RIA Compliance and Practice Management Blog

Top RIA compliance news articles for the week of Oct. 28, 2022

Posted by RIA in a Box

Nov 4, 2022 2:38:04 PM

RIA marketing rule

Each week, 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 Securities and Exchange Commission (SEC) Marketing Rule, the SEC’s continued enforcement actions, and how firms embrace communication apps and remain in compliance.

Here are our top investment adviser compliance articles for the week of Oct. 28, 2022:

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  1. SEC Expected to Be ‘Heavy-Handed’ With Marketing Rule Enforcement (Author – Melanie Waddell, Think Advisor)

The SEC Marketing Rule is officially in effect, and according to Bill Simpson, compliance principal at Hearsay Systems, firms can expect, “the agency’s handling of marketing rule compliance will likely be reminiscent of the string of fines associated with Form CRS.” While firms have had over two years to comply ahead of today’s deadline, many still remain ill-equipped to comply with the requirements set out in the updated ruling. However, this will not stop the SEC from coming down harshly on those firms, as they clarified in a recent Risk Alert.

  1. Gensler’s Warning to Market Players: SEC’s Crackdown Is Just Getting Started (Author - Lydia Beyoud, Wealth Management)

“Make no mistake: If a company or executive misstates or omits information material to securities investors, whether in an earnings call, on social media, or in a press release, we will pursue them for violating the securities laws.”

Gary Gensler set a clear warning for the financial services industry; the SEC is just getting started. With over 700 enforcement actions equating to $6.4 billion in judgments, advisory firms are on notice. This warning, and the associated impact, is only compounded by the increased regulations put out by the SEC this past year.

  1. What’s Worrying Advisors on the Eve of the SEC Ad Rule? (Author - Patrick Donachie, Wealth Management)

The compliance date for the SEC’s new Marketing Rule is here…and with it? Some concern. According to experts in the field, while most firms have made progress toward complying with the new rule, it may still not be enough. This is especially true for those smaller firms who potentially lack funding and resources for their compliance initiatives.

“Some firms may believe they can wait to make changes as long as they’re not issuing new ads or marketing materials, according to John Gebauer, the chief regulatory officer of ComplySci, which offers compliance software and consulting for financial institutions. But this is a misunderstanding of the rule, for any ads and marketing materials used after the date need to comply.”

  1. Want to Avoid a Fine for Using WhatsApp? Here’s How (Author - Robert Cruz, Wealth Management)

When it comes to the use of communication apps like WhatsApp, RIAs can learn from the recent $1.8 billion SEC fines. This article breaks down how smaller firms can continue to comply with SEC regulations without completely banning the use of such apps, a move which could harm future growth. To avoid potential SEC penalties, firms should:

  • Implement a compliance technology that captures and archives all messages sent through these kinds of apps.
  • Establish clear policies around which apps can be used and who can use them.
  • Trust, but verify with management supervision.
  • Address gaps in your compliance program.
  1. In scramble to comply with SEC marketing rule, advisors wrestle with ambiguities (Author – Dan Shaw, Financial Planning)

Still have questions about the SEC’s Marketing Rule? You aren’t alone. Industry experts have stated that while most firms are prepared for the compliance date (today), there remains a certain level of ambiguity that could leave firms susceptible to certain “compliance questions,” which include model fees.

Despite this concern, which many think will lead to the SEC release of additional guidance on the rule, experts believe the industry is ready for the new rule, with firms putting in a “good faith effort” to comply with the new requirements.

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Don't forget to check out last week's top RIA compliance news articles that focus on the SEC's proposed rule, that would make investment advisers responsible for monitoring third-party service providers, the industry response to the proposed rule, the opportunities and requirements which the SEC’s new marketing rule presents to firms, and investment advisers’ perspective of cryptocurrencies in light of the SEC’s recent enforcement actions.

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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