What’s the latest news in the world of regulatory compliance? Welcome to our biweekly recap, where we give 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 regulatory compliance, industry news, and critical updates. Today’s recap focuses on SEC Marketing Rule enforcement, a new SEC Risk Alert, adopted amendments for Robo-Advisors, an update on the proposed DOL rule, and the SEC’s view on AI.
Here are our top compliance articles as of March 29, 2024:
Reining in regulation by enforcement (Author – Dale Brown, Investment News)
The Financial Services Institute (FSI) is calling for an end to”Regulation by enforcement,” which they say bypasses formal rulemaking, leading to unjust penalties and eroding public trust. FSI calls for consistent rules and proposes procedural frameworks to prevent unfair enforcement practices, promoting investor protection and a healthier regulatory environment. Dale Brown, FSI’s president and CEO, advocates for these reforms.
New SEC Risk Alert Warns of T+1 Transition (Author – Melanie Waddell, Think Advisor)
The Securities and Exchange Commission issued a risk alert regarding the transition to T+1 settlement cycle, effective May 28, reducing the cycle from two business days to one. This transition coincides with new rules for institutional trade processing and recordkeeping amendments for RIAs. The alert emphasizes the need for market participants to prepare for the change, as it will require adjustments to business practices, systems, and compliance efforts. The SEC’s Division of Examinations will monitor registrants’ readiness and compliance with the new rules.
SEC Updates Rules for Robo-Advisors (Author – Melanie Waddell, Think Advisor)
The SEC approved amendments to its rule governing advisers operating solely through the internet. SEC Chairman Gary Gensler stated that the changes aim to modernize the 22-year-old rule, enhancing investor protection in the digital era. The amendments mandate internet advisers to maintain an operational interactive website for ongoing digital advisory services to multiple clients.
Beware, boasters: SEC challenges firms’ extravagant AI claims (Author – Dan Shaw, Financial Planning)
The SEC is scrutinizing financial firms’ exaggerated claims about AI capabilities, cautioning against misleading marketing. Many firms boast of AI-driven services, promising superior investment strategies. However, the SEC warns against overstating AI’s role, highlighting instances where these claims may mislead investors. Regulators emphasize the importance of transparency and accuracy in marketing materials to ensure investors make informed decisions. This increased scrutiny aims to protect investors from potential misinformation and exaggerated promises in the financial industry.
DOL retirement advice proposal advances; poll suggests support (Author – Tobias Salinger, Financial Planning)
The Department of Labor’s (DOL) proposal to redefine the term “fiduciary” for retirement advisors has progressed to the Office of Management and Budget (OMB) for review. The proposal aims to amend fiduciary regulations, potentially impacting financial advisors and brokers providing retirement advice. Once reviewed by the OMB, the proposal may undergo revisions before being published for public comment. This advancement signifies a step forward in the DOL’s efforts to redefine fiduciary standards in the retirement advisory space.
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