Wealth Adviser Regulation

Ethics, Laws, Regulations, and The Practice of Wealth Management

This provides an overview of the ethical, legal, and regulatory aspects of wealth management, focusing on the roles of wealth advisers and asset managers, and the structure of the wealth management industry.

Regulation of Wealth Advisers

• Wealth advisers are governed by intricate regulations that cover practical aspects such as licensing, registration, disclosure, fiduciary duty, regulatory supervision, enforcement, and cooperation with relevant authorities. For instance, a wealth adviser operating in both the US and UK must comply with the SEC regulations and the FCA rules respectively.
• These advisers often operate in multiple jurisdictions and markets, necessitating compliance with the respective laws, rules, and regulations of each country, region, or jurisdiction where they conduct business.

Asset Managers for High-Net-Worth and Ultra-High-Net-Worth Clients

• Asset managers for high-net-worth and ultra-high-net-worth clients bear the responsibility of guiding clients through the fluctuations of the economy and market conditions. For example, during the 2008 financial crisis, asset managers had to navigate through volatile markets to protect their clients’ wealth.
• Over the past few decades, these managers have had to operate in an increasingly challenging legal and regulatory environment.

Structure of the Wealth Management Industry

• Historically, the wealth management industry was structured around privacy and client confidentiality. For example, Swiss banks were known for their strict client confidentiality practices.
• Private banking practices, often portrayed negatively in media, involve confidentially moving large sums of money in or out of ultra-private numbered bank accounts.
• These types of banking and wealth management practices can have both positive and negative implications.

Financial Privacy and its Implications

Financial privacy is a crucial aspect for many clients due to various reasons such as personal preference, legitimate investment, or tax management strategies. However, this privacy can also be exploited for illicit activities like tax evasion, money laundering, terrorist financing, and other illegal activities. Money laundering is a particular concern for regulators and law enforcement due to its complexity, difficulty in detection, and its role in facilitating the ambitions of drug traffickers, terrorists, organized criminals, insider dealers, and tax evaders.

• Private banking and wealth management are susceptible to money laundering due to several factors. Loyalty among bankers and advisers can lead to oversight of warning signs. Additionally, powerful clients, such as government officials or Politically Exposed Persons (PEPs), may influence operations, causing reluctance to offend them. PEPs, often involved in bribery or corruption, are now avoided by many adviser firms due to associated risks.

• Private Wealth Management (PWM) traditionally prioritizes discretion and privacy. Strategies like shell companies conceal beneficial owners’ identities. Historically, banking center nations like Switzerland had strict secrecy laws, but recent legal changes discourage such practices.

• Despite intense competition, PWM’s profitability can hinder strict anti-money laundering (AML) controls. However, legal changes incentivize firms to implement AML measures, as the risk of reputational and financial loss outweighs potential gains from non-compliance. This environment creates opportunities for bad actors to exploit private banks and wealth managers.

Global Regulatory Collaboration in Private Banking

The need for improved global regulatory collaboration has been underscored by various financial crises and crimes. These incidents, although not always directly related to private banking, often reveal hidden gaps in oversight and risk management, thereby advocating for stronger, harmonized regulations. Financial regulatory reform and regulation are often the aftermath of scandals or large financial disruptions.

Implementation of Legal Changes and Regulatory Reforms

Legal changes and regulatory reforms are implemented through lawmaking at a national or sub-national level. However, these new regulations are often modeled or influenced by the work of multilateral organizations. These organizations play a significant role in policy development impacting banking and private wealth management.

Role of OECD and FATF

The Organization for Economic Co-operation and Development (OECD) is one such organization that sets standards on transparency and exchange of information between governments to combat money laundering, tax evasion, and terrorist financing. The OECD created the Common Reporting Standard (CRS), an information-gathering and reporting regime for financial institutions involving more than 90 countries.

The CRS is similar to the Foreign Account Tax Compliance Act (FATCA), which focuses on US-based institutions and persons. The Financial Action Task Force (FATF) is another intergovernmental organization that designs and promotes policies and standards to combat financial crime, Anti-Money Laundering (AML), and counter-terrorism financing. The FATF requires wealth advisers to implement customer due diligence, transaction monitoring, record keeping, reporting, and risk management measures to prevent and combat money laundering and terrorist financing.

Importance of CRS and FATCA

CRS and FATCA are important tools in the fight against tax evasion and money laundering. They ensure that financial institutions maintain transparency and adhere to global standards, thereby reducing the risk of financial crimes.

