SEC Chief Accountant Recommends Improving the Quality of Financial Reporting

SEC Chief Accountant Wesley Bricker made recommendations to improve the quality of financial reporting for regulatory agencies and firms. He also reviewed developments in non-Generally Accepted Accounting Principles (“non-GAAP”) measures and other areas.

In remarks before the Baruch College Financial Reporting Conference, Mr. Bricker encouraged standard-setting bodies to maintain distinct financial reporting frameworks for general and specific purpose reporting. He explained that general purpose financial reporting should continue to provide crucial business and financial information to shareholders while specific purpose financial reports should remain limited to a “special purpose framework” in order to address more specific needs.

Mr. Bricker identified the means by which firms can improve the quality of interim reviews and annual audits. He stated that firms should implement an “effective firm-wide (enterprise) risk management system” to enhance audit firm governance. He encouraged “independent, diverse thinking” on audit committees in order to improve corporate governance. He emphasized the importance of improving the “tone and culture” of the company in enabling auditors to accomplish their work.

Mr. Bricker mentioned that the SEC is issuing a request for public comment to address compliance challenges related to auditor independence rules. Mr. Bricker promised that amendments to the accounting standards will significantly improve the quality of financial reporting for investors. The amendments include: (i) requiring calendar year-end public companies to report revenue from contracts with customers; (ii) standardized company reporting requirements to help investors compare financial statements across companies; (iii) improving reporting and disclosures of non-GAAP and GAAP to help investors identify how management monitors performance and analysis; and (iv) enhancing the quality of disclosures as to market risk.

CFTC Commissioners Have Different Wish Lists

In separate remarks at the FIA 40th Annual Law and Compliance Conference, CFTC Commissioners Brian Quintenz and Rostin Behnam described their respective regulatory priorities in contrasting terms.

Commissioner Quintenz advocated for concerted efforts to accomplish harmonization between SEC and CFTC swap regulation. According to Mr. Quintenz, firms that register as both swap dealers and securities-based swap dealers with the CFTC and the SEC, respectively, should be subject to different regulatory requirements only when there are “irreconcilable difference[s] between the securities and derivatives markets.” Further, Mr. Quintenz emphasized the importance of pushing for full harmonization where possible, noting that small differences often lead to a large cost for compliance. As to CPO/CTA registration for registered investment advisers, SEFs and data reporting, Mr. Quintenz argued that deference to the rules of the other agency may be appropriate. A firm engaged in trading and reporting swaps and security-based swaps should follow “one set of rules, instead of two,” he argued.

While Commissioner Behnam also spoke about SEC/CFTC harmonization, he emphasized more broadly that CFTC Chair J. Christopher Giancarlo’s agenda for regulatory change was overly ambitious. In Mr. Behnam’s words:

We’ve been waiting for deliverables in terms of Project KISS, Reg. Reform 2.0, and CFTC and SEC harmonization, and anticipating resolution of unfinished business in terms of the de Minimis exception, position limits, capital, and Regulation Automated Trading (Reg. AT). Since that time, we’ve received the Chairman’s white paper on “Swaps Regulation Version 2.0,” which purports to set the agenda for Reg. Reform 2.0. While I appreciate the Chairman’s transparency in setting forth his vision and, in his words, starting a dialogue, I can’t help but note that there is already a process for dialogue with market participants regarding potential rule changes – the notice and comment process for proposed rules under the Administrative Procedure Act. Adding another white paper just pushes back the timeline for getting to actual deliverables. It adds another step to the process. It also takes a lot of staff time when budgets are tight.

Commissioner Behnam went on to say: “If [CFTC] staff is directed to focus on reworking the broader framework for the swaps market in lieu of fine-tuning and building on the progress we’ve made since 2008, we risk creating greater uncertainty and impracticability at increased costs to market participants.”

Lofchie Comment: While one can be sympathetic to Commissioner Behnam’s skepticism of the need for regulatory change, and that such change itself can be costly, sufficient time has now passed since Dodd-Frank was adopted to evaluate many of the rule changes. Many of the rule changes have not only not produced the suggested benefits, but have had a negative impact on liquidity, have increased market fragmentation, and have materially increased costs to end users. Particularly given the tremendous speed with which the swap rules were adopted, and given that there is now sufficient data to evaluate at least some of the results that they have produced, there seems a great benefit in the rethinking suggested by Chair Giancarlo and CFTC Chief Economist Bruce Tuckman. It should also be noted that many of the observations made by Chair Giancarlo had also been raised by him when he was a Commissioner, but had not received the attention that they merited or the discussion that they deserved and now hopefully will receive.

