Compliance September 29, 2017

SEC Provides Its Own Relief for Hurricane Victims

Joining a number of other regulatory agencies, the SEC has issued important easements and compliance relief provisions for companies and individuals impacted by three recent hurricanes striking the U.S. and its territories.
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The Securities and Exchange Commission (SEC) announced that it is providing regulatory relief to publicly traded companies, investment companies, accountants, transfer agents, advisers and others affected by Hurricane Harvey, Hurricane Irma, and Hurricane Maria.  

As the SEC explains, the loss of property, power, transportation, and mail delivery due to the hurricanes poses challenges for some individuals and entities that are required to provide information to the SEC and shareholders. To address compliance issues of this nature, the commission issued an order that “conditionally exempts affected persons from certain requirements of the federal securities laws for periods following the weather events.” 

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The SEC also adopted interim final temporary rules that extend the filing deadlines for specified reports and forms that companies must file pursuant to Regulation Crowdfunding and Regulation A.

The relief and rule easements are structured for a broad class of companies and others affected by the hurricanes and their respective aftermaths. Some companies and other affected persons may require additional or different assistance in their efforts to comply with the requirements of the federal securities laws. The commission staff will address these and any disclosure-related issues on a case-by-case basis in light of their fact-specific nature.

There is a significant amount of relief described in the SEC’s orders, relating both to conduct required of registered investment advisers as well as actions prescribed for public companies and other stakeholders. Perhaps most important for the readership of PLANADVISER, with this relief, a registered investment adviser will be considered to have satisfied Form ADV filing requirements under Section 204(a) of the Advisers Act and Rule 204-1 thereunder, if the following conditions are met: “The registrant’s Form ADV filing deadline falls within the period from Aug. 25, 2017 to Oct. 6, 2017; the registrant was or is not able to meet its filing deadline due to Hurricane Harvey; and the registrant makes the required Form ADV filing by Oct. 10, 2017.” The same language is used to provide relief or Hurricanes Irma and Maria.

The SEC further explains: “During the period from Aug. 25, 2017 to Nov. 1, 2017, a registered investment adviser will be considered to have satisfied the requirements of Section 204 of the Advisers Act and Rule 204-3(b) thereunder to deliver the written disclosure statements required thereunder to its advisory client, provided that:  (1) the client’s mailing address for delivery, as listed in the records of the investment adviser, has a ZIP code for which the common carrier has suspended mail service, as a result of Hurricane Harvey, Hurricane Irma, or Hurricane Maria, of the type or class customarily used by the adviser to deliver written disclosure statements; and (2) the investment adviser or other person promptly delivers the written disclosure statement either (a) if requested by the client, or (b) at the earlier of (i) Nov. 2, 2017 or (ii) the resumption of the applicable mail service.”

Data & Research September 28, 2017

Investor Optimism Surges, Must Be Proactively Managed

Investors are not good at predicting market corrections big or small—but that doesn’t mean they can’t take concerted action to prepare for tougher times. 
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A slight majority of U.S. investors, 54%, anticipate a market correction later this year in which the stock market takes back “significant gains,” according to results from the updated Wells Fargo/Gallup Investor and Retirement Optimism Index.

While still a majority, this is down from 62% worried about such a correction in 2013 and 58% in 2014, the previous high points. It should be noted straight away that very few investment advisers, if any at all, would recommend their clients try to predict and game future market moves, either positive or negative. But the result are still informative from a behavioral psychology standpoint.  

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Indeed, while the majority sees a market correction in the near term as likely, still most investors are not acting proactively to rebalance or otherwise adjust their portfolios to match their true risk tolerance. Defining risk tolerance in this fashion does not mean making guesses on market moves but instead taking a regulated and disciplined approach to periodically adjusting the portfolio to meet long-term objectives.

“One of the consequences of a protracted bull market is, unfortunately, investor complacency,” warns Heather Hunt-Ruddy, head of client experience and growth at Wells Fargo Advisors. “With a market correction inevitable at some point, it’s important for investors to check their confidence with a comprehensive risk assessment to determine how a market correction could affect their overall investment strategies.”

Again, the emphasis is on improving understanding of risk tolerance rather than trying to time the inevitable correction.  

Important to the results, researchers find that the “financial wound of the recent recession finally appears to be healing for many.” The percentage of investors who say they have not financially recovered from the recession is now 26%, down from 37% in February 2016. Similarly, 43% of investors currently say they know someone besides themselves whose financial situation hasn’t recovered, down from 70% in 2016.

Given all of this, the optimism index stands at a 17-year high, largely due to increased confidence in the stock market. Even though investors aren’t fretting over a possible market correction, 56% say their financial situation would be hurt either a lot (13%) or a moderate amount (43%) by such a downturn. The overall percentage believing they would suffer financially includes 60% of high asset investors—those with $100,000 or more in investments—as well as 48% of lower asset investors. At the same time, investors hedge when asked if they feel prepared for a market correction. Barely a third (32%) strongly agree they are prepared, while another 48% somewhat agree they are prepared. Fully one in five (20%) says they are not prepared.

The research further suggests that many more people engaged with retirement plans could benefit from working directly with investing professionals. Despite their recognition that they are not investing pros, only about half of investors say they are most likely to turn to a professional financial adviser to help them through a market correction. A third would rely on their own knowledge or research, while 13% would turn to a trusted friend or family member and just 1% would rely on financial news commentators. 

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