B-Ds, RIAs face swarm of surprise regulations: Pershing

Executives warn about bevy of new regs, legislation that have received scant attention; not just Dodd-Frank anymore

Jun 8, 2011 @ 2:56 pm

By Dan Jamieson

Officials at Pershing LLC are warning their broker-dealer and investment adviser clients about a host of new regulations coming down the road, some of which might be a surprise.

For example, brokerage firms will face new suitability rules and much broader trade reporting rules, while RIA firms might face for the first time anti-money laundering regulations, officials said.

The warnings came at a session today at Pershing's annual conference in Hollywood, Fla., for its broker-dealer correspondents and RIA custody clients.

Although there is a lot of unfinished business related to the Dodd-Frank financial reform law, "I think it's not just Dodd-Frank that's causing" the wave of new regulations, said Brian Shea, Pershing chief executive, in an interview.

For example, the U.S. Department of the Treasury's Financial Crimes Enforcement Network, which enforces money-laundering rules, has been doing "more saber rattling" about subjecting RIA firms to anti-money laundering rules, said Doug Walker, Pershing vice president, during a panel session at the conference.

"Fincen will look at whether it's appropriate for hedge funds and RIAs [to do] SAR reporting," he said, referring to the suspicious-activity reports B-Ds and banks now have to file.

Separately, revised suitability rules from the Financial Industry Regulatory Authority, Inc., due to go into effect in July 2012, will add new criteria that firms and brokers have to consider, said Pershing vice president Katherine Ferriter, during the panel discussion.

Finra is adding five new suitability elements, she said: a client's liquidity, age, investment experience, time horizon, risk tolerance, and a category for other information, she said.

Broker-dealers will also be challenged with several new trade-reporting requirements, said Jesse Lawrence, Pershing director and managing counsel.

Last month, brokerage firms had to begin reporting trades of asset-backed securities on Finra's Trade Reporting and Compliance Engine (TRACE) system, he said, although the system wasn't ready to accept many of those securities. Turnaround time on reporting those trades will be shortened in November, Mr. Lawrence said.

And in October, B-Ds will have to report more equity trades and more data through Finra's Order Audit Trading System (OATS), he said.

New data fields in the revised OATS system will require "information that was never captured before," Mr. Lawrence said.

Larger financial institutions are struggling with regulatory overload like smaller firms, Mr. Shea and other officials said.

For one thing, regulators want clearing firms to report more data on their larger traders.

In addition, "there are new regulations, like FACTA [the Foreign Account Tax Compliance Act] that are going to have significant impacts [for anyone] custodying assets for U.S. investors," Mr. Shea said.

Global financial institutions are now trying to figure out how to comply with the law, Mr. Shea said.

Congress passed FACTA last year, which imposes stricter IRS filing requirements on those who have overseas assets of more than $50,000. The law takes effect in 2013.


What do you think?

View comments

Most watched


Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.


Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

Latest news & opinion

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

4 strategies for Roth conversions

There's never been a better time to do a Roth conversion, and here are several ways to go about it.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print