RIA Compliance and Practice Management Blog

Top RIA compliance news articles for the week of Jan. 6, 2023

Posted by RIA in a Box

Jan 13, 2023 10:15:55 AM

RIA outsourcing rule

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 how firms can meet the Securities and Exchange Commission’s (SEC) electronic books and record-keeping regulation, a new database which tracks and reports adviser misconduct data, the SEC’s policy agenda for 2023, how advisers need to market in the changing financial landscape and the North American Securities Administrators Association’s (NASAA) plans to push lawmakers to act against bad actors.

Here are our top investment adviser compliance articles for the week of Jan. 6, 2022:

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The SEC is increasingly scrutinizing firms’ policies and procedures regarding personal device communications. Those who do not meet the SEC’s requirements have been and will be penalized with hefty enforcement actions.

To ensure you are meeting the SEC’s requirements, firms should do the following:
•    Compliance teams must address the use of personal devices with all employees and independent contractor representatives on a periodic basis.
•    Firms should hold regular compliance meetings with all staff and discuss the use of personal devices at each of these meetings.
•    All employees and independent contractor representatives should sign the corresponding applicable standard acknowledgement form (stating texting is prohibited, with express limited exceptions) upon employment and no less than annually thereafter.
•    If a firm, upon prior written approval, permits texting via use of a firm-provided app installed on the employee’s/representative’s personal device, then a corresponding different acknowledgement form reflecting the same should be used.
•    If a firm, upon prior written approval, permits texting via the use of a firm-provided device, then a corresponding acknowledgement should be used.

A fintech startup, AIMR Analytics, whose founders say they're fed up with billions of dollars in investor losses each year due to financial adviser misconduct, has created their own regulatory database. The database, AdvisorCheck.com, combines SEC and FINRA data to track adviser misconduct data.

Access to the database is free with user registration. By mid-March, AIMR Analytics plans to roll out a paid service with deeper background checks while keeping the free search tools intact.


New regulatory agenda sets April, October deadlines for SEC ESG rules (Author – Mark Schoeff, Jr., Investment News)

The latest federal regulatory agenda released by the Office of Management and Budget outlines that the SEC expects to release final regulations targeting environmental, social and governance (ESG) investing over the next 10 months.

The SEC’s roster of activity encompasses 52 regulations which are either at the proposed or final rulemaking stage. They include closely watched ESG proposals which would impose mandatory climate risk disclosures for public companies, strengthen ESG disclosures for investment funds and investment advisers and reform how investment funds are named to better reflect their strategies.

It's worth noting, while these items and the time frames are not binding, this list provides a sense of the SEC’s rulemaking priorities.


Now more than ever, advisers need a marketing makeover (Author – Gary Foodim, Investment News)

Because the wealth management landscape has changed so dramatically, traditional referral activities aren’t enough to make up for the client churn and asset decumulation as they age, resulting in minimal organic growth. Organic growth, often overlooked, isn’t just an “if you build it, they will come” endeavor. It requires strategy.

Here’s are a few pointers firms can implement in their approach to direct-to-consumer growth:

•    Firms need to refine their message and target audience – are they targeting the right people and are they doing it with a differentiated message?
•    Firms should be open to testing a wide array of digital lead generation sources, like paid search, paid social, connected TV ads, retargeting, nurturing email campaigns and more.
•    Firms need to conduct audience testing with a strong focus on the benefits they bring to their target markets to uncover key messages which will help drive investors to seek them out and take action.
•    Finally, and probably most importantly, firms need to develop an internal sales team which can follow up and convert leads into clients.


NASAA plans 2023 push for bad actors database (Author – Melanie Waddell, Think Advisor)

NASAA recently released a policy agenda, in which the organization shared its plans to press lawmakers in 2023 to mandate that regulators set up a bad actors database to track fraudsters.

The organization says this initiative would complement acts which governmental bodies, like Congress, have already pushed. For instance, this initiative would complement the Stronger Enforcement of Civil Penalties Act, introduced in 2021, which “would update the SEC’s outdated civil penalties statues and raise financial stakes for repeat offenders of our nation’s securities laws.”

Andrew Hartnett, NASAA president and Iowa Insurance Division’s Deputy Administrator for Securities, said the “database would allow investment advisers, brokerage firms, investors, legislators and regulators to have the information they need to guard against people known to have engaged in fraud.”

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Don't forget to check out last week's top RIA compliance news articles recapping the SEC's proposed rule about outsourcing and independent contractors, the various opinions surrounding the proposal, and how investment options can change in light of the U.S. Department of Labor’s (DOL) recently proposed rule concerning environmental, social and governance (ESG).

Topics: RIA Operations, RIA Compliance, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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