1. 300 Montgomery Street, Suite 600
ROBO-ADVICE
What Sayeth the Digital Police?
Stephen P. Wilkes, Esq.
300 Montgomery Street, Suite 600
San Francisco, CA 94104

2. Agenda Introduction Regulators Suitability, Advertising, Registration
SEC, FINRA, State….and DOL
Suitability, Advertising, Registration
Privacy
DOL exemptions

3. Introduction What is a Robo-Adviser? Significant growth statistics
Can a robot be a fiduciary?

4. SEC SEC IM Guidance February 23, 2017 Subject to Advisers Act
Focus on Disclosures, Client Data/Profile, Effective compliance
Disclosures on Business Model
Compliance Responsibilities Adequate disclosure
OCIE Priorities

5. FINRA FINRA Report March 2016 on Digital Investment Advice
Governance and Supervision
Investors Profile
Rebalancing accounts
Training

6. MA Securities Division 2016 Policy Stmts.
State Activity
MA Securities Division 2016 Policy Stmts.
Due diligence
Sub-advisory issues
Disclosure obligations

7. SEC Registration
Various exemptions
Multi State
Internet

8. Disclosure Issues Tax Harvesting IM Guidance Fees and expenses
Algorithms
Conflicts
Risks
Scope of Services
Third Party involvement

9. Rule 3a-4 Non exclusive safe harbor
“Each client’s account…managed on basis of client’s financial situation…in accordance with any reasonable restrictions…”
“Sponsor and personnel…reasonably available”

10. Suitability Advertising Rebalancing
Suitability turns on reasonable determination
Rebalancing requires clear disclosure
Advertising rules apply
Don’t forget social media
Is the algorithm suitable?
Is it performing?

11. DOL and ERISA
Robo advisers need to square with fiduciary standards and prohibited transaction
Is it a fiduciary for ERISA?
Common exemptions
BIC
PPA Computer Exemption
Sun America
PTE 77-4
Frost type offsets

12. IMPORTANT INFORMATION
This presentation is intended for general informational purposes only, and it does not constitute legal, tax or investment advice from The Wagner Law Group.

13. 300 Montgomery Street, Suite 600
ROBO-ADVICE
What Sayeth the Digital Police?
Stephen P. Wilkes, Esq.
300 Montgomery Street, Suite 600
San Francisco, CA 94104