What’s the latest news in the world of regulatory compliance? Welcome to our biweekly recap, where we are giving you our report highlighting the top compliance news articles from various industry news publications. We have selected the most relevant and important news articles related to registered investment adviser (RIA) compliance and regulatory issues. Today’s recap focuses on the SEC’s spot bitcoin ETF approval, updates from the DOL, advisers opinion on AI, and the impact of SEC cybersecurity rules.
Here are our top investment adviser compliance articles as of January 12, 2024:
SEC OKs 11 spot bitcoin ETFs in milestone for digital assets (Author –Bloomberg News, Investment News)
US regulators have approved exchange-traded funds (ETFs) directly investing in Bitcoin, marking a significant development for the $1.7 trillion digital asset sector. The Securities and Exchange Commission (SEC) granted authorization for 11 funds, a landmark move after over a decade of opposition. The SEC’s approval, triggered by BlackRock’s application and a court ruling, is seen as a rare capitulation. SEC Chair Gary Gensler emphasized caution, stating the approval doesn’t endorse Bitcoin, highlighting associated risks. The decision follows a false post on the SEC’s account, causing Bitcoin price fluctuations. This approval allows both retail and institutional investors to diversify portfolios with crypto exposure easily.
Cybersecurity Rule Could Prompt Firms to ‘Cry Wolf’: SEC Roundup (Author – Nick Morgan and Tom Zaccaro, ThinkAdvisor)
In the SEC Roundup video series, former SEC trial counsels Nick Morgan and Tom Zaccaro discuss concerns raised by former federal cybercrime prosecutor Joe Sullivan regarding the SEC’s new cybersecurity incident disclosure rules. Sullivan, the former chief security officer of Facebook and Uber, worries that the rules may lead to premature or inaccurate disclosures due to the conflicting nature of responding to cyber breaches and the evolving forensic challenges, potentially resulting in disclosures resembling false alarms without substantial benefit to investors.
DOL Releases Final Indepenent Contractor Rule (Author – Melanie Waddell, Think Advisor)
The Labor Department has released its final rule under the Fair Labor Standards Act to determine if a worker is an employee or an independent contractor. The Financial Services Institute (FSI) warns that the rule could jeopardize advisers’ status as independent contractors. FSI’s president, Dale Brown, expresses concern that despite stakeholder input, the rule may undermine financial advisers’ independent contractor status. Acting Labor Secretary Julie Su emphasizes the rule’s intent to prevent employee misclassification and ensure fair wages for workers, especially those vulnerable to exploitation. The rule is under review by the Office of Management and Budget.
Critics of DOL fiduciary proposal pulling every lever to block rule (Author – Tobias Salinger, Financial Planning)
The US Labor Department’s proposed retirement advice regulation, extending fiduciary duty to 401(k) rollover recommendations and certain insurance product sales, has sparked divergent views. Critics argue it will impose costly burdens, limiting access to professional guidance, while advocates believe it will save retirement investors from costly conflicts of interest. The proposal, currently under review, received over 19,000 public comments.
The final rule, expected later this year, may reshape retirement advice practices.
9 in 10 advisors have positive view of AI, Arizent study finds (Author – Nathan Place, Financial Planning)
A new study by Arizent reveals that 87% of wealth managers are optimistic about the benefits of artificial intelligence (AI) in their industry. Most wealth managers (81%) plan to leverage AI to support their business in 2024, with applications focused on tasks such as improving emails and marketing communications (49%). While some remain hesitant to use AI for core tasks like devising financial strategies, 10% believe it could help with portfolio management in 2024. Concerns include the potential for misinformation from generative AI, emphasizing the importance of regulation and discernment in its use.
Check out our previous round up, which focused on the evolving regulatory industry in 2023, RIA deals in 2024, the biggest cybersecurity breaches over the last year, and a look at SEC whistleblower payouts.