• The Common Reporting Standard (CRS) is a global framework established to combat tax evasion. It targets individuals who attempt to conceal their assets or income in offshore accounts. For instance, a businessman in Germany hiding his assets in a Swiss bank would be subject to CRS. Participating jurisdictions under CRS agree to collect and share information on their residents’ financial accounts with other jurisdictions annually. The CRS applies to individuals and entities that are tax residents of a participating jurisdiction, regardless of their nationality or citizenship.

• Contrastingly, the Foreign Account Tax Compliance Act (FATCA) mandates foreign financial institutions to report information on the accounts of US citizens and residents to the US Internal Revenue Service (IRS). This is unlike CRS, which is not limited to US citizens and residents. For example, a US citizen living in Canada and holding an account in a Canadian bank would be subject to FATCA.

Role of International Organization

• The International Organization of Securities Commissions (IOSCO) is an association of securities regulators from over 120 jurisdictions. It promotes cooperation and information exchange among its members and other stakeholders. The principles on securities regulation provided by IOSCO offer guidance on the objectives and functions of securities regulators. These include protecting investors, ensuring fair and efficient markets, and reducing systemic risk. IOSCO has published principles and reports on a wide range of markets and wealth management activities. It has also published reports on the role of regulation in asset management. These reports address issues such as leverage, liquidity, product design, and distribution in the context of private banking and wealth management.

• The Basel Committee on Banking Supervision (BCBS) is a global authority that sets standards for banking regulation. It focuses on various aspects of banking supervision, including capital adequacy, liquidity risk, operational risk, market risk, and credit risk. Despite not having direct authority over banks or financial advisers, the BCBS has published guidelines that emphasize the importance of risk management and legal compliance.

Impact on Financial Advisers

Financial advisers working with banks or offering advice on banking products or services should be aware of how BCBS standards may affect their professional responsibilities. The participation of key official-sector stakeholders in formulating these rules and standards ensures their adoption. These principles have been widely adopted and implemented by national regulators through their own laws and regulations.

Regulatory Regimes and Requirements

Private wealth advisers should be aware of the different regulatory regimes and requirements that apply to them in each jurisdiction in which they operate or have clients. With more jurisdictions enacting more complex laws and more regulations in recent years, modern wealth managers and their firms must put in more effort to truly understand their customers and their activities both domestically and internationally.

CFA Ethics and the CFA Institute Asset Manager Code

The CFA Institute is a global organization that aims to uphold the highest standards of ethics, education, and professional excellence in the investment profession. This is achieved through the CFA Institute Code of Ethics and Standards of Professional Conduct (the Code and Standards), which serves as a model for ethical behavior, promoting the integrity of charterholders.

Adherence to Standards

Both CFA Candidates and charterholders are obligated to meet the highest standards set by the CFA Institute, regulators, or their employers. Non-compliance with these standards can result in disciplinary action. The Code and Standards prioritize an investment management professional’s duty to market integrity.

Annual Attestation

Each year, CFA Charterholders and CFA Program candidates are required to sign a statement attesting to their continued adherence to the Code and Standards. Furthermore, asset managers, including those engaged in private wealth management, are guided by the CFA Institute Asset Manager Code™ (AMC).

Guidelines and Standards

The CFA Institute plays a crucial role in developing and administering codes, best practice guidelines, and standards that guide the investment industry. These guidelines and standards are designed to ensure that all investment professionals place client interests first. The Institute strongly encourages participation in the voluntary AMC. The AMC helps investors identify asset managers who have committed to high standards of professional conduct, thereby building the integrity of the investment industry.

CFA Mission

The CFA Institute’s mission is to promote the highest standards of ethics, education, and professional excellence in the investment profession. The CFA Institute Code of Ethics and Standards of Professional Conduct (the Code and Standards) is a model for ethical behavior that promotes the integrity of charterholders. CFA Candidates and charterholders are required to meet the highest standards set by the CFA Institute, regulators, or their employers. The Code and Standards prioritize an investment management professional’s duty to market integrity. The CFA Institute Asset Manager Code™ (AMC) guides asset managers, including those engaged in private wealth management. The CFA Institute strongly encourages participation in the voluntary AMC, which helps investors identify asset managers who have committed to high standards of professional conduct.

AMC Ethical and Professional Standards for Asset Managers

The Asset Management Company (AMC) establishes ethical and professional standards for asset managers, akin to a code of conduct. These standards are crucial in ensuring that asset managers maintain a high level of ethics and prioritize investor protection.

