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 Reg BI, the role of AI, the DOL Fiduciary Rule, FINRA fines, and how firms are responding to SEC enforcement regarding the use of messaging apps.
Here are our top investment adviser compliance articles as of March 15, 2024:
No Changes Coming to Reg BI: SEC Chief (Author – Melanie Waddell, Think Advisor)
SEC Chair Gensler stated no further changes to Regulation Best Interest planned, instead emphasizing examination and enforcement against conflicts.
‘“We live in a world now where we’re inundated with behavioral prompts and nudges to do things, and ensuring that investment advisors and broker-dealers continue to put investors first and put their interests behind the investors’ and that those behavorial prompts as well as recommendations and advice don’t shift that,” he explained.”
Morgan Stanley gives AI even bigger role with new appointment (Author – Dan Shaw, Financial Planning)
Morgan Stanley appoints Jeff McMillan as head of firmwide artificial intelligence, advancing its AI initiatives in wealth management. McMillan, overseeing analytics and innovation previously, aims to integrate AI for advisers’ benefit, optimizing tasks and client interactions. The firm emphasizes the potential for AI to streamline operations, enhance compliance, and improve client services.
“Hovig Melkonian, the senior director of compliance at the technology and regulatory consultant COMPLY, said many of the uses of AI he has seen so far are along the lines of what Morgan Stanley is doing. When it comes to compliance, he said, many firms are taking required regulatory reports that their advisors turn in periodically to a central office and feeding them into AI. The system is then used to detect any anomalies or transactions that perhaps require additional scrutiny.”
Hedge funds, PE firms discussing ways to deal with SEC messaging crackdown (Author – Bloomberg News, Investment News
Hedge funds and private equity firms are strategizing responses to the SEC’s crackdown on messaging. The agency’s heightened scrutiny aims to curb misleading or deceptive statements in investor communications. Discussions among industry players include adopting clearer communication practices and enhancing compliance efforts to navigate regulatory expectations effectively. Amidst regulatory pressure, firms seek to uphold transparency and integrity in their communications while exploring ways to mitigate potential enforcement risks.
FINRA’s Top 5 Fine Categories in 2023 (Author – Melanie Waddell, Think Advisor)
In 2023, FINRA fines surged to $89 million from $54.5 million in 2022, with notable increases in “supersized” and “mega” fines. Restitution orders dropped significantly to $7 million from $21 million in 2022. Despite a decline in restitution, total monetary sanctions rose to $101 million. The number of disciplinary actions decreased by 9%, with 453 reported cases.
Fine categories included:
- Suitability
- Reg BI
- Anit-Money Laundering
- Trade Reporting
- Spoofing
Expect a stronger, more lawsuit-proof fiduciary rule very soon (Author – Emile Hallez, Investment News)
A more robust and “lawsuit-proof” fiduciary rule is anticipated to be introduced imminently. The updated regulation aims to establish stringent standards for financial advisors, ensuring they prioritize clients’ best interests. It is expected to address shortcomings of previous versions, emphasizing clarity and effectiveness in protecting investors. This forthcoming rule signals a renewed commitment to fiduciary duty enforcement, potentially reshaping the financial advisory landscape with heightened accountability and stricter compliance requirements.
Have questions? Schedule time to speak with an expert today!