Each week, we are giving you our weekly 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 week’s recap focuses on the Securities and Exchange Commission’s (“SEC”) Marketing Rule, social media marketing tips, regulatory exam focus areas, and the North American Securities Administrators Association’s (“NASAA”) model rule regarding unpaid arbitration awards.
Here are our top investment adviser compliance articles for the week of May 20th, 2022:
1. SEC Sends Email Warning on Marketing Rule Compliance (Author – Melanie Waddell, ThinkAdvisor)
Melanie Waddell covers the latest updates on the SEC’s Marketing Rule, starting with discussing the agency’s recent email to all investment advisers on compliance requirements. The email reminded advisers of the November 4th compliance deadline and specific steps to take to comply with the new rule, like updating the firm’s Form ADV Part2A.
Industry experts remind advisers of the significant effort and time needed to comply with the rule. They recommend the firms start reviewing their current marketing materials and their policies and procedures, and then conduct training sessions on the firm’s updated marketing policies and procedures for their staff.
2. Advisers Getting Better at Social Media, But Still Have Work To Do (Author – Ryan W Neal, Investment News)
This article shares tips for advisers to improve their social media marketing strategies, backed by an analysis of social media posts from the financial services industry. It is recommended that advisers get more personal with their content to engage viewers. They can do so by showcasing community involvement, having a profile picture, and completing their profile summaries. LinkedIn is the most popular social media platform for advisers, with Facebook coming in second. Instagram is also gaining popularity, particularly with video content for younger investors. For those taking on the new Marketing Rule, there are many opportunities to engage current clients and prospects.
3. Don’t Wait! Get Ahead of SEC Scrutiny With Mock Examinations (Author – Steven Goldman, Think Advisor)
Advisers can prepare for regulatory examinations by conducting mock exams and honing in on the following compliance areas: 1) private funds and their advisors; 2) environmental, social and governance investing; 3) standards of conduct; 4) information security and operational resiliency; and 5) emerging technologies and crypto-assets.
The author reminds advisers that when it comes to examinations, the SEC typically prioritizes firms that have not been examined before or have gone many years without an exam. If an exam leads to findings that warrant a full investigation, a firm can face significant financial impacts and reputational damage. Mock exams allow firms to proactively identify key areas in their compliance programs that need improvement.
4. NASAA Approves Model Rule Targeting Unpaid Arbitration Awards (Author – Patrick Donachie, Wealth Management)
This article provides an overview of the North American Securities Administrators Association’s (NASAA) recently approved model rule regarding regulatory actions against firms with unpaid arbitration awards. Patrick Donachie shares that firms could face regulatory action if they do not pay arbitration awards or regulatory-imposed fines promptly. Such action could include marking the adviser’s practice as fraudulent or prohibited, and the adviser could potentially be prevented from registering in their state until the award is paid. One industry expert expects approximately half of the states to adopt the rule within the next two years, considering support from regulators and industry committees.
5. SEC To Crack Down On Funds’ Misleading ESG Claims With New Rule (Authors – Saijel Kishan and Lydia Beyoud, Financial Advisor)
A recurring topic in the wealth management industry, ESG funds, made headlines again, as the SEC is expected to release further guidance on how these funds will be labeled and disclosed to investors. The agency aims to help investors fully understand “underlying investments in a fund and its overall strategy for addressing climate change or social issues”. The article points out that retail investors are typically less inclined to fully investigate a portfolio’s underlying assets, and therefore fall for “greenwashing”.
Don’t forget to check out last week’s top RIA compliance news articles that focus on the SEC’s Marketing Rule, an investment adviser’s fiduciary duty, and industry concerns on arbitration clauses.