AMC General Principles of Conduct

The AMC General Principles of Conduct mandate asset managers to:

• Act in a professional and ethical manner
• Act for the benefit of clients
• Act with independence and objectivity
• Act with skill, competence, and diligence
• Communicate with clients in a timely and accurate manner
• Uphold the applicable rules governing capital markets

Ethical and Professional Responsibilities

Beyond the General Principles, the AMC Code further details the ethical and Professional Responsibilities of firms (referred to as “managers”) in six key areas:

• Loyalty to clients
• Investment process and actions
• Trading
• Risk management, compliance, and support
• Performance and valuation
• Disclosures

The AMC stipulates multiple requirements in each area that must be met to comply with the code.

Asset Manager Code (AMC) Requirements and Legal Implications

This section provides an overview of the Asset Manager Code (AMC) requirements and their legal implications. The AMC is a set of ethical guidelines designed to establish a high level of professional conduct among asset managers.

Alignment with Existing Laws and Regulations

The AMC requirements often mirror existing laws and regulations in developed nations such as the United States, United Kingdom, and Japan. This alignment ensures that asset managers operating in these markets are adhering to both local laws and the AMC.

Voluntary Participation and Potential Risks

• While participation in the AMC is voluntary, ignoring these guidelines can pose significant risks. For instance, a manager at a hedge fund could jeopardize their clients’ investments, the firm’s reputation, and their personal career if they fail to comply with the AMC.
• It’s crucial for managers to understand the AMC requirements and how they intersect with the legal requirements in the regions they operate.
• Non-compliance with laws and regulations can lead to severe consequences such as financial penalties, damage to reputation, and legal action.

Penalties for Breaching Securities Laws

• The penalties for violating securities laws vary based on the jurisdiction, the severity of the violation, and the enforcing body. For example, in the United States, the Securities and Exchange Commission (SEC) can impose penalties ranging from fines to criminal charges.
• These penalties can include fines, disgorgement (repayment of ill-gotten gains), restitution (compensation for losses), adviser registration limitations, injunctions (court orders to stop a particular action), criminal charges, and civil litigation.

The AMC and The Global Legal and Regulatory Landscape

The Asset Management Company (AMC) operates within a complex global legal and regulatory landscape, significantly influenced by global securities laws. For instance, the US Securities and Exchange Commission (SEC) and the Financial Conduct Authority (FCA) in the UK are two major regulatory bodies that oversee AMCs.

AMC Requirement for Managers

AMC mandates that managers prioritize client interests over their own, reflecting two key principles: “loyalty to clients” and “the duty of care”.

• Loyalty to Clients:The principle of loyalty to clients necessitates financial advisers to act in the best interests of their clients, avoiding or disclosing any conflicts of interest. This principle is enforced by laws such as the US Investment Advisers Act of 1940 and the European Union’s MiFID II.

• Duty of Care: The duty of care principle requires financial advisers to exercise reasonable care, skill, and diligence when providing advice or services to their clients. This duty is imposed by the UK’s Financial Services and Markets Act and Hong Kong’s Securities and Futures Ordinance (SFO).

Client Interests in Trading

Client interests must also be prioritized in trading, as stipulated by MiFID II. This means that the interests of clients should be placed above those of advisers or their firms. MiFID II in the EU requires investment firms to take all sufficient steps to obtain the best possible result for their clients when executing orders.

Client confidentiality is a crucial aspect of financial advisory, mandated by various global laws such as the US Gramm-Leach-Bliley Act, the European Union’s General Data Protection Regulation, and Singapore’s Personal Data Protection Act. These laws ensure the protection of client data and mandate advisers to maintain client confidentiality.

Undue Influence and Conflicts of Interest

Advisers should avoid undue influence, such as gift-giving, which is often legally discouraged. For instance, retrocessions, fees paid by funds to advisers for recommendations, can create conflicts and should be transparent. Similarly, “Payment for order flow” poses ethical challenges. Advisers need to be transparent with clients about retrocessions and similar arrangements, to avoid related conflicts of interest.

Market Manipulation and Misrepresentation

Market manipulation and misrepresentation are prohibited. The AMC prohibits practices that distort prices or artificially inflate trading volume with the intent to mislead market participants. Laws addressing this issue include the SFO in Hong Kong, which prohibits false trading, price rigging, disclosure of false or misleading information, stock market manipulation, and other market misconduct in the Hong Kong securities and futures markets. Similarly, in the EU, the Market Abuse Regulation prohibits insider dealing, unlawful disclosure of inside information, and market manipulation in the financial markets.

