Introducing OCCO-Lite: Compliance Without The Headache
State-Registered RIAs: Navigating NASAA’s Proposed Marketing Rule Changes
Launch Your Independent RIA with Trusted Regulatory & Business Support
FINRA Arbitration: How One Advisor’s Fight Cleared His Record of an Old Annuity Claim
The High Cost of RIA Compliance Oversight: A Cautionary Tale
Financial advisors working for independent broker-dealers (IBDs) are typically seen as independent contractors with full autonomy over their businesses. However, recent developments at Cetera Financial Group are challenging this long-standing model by requiring firm approval for all practice sales. This shift could have significant implications for advisors, raising concerns about autonomy, compliance, and succession planning.
The Cetera Policy on Practice Sales: A Firm-Wide Warning
In a message to its 8,000 advisors, Cetera warned that attempting to sell a practice without firm approval could be considered an unapproved private securities transaction (PST) or an outside business activity (OBA). Both of these are direct violations of securities regulations, which can lead to severe penalties from FINRA, including fines, suspensions, and even industry bars.
- What is an OBA? An OBA is any business activity an advisor conducts outside of their broker-dealer employment. While not all are prohibited, they must be disclosed and approved by the firm to prevent conflicts of interest.
- FINRA Enforcement: FINRA has consistently focused on enforcing OBA and PST rules. With a rising trend of advisors engaging in outside activities, regulatory scrutiny and enforcement actions are increasing.
Navigating the M&A Landscape as an Independent Advisor
Cetera's new policy has sparked debate within the industry. Some believe it is an attempt to gain greater control over advisor assets and push for internal acquisitions. Others suggest it may drive advisors to seek opportunities with firms that offer greater autonomy over their businesses.
This policy underscores the importance of legal and regulatory compliance for all financial advisors, particularly during a transition. Advisors who choose to go independent are often met with resistance from their former firms, making legal counsel a critical component of a successful move.
How AdvisorLaw Helps Cetera Advisors and Other Independent Advisors
Navigating this complex landscape requires expert guidance from a qualified securities attorney. AdvisorLaw specializes in providing comprehensive counsel to financial advisors, particularly those facing the challenges of a transition or succession plan.
Our services are designed to make sure that your practice sale is a success and your interests are protected:
- Expert Compliance Guidance: We help advisors prepare necessary documentation and maintain full compliance with Cetera's new warning and all other securities regulations.
- Transaction and Negotiation Support: We assist with negotiating the terms of your practice sale, including drafting and reviewing purchase agreements and conducting due diligence on potential buyers.
- Practice Valuation: We offer complimentary business valuations to help you determine the current fair market value of your practice.
- Network of Buyers and Sellers: Through our Practice Purchase Network (PPN), we help advisors find the right match for their practice, facilitating a seamless transaction.
- Legal Representation: In the event of disputes or legal challenges, our team provides aggressive representation in arbitration proceedings, or defends against regulatory enforcement actions or TROs.
By partnering with AdvisorLaw, independent advisors at Cetera can get the expert guidance and support they need to successfully plan their succession, protect their livelihood, and ensure their clients are well cared for during the transition.
Engage with our experts today!