SEC Director of Investment Management Answers Questions on Proposed “Best Interest” Standard

SEC Division of Investment Management Director Dalia Blass addressed general questions on the recently proposed “best interest” standard. (See here for a thorough review of the proposed rule.) In addition, Ms. Blass updated SEC activity since the adoption of the liquidity risk management rule.

At a PLI Investment Management Institute program, Ms. Blass explained that the Regulation Best Interest (“Reg. BI”) proposals “are intended to serve Main Street investors by bringing the legal requirements and mandated disclosures of investment professionals in line with investor expectations.” Ms. Blass described how Reg. BI “raises the standard of conduct for broker dealers” while “preserv[ing] the pay-as-you-go broker-dealer model by recognizing how it differs from the investment adviser model.”

Ms. Blass responded to the fact that the term “best interest” is not defined in the proposal, stating “although we have not defined the term in the proposed rule text, we have defined the contours of the obligation: a broker-dealer cannot put its interests ahead of the retail customer’s and must comply with specific disclosure, care and conflict of interest obligations.” In this way, she argued, “Reg. BI incorporates, but goes beyond suitability.” Further, she notes “Reg. BI draws from principles that apply to investment advice under other regulatory regimes, yet it reflects the structure and characteristics of a broker-dealer’s relationship with retail customers.” Ms. Blass drew further distinction between broker dealers and investment advisers, stating: “[t]he duties required under Reg. BI are tied to each recommendation a broker-dealer makes, whereas an adviser’s fiduciary duty applies to the ongoing relationship with a client.”

Finally, Ms. Blass explained that the new interpretive guidance for investment advisers would serve to clarify their fiduciary duty standards. She said the guidance reaffirms that investment advisers must act in the best interest of its client, but also owes a duty of care and a duty of loyalty. She said the “staff recommended proposing this interpretation in order to draw together a range of sources and provide advisers with a reference point for understanding their obligations to clients.”

Separately, Ms. Blass discussed three projects implemented by the SEC following the adoption of a liquidity risk management rule. The rule requires certain registered investment companies to create liquidity risk management programs. Ms. Blass stated that the agency responded to feedback concerning the rule by (i) issuing FAQs regarding “classification, sub-advisory relationships, ETFs and reporting,” (ii) providing affected parties with six additional months in which to comply with the “classification and related elements of the rule,” and (iii) reevaluating the public reporting requirement of the rule to stop subjective liquidity information from being misconstrued. Ms. Blass also announced that the SEC intends to issue a proposal to modify the public reporting requirements for liquidity risk management programs. She said the new amendment would replace the requirement to “disclose publicly aggregated liquidity buckets” and instead require funds to provide an evaluation of their liquidity risk management programs in their annual shareholder reports.

Lofchie Comment: Ms. Blass expresses support for both the concept of “full-service” brokerage, where broker-dealers are able to make recommendations to retail investors and be paid through trading commissions, and for the imposition of a higher duty on broker-dealers under newly proposed Regulation Best Interest. Two fundamental questions are: (i) how much time/money must a broker-dealer invest in learning about a client so that it would be in a position to satisfy its proposed best interest obligation, and (ii) how many trades would a broker-dealer have to execute for the client so that the investment would be worthwhile?

It seems very likely that it would take a substantial volume of trading by a retail investor for a broker-dealer to truly understand its retail investor’s circumstances to the extent mandated by the proposed Best Interest Requirement. If that is the case, a retail investor who might execute ten or twenty trades a year will not be able to “pay for” full-service brokerage.

Of course, the above is just an uninformed guess. It would be more meaningful if the SEC were to provide its own estimates of (i) the costs to broker-dealers of obtaining and understanding required suitability information, (ii) the revenues and profits to broker-dealers of executing trades for retail customers, and (iii) the volume level at which it will make sense for broker-dealers to offer full-service brokerage recommendations to retail investors.

NYDFS Proposes “Best Interest” Standard for Sellers of Life Insurance and Annuity Products

The New York Department of Financial Services (“DFS”) proposed amendments to New York’s existing suitability regulation in order to establish a “best interest” standard for the sellers of life insurance and annuity products.

