What’s the latest news in the world of regulatory compliance? Welcome to our biweekly recap, where we compile the top compliance news articles from various industry news publications. We have selected the most relevant and important news articles related to regulatory compliance, industry news, and critical updates. Today’s recap focuses on updates from the Supreme Court, FINRA’s comment on AI, a new IRS rule for Broker-Dealers, and the number of enforcements coming from FINRA.
Here are our top compliance articles as of July 5, 2024:
SEC loses home-court advantage: Supreme Court reaffirms advisors’ right to jury trials (Author – Dan Shaw, Financial Planning)
Due to a recent Supreme Court ruling, SEC cases seeking civil penalties must now be brought to a jury trial. Previously, the regulator relied on administrative law judges in such matters, which, according to the ruling, violated the Seventh Amendment. However, it should be noted that, “since Thursday’s Supreme Court ruling explicitly applies to civil penalties, Moustakis said there’s still a chance the SEC could win disgorgement — or the repayment of ill-gotten gains to victims — through its administrative system.”
Supreme Court muddies regulatory authority of SEC and DOL (Author – Emile Hallez, Investment News)
The Chevron Defense has been overturned by the Supreme Court, which will likely directly impact the regulatory authority of the SEC, DOL, and others as they seek to implement new rules. Rules that will likely face challenges with this new update:
- DOL Fiduciary Rule
- SEC Climate Disclosure Rule
- Anticipated rules regarding cryptocurrency
Experts quoted within the article highlight the fact that while the overturning of the Chevron Defense may open rules and amendments up to be potentially overturned much more easily, it could result in additional “fire drills” for the advisory industry as firms are forced to comply with rules which may be overturned in short order.
Follow the rules, ask questions when using gen AI, Finra tells firms (Author – Leo Almazora, Investment News)
A recent FINRA reminder highlights the care firms must take when implementing and utilizing AI.
“…the watchdog emphasized that its rules as well as securities laws in general remain applicable, even as firms adopt advanced technologies like gen AI.
“Finra reminds its member firms that Finra’s rules… continue to apply when member firms use Gen AI or similar technologies in the course of their businesses,” Finra said.
While stressing that it’s not introducing new legal requirements or interpretations of its rules, the self-regulator highlighted the ongoing relevance of existing regulations under federal securities laws.”
FINRA goes quiet on beat as caseload plunges (Author – Austin Weinstein, Financial Planning)
Recent declines in both the number of FINRA enforcement cases as well as press release announcements regarding cases have made some question the regulator. While FINRA argues that its authority has led to a reduction in “bad actors,” others fear changes within the SRO may mean they will be less likely to catch the next big case.
New IRS Rules Require BDs to Report Sales, Exchanges of Digital Assets (Author – Melanie Waddell, Think Advisor)
Custodial brokers will now be contending with new digital asset regulations from the IRS.
“The final regs require brokers to report certain sale and exchange transactions that take place beginning in calendar year 2025 and will be reported on the soon-to-be released Form 1099-DA.”
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