Each Friday, we are giving you our weekly 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. This week’s recap focuses on the need for consolidation in the financial services industry, the converging roles of compliance and cybersecurity professionals, updates from the Securities and Exchange Commission (SEC) about recent proposals, fiscal year 2023 and exam priorities for 2024 and responses to those updates.
Here are our top investment adviser compliance articles for the week of November 3, 2023:
Financial services needs compliance aggregators (Author – Nathan Remmes, Wealth Management)
COMPLY’s Chief Growth Officer Nathan Remmes acknowledges that the financial services industry is experiencing breakneck consolidation, and compliance requirements are becoming increasingly complex. This has led to a fragmented compliance industry that is inefficient and costly for many firms. Compliance aggregators offer a solution to this problem by providing a unified approach to compliance technology and services. This can help firms streamline their compliance processes, reduce risk and save money.
Remmes argues that the compliance industry is ripe for consolidation. He believes that compliance aggregators are best suited to meet the needs of financial services firms in the face of increasing regulatory complexity and consolidation.
The tale of two executive roles in cybersecurity compliance (Author – Helen Johnson, Financial Advisor)
COMPLY’s Chief Technology Officer Helen Johnson discusses the convergence of compliance and cybersecurity in the financial services industry. In the article, she argues that, in the past, compliance and cybersecurity were two separate and autonomous roles, but that this is no longer the case. New technologies and regulations have blurred the lines between the two, and financial services firms now face the challenge of creating teams where both departments collaborate to create a coherent, sustainable and supportive system that protects data and complies with regulations.
Trying to halt the SEC (Author – Mark Schoeff, Jr., Investment News)
The SEC is facing pushback on some of its proposed rules, including those on mutual fund reform, advisor custody and predictive data analytics. Industry groups, lawmakers and even some investor advocates are urging the SEC to withdraw or revise these proposals, arguing that they would be too burdensome and costly to implement.
The SEC has said that it is taking note of the concerns that have been raised, but it is unlikely that it will withdraw any of the proposals entirely. The agency is under increasing political pressure to introduce industry reforms, and it is likely to be reluctant to make changes that would weaken the proposals significantly.
SEC steps up enforcement: Actions increase, money obtained falls in fiscal 2023 (Author – Mark Schoeff, Jr., Investment News)
The SEC filed more than 780 enforcement actions in fiscal 2023, 20 more than it filed in fiscal 2022. The total amount of money the agency collected from offenders fell from $6.4 billion in fiscal 2022 to $5 billion in fiscal 2023.
Major findings from fiscal year 2023 so far include:
- More than 780 enforcement actions were filed.
- 20 more enforcement actions than fiscal 2022.
- $5 billion collected from offenders.
- $1.5 billion in penalties ordered for off-channel communications violations.
- 23 firms settled charges related to record-keeping.
SEC Chair Gary Gensler defended the agency’s enforcement actions against critics who accuse it of regulation by enforcement. He said, “Some may call high-impact cases regulation by enforcement. I call it enforcing the laws and the regulations that are on the books.”
The SEC was more active in its enforcement efforts in fiscal 2023, but the total amount of money it collected from offenders fell. The agency is also continuing to focus on off-channel communications by financial firms.
SEC highlights exam priorities for 2024 (Author – Thomas D. Giachetti, ThinkAdvisor)
The SEC has released its 2024 priorities for investment advisors, with a focus on complex, illiquid and unconventional products, conflicts of interest, marketing practices, compensation arrangements, safeguarding controls, disclosure and portfolio management risks.
Some of the focus areas are:
- Processes for determining that investment advice is provided in clients’ best interest will be reviewed.
- Marketing reviews of disseminated advertisements will continue to take place.
- Safeguarding assessments of advisors’ controls to protect clients’ material non-public information.
Overall, the SEC’s 2024 priorities for investment advisors focus on protecting investors and ensuring that advisors are acting in their clients’ best interests.
Don’t forget to check out last week’s top RIA compliance news articles recapping the SEC’s new proposal regarding cybersecurity, the importance of growth for RIA firms and more.