DFS issued the proposal in order to protect New York State consumers from receiving conflicted advice from agents, brokers and/or insurers regarding life insurance and annuity product transactions. The proposal would require an agent or broker (or an insurer, if there is no agent or broker involved) to “act in the best interest of the consumer.” According to the proposal, this means that an agent, broker or insurer should make recommendations “based on an evaluation of the suitability information of the consumer that reflects the care, skill, prudence, and diligence that a person familiar with such matters would use under the circumstances without regard to the financial or other interests” of themselves or other parties.

The amendments would (i) require disclosure of all suitability considerations and product information that form the basis of any recommendation, (ii) permit agents or brokers to make a recommendation only if they have a “reasonable basis to believe that the consumer can meet the financial obligations under the policy,” and (iii) prohibit an agent or broker from telling a consumer that a recommendation is part of financial planning, investment advice or related services (unless the agent or broker is a certified professional in that area).

Additionally, the proposed regulation would require insurers to (i) “establish and maintain procedures to prevent financial exploitation and abuse,” (ii) disclose to customers all relevant policy information in order to evaluate a transaction, and (iii) provide to producers all relevant policy information in order to evaluate a replacement transaction.

The proposed amendments are open to public comment for 30 days after their publication in the New York State Register.

Lofchie Comment: The proposed NYDFS standard that a seller must understand fourteen different characteristics of the insurance buyer, and must take account of “all available, products, services and transactions,” seems to set an unreachable bar. Is NYDFS really requiring that an insurance broker have information as to all available products, including those she does not offer, and then evaluate all of those available products against the customer’s fourteen suitability information characteristics?

Further, a “recommendation” seems to be defined to include any communication with a customer of a non-clerical nature, as it would seem that a broker would expect that a communication with a customer or potential customer would result in either the customer transacting or not transacting (that seems to cover all the bases). Does this mean that a broker responding to any question from a customer is thereby subject to the “best interest standard”? If so, the broker would be wise to let the customer do her own research.

These standards are published immediately after the SEC issued its own Retail Best Interest standard. While those rules seemed as if they would set a difficult standard for firms to meet, and likely would discourage firms from making recommendations, the New York State proposal is harsher by far; can brokers really meet these standards in talking to customers? This is not the first time that the NYDFS has issued a proposal with which compliance appeared impossible on its face (see, e.g., the NYDFS proposed AML Rules).

If these rules go forward as proposed, firms selling annuities in New York may be at high risk.

CFTC Commissioner Reviews Current Regulation of Cryptocurrencies

CFTC Commissioner Brian Quintenz described deficiencies in U.S. regulation of cryptocurrencies and identified potential developments in the “broader tokenization revolution.”

In remarks before the Eurofi High Level Seminar, Mr. Quintenz encouraged international regulators to develop different regulations for (i) cryptocurrencies that serve only as a medium of exchange or store of value and (ii) for tokens that are intended to represent physical assets.

Mr. Quintenz asserted that, in the future, a cryptocurrency’s “volatility and transferability” could compare reasonably well even against a sovereign currency. In this “broader tokenization revolution,” Mr. Quintenz outlined three motivations that may further increase the use of tokens: (i) tokenizing a company’s product as a marketing ploy; (ii) creating a token to improve efficiency of the blockchain construct for assigning and tracking ownership, coined as “the back office tokenization revolution”; and (iii) harnessing the flexibility of tokens to create a secondary market for non-tangible items.

Domestically, Mr. Quintenz called for better regulatory oversight for cryptocurrencies, particularly in the area of spot trades. He explained that the CFTC has regulatory authority only over derivatives on commodity cryptocurrencies and cannot regulate the spot transactions in such currencies, although it does retain enforcement authority over these markets to the extent that there is fraudulent conduct. According to Mr. Quintenz, this means that “the CFTC can only police fraud and manipulation in the actual trading of cryptocurrencies, but has no ability to make platforms register with the Commission or set any customer protection policies.”

To strengthen regulatory oversight, Mr. Quintenz said that the CFTC is launching an initiative to educate customers on cryptocurrency and potential fraud, “aggressively target[ing]” incidents of fraud and manipulation, and collaborating with the SEC. He argued that the “patchwork” nature of state and federal regulation will not be enough. Mr. Quintenz recommends the cryptocurrency spot platforms form an “SRO-like entity” to regulate customer protection rules and legitimize the markets. Mr. Quintenz emphasized, however, that an SRO-like entity is not a sufficient replacement for federal oversight.

