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. This recap focuses on an SEC cryptocurrency update, implications of AI, how advisers can take advantage of social media and the potential compliance concerns when it comes to Threads.
Here are our top investment adviser compliance articles as of Jul. 14, 2023:
SEC’s rejection of BlackRock bitcoin ETF unlikely to derail eventual approval (Author Ryan W. Neal, Investment News)
The SEC has rejected filings for a spot bitcoin exchange-traded fund (ETF) from BlackRock, Fidelity, and other asset managers. However, crypto-enthusiasts remain optimistic that approval will be granted soon. The SEC informed exchanges that the filings lacked clarity and comprehensiveness. While there are already ETFs tracking bitcoin futures or cryptocurrency-related companies, the SEC has rejected around 30 applications for an ETF tracking the actual price of bitcoin since 2017. Despite the rejections, crypto-enthusiasts believe that ETFs will increase participation in bitcoin investing and view the SEC’s feedback as a positive sign towards eventual approval.
Advisors jumping onto Threads could create compliance headaches (Author Ryan W. Neal, Investment News)
Threads, a new social media app developed by Meta Platforms Inc., has gained significant popularity in the past week, surpassing 70 million registrations. Wealth management firms such as ETrade, Potomac Fund Management and Pearl Financial Planning have joined the platform to secure their brand names, while influential financial personalities have actively engaged, including Douglas Boneparth and Tyrone Ross. Some advisers are seeking an alternative to Twitter, which has undergone frequent changes. However, compliance concerns arise due to the recent focus on off-channel communications by regulators like the SEC. While advisers can use Threads for personal reasons, using it for business requires approval and adherence to compliance policies.
How advisors and firms can up their social media game (Author Victoria Zhuang – FinancialPlanning)
This article provides insights on how financial advisers and firms can improve their social media presence, highlighting the significance of understanding the target audience and tailoring content accordingly.
“Less than 10% of surveyed wealth management professionals across the industry see their firms as “very successful in leveraging social media” for customer acquisition, according to a recent report by Arizent, Financial Planning’s parent company. Only 24% said they relied on social media to generate new leads, reflecting the industry’s long-standing tendency of relying on word-of-mouth and old-fashioned referrals for new customers.”
To improve social presence, advisers should consider using various platforms strategically, incorporating engaging visuals and videos, and staying compliant with regulatory guidelines. The article emphasizes the importance of consistent branding, establishing credibility through thought leadership, engaging with followers and measuring the effectiveness of social media efforts through analytics. Ultimately, a well-executed social media strategy can help advisers and firms enhance their visibility, build relationships with clients, and expand their business opportunities.
AI Will Heighten Cybersecurity Risks for RIAs (Author Rob Burgess, Wealth Management)
The wealth management industry is facing increasing risks of fraud and scams as artificial intelligence (AI) technology advances. Scammers can use AI-powered voice manipulation to imitate clients and deceive advisers into making unauthorized transactions. AI also enables more targeted and sophisticated phishing attacks by generating convincing emails and messages. Deepfake technology further enhances the risk by allowing scammers to create fake audio and video content that impersonates clients. To mitigate these risks, experts suggest taking a strong defensive posture, using cybersecurity software, implementing multi-factor authentication, staying vigilant for impersonation signs and educating clients and staff on cybersecurity best practices. Proposed SEC rules on cybersecurity aim to address these emerging threats.
Why dealmakers are still making waves in the M&A slowdown (Author Tobias Salinger, FinancialPlanning)
The article discusses the trends in wealth management mergers and acquisitions (M&A), highlighting a decline in the number of deals but an increase in their size. It mentions that the total number of M&A transactions in the industry has been decreasing over the years, however, “the size of firms changing hands is on the rise.” The article suggests that regulatory changes, technological advancements and the need for scale and efficiency are factors contributing to this trend. It also emphasizes the importance of strategic planning and due diligence for successful M&A transactions in the wealth management sector.
Check out our previous round up, which focused on takeaways from the Investment Adviser Association (IAA) and COMPLY IA Snapshot, concerns over the number of SEC rule proposals and the impact it could have on the industry, the DOL’s Retrospective Review Requirement deadline and third-party exams for RIAs.