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 SEC’s 2025 Exam Priorities, a regulatory focus on AI, the ongoing off-channel communications enforcement, NASAA’s enforcement report, and a cyber warning from the New York State Department of Financial Services.
Here are our top compliance articles as of October 25, 2024:
Fiduciary duty, cybersecurity and AI top SEC’s 2025 exam priorities (Author – Leo Almazora, Investment News)
The SEC’s recently released 2025 Exam Priorities highlight a multitude of focus areas from the regulator. From Investment Adviser Fiduciary Duty to Broker-Dealer Reg BI requirements, the priorities span both perennial and heightening risks.
Additional priorities include:
- Crypto assets
- Cybersecurity
- AI
- AML
- And more
SEC to Boost Scrutiny of AI Tools Used by Advisors, Brokers (Author – Nicola M. White, Think Advisor)
“Although the agency put AI risks on its examination watch list last year, it went into further detail in the latest report.
The sharper focus follows warnings from a number of financial regulators, including the Federal Reserve and Consumer Financial Protection Bureau, that the new tools present serious risks as well as opportunities. They have sounded alarms about everything from discrimination to potential systemic risk.
The SEC has clamped down on so-called AI washing, or misrepresenting how companies use machine learning and other tools. Chair Gary Gensler has repeatedly warned against overblown claims about AI.”
SEC Chief Defends Texting Crackdown (Author – Melanie Waddell, Think Advisor)
SEC Chair Gary Gensler has shared his perspective on the ongoing “off-channel communications crackdown.”
While SEC Commissioner Hester Pierce has expressed their disagreement with the current course of action, Gensler highlighted the need to get firms back on track, complying with all applicable regulations.
State regulators ramp up enforcement with digital fraud coming into focus (Author – Leo Almazora, Investment News)
NASAA’s annual report has highlighted key enforcement stats from the past year, shining a light on the regulator’s active work protecting the markets.
Key stats include:
- 8,768 investigations
- 103 enforcement actions against broker-dealers, 42 against agents, 113 against investment advisers, and 142 against investment adviser representatives
- 72 individuals and 14 firms were barred from the industry entirely
Financial Firms Need to Focus on Cyber Risks Posed by AI, New York Regulator Says (Author – Mengqi Sun, Wall Street Journal)
“The New York State Department of Financial Services…issued a new guidance document that advises the entities it regulates to monitor and assess risks from AI-enabled tools, as part of the agency’s existing cybersecurity regulation. The department said financial-services firms need to better understand AI-related risks, including from social engineering, cyberattacks and the theft of nonpublic information.
The state regulator said the 11-page guidance document didn’t impose new requirements but was just the latest installment in the department’s efforts to rein in the risks from AI tools. The department also recently adopted new guidance targeting discrimination by insurers through the use of AI.”
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