Episode 11: Recapping the 2018 IAA Investment Adviser Compliance Conference

This week, Jennifer Greene discusses the highlights of the 2018 Investment Adviser Compliance Conference, with the hot topics on everyone's mind as well as the most popular sessions of the conference.

Transcript: 

Jennifer:

Welcome to the CCO Buzz, I’m Jennifer Greene, the Marketing Strategist here at Core Compliance and Legal Services. This week, I’ll be recapping the highlights of the 2018 Investment Adviser Compliance Conference, which took place last week in Washington, DC.

The conference kicked off with impressive discussions with key staff from the SEC, including the Honorable Hester Peirce, Commissioner. Commissioner Peirce’s discussion with the CEO of IAA, Karen Barr, was an interesting one, discussing rule focus, new rules, and challenges. She made a poignant comment that investment advisers should be careful what they wish for when it comes to rules and regulations. Apparently there’s been discussion and requests to increase regulations for broker-dealers, but in the process of doing so it’s likely that investment advisers will see increased regulations as well.

Ms. Barr asked Commissioner Peirce what she viewed as the three biggest challenges for the SEC, and her answers were cybersecurity, cryptocurrency, and a return the unglamorous “bread and butter” of what the SEC does – those less exciting areas of regulation that need to be focused on as a day to day aspect of what the SEC is all about.

After that, there was a roundtable discussion between Peter Driscoll, Director of the Office of Compliance Inspections, as well as Stephanie Avakian, Co-Director of the Division of Enforcement, and Robert Kaplan, Partner at Debevoise & Plimpton LLP, as well as Gail Bernstein, general counsel for IAA, who moderated. Their discussion was lively and covered a variety of topics, but emphasized throughout the entire thing the SEC is experiencing greater collaboration than ever before, and there is a distinct effort being made to make the agency more approachable than it has been in the past.

A hot topic that was of clear interest to the crowd was the idea of robo-advisors, and the risk involved with them. Director Driscoll took the lead on the topic, with some interesting insights as to what he sees as two main categories that robo-advisors fall under. For more details on these initial sessions with the SEC staff I invite you to subscribe to the Core Compliance℠ blog – a detailed recap of those initial discussions is going to be posted to our blog in the coming weeks.

From there, the breakout sessions began after a networking break, with tracks suitable for small, medium, and large firms. I generally attended the small firm sessions, and I found them extremely insightful and practical for the attendees. I heard from attendees of all firm sizes that the sessions geared towards their specific firm size were well thought out and put together, and those folks found as much value in their sessions as I did in the small firm sessions.

One of the first breakout sessions I attended was about compliance testing and implementation for smaller firms. It focused on what regulators would be expecting to see in a firm’s annual compliance review. A key takeaway from the session was that an annual review shouldn’t be a one time event, once a year. Sure, certain aspects need to be done once a year, but despite what’s implied with the name, the annual review as a whole needs to be an ongoing, constant process. The panelists also discussed practical aspects, such as review types, best practices for when to do reviews internally or hire an outside consultant, and similar items.

This session was one of the most packed sessions I saw, with attendees spilling out into the hall to try and listen in. After that it was the session that nearly every attendee described as the best one they attended, regardless of the track they were on – every size firm had a cybersecurity session. I sat in on the small firm cybersecurity session, and it was extremely informative and practical. It started with an in-depth look at the biggest risks that small firms face, and how attacks and problems actually happen in the real world, coming from a cybersecurity expert. It then had the leaders of two smaller firms describing their experiences with becoming more secure in their digital environment.

Laura Drynan, partner at Bourgeon Capital Management, had an upbeat take on a scary topic, pointing out where there were extensive gaps but telling a story that made becoming more secure with your firm’s digital environment seem achievable. I particularly enjoyed the real examples of phishing emails presented by David Edwards, president at Heron Financial Group, as well as Mr. Edwards’ story of setting up a secure digital environment early on, when there was really little guidance out there. For more details on this specific session, I again encourage you to subscribe to our blog – this one was such a good session that I’ll be posting a more detailed recap in the coming weeks. After the cybersecurity session, nearly every attendee could be heard discussing what they’d learned, and the steps they wanted to take to deal with the risks.

One of the final sessions I attended on Thursday was advertising, marketing materials, and social media, which was insightful and included input from Melissa Harke, the senior special counsel in the division of investment management at the SEC. The advertising rule is always one that stirs up discussion, and the panelists spent a lot of time reviewing what counts as marketing materials, what counts as advertising, specific definitions of all the related terms, and more. Specifics involving social media were reviewed in terms of how they relate to the rule, and were very direct and to the point. After that, the first day of the conference wrapped up with the cocktail hour, where attendees discussed what they’d learned that day. Cybersecurity was definitely one of the most discussed topics, and was at the top of everybody’s mind.

The next day, the session on Best Practices for Form ADV disclosure was packed – even people catching early flights out made a point to sit in for that session. It was very hands-on, almost a walk through of the form, not quite, but close and plenty of attendees submitted questions for discussion. Immediately after was the session on the recent custody rule, which again, was packed, and had a lot of questions flying through the room.  SLOAs, first person transfers, and inadvertent custody were clearly on the mind of many attendees, and the discussion in the breakout sessions after this showed it.

Michelle Jacko, speaking as the managing partner for Jacko law group, moderated one of the breakout sessions after the SLOA panel. That session was about considerations for advisers with individual clients, including discussion about the DOL fiduciary rule and aging clients. Presenting with Michelle were Steven Wilkes, CEO of Hutchinson Capital Management, Scot Draeger, General Counsel and COO of R.M. Davis, Inc, and Sharon Buccafusco, Vice President and CCO of Tradition Capital Management, LLC.

This session was described as one of the best at the conference, second only to the cybersecurity sessions, and attendees stayed for nearly an hour after the session ended to talk further with Michelle and the other panelists about specifics of the DOL rule.

For a more detailed review of the session, much like the other hot topics from the conference, a recap will be posted on the website of our sister company, Jacko Law Group, and you’ll be able to find it on the blog there in the coming weeks.

The conference wrapped up with more breakout sessions rich in information and discussion, with one of the last sessions after lunch being nearly as packed as the ADV session. That was the session on strategies for managing an SEC exam, which again, part of why it seemed so popular was that it was a very practical, actionable presentation with strategies that advisers really found helpful.

Were you at the conference? Did you come by our booth to say hello? Leave us a comment if you did, or just leave your thoughts on the conference along with your favorite sessions. If you have any questions on the topics at the conference, or would like to discuss the specific hot topics in more detail, request time with one of our compliance consultants by giving us a call at (619)278-0020, or you can email us at info@corecls.com. Thank you.  

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