Lofchie Comment: This is at least the second time that Commissioner Quintenz has pushed for cryptocurrency exchanges to establish a self-regulatory organization. This is unlikely to happen. For self-regulation to be really effective, the firms or exchanges that deem themselves to be compliant have to be able to “punish” the non-compliant firms in some way. When several firms gang up against another, that raises significant antitrust issues. Broker-dealers can do this in the securities markets because the Supreme Court recognizes that Congress has given broker-dealers a limited exemption by providing for the establishment of SROs, as has been the case under the Commodity Exchange Act. There is nothing similar for cryptomarkets. In any case, this market is far too young and fast-moving for an SRO system to develop.

SEC Commissioner Urges New Approach to Equity Market Structure Regulation

SEC Commissioner Hester M. Peirce advocated for a more holistic retrospective review of equity markets regulation that focuses on the “assumptions underlying those rules” rather than the most recent adoptions.

At SIFMA’s market structure conference, Ms. Peirce encouraged regulators to address challenges in equity markets without accepting the current regulatory framework as a structure for all future reforms. Ms. Peirce explained that the regulators have focused on making “regulatory tweaks” to restrict market behavior instead of taking a holistic approach by questioning assumptions and the current regulatory status quo. As an example, Commissioner Peirce cited the Order Protection Rule, which, according to Ms. Peirce, has significantly impacted equity markets without sufficient justification. Additionally, Ms. Peirce argued that the rule “distorts” market behavior by (i) incentivizing broker-dealers to prioritize price in execution decisions above customer needs, (ii) increasing underlying issues of securities information processor feeds by expanding their importance, (iii) compelling brokers to subscribe to exchanges’ private data feeds as well as public tapes, and (iv) increasingly homogenizing trading facilities and exchanges. Ms. Peirce questioned whether the SEC should be exploring alternatives to the rule rather than continuing to offer up new regulatory tweaks that try to control the distorted behavior the rule itself creates.

Ms. Peirce advised regulators to consider:

  • acknowledging that efforts to “micromanage” communications and trade between market participants have been demonstrably ineffective;
  • eliminating burdensome market communication rules rather than proposing specific rules to remedy issues;
  • revising statutory and regulatory requirements, which currently deter new entrants and reduce diversity within investor services; and
  • favoring a more “agile” regulatory system for trading equities to address changing technology and investor needs, rather than a national market system.

Lofchie Comment: Regulation NMS was adopted over two dissents that were issued by SEC Commissioners Cynthia Glassman and Paul Atkins. The reasoning behind those dissents has been materially borne out. A reexamination of assumptions is in order.

Treasury Reports on Successful Deregulation Efforts

The U.S. Treasury Department (“Treasury”) issued a report listing its regulatory reform accomplishments. In the report, Treasury outlined the steps it had taken to execute Treasury-specific orders issued by President Trump, which include Executive Order 13777 (“Enforcing the Regulatory Reform Agenda”) and Executive Order 13771 (“Reducing Regulation and Controlling Regulatory Costs”). Since the release of E.O. 13777, Treasury:

  • reduced regulatory costs by (i) withdrawing 62 items from its Regulatory Agenda and (ii) moving 50 rules from active to long-term status;
  • proposed rulemakings to remove 298 duplicative, obsolete or unnecessarily burdensome tax regulations;
  • recommended the “reform or withdrawal of recent significant IRS regulations” in an October 2017 report;
  • urged the U.S. financial regulatory system (in a series of reports) to make the regulation of banks and credit unions, capital markets, and asset management and insurance more effective and precise;
  • pushed for the Financial Stability Oversight Council to implement reforms to prior designated non-bank financial companies as systemically significant; and
  • published a “critical evaluation” of the ban by the Consumer Financial Protection Bureau on arbitration clauses in financial contracts, which would have cost businesses and consumers billions before it was nullified by a Congressional Review Act resolution.

Lofchie Comment: Leaving aside the quality or benefit of individual regulations issued during the prior administration – an issue that can be fiercely debated – the sheer volume of new requirements was simply overwhelming to the markets. Keeping up with rulemaking became a major business; often more important than doing business. Respite is welcome.

