Compliance Considerations in an RIA Merger or Acquisition
By Robert "Bob" Lavigne, David Birnbaum and Hank Sanchez
Managing Directors, Bates Compliance Team
Mergers and acquisitions of registered investment advisers set new records in 2019 with the number of deals reportedly exceeding 200 for the year. Driving these consolidations is a fragmented industry of over 11,000 RIAs, continuing downward pressure on fees, a demanding regulatory environment that increases compliance costs, and rapid advances in financial technology that offer both great opportunity, but at potential cyber and privacy cost.
The case to consolidate in today’s market is strong. The backdrop, however, includes changes to the regulatory framework and how best to protect retail investors while ensuring a marketplace that works for advisers and brokers. For those considering a merger or acquisition, failure to account for the practical and future implications of these regulatory changes is a mistake that can impact their best effort.
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Compliance Training: A Marathon Without a Finish Line
By Matthew Bromberg and Jenna Burch, Dorsey & Whitney LLP*
Registered investment advisers are required by law to develop and follow written compliance policies and procedures that are reasonably designed to prevent violations of law and protect clients. As the responsibility to maintain compliance with SEC rules and regulations rests on all associates and supervised persons, and not only the Chief Compliance Officer (CCO), providing compliance training to all personnel is critical and contributes to a compliance and business culture where legal, ethical practices are the norm.
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A Primer on the Difference Between Cyber and Financial Institution Fidelity Bond Insurance Policies
By Mike Oppe, Senior Vice President, Financial Institutions, Chubb Insurance*
The annual Investment Management Compliance Testing Survey results for each of the last six years (2014-2019) rank cybersecurity as the “hottest compliance topic” scored by respondents. The survey also points to an increasing uptake in the purchase rate of cyber insurance policies, increasing from 33 percent in 2016 to 66 percent in 2019. We continue to observe a significant amount of confusion regarding the perils covered by cyber policies versus other policies, particularly the fidelity bond.
A key step to sorting out the confusion is understanding what type of perils are covered and where, with a goal of achieving a more comprehensive insurance risk transfer solution.
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