Investment Decisions

Managers are expected to have a reasonable and adequate basis for their investment decisions. This should be supported by appropriate research and analysis. This ensures that the decisions made are in the best interest of the clients and are not influenced by any external factors.

Regulatory Requirements and Fiduciary Standards

In the field of finance, regulatory requirements and fiduciary standards play a crucial role in ensuring the integrity of financial markets and protecting investors. These regulations vary across different jurisdictions, including the US, EU, and others.

US Regulations

• The Securities and Exchange Commission (SEC), for instance, enforces the Care Obligation of Regulation Best Interest (Reg BI) for broker-dealers, similar to how JP Morgan Chase is regulated.
• The Investment Advisers Act of 1940 enforces the duty of care for investment advisers, like those at Goldman Sachs, also known as the IA fiduciary standard.
• ERISA sets standards for fiduciary duties and diversification in pension plans, such as those managed by Fidelity Investments.

EU Regulations

• Markets in Financial Instruments Directive II (MiFID II) contains rules for advisers, covering the concepts of appropriateness and suitability, as seen in the case of Deutsche Bank.
• “Appropriateness” refers to the evaluation of whether a product or service is consistent with the client’s level of understanding and ability to bear the risks involved.
• “Suitability” evaluates if a product or service matches the client’s needs, preferences, and goals.
• In recent years, fiduciary obligations in the EU and the United Kingdom have been expanded to require consideration of Environmental, Social, and Governance (ESG) criteria in investment decisions, as seen with Barclays’ ESG-focused funds.

Fiduciary Obligations in Other Jurisdictions

• Other jurisdictions, such as Australia or Canada, also expect a similar fiduciary obligation from managers.
• This obligation can include using a “reasonable and adequate basis” but may also imply a wider set of responsibilities.

Portfolio Management

In portfolio management, investment managers, like those at BlackRock, must align actions with a fund’s stated objectives and constraints.

The financial markets in the European Economic Area are regulated by the Undertakings for Collective Investment in Transferrable Securities (UCITS) laws, which govern retail open-ended funds. These laws impose restrictions on terms, liquidity, and transparency. Additionally, the Alternative Investment Fund Managers Directive (AIFMD) regulates alternative investment funds such as hedge funds and private equity. For instance, a hedge fund like Bridgewater Associates would need to comply with these regulations.

Material Non-Public Information (MNPI)

In most developed markets globally, there are stringent rules against the use of MNPI. In the United States, the Securities and Exchange Commission (SEC) enforces federal securities laws, including Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. These laws prohibit fraud and deception in connection with the purchase or sale of any security. For example, the SEC’s case against Martha Stewart for insider trading falls under these regulations.

Regulations in Canada and the United Kingdom

In Canada, the provincial securities regulators enforce the provincial securities acts, which prohibit insider trading and tipping. In the United Kingdom, the Financial Conduct Authority (FCA) enforces the Market Abuse Regulation, which prohibits insider dealing, unlawful disclosure of inside information, and market manipulation. For instance, the FCA’s case against Ian Hannam for market abuse falls under these regulations.

FCA Guidance and Codes of Conduct

The Financial Conduct Authority (FCA), a regulatory body in the UK, issues guidelines and codes of conduct, including the Code of Market Conduct. This code provides real-world examples of behavior that may be considered as market abuse, such as insider trading or manipulation of trade prices.

Prioritizing Client Activities

Investment managers, whether working for a hedge fund in New York or a pension fund in Beijing, are required to prioritize the interests of their clients over their own when making investment decisions. This means they should not trade for their own accounts before executing client orders or allocate more favorable trades to their own accounts than to client accounts. This practice is prohibited by many global rules and laws, including the Markets in Financial Instruments Directive (MiFID) in the EU, the Asset Management Association of China Code of Conduct, and the CFA Institute Code of Ethics and Standards of Professional Conduct.

Use of Commissions

Investment managers may allocate a portion of client brokerage fees to services that aid them, known as “soft dollars” in the United States and “inducements” in the United Kingdom and Europe. These services can include research reports from Morningstar, data feeds from Bloomberg, or software from Microsoft. Managers should allocate commissions solely for client-beneficial services and disclose this usage to clients. Various global regulations, like the US’s Section 28(e) of the Securities Exchange Act and the EU’s MiFID II, govern this practice, and the CFA Institute maintains Soft Dollar Standards.

