News & Events – Compliance and Regulatory Alerts

The SEC Office of Compliance, Inspections and Examinations (OCIE) issued a Risk Alert to address compliance and disclosure issues raised in examinations covering the oversight practices of SEC-registered investment advisers “that previously employed, or currently employ, any individual with a history of disciplinary events.” OCIE also proposed a number of ways that firms could address the weaknesses in their compliance frameworks related to supervised individuals with a prior history of disciplinary events.

The formal publication by the Federal Register on July 12, 2019, of Regulation Best Interest triggers final effective and compliance dates for the rulemaking package. 

By a 3-to-1 margin, the SEC voted to approve its long-debated Regulation Best Interest at an open meeting today. Also approved was a new interpretation of the “solely incidental” provision of the Investment Advisers Act of 1940.

In a new Regulatory Notice, FINRA provided guidance on reporting and monitoring suspicious activities under a member firm’s anti-money laundering (“AML”) compliance program.

The SEC's Enforcement Division has now initiated investigations against firms that did not self-report by the deadline of the SEC’s Share Class Selection Disclosure Initiative. Whether you are facing an enforcement or remediation effort, Bates can help.

In June 2018, Bates Group published an article reporting on deficiencies identified by FINRA in its exam findings which may trigger further scrutiny. In that article we noted FINRA’s focus on the Uniform Transfer to Minors Act (UTMA), among other exam topics. That scrutiny has now arrived in the form of FINRA inquiries/investigations into how accounts for UTMA and Uniform Gifts to Minors Act (UGMA) accounts are handled at financial services firms.

FINRA’s 529 Share Class Initiative self-reporting deadlines have been pushed back one month to allow firms additional time to review their supervisory systems, procedures and past transactions to identify sales of 529 plan share classes. The extension also allows firms more time to consider additional information made available by FINRA (FAQs) and to determine whether to self-report.

Firms participating in FINRA’s 529 Plan Share Class Initiative should act now to meet the regulator’s approaching April 1st deadline to self-report violations and submit a plan to remediate harmed clients. Bates looks at four distinct challenges facing firms as they prepare their response.

Bates Research recently conducted a Q & A session with Alex Russell, Managing Director of Securities Litigation & Regulatory Enforcement at Bates, to discuss FINRA's new 529 Share Class Initiative. Alex talks about responding by FINRA's deadline and potential pitfalls firms should avoid when preparing their response.

Last week, Bates sent a time-sensitive Alert concerning FINRA’s new Share Class Initiative -- similar to the SEC’s Share Class Initiative, except that FINRA’s focus is on 529 savings plans.

Bates has deep and proven experience and expertise in share class disclosure matters. To support firms facing FINRA’s 529 Plan disclosure and remediation initiative, Bates has created a plan that provides essential end-to-end steps and solutions to identify and address accounts and clients impacted by share class selection.

For legislators and regulators, writing rules for crypto-related assets requires balancing the tension between innovation and entrepreneurship, and between sound markets and investor protection. Bates Research has previously described some of the definitional challenges which directly affect which agencies govern crypto assets. In this article, we review recent developments in the ongoing debate over regulating crypto, including legislative proposals, and regulatory activity by leadership at the SEC, the CFTC and FINRA.

On the heels of the SEC’s 12b-1 Share Class Initiative, FINRA just announced its own Share Class Initiative. FINRA’s Share Class Initiative sets a deadline of April 1, 2019 for firms to self-report 529 savings plan share class violations and to provide FINRA with a plan to remediate harmed clients.

Bates Group has deep and proven experience and expertise in share class disclosure matters. To support firms facing FINRA’s 529 Plan disclosure and remediation initiative, we have created a plan that provides essential end-to-end steps and solutions to identify and address accounts and clients impacted by share class selection.

At the November 2018 SIFMA C&L New York Regional Seminar, Susan Schroeder, FINRA’s Executive Vice President and Head of Enforcement, discussed some of FINRA’s enforcement priorities heading into 2019. You can expect these to be included when the official list comes out in January. Read the full alert to preview FINRA's 2019 priorities.

Staff members at the SEC Office of Compliance Inspections and Examinations ("OCIE") issued a Risk Alert November 8th informing market participants that they will be conducting a series of examination initiatives on regulatory compliance of mutual funds and exchange-traded funds. The OCIE listed and described the categories of funds and advisers for examination and highlighted certain areas for review.

On October 31st, the SEC Office of Compliance Inspections and Examinations issued a Risk Alert informing investment advisers, investors and other market participants of the most common compliance deficiencies related to the so-called Cash Solicitation Rule (Investment Advisers Act, Rule 206(4)-3).

On October 1, FINRA announced that it will consolidate its Examination and Risk Monitoring Programs under a single structure. When completed in 2019, the move will incorporate business conduct, financial compliance and trading compliance under one unified framework.