FRB Governor Advocates for Cyclical Protections in Event of Economic Downturn

Board of Governors of the Federal Reserve System (“FRB”) Governor Lael Brainard urged the FRB and banking institutions to “safeguard” capital and liquidity protections as cyclical pressures increase.

In remarks at the Global Finance Forum in Washington D.C., Ms. Brainard stated that despite the overall strength of the banking system, there are areas of financial vulnerability. She stated that measures should be implemented to ensure that the system can withstand negative shocks. According to Ms. Brainard, areas of financial vulnerability include asset valuation and business leverage (in the non-financial business sector), that are high in comparison to “historic norms.”

Ms. Brainard summarized the FRB’s next regulatory steps. She reported that the FRB is close to (i) completing the net stable funding ratio to ensure that large banking firms maintain a stable funding profile past a one-year projection, and (ii) implementing Dodd-Frank Act limits on large counterparty exposures, which will reduce the ripple effect of financial distress. Ms. Brainard additionally advocated for efforts to improve the Volcker Rule so it can better serve its underlying purpose of prohibiting banking firms from certain speculative activities. She expressed her support for market-wide “minimum haircuts for securities financing transactions,” and for recalibrating the regulatory framework to reduce the burden on smaller banking firms.

Senate Votes to Repeal CFPB Auto-Loan Financing Regulatory Guidance

The U.S. Senate voted to repeal Consumer Financial Protection Bureau (“CFPB”) regulatory guidance on auto-loan financing, which purported to regulate discriminatory dealer markups on car loans to consumers.

The CFPB’s auto-lending regulatory guidance (“Bulletin“), although not a formal rule, allowed the CFPB to pursue legal claims against car dealerships that allegedly charged minority consumers higher interest rates on their auto loans. By enforcing regulatory guidance rather than developing a rule, the CFPB avoided the Administrative Procedures Act’s rulemaking process and related requirements.

In remarks before the Senate, Committee Chair Mike Crapo (R-ID) criticized the regulation, which he stated was implemented as an end run around required rulemaking procedures. Mr. Crapo also questioned the agency’s ability to enforce the rule, as Dodd-Frank does not authorize the CFPB to regulate auto-dealers. Citing an internal CFPB memo, Mr. Crapo referenced the CFPB’s decision not to develop a rule because it had “no regulatory authority” over auto-dealers. By sidestepping the legal process, Senator Crapo said, the CFPB had denied individuals and businesses the “vital” opportunity to provide feedback on the potential impact of the regulation.

House Financial Services Committee (“FSC”) Chair Jeb Hensarling (R-TX) supported the repeal, asserting the financial harm its enforcement has caused to credit-worthy consumers. The White House also commented on the matter, stating that the Bulletin reduces consumer choice and limits auto dealers’ ability to offer loans to consumers. If it is continued, Mr. Hensarling stated, then banks, credit unions and finance companies holding outstanding loans would face significant liability.

Committee Ranking Member Sherrod Brown (D-OH) denounced the vote and warned that preventing the CFPB from issuing future fair lending guidance could “permanently weaken federal anti-discrimination laws.”

The measure must now go to the House.

Lofchie Comment: Senator Brown’s criticism of the Senate’s action was phrased in dramatic language. His argument is flawed. According to Senator Brown, the Senate was acting to repeal what was intended to be mere “regulatory guidance,” which essentially advises parties as to what the law actually is. Assuming that he is correct in this statement, then the repeal of the guidance has no legal effect whatsoever: the law remains what it is. If in fact the guidance did change the law in any material way, then the “guidance” was really a rulemaking in sheep’s clothing, and the CFPB should have subjected the guidance to a formal rulemaking process. In short, either (i) repeal of the guidance is essentially legally meaningless or (ii) the guidance was illegally promulgated in violation of the Administrative Procedures Act.

In fact, the problem with the CFPB’s lender guidance is even more profound. The guidance was issued based upon a study conducted by the CFPB that was widely criticized as being based on extremely flawed data. Whether one agrees with that view or not, the CFPB was able to publish the study without dissent or a meaningful internal vetting process, and the guidance was not put through a rulemaking and comment process. That Dodd-Frank provides the head of the CFPB with such unchecked authority is a fundamental flaw in the legislation; one that Congress now has the opportunity to correct.

