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 a U.S. appeals court overturning the SEC’s Private Fund Reforms rule, a lawsuit regarding the SEC’s off-channel communication sweep, a look at what triggers an SEC exam for Broker-Dealers, the impact of the SEC’s Marketing Rule, and FINRA’s work from home ruling.
Here are our top compliance articles as of June 7, 2024:
US Appeals Court Strikes Down SEC Private Equity, Hedge Fund Oversight Rule (Author – Rueters, U.S. News)
A U.S. appeals court nullified an SEC rule aimed at increasing transparency in private funds, favoring the $27 trillion industry. The 5th Circuit Court ruled 3-0 that the SEC overstepped its authority. The rule required fund managers to provide performance reports, audits, and equitable treatment of investors. Critics praised the decision, citing reduced regulatory burdens, while investor advocates decried it as detrimental to ordinary investors and market stability. The SEC is reviewing its next steps.
SEC Hit With Lawsuit Over Texting Sweep (Author – Melanie Waddell, Think Advisor)
The American Securities Association is suing the SEC for not providing documents under FOIA regarding its investigation into broker-dealers’ off-channel communications, like personal text messages. The lawsuit claims the SEC refused to release records, citing law enforcement exemptions without justification. ASA seeks to compel document release and recover legal fees, emphasizing public transparency.
Watch Out, BDs! Here’s What Triggers an SEC Exam (Author – Melanie Waddell, Think Advisor)
The SEC’s new Risk Alert warns broker-dealers that factors like prior disciplinary history, financial stress, and media reports could trigger an exam. The alert helps firms prepare by detailing potential focus areas and documents requested during exams. Selection criteria include past exams, complaints, customer base, and business activities.
SEC marketing rule has ‘fallen short’ of industry expectations (Author – Steve Randall, Investment News)
The SEC’s Marketing Rule, implemented in November 2022, aimed to modernize advertising for investment advisors but has fallen short of expectations. A recent survey revealed that many RIAs faced challenges and saw little practical change. Compliance burdens remain high, and the rule’s anticipated benefits have not materialized. Most advisors haven’t altered their advertising or social media strategies, with performance advertising being particularly challenging. The SEC continues to enforce compliance strictly.
FINRA tells firms there’s no mandatory RTO — but it’s time to register your remote locations (Author – Dan Shaw, Financial Planning)
FINRA’s pandemic-related remote work rules ended, but firms aren’t forced to bring advisors back to the office. Instead, firms must update regulatory filings (Forms U4 and BR) and may resume in-person inspections unless joining a pilot program for remote inspections. FINRA clarified that remote work remains possible, and firms must register home offices. Some large firms are adjusting their policies, while smaller firms adopt hybrid schedules to foster collaboration.
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