Best Execution

Best execution mandates managers to secure optimal terms for clients during trades, considering factors like price and speed. For example, if a client wants to buy shares of Apple, the manager should find the best possible price in the quickest time. Managers should maintain and regularly review policies for achieving this, disclosing their methods and any conflicts to clients. Regulations such as the EU’s MiFID II and the UK Financial Services and Markets Act 2000 set similar requirements, including the disclosure of best execution policies and ongoing monitoring.

Developing Policies for Risk Management, Compliance, and Support

In the field of asset management, it is crucial to have robust policies and procedures in place to ensure compliance with regulatory requirements, manage risks effectively, and provide support to clients. This involves a comprehensive approach that covers all aspects of business activities, from trading and valuation to disclosure and ethics.

Regulatory Requirements for Asset Managers

• Asset managers, such as BlackRock or Vanguard, are obligated to create and maintain policies and procedures that encompass all facets of their business operations. This includes trading, valuation, disclosure, conflicts of interest, anti-money laundering, cybersecurity, and ethics.
• These policies and procedures should be reviewed and updated regularly to reflect changes in laws, regulations, and best practices. For example, when GDPR was introduced in the EU, asset managers had to update their data protection policies.
• A compliance officer, similar to the role at Goldman Sachs, should be appointed to oversee the implementation and enforcement of the policies and procedures, conduct periodic compliance audits and tests, report any violations or deficiencies to senior management and regulators, and handle any complaints or inquiries from clients or regulators.
• Asset managers are required to provide accurate and complete portfolio information to clients, such as performance, fees, risks, holdings, and transactions. This information should be verified by an independent third party, such as an auditor, a custodian, or a benchmark provider, to ensure its reliability and integrity.
• Records of all business activities should be maintained securely and accessibly for a legally mandated period (usually between 5 and 10 years), available for regulatory or client inspection.
• A business continuity plan with contingency measures for key functions like portfolio management, trading, and IT should be implemented.
• A firmwide risk management process covering market and non-market risks, with defined risk appetite, limits, controls, and reporting mechanisms should be established.

Legal Requirements

In the United States, the Investment Advisers Act of 1940 requires investment advisers to register with the SEC and to adopt a code of ethics, a compliance program, and a business continuity plan.
MiFID II in the EU imposes various obligations on investment firms, such as ensuring the suitability and appropriateness of their services for their clients, disclosing conflicts of interest, costs, and charges, providing best execution and fair allocation, and reporting transactions and positions to regulators.

In Singapore, the Securities and Futures Act regulates fund management companies and requires them to obtain a license from the Monetary Authority of Singapore and to comply with various rules on capital adequacy, risk management, disclosure, reporting, and record keeping.
The Financial Services Act 2013 in Malaysia regulates fund management companies and requires them to obtain a license from the Securities Commission Malaysia and to comply with various guidelines on governance, compliance, risk management, disclosure, reporting, and record keeping.

Global Investment Performance Standards (GIPS)

The CFA Institute’s Global Investment Performance Standards (GIPS) are voluntary ethical standards for calculating and presenting investment performance information based on the principles of fair representation and full disclosure. The GIPS standards are widely adopted by asset managers around the world and are recognized as a global benchmark for performance reporting.

Statutory Reporting Requirements

• The Investment Advisers Act of 1940 in the United States requires registered investment advisers to provide clients with a brochure that discloses, among other things, their methods of analysis, investment strategies, performance fees, and performance-based advertising. The brochure must be updated annually and delivered to clients within 120 days of the end of the fiscal year.
• MiFID II in the EU has disclosure requirements on costs and charges, inducements, conflicts of interest, and best execution. MiFID II also requires asset managers to provide clients with periodic reports on the performance of their portfolios, including a comparison with a benchmark.

Common Legal Requirements for Investment Advisers or Investment Funds

Communicating with clients on an ongoing and timely basis. This typically includes providing periodic reports, statements, disclosures, and notices to inform clients of their account activity, performance, fees, risks, and other relevant information. Disclosures should be truthful, accurate, complete, and easily understood. For instance, the Investment Advisers Act of 1940 mandates advisers to provide a comprehensive brochure to clients.The SEC’s 2023 rules for private fund advisers require the disclosure of material facts, important for investor decision-making, including:

• conflicts of interest from relationships, fee structures, etc.,
• regulatory actions against the adviser or its staff,
• changes in investment strategies, risk factors, use of derivatives,
• fee structures and calculation methodologies,
• soft or bundled commissions and their client benefits,
• timely performance updates,
• shareholder voting policies,
• trade allocation policies,
• audit or review results, and
• significant organizational changes.

