Failure To Adopt Continuity & Succession Plans May Lead to Stiff Penalties

Penalty - fraud

At its recent LINC Conference, TD Ameritrade held a panel discussion, Washington Flyover: Policy Coming Your Way, moderated by Skip Schweiss, TD Ameritrade’s managing director for advisor advocacy and industry affairs. Schweiss highlighted in his comments “While surveys suggest most advisors are aware of the coming (business continuity) rule, less known is the fact that the SEC will charge a firm with fraud if they don’t have a documented plan in place.”

According to Christopher Winn, CEO & Lead Consultant at compliance firm AdvisorAssist Schweiss’s statement is a “strong statement, but technically accurate. Section 206 of the Investment Advisers Act of 1940 defines anti-fraud provisions and fiduciary duty. While the statement seems strong, it its fairly reasonable.”

Continuity and succession planning have long been considered and industry best practice that advisors have universally agreed should be implemented, but for lack of time and priority advisors have generally failed to adopt a solution. According to Financial Advisor, “In TD Ameritrade’s recent Advisor Benchmark Study, just 16 percent of respondents said that they have a formal, documented continuity plan, with another 18 percent saying they have plan in the works.”

One would have thought those statistics would have changed in the two years since regulators first announced they would make such practices mandatory and impose stiff penalties for non-compliance. Indeed, the North American Securities Administrators Association (NASAA) issued a model rule requiring a continuity and succession plan for state regulated advisors in April 2015 and 11 states have implemented their own rules based on that guidance. A great many additional states are prepared to do the same once the SEC adopts its own version of the rule which it proposed in June 2016. (See Tracking The Latest Regulatory Changes For Continuity and Succession Plans)

All that should be enough to put continuity and succession right at the top of the priority list, especially when they are so easy to implement. Pinnacle Advisor Solutions introduced PRISM, its continuity and succession planning solution, more than four years ago to provide advisors with a straightforward answer to their continuity and succession planning needs. PRISM can be implemented in just one to two weeks.

If you are interested in exploring PRISM in more detail, don’t hesitate to contact me.

Copyright: andreypopov / 123RF Stock Photo

About the Author

Tim Mascari

Tim MascariTim is Associate Director of Strategic Partnerships and heads Pinnacle's continuity and succession planning program.View all posts by Tim Mascari →

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