SEC Proposes “Retail Best Interest” Standard for Broker-Dealers; Fiduciary Interpretation for Advisers

The SEC proposed to (i) require broker-dealers to act in the “best interests” of retail customers when making a recommendation of any securities transaction or investment strategy and (ii) affirm and clarify the various types of obligations that investment advisers owe to their clients. The proposal was approved by a four-to-one vote. SEC Commissioner Kara M. Stein dissented.

Under Regulation Best Interest, a broker-dealer would not be permitted to place its own interests ahead of those of its retail clients. The proposed regulation provides that a broker-dealer will satisfy the best interest standard if it complies with the following obligations:

  • Disclosure: disclose material information about the relationship with the retail customer, including material conflicts of interest;
  • Care: act with reasonable “diligence, care, skill and prudence to (i) understand the product; (ii) have a reasonable basis to believe that the product is in the retail customer’s best interest; and (iii) have a reasonable basis to believe that a series of transactions is in the retail customer’s best interest”; and
  • Conflict of Interest: implement policies and procedures reasonably designed to identify and address conflicts of interest arising from financial incentives, and to disclose any other material conflicts of interest.

The SEC stated that the “Commission believes that material conflicts of interest associated with the broker-dealer relationship need to be well understood by the retail customer and, in some cases, mitigated or eliminated” [at fn 17].

As to litigation that might arise under Regulation Best Interest, the release states that the Regulation “would not alter a broker-dealer’s obligations under the general antifraud provisions of the federal securities laws . . .  [nor would it] create any new private right of action.” On the other hand, the SEC stated, “scienter would not be required to establish a violation of Regulation Best Interest.” Further, “as compared to a broker-dealer’s existing suitability obligations under the antifraud provisions of the federal securities laws . . . a broker-dealer would not be able to satisfy its ‘Care Obligation’ . . . through disclosure alone.”

In addition, the SEC proposed an interpretation reaffirming and/or clarifying certain aspects of the fiduciary duty that investment advisers owe to their clients. These duties owed by an adviser to a customer include (i) a “duty of care” (including the obligation to provide advice in the client’s best interest, a duty to seek best execution, and a duty to provide advice and monitoring over the course of the relationship) and (ii) a “duty of loyalty.” The SEC also asked for comments as to whether adviser regulation should be expanded so that it mirrors broker-dealer regulation. In particular, the SEC requested comments as to whether (i) the employees of investment advisers should be subject to federal licensing and qualification requirements; (ii) advisers should be required to provide more detailed statements of the fees that they charge; and (iii) advisers should be either subject to capital requirements or forced to obtain fidelity bonds that might compensate clients for losses due to the advisers’ misconduct.

Finally, the SEC proposed a rule that would require broker-dealers and investment advisers to provide retail investors with a short-form “relationship summary” detailing (i) certain information related to services offered, including the legal standard that applies to each type, (ii) associated fees, and (iii) conflicts of interest.

There will be a 90-day public comment period on these proposed rules and interpretations after their publication in the Federal Register.

Lofchie Comment: There is quite a lot here (the Release for Regulation Best Interest tops 400 pages), including a good deal that could have a significant effect on the products that firms offer and the way in which broker-dealers conduct business. For example, broker-dealers will need to examine closely (i) the types of products that they offer (particularly proprietary, complex or structured products), (ii) the manner in which they compensate their employees, (iii) the manner in which they charge fees to their customers and (iv) the provision of different benefits to different customers (see pages 53-4).

The obligations that may be imposed on advisers, though not fundamentally different than those that are understood to exist today, may have been increased. The Fiduciary Release (which runs a mere 38 pages) says at page 21 that they have not been increased; just clarified. However, the release suggests the possibility for significantly expanded private rights of action and litigation under the Advisers Act. For example, the Advisers Act is described as having “establishe[d] a federal fiduciary standard for investment advisers” (fn. 10) . . . that is “made enforceable by the antifraud provisions of the Advisers Act.” As to the specific duties imposed on advisers, firms should consider, for example, (i) their obligations to obtain information regarding each client’s situation through the “client investment profile,” (ii) their obligation to provide investment advice that takes account of the client’s entire circumstances (going beyond the particular investments recommended or purchased), and (iii) the adviser’s obligation to provide advice to a client “at a frequency that is both in the best interest of the client and consistent with the scope of advisory services agreed. . . . The duty to provide advice and monitoring is particularly important for an adviser that has an ongoing relationship with a client.”