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 SEC priorities and rules, DOL rules, and RIA growth.
Here are our top investment adviser compliance articles as of March 8, 2024:
New Marketing Rule, AI in SEC Examiners’ Crosshairs (Author – Melanie Waddell, Think Advisor)
The Securities and Exchange Commission (SEC) is prioritizing examinations on two main fronts this year, as outlined by Natasha Vij Greiner, deputy director of the SEC’s Division of Examinations. The first is the enforcement of the agency’s new Marketing Rule, with a focus on firms’ marketing materials and compliance. Secondly, the SEC is examining investment advisers’ utilization of artificial intelligence (AI), particularly scrutinizing disclosures regarding AI usage. Additionally, preparations for enforcing the Treasury Department’s forthcoming anti-money laundering (AML) rule are underway.
Organic Growth Strategy Can Be the Ultimate Hedge for RIAs (Author – Daniel Gilmartin, Wealth Management)
Amidst the challenges of mergers and acquisitions (M&A) for registered investment advisory firms (RIAs), organic growth emerges as a vital strategy. While M&A presents complexities, organic growth keeps advisors in control, fostering sustainable expansion. Despite the allure of M&A, organic growth demands patience and a strategic focus on client acquisition and brand development. With the wealth transfer from baby boomers, optimizing client acquisition strategies becomes crucial, emphasizing the importance of organic growth for long-term resiliency and autonomy.
FSI Asks Court to Strike Down DOL Independent Contractor Rule (Author – Melanie Waddell, Think Advisor)
The Financial Services Institute (FSI) and coalition partners filed an amended complaint challenging the Labor Department’s 2024 independent contractor rule, seeking its invalidation. The complaint alleges that the new rule is arbitrary, capricious, and violates regulatory acts. FSI highlights concerns about the rule’s ambiguity and potential risks to independent contractor status for its members. Litigation against the rule continues after the Labor Department’s efforts to revise worker classifications.
SEC approves watered-down climate disclosure rule (Author – Michael Cohn, Financial Planning)
The Securities and Exchange Commission approved a new climate-related disclosure rule with a 3-2 vote, requiring companies to divulge climate risks impacting business strategies and financial conditions. However, the rule excludes reporting of Scope 3 emissions and offers exemptions for smaller companies. SEC Chair Gary Gensler emphasized the rules’ aim to enhance the consistency and reliability of disclosures, despite criticisms from some commissioners. Mixed reactions from environmental groups and businesses reflect ongoing debates on the scope and effectiveness of climate reporting regulations.
RIA M&A bounces back to start 2024: Report (Author – Bruce Kelly, Investment News)
Despite a decline in mergers and acquisitions (M&A) activity for registered investment advisors (RIAs) in 2023, 2024 began with a 20% increase in transactions compared to the same period last year, according to DeVoe & Co. The slowdown in 2023 was attributed to high interest rates and global economic concerns, but the appetite for RIA acquisitions remains strong among private equity firms and financial advisers seeking succession plans.
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