News & Events – Compliance and Regulatory Alerts

The Securities and Exchange Commission announced in a statement yeterday that “21 investment advisers and 6 broker-dealers have agreed to settle charges that they failed to timely file and deliver their client or customer relationship summaries – known as Form CRS – to their retail investors."

The Financial Crimes Enforcement Network (FinCEN) today issued the first government-wide priorities for anti-money laundering and countering the financing of terrorism (AML/CFT) policy.

The Securities and Exchange Commission today announced that Gurbir S. Grewal has been appointed Director of the Division of Enforcement, effective July 26, 2021.

On April 9, 2021, FINRA issued guidance reminding members of their obligations on customer options accounts. The new alert flows from a reported increase in the opening of self-directed brokerage accounts and a broader risk of whether broker dealers and investment advisers are collecting information and performing adequate due diligence to ensure that options trading is appropriate for their customers. Additionally FINRA highlights compliance obligations on supervision, anti-money laundering and margin for customers seeking to trade options. In this Alert, Bates takes a look at the recently published guidance and what you need to know to stay in compliance.

The SEC’s new marketing and advertising rule will impose considerable oversight, recordkeeping and disclosure requirements affecting “100 percent” of investment advisers when it goes into effect May 4, 2021. The SEC Division of Investment Management staff have made clear that until an adviser chooses to comply fully with the new rule, they must continue to comply with the previous advertising and cash solicitation rules and related staff positions on them. In this Alert, Bates Compliance takes a look at the recently published FAQ on the new marketing and advertising rule and what you need to know to successfully comply with it.

The SEC Division of Examinations announced its 2021 examination priorities today, focusing on climate-related risks, conflicts of interest for brokers (Regulation Best Interest) and investment advisers (fiduciary duty), and attendant risks relating to FinTech in its initiatives and examinations. Stay tuned for our annual commentary, coming soon.

In May 2019, Bates Compliance published a review of the supervision, inspection and operational considerations for broker-dealer branch office compliance. Since then, FINRA has broadened its examination priorities, while the COVID-19 pandemic has heightened compliance risks. This updated white paper discusses the responsibilities placed on the supervisors of broker-dealer branches in light of FINRA's broadened priorities and recently updated guidance on remote supervision.

FINRA has announced the publication of the 2021 Report on FINRA's Examination and Risk Monitoring Program. The new Report combines and replaces two previously published annual reports, the Report on Examination Findings and Observations and the Risk Monitoring and Examination Program Priorities Letter.

Just prior to the new year, the SEC finalized significant changes to rules and forms governing advertising and cash solicitations under the Investment Advisers Act, replacing both the prior Advertising Rule and Cash Solicitation Rule with a single, broad, “modernized” marketing rule. The new rule also amends investment adviser registration Form ADV and the books and records rule to reflect the related changes. In this article, we detail key provisions of the new rule and how Bates will help your firm navigate and implement this significant rule change.

On December 15, 2020, the Department of Labor finalized long-considered regulations on investment advice for retirement accounts under ERISA and the Internal Revenue Code. What does this mean for your firm?

FINRA is conducting a targeted review of brokerage firms' systems and procedures for providing customers waivers and rebates available through Rights of Reinstatement (RoR) on mutual fund purchases. As part of this review, FINRA will request each firm that receives this information request respond to certain questions with respect to the period of January 1, 2017 through June 30, 2020.

On November 18, 2020, the SEC made effective FINRA’s proposed temporary rule amendment allowing remote inspections through December 31, 2021. The SEC regulatory action adopts temporary relief (Supplementary Material .17) under FINRA Rule 3110 (Supervision) by providing member firms the option to remotely complete inspection obligations for Calendar Years 2020 and 2021. FINRA stated that the change was a response to the operational challenges presented by the COVID-19 pandemic.

Today, October 26, 2020, the SEC and FINRA staff will hold a remote public roundtable to discuss their observations on the implementation of Regulation Best Interest (“Reg BI”) and Customer Relationship Summary disclosure form (“Form CRS”) since mandatory compliance began on June 30, 2020. Following the program, on Wednesday, October 28, 2020 at 2 pm ET / 11 am PT, Bates Compliance will hold its own webinar with Global Relay to discuss “Reg BI - 120 Days On.”

FINRA Enforcement has recently initiated enforcement actions concerning mutual funds and brokers of record centering around client impact, remediation, and other issues. Read the full Alert to learn more about FINRA Enforcement's focus on "brokers of record," and other products on the regulator’s radar.

On September 15, 2020, the Office of Compliance Inspections and Examinations (“OCIE”) issued an alert urging investment advisers and broker-dealers to review their customer account protection safeguards and identity theft prevention programs. The impetus behind the alert is an increase in the number of cyber-attacks using a tactic called “credential stuffing,” observed during recent examinations. OCIE also disclosed a number of practices firms are using to mitigate this emergent risk.

Labor Day is almost here, which means those lazy, remote days of summer are coming to a close. What did you miss when you powered down this summer? We have a roundup of all the important Bates news, events and alerts from July and August as well as a sneak peek of the next few months to help you head into Fall fully prepared.