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 Mar. 17, 2023.
SEC proposes new cyber rules for RIAs, BDs – Author Melanie Waddell
The Securities and Exchange Commission (SEC) has proposed new cybersecurity rules that require broker-dealers, investment advisers and asset managers to notify individuals affected by certain types of data breaches which may put them at risk of identity theft or other harm.
The proposed rules would require these entities to adopt written policies and procedures for an incident response program to address unauthorized access to or use of customer information. The proposed amendments would also require covered institutions to provide notice to individuals whose sensitive customer information was or is reasonably likely to have been accessed or used without authorization, no later than 30 days after the firm becomes aware of an incident.
The SEC has also reopened the comment period for these proposed rules.
SEC set to step up number of onsite exams – Author Mark Schoeff, Jr.
The SEC is planning to increase the number of on-site exams to be conducted for RIAs and broker-dealers. The SEC’s Office of Compliance Inspections and Examinations (OCIE) announced it would conduct a higher number of on-site exams for RIAs and broker-dealers as it seeks to improve the examination process and better protect investors.
The OCIE also plans to focus on cybersecurity, anti-money laundering (AML) and environmental, social and governance (ESG) issues. In addition, the OCIE intends to examine RIAs which have never been examined before and focus on smaller and mid-sized RIAs which have not previously been a priority for on-site exams.
FINRA’s top 5 fine categories in 2022 – Author Melanie Waddell
The Financial Industry Regulatory Authority (FINRA) has released its top five fine categories from 2022. These categories are:
- AML and Bank Secrecy Act (BSA) violations, which saw a total of $15.6 million in fines.
- Supervisory violations, which had $10.4 million in fines.
- Advertising and sales literature violations with $6.2 million in fines.
- Books and records violations, which saw $5.9 million in fines.
- Best execution violations, with $5.1 million in fines.
FINRA stated it is committed to detecting and addressing regulatory violations in a timely and effective manner and that it will continue to focus on these areas in the coming year.
Form ADV common missteps and best practices for RIAs – Author Chris Stanley
A recent report highlights common mistakes made by registered investment advisers (RIAs) on the Form ADV, as well as best practices for avoiding these missteps. Common mistakes include incomplete disclosures, inconsistencies in reporting and inadequate descriptions of conflicts of interest. Best practices for avoiding these errors include thoroughly reviewing and updating the Form ADV, ensuring consistency between various parts of the form and providing clear and detailed descriptions of conflicts of interest.
The report emphasizes that the Form ADV is an important tool for ensuring transparency and accountability in the RIA industry, and that taking the time to complete it accurately can help build trust with clients and regulators.
New investors are now more likely to seek out advisers, survey finds – Author Tracey Longo
According to a new survey, investors who are new to investing are more likely to seek out the services of a financial adviser.
The survey, which was conducted by the Certified Financial Planner Board of Standards (CFP Board), found that 61% of respondents who had recently begun investing had either hired or were considering hiring a financial adviser. The survey also found that the primary reasons investors cited for seeking out an adviser were for help with retirement planning, investment selection and risk management.
The survey noted that while investors who are new to the market are more likely to seek out an adviser, overall, only about 20% of Americans currently work with a financial adviser.
The CFP Board said that the survey’s results underscore the importance of education and outreach efforts aimed at increasing awareness of the benefits of working with a financial adviser.