What’s the latest news in the world of regulatory compliance? Welcome to our biweekly recap, where we are giving you our 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. Today’s recap focuses on the evolving regulatory industry in 2023, RIA deals in 2024, the biggest cybersecurity breaches over the last year, and a look at Securities and Exchange Commission (SEC) whistleblower payouts.
Here are our top investment adviser compliance articles as of December 29, 2023:
6 Big Rules the SEC Finalized in 2023 (Author – Melanie Waddell, Think Advisor)
In 2023, the Securities and Exchange Commission (SEC) fulfilled its commitment to pass significant rules, with more expected in 2024. The Investment Adviser Association’s CEO, Karen Barr, noted the challenging timeline for rule implementation. Notably, the SEC postponed finalizing controversial rules on custody/safeguarding and predictive data analytics due to complexity. Barr criticized the latter as a “mess” impacting all investment advisors. The SEC aims for a meticulous approach, acknowledging the intricacies. A cybersecurity rule for advisors is anticipated to gain approval in the upcoming year.
2024: The Year of the Creative RIA Deal (Author – Ali Hibbs, Wealth Management)
In 2024, dealmakers in the registered investment advisory (RIA) space are anticipated to adopt more creative transaction structures, driven by market uncertainty, geopolitics, and the looming presidential election. Advisor Growth Strategies predicts greater divergence in firm valuations, with attractive businesses maintaining high prices and less appealing ones experiencing diminishing multiples. The quest for talent, resources, and succession will spur sellers to the market, leading to innovative deal structures. Minority and capital raise strategies are expected to rise, and the pursuit of scale may bring new players into the RIA M&A space. Independent broker/dealers are anticipated to become formidable competitors.
12 Biggest Financial Services Data Breaches of 2023 (Author – Allison Bell, Think Advisor)
In 2023, the 12 largest data breaches in U.S. financial services and related sectors may have impacted over 65 million Americans. The breaches, ranging from 10,000 to 37 million victims, utilized various methods, including hacking, phishing, and credential stuffing. Notable affected entities include national investment firms, banks, insurance providers, and retirement services. To protect against such threats, clients are advised to use strong passwords, change them regularly, monitor financial accounts, and take precautionary measures in light of potential unauthorized access to personal information.
SEC payouts to whistleblowers plummet despite surge in tips (Author – John Holland, Financial Planning)
In fiscal year 2023, the SEC saw a significant increase in tips, receiving over 18,000, a 50% surge from the previous year. However, the number of whistleblowers receiving awards dropped, with only 68 individuals compensated, down from over 100 in each of the preceding two years. The surge in large payouts, including a record $279 million to a single informant, may strain the SEC’s resources. Critics argue that additional resources are needed to handle the program’s success effectively, addressing delays, appeals challenges, and limited information sharing.
2023 was another big year for regulation. Here are 7 reasons why (Author – Dan Shaw, Financial Planning)
In 2023, major U.S. watchdog agencies, including the SEC and FINRA, introduced numerous regulations affecting the financial industry. Proposed rules covered areas such as cybersecurity, the use of artificial intelligence, and remote work. The Investment Adviser Association criticized the regulatory surge, warning of potential redundancies and conflicting obligations. Significant changes included the SEC’s cybersecurity rule for reporting breaches and proposals addressing AI usage in financial planning. Legal victories, like Massachusetts imposing a fiduciary rule on Robinhood, and FINRA’s adjustments to expungement processes also shaped the regulatory landscape.
Check out our previous round up, which focused on updates to Form CRS FAQs, a deeper looking into the DOL’s proposed rule, COMPLY’s recent Digital Asset Trade Monitoring launch, and how panelists think the SEC should address AI conflicts.