically transfers funds from your Flex Funding account to your Renewal account for any fees due.

  • December 26, 2017: Last Day to Submit Registration Terminations by 6 PM (ET).

  • January 02, 2018: Final Statements Available with a Balance Due or a Refund.

  • January 22, 2018: Final Renewal Fee Statement payments are due to avoid de-registration.

Consequences of Non-Payment
If applicable registration fees are not paid, firm and/or individual registrations terminate and a new application will need to be submitted. Depending on the state, a new application may begin the registration process as if it were an initial registration subject to a 30-day review period.  During the period of time where an entity or individual registration is pending, advisory services may not be offered and no fees collected.

Please contact AdvisorAssist with any questions: and stay tuned for upcoming communications on how we can assist with your renewal process.

Wednesday, September 27, 2017

Cybersecurity: SEC Initiatives

On September 25, 2017, the U.S. Securities and Exchange Commission (“SEC”) announced the launch of the following enforcement initiatives in order to combat cyber-based threats and protect retail investors:
1.     Creation of a Cyber Unit – dedicated to:
  • Target cyber related threats and misconduct.
  • Focus on problems such as:
    • Stealing of nonpublic information.
    • Intrusions into retail brokerage accounts
    • Market manipulation schemes.
    • Threats to market infrastructure like trading platforms.
    • Dark web.
2.     Establishment of a Retail Strategy Task Force
  • Develop proactive, targeted initiatives to identify misconduct toward retail investors.  
  • Leverage data analytics, technology solutions, and the expertise of law enforcement personnel and SEC staff in order to protect retail investors.

This announcement from the SEC comes shortly after the disclosure of a 2016 breach in the SEC’s EDGAR system and a long running data breach at Equifax (one of the nation’s three major credit reporting agencies).  Click here to read our blog post on the Equifax breach.
For additional details please read the full press release: Click Here.

If you have any questions, please contact us at or to your compliance consultant.

AdvisorAssist Team

Friday, September 15, 2017

Most Frequent Compliance Issues - Advertising Rule

On September 14, 2017 the US Securities Exchange Commission (“SEC”) released a risk alert on the most frequent compliance concerns related to Rule 206(4)-1 (“Advertising Rule”).

The SEC has identified the most common deficiencies related to compliance with the Advertising Rule:
  • Misleading Performance Results
  • Misleading One-on-One Presentations containing “Gross-only” Performance
  • Cherry Picked Profitable Stock Selections
  • Misleading Selection of Recommendations, (a.k.a. Client Testimonials)
  • Compliance Policies and Procedures related to the review and approval of Advertising

For additional details please read the full Risk Alert.

If you have any questions, please contact us at or to your compliance consultant.

AdvisorAssist Team