Practice Questions

Question 1: A wealth adviser is planning to expand his business operations to multiple jurisdictions and markets. In order to ensure a smooth transition and maintain the integrity of his practice, he must be aware of the various aspects of regulations that he will be subject to. Which of the following is not a regulatory aspect that the wealth adviser needs to consider while operating in multiple jurisdictions and markets?

1. Licensing and registration
2. Cooperation with relevant authorities
3. Marketing strategies and client acquisition

Answer: Choice C is correct.

Marketing strategies and client acquisition are not regulatory aspects that a wealth adviser needs to consider while operating in multiple jurisdictions and markets. While these are important aspects of expanding a business, they do not fall under the purview of regulatory considerations. Regulatory aspects typically involve rules and regulations set by governing bodies or authorities that businesses must comply with. These include licensing and registration requirements, cooperation with relevant authorities, compliance with anti-money laundering and anti-corruption laws, data protection and privacy laws, and adherence to ethical standards and practices. Marketing strategies and client acquisition, on the other hand, are business strategies that are crucial for growth and expansion but are not regulated by authorities in the same way as the other aspects mentioned.

Choice A is incorrect. Licensing and registration are indeed regulatory aspects that a wealth adviser needs to consider while operating in multiple jurisdictions and markets. Different jurisdictions may have different licensing and registration requirements, and it is crucial for the adviser to understand and comply with these requirements to legally operate in those jurisdictions.

Choice B is incorrect. Cooperation with relevant authorities is another important regulatory aspect. This could involve cooperating with regulatory bodies during audits or investigations, reporting suspicious activities, and complying with requests for information. Failure to cooperate with authorities can lead to penalties and damage to the adviser’s reputation.

Question 2: The structure of the wealth management industry has historically been centered around privacy and client confidentiality. Private banking practices often involve confidentially moving large sums of money in or out of ultra-private numbered bank accounts. These types of banking and wealth management practices can have both positive and negative implications. What is one potential negative implication of these practices?

1. They can lead to a lack of transparency and potential misuse of funds
2. They can lead to a decrease in the number of high-net-worth and ultra-high-net-worth clients
3. They can lead to an increase in the number of wealth advisers

Answer: Choice A is correct.

One potential negative implication of private banking practices that involve confidentially moving large sums of money in or out of ultra-private numbered bank accounts is that they can lead to a lack of transparency and potential misuse of funds. The high level of confidentiality and privacy associated with these practices can make it difficult for regulators and law enforcement agencies to monitor and track the movement of funds. This can create opportunities for money laundering, tax evasion, and other illicit activities. Furthermore, the lack of transparency can also make it difficult for clients to fully understand and manage their financial risks. This can potentially lead to financial losses and reputational damage for both the clients and the banks involved. Therefore, while privacy and confidentiality are important aspects of wealth management, they need to be balanced with the need for transparency and accountability.

Choice B is incorrect. Private banking practices do not necessarily lead to a decrease in the number of high-net-worth and ultra-high-net-worth clients. In fact, these practices are often designed to cater to the needs of such clients, who value privacy and confidentiality. Therefore, if anything, these practices could potentially attract more high-net-worth and ultra-high-net-worth clients, rather than leading to a decrease.

Choice C is incorrect. The number of wealth advisers is not directly related to private banking practices. The number of wealth advisers is more likely to be influenced by factors such as the demand for wealth management services, the complexity of the financial market, and the regulatory environment. Therefore, private banking practices do not necessarily lead to an increase in the number of wealth advisers.

Glossary

• Common Reporting Standard (CRS): Framework for combating tax evasion.
• Foreign Account Tax Compliance Act (FATCA): US law for reporting foreign financial accounts.
• International Organization of Securities Commissions (IOSCO): Securities regulators association.
• Basel Committee on Banking Supervision (BCBS): Authority setting banking standards.

Private Wealth Pathway Volume 1: Learning Module 1: The Private Wealth Management Industry;

LOS 1(d): Describe and evaluate regulatory and compliance considerations influencing the private wealth management industry