News & Events – Compliance and Regulatory Alerts

On March 27, 2023, the SEC Division of Examinations issued a Risk Alert focused on compliance deficiencies found in examinations of newly registered advisers. The Division said these advisers may face unique risks, particularly as to conflicts of interest, and cautioned them to review their policies and procedures, disclosures, and marketing practices. The Division also explained—perhaps as guidance for these new registrants—that their examinations were “an opportunity for early engagement between advisers and the staff.” Bates has a brief summary of this new Alert and what it could mean for your firm and clients.

FINRA proposed amendments to the Codes of Arbitration Procedures for Customer Disputes and Industry Disputes that would affect the arbitrator list selection process. The proposed amendments would also make clarifying changes on administrative practices. 

The Securities and Exchange Commission’s Division of Examinations has just released its 2023 examination priorities report, providing insights into its risk-based approach, including the areas it believes present potential risks to investors and the integrity of the U.S. capital markets. Stay tuned for our annual commentary and chart, coming soon, on the SEC's 2023 priorities and how they may impact your legal, regulatory and compliance matters.

Businesses that are interested in engaging in virtual currency activities in Louisiana must now take steps to file for a license from the state. Read our new alert for details and a link to the new license application checklist.

FINRA has announced the publication of the 2023 Report on FINRA's Examination and Risk Monitoring Program. The comprehensive report from FINRA’s regulatory operations covers 24 topics relevant to the evolving securities industry. Additionally, the report introduces a new Financial Crimes section highlighting FINRA’s increased focus on protecting investors and safeguarding market integrity against these ongoing threats. Stay tuned for our annual commentary, coming soon, on FINRA’s 2023 objectives and how they may impact your legal, regulatory and compliance matters.

The SEC Divison of Examinations and Office of Investor Education and Advocacy have both issued recent alerts about protecting investors from identity theft. The first alert was issued because recent firm examinations revealed practices “inconsistent” with Regulation S-ID (Identity Theft Red Flag Rules). Here is an overview of both recent alerts.

FINRA has remained focused on ensuring that eligible customers received Rights of Reinstatement (“ROR”) benefits where appropriate. Just recently, we were retained by another large firm looking to leverage the depth of our experience gained through many engagements assisting our clients with Rights of Reinstatement issues since the targeted examination announcement in 2020. Contact Bates today if you are facing a FINRA inquiry or other action or need to update your policies and procedures.

Under a proposed new rule, the SEC would require investment advisers to conduct due diligence and monitor “covered services” outsourced to third-party providers. The Commission said it recognizes that investment advisers are increasingly relying on outsourced sources to perform many functions in support of advisory services and, as a result, “more needs to be done to protect investors.” Bates breaks down what you need to know.

In a new Risk Alert issued by the Division of Examinations, the SEC reminded investment advisers to review their written policies and procedures on the new marketing rule before the November 4, 2022 compliance deadline. 

The SEC last week issued a proposal to require “registered investment advisers, certain advisers exempt from registration, registered investment companies, and business development companies” to disclose information on environmental, social and governance (“ESG”) investment practices and strategies in fund registration statements, prospectuses, annual reports, and adviser brochures. The 362-page proposal contains new disclosure requirements and would amend numerous Forms for funds and advisers.

On April 26, 2022, the SEC Division of Examinations urged investment advisers to revisit their compliance policies, practices, and procedures concerning the misuse of non-public information (MNPI). In the Risk Alert, the SEC (i) reviewed the applicable Investment Adviser Act rules and ethical code considerations and (ii) described compliance deficiencies observed by the Division during its recent examinations.

In a broad new rule proposal, the Securities and Exchange Commission would require both domestic and foreign registrants to provide climate-related information in their filings and periodic reports. The deadline for comments is May 20, 2022. Read the full alert for details.

In a reminder to (i) firm management on their supervisory obligations under FINRA Rules, and (ii) Chief Compliance Officers on their potential liability within a firm’s supervisory system, FINRA distinguished between the two in a recent Notice and detailed how it would make liability determinations on an enforcement action against a CCO for a failure to reasonably supervise. Read our Alert for details on FINRA's new guidance on CCO supervisory liability and what it could mean for your firm and clients.

The SEC Division of Examinations has just released its 2022 examination priorities report, focusing on Private Funds, ESG Investing, Standards of Conduct (including Regulation Best Interest, Fiduciary Duty, and Form CRS), Information Security and Operational Resiliency, and Emerging Technologies and Crypto-Assets. Stay tuned for our annual commentary, coming soon.

FINRA has proposed amendments to the Code of Arbitration Procedure to accelerate certain case processing deadlines for seriously ill or elderly parties. Under the proposed rule, parties to the proceeding must request the expedited deadlines.

In a press release touting twelve additional enforcement actions against firms for failing to provide complete information on, file, or deliver Form CRS to retail investors, the SEC announced settlements against six investment advisers and six broker-dealers. That message underscores the agency’s intention to hold firms accountable for making these disclosures. Read our Alert for details on the SEC's findings, the settlements, and what they could mean for your firm and clients.