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January 28, 2021 at 12:52 PM
Photo: FotoIdee/Shutterstock
On New Year’s Eve, I looked back at a tumultuous 2020 and tried to put things in perspective, and then look forward. In March, what appeared to be the start of a global market disaster turned into a very good year for the vast majority of advisory firms.
Technology was the biggest blessing for advisory firms, permitting them to work almost seamlessly during the global pandemic. However, we can’t forget that countless others haven’t been as fortunate, and may not be so in the foreseeable future.
For those who lost loved ones and friends, an up market was no consolation. At the end of the day, unless those around you are safe and healthy, little much else matters. Let’s be guarded and cautious, while looking forward to a safer, more secure, 2021.
With the above framework, what should advisors be thinking about in 2021? Most important, remain guarded: The Securities and Exchange Commission continues to conduct examinations at a fast pace, and those continue to be more aggressive.
It seems the new push is: How can we find a way for you to reimburse clients! Many Deficiency letters have taken on a more accusatory tone, citing violations where no such rule or requirement currently exists. Quick to allege breach of fiduciary duty.
What is an advisor to do? Some thoughts:
1. Push back.
But do this tactfully, relative to findings and/or allegations that you believe to be incorrect, unfair or unjust. The SEC makes mistakes, and at times, will reconsider its conclusions or required actions.
However, the optimal time to initially do so is prior to receipt of a Deficiency letter. Rebut as the exam is in progress; in writing, if necessary. Use the Exit interview as your opportunity to understand the Commission’s issues and reasoning.
Don’t hesitate to respectfully challenge exit interview findings, in writing, swiftly thereafter. But, make sure you have good counsel. Know why and how to address;
2. Be proactive.
Whether right or wrong, fair or otherwise, based in rule or not, you can and should be ready for examination issues. Consider a real (attorney-client privileged) compliance review to address what issues the Commission will most likely raise based upon your advisory operations. No blunderbuss, one size-fits-nobody, approach.
