Compliance innovation moves fast, but the news moves faster. To keep you and your team up to speed on the latest happenings and goings-on in the compliance world, we’ve aggregated the top five articles from the past few weeks to provide you with an in-depth look at the regulatory ecosystem.
Stay up-to-date and in the know on everything happening in the compliance world as of September 1, 2023.
SEC’s first NFT enforcement action should give advisors pause, experts say – Author Mark Schoeff Jr.
Experts advise financial advisers to wait for regulatory clarity before recommending non-fungible tokens (NFTs) to clients, following the SEC’s first NFT-related enforcement action. A media and entertainment company was ordered to pay $6.1 million for selling NFTs without registering them as securities. The SEC alleged the NFTs were investment contracts, raising concerns about unclear NFT regulations. Advisers are urged to understand securities laws and potential risks before engaging in NFT recommendations. With the SEC’s active stance, experts recommend caution and waiting for clearer rules. Alternative investments are deemed more suitable by some, and experts warn against being early adopters without regulatory clarity.
NASAA program lets brokers who leave industry go five years without retaking exams – Staff Report
The North American Securities Administrators Association (NASAA) has launched the Exam Validity Extension Program (EVEP), allowing brokers to maintain their Series 63 exam certification for five years after leaving the industry. Previously, brokers could retain their certification for only two years without retaking exams. To qualify, brokers need to reside in a state that has adopted NASAA’s model rule permitting the extension beyond two years, with Minnesota being the only one so far. NASAA also plans an EVEP for Series 65-certified investment advisor representatives.
EVEP participation costs $35 annually with ongoing education requirements.
SEC’s custody rule will simmer a little longer for advisor input – Author Dan Shaw
The SEC has extended the public comment period by two months for proposed changes to its custody rule, which currently requires advisers to hold client assets at qualified third parties. The changes would extend this mandate to more complex investments like cryptocurrencies, real estate and derivatives. Critics, including some advisers, oppose a provision that would apply the custody rule to advisers with discretionary trading authority. Independent advisers fear the requirement for elaborate written agreements with custodians could disrupt their business with larger custodian firms. The SEC’s decision to reopen the comment period coincided with its approval of new regulations for private equity and hedge funds.
SEC adopts rules to boost oversight of private-fund advisors – Author Mark Schoeff Jr.
The SEC, in a 3-2 vote, has approved rules to enhance transparency and oversight of private funds. The regulations aim to shed light on private funds’ operations and require advisers to provide quarterly statements to investors on fees, performance, expenses and adviser compensation. The rules restrict certain adviser activities, such as charging funds for regulatory compliance or portfolio investment without disclosing to investors. Retail advisers operating private funds anticipate increased regulatory expenses. The rules sparked division among the SEC commissioners, with Chair Gary Gensler advocating transparency while some Republicans opposed the changes.
FINRA Says Video Conferences Now a Permanent Hearing Option – Author Melanie Waddell
FINRA will now permit video conference hearings for disciplinary and enforcement proceedings before its Office of Hearing Officers and National Adjudicatory Council, building upon temporary COVID-19 adaptations. The updated rules allow remote hearings in situations endangering participants’ health or when in-person attendance is unfeasible due to factors like natural disasters or travel disruptions.
Learn more about key regulatory issues like those discussed in this blog by downloading our 2023 Regulation Rundown.