Welcome to our biweekly recap, where we curate the top compliance news and insights from various industry publications. We have selected the most relevant and important updates related to regulatory compliance, industry news, and critical updates.
Today’s recap focuses on the release of Fund Name Rule FAQs, another round of fines for record-keeping failures, legal cases facing the regulators, and the impact of the 119th Congress on crypto regulations.
Here are our top compliance articles as of January 17, 2025:
SEC Releases FAQ on Controversial Fund Names Rule (Author – Melanie Waddell, Think Advisor)
The SEC has released FAQs for its Investment Company Names rule, which was amended in 2023 and “broadened the scope of the original names rule’s 80% investment policy requirement “to include any fund name with terms suggesting that the fund focuses in investments that have, or investments whose issuers have, particular characteristics,” the SEC states.”
The FAQs provide additional insight and guidance on the amendments; however, industry groups continue to highlight the compliance challenges many firms will face with this ruling.
SEC fines investment advisors, broker-dealers $63M for record-keeping failures (Author – Steve Randall, Investment News)
“The Securities and Exchange Commission has announced multi-million dollar penalties for investment advisors and broker dealers, mostly resulting from record-keeping failures.
A combined $63.1 million in fines were handed out to 12 firms – nine investment advisors and three broker-dealers – to settle charges resulting from firms failing to main and preserve electronic communications.
The SEC investigations found use of off-channel communication methods in each of the cases and the failures to ensure compliance involved personnel of all levels of authority including supervisors senior managers.
One of the firms self-reported to the SEC and received a penalty of several hundred thousand dollars rather than the far larger fines paid by the others.”
These legal cases will determine regulatory power in 2025 and beyond (Author – Tobias Salinger, Financial Planning)
In 2024, regulators faced numerous court challenges, including the reversal of the Chevron Deference and stays on the DOL Fiduciary Rule. And it seems that trend will continue into 2025. Multiple court cases could, depending on the results, diminish some of the regulators’ authority and power. On the chopping block now:
- SEC Follow-On Proceedings
- FINRA’s ability to expel member firms
- The Corporate Transparency Act
Lawsuit contests SEC’s ability to slap advisors with industry bans (Author – Dan Shaw, Financial Planning)
The SEC is facing another day in court. On the chopping block this time? Follow-on proceedings and the often-associated industry bans.
This case, which was brought by Michael and David Sztrom, “seeks either to have an injunction placed on the SEC’s follow-on proceedings or for the scheduling of a formal hearing in which they can present their case. Among other things, the suit accuses the SEC of seeking to deny due process law as guaranteed by the Fifth Amendment, usurp judicial power in violation of Article III of the Constitution and deprive the Sztroms’ right to a jury trial under the Seventh Amendment.”
This aligns closely to the SEC vs. Jarkesy case, after which, the regulator was made to abandon their previous process which used in-house adjudicators for fraud allegations.
Fintech and crypto are having a moment in the 119th Congress (Author – Claire Williams, Financial Planning)
“The 119th Congress is taking shape, and financial policy (in one form, at least) is back as a top legislative priority…
This Congress, which was gaveled in on Jan. 3, has an influx of crypto-friendly lawmakers, thanks in part to a large amount of spending in the 2024 elections from crypto advocacy groups like Andreessen Horowitz’s Fairshake PAC.
President-elect Donald Trump has also pledged to make crypto a top priority, promising, among other things, to establish a strategic bitcoin reserve.
Leadership in both the House and the Senate is also decidedly more innovation-friendly. Sen. John Thune, R-S.D., is the new Senate Majority leader, taking over from Sen. Mitch McConnell, R-Ky., who has struck a tepid stance on the topic in the past… Crypto isn’t the only industry that got a boost from the 2024 elections. The influx of crypto-friendly lawmakers also could signal opportunity for fintech products and services to get some legislative and regulatory relief.”
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