Top RIA compliance news articles for the week of Nov. 11, 2022

1. SEC officials tell advisers to put clients’ interests first, tell truth in ads (Author – Mark Schoeff Jr., Investment News)

The SEC held a virtual Investment Adviser/Investment Company National Compliance Seminar in which SEC staff members provided guidance for compliance professionals on how to ensure their firms stay aligned with agency rules, including the new Marketing Rule.

SEC Chairman Gary Gensler urged the audience to be “good counselors” at their firms by helping their colleagues adhere to securities regulations, using the investment advice rules as an example. He said, “At the core, this rule is about truth in advertising.”

Although the agency did not go into detail about what it will look for during examinations, the SEC will check whether advisers have changed their policies and procedures to reflect the regulation now in place.

2. SEC levies record $6.5 billion in fines in 2022 (Author – Dan Shaw, Financial Planning)

Earlier this week, the SEC reported its investigations resulted in nearly $6.5 billion in fines. Most of these fines were leveled at advisers, and the agency targeted everything from large institutions to individual advisers.

This was a record fiscal year, as orders arose from 760 enforcement actions, a number up by 9% from the previous fiscal year. The total penalties increased by more than 50%.

3. Survey: More Firms Plan to Add Compliance Resources (Author – Patrick Donachie, Wealth Management)

According to a recent survey, 42% of survey respondents, including RIAs, expect to increase compliance staff in the next year. This is a noteworthy increase from 30% in last year’s survey. This increase comes in light of a more aggressive regulatory agenda coming from the SEC, including new rules around marketing and advertising.

Hearsay Compliance Principal Bill Simpson says the SEC’s regulatory push has caused a “major shift” in how firms and advisers will allocate their resources. He said, “Firms would rather just make the initial investment, and not have to worry about not only the financial risk, but also the headline risk of being in the news as one of the firms caught up in this large sweep that’s still happening.”

4. SEC exams director reticent about how agency will probe marketing rule (Author – Mark Schoeff Jr., Investment News)

At the recent ComplyConnect conference, John Walsh, a partner at Eversheds Sutherland, shared his thoughts on the SEC’s approach to evaluating advisers’ compliance with the new Marketing Rule. Walsh worked at the SEC for more than two decades and helped establish its office of examinations, the predecessor to today’s division.

He said, “My expectation is that they’re going to be expecting full compliance from now. I would not expect any additional period to get ready. I would be ready right now.”

5. SEC Commissioner says ESG Rules Would Quadruple Company Reporting Costs (Author – Tracy Longo, Financial Advisor)

Costs associated with the SEC’s proposed ESG reporting rules may increase public companies’ regulatory reporting costs from about $2 billion to $8.4 billion per year. Many firms and those representing them have expressed concern over these numbers.

There is concern over whether the long-term viability of ESG-focused investing would justify these costs, especially for smaller firms who may not have the resources to adhere to the proposed regulations.

According to agency commissioner Mark Uyeda, these costs could make it difficult for firms to scale economically.

Don’t forget to check out last week’s top RIA compliance news articles that focus on the Securities and Exchange Commission (SEC) Marketing Rule, the SEC’s continued enforcement actions, and how firms embrace communication apps and remain in compliance.