Biz Briefs: SEC cracks down anew on RIA reverse churning ~ Envestnet borrows $350 million to buy its own stock ~ Fidelity is creating a crypto waiting list while exec questions crypto ecosystem

You can't reverse churn butter, but you can reverse churn assets illegally, the Securities and Exchange Commission (SEC) is keen to remind advisors.

The Washington, D.C. regulator is stepping up its investigations into RIAs with legacy accounts held in pricey wrap fee programs. See: RIAs may face ticking time bomb after SEC slams a $1.9-billion RIA for neglecting 'orphan' accounts.

The SEC will hold advisors in breach of Regulation Best Interest (Reg BI), if advisors charge fees for advice without actually providing it  – a form of neglect known as reverse churning.

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To avoid running afoul of SEC regulations, many RIAs hire ComplySci, a company that boasts compliance expertise that it claims can “catch every red flag and meet regulatory filings with confidence.” 

The rollup of RIA in a Box, ilumis and National Regulatory Services, is rebranding itself as COMPLY.

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In another regulatory matter, the SEC says names matter.

Asset managers, including Invesco and Dimensional Funds, are upset by a new SEC rule that fund names have to mean explicitly what they convey. 

Aimed at ESG hocus-pocus, the fear is that terms like “growth” and "momentum" might fall prey to Orwellian newspeak in the hands of asset managers.

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Skience, a financial services solution and consulting provider, just partnered with CapitalROCK’s RightBRIDGE best interest validation system, which checks the RegBI status of rollovers, account types and investment choices.

The company makes it possible for “firms of all sizes to easily integrate Regulation Best Interest into their workflow process with a click of a button.”

 Fortunately, the SEC provided no impetus for that creative partnership.

Cash in and cash out

Envestnet had a rough time when a hedge fund aired its dirty laundry, in large part because its stock was performing below peers like AssetMark. See: After Envestnet rebuffed an ESG hedge fund's demand for a board seat, the fund managers sent a shrill, scalding letter in retaliation to force the issue

Yet Envestnet is willing to put its money where its mouth is.

The company is raising $350 million in convertible notes due 2027, and intends to use part of the net proceeds from the offering to repurchase shares of its common stock, a move typically designed to lift share prices.

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M1 Financial, a Chicago robo-advisor with customizable portfolios, just added a high yield savings account with a 4.5% yield. To avail of the rate, investors must pay $125 a year to join 'M1 Plus'.

But the rate far outmatches Wealthfront's 3.3%, and even RIA cash manager MaxMyInterest's 3.83%. 

Why? M1 has yet to answer whether it has a better lender or simply a greater willingness to forgo profits.

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Robinhood's bid to 'democratize' IPO investing is a flop.

The share price of all 23 IPOs it opened to retail customers has dropped by double digits since their respective debuts, including its own stock. Five lost 89% of their value.

Sam Bankman-Fried, who resigned as FTX CEO after the cryptocurrency exchange collapsed (Nov. 11), also holds an equity stake in Robinhood (HOOD).

But the commission-free stock, exchange-traded fund and cryptocurrency broker has "no direct exposure to [FTX-linked] Alameda, FTX, or any of its entities," Robinhood CEO Vlad Tenev told Reuters.

Software movers

Making it near a clean sweep, another former United Capital financial technology executive has left Goldman Sachs.

One-time FinLife sales head Steve Reder joined Adviser Investments in Newton, Mass. He is the only ex-FinLife executive listed on Goldman's website for the legacy United Capital software service.

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Panoramix and RIA custodian TradePMR will share data so Panoramix can automatically reconcile accounts for advisors using the two firms' services. See: Unprecedented challenging ‘The Big Four’

And direct indexing software provider, Rowboat Advisors just appointed Chris Murray, 41, formerly JP Morgan's global head of central risk.

Rowboat co-founder and CEO Iraklis Kourtidis and Murray worked together in Goldman Sachs' New York City office roughly 15 years ago, and the former rescued the latter from a “very early retirement." See: Iraklis Kourtidis builds on a shoestring.

Murray was enjoying a sabbatical to spend time with his three young daughters and “enjoy a slower lifestyle."

Slow gave way to Row, and he will now bring years of experience with quantitative trading, analytics and machine learning to Rowboat as a vice president with an equity stake -- Silicon Valley code for key software developer, according to Kourtidis.

Murray says in a LinkedIn post although he's “only a few days in, [he's] already impressed."

New capabilities

DPL Financial Partners has a new perk for advisor clients – investor referrals. Its advertising to RIAs has managed to reach investors who come to DPL directly.

Now it has a formal process in place to refer those investors to the 1,200 RIAs that buy annuities through its marketplace.

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RIA custody overlay Altruist has added unified managed account capabilities. Advisors using its software on top of Apex Clearing can now run multiple models in one tax account.

SEI beefed up its UMA capabilities, too, partnering with portfolio software company LifeYield.

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Northern Trust, in partnership with Equity Data Science, is the latest company to try to distill environmental, social, and governance terminology into a single definitional mix that its software can aggregate, analyze, then punt on to advisors with ESG-minded clients.

Flat-fee financial planning RIA Facet Wealth just hired Vince Maniago as its new chief product officer from Personal Capital. 

And AdvisorGroup also just rolled-up a New York broker-dealer with $40 billion under its administration.

Alts vistas

The alternative investing (alts) market in the United States is not active enough to keep players busy, so top vendors are looking abroad.

The alts marketplace iCapital just opened an office in Lisbon, Portugal.

Portugal offers special low tax deals and speedy visas to "digital nomads" working at technology companies.

Addepar, known for its performance reporting software's handling of alts, also expanded its European presence, opening a London office to support international sales, on top of the Edinburgh technology office it opened last year.

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Alts had an affirming 12 months, too, by skewing toward exotic stocks and even shorting conventional ones.

Although average investment returns earned by university endowments administering over $1 billion plunged from a 27.3% gain in the last fiscal year to  a 4.1% loss, endowments investing in private equity lost a lot less, according to a Pensions & Investments study.

Washington University's endowment returns are a case in point. It invested heavily in public equities, and its endowment returns fell from 65% last year, to -10.6% this year. 

The S&P 500 is down 18.22% in the year-to-date, as of Nov. 17.

Fidelity waiting list belies crypto woes

Sam Bankman-Fried went from crypto's Superman to being its Kryptonite.

Yet with startup crypto brands imploding, Fidelity Investments has announced the launch of a waiting list for retail investors keen to trade Bitcoin and Ethereum.

The bloom may be off the rose for this juvenile currency (or is it asset?) class, according to a top executive at Fidelity International, once Fidelity Investments' overseas arm, but an independent company since 1980.

The “viability of the crypto ecosystem” is a big question mark, the executive says.

Grayscale's Bitcoin Trust (GBTC) is trading at a record discount of 41% off the value of the Bitcoin it owns. See: Grayscale shreds the hype about Bitcoin's power.

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Apex has seen enough. The RIA custodian and clearing house just sold its cryptocurrency custodian Apex Crypto to Bakkt.

Apex will receive an initial $55 million in cash and $45 million in stock, with up to $100 million potentially payable if Apex Crypto meets undisclosed targets.