What: The Division of Examinations issued a Risk Alert with preliminary observations about Marketing Rule items contained in Form ADV as well as related discussions concerning the Compliance Rule (206(4)-7), the Books and Records Rule (204-2), and the Marketing Rule’s General Prohibitions. Who: SEC-Registered Investment Advisers (The Marketing Rule applies to investment advisers registered or required to be registered with the SEC under Section 203 of the Advisers Act.) When: Risk Alert issued April 17, 2024. Why: Marketing practice assessments were designated as a particular focus area in th ..read more

Last week the SEC announced that it had settled charges against five more registered investment advisers for Marketing Rule violations, resulting in $200,000 in combined penalties (with one firm making up half the total on its own). This latest round of cases resulted from an ongoing targeted sweep concerning the Marketing Rule, and it follows another group of cases from September 2023 against nine other advisory firms. In the present actions, the SEC’s orders found that the five firms advertised hypothetical performance to the general public on their websites without adopting and implementin ..read more

As the regulatory landscape is constantly evolving, Compliance Risk Concepts (“CRC”) is issuing its monthly review and summary of various FINRA, SEC, NFA, and FinCEN publications to assist our clients in keeping abreast of notable regulatory developments and deadlines in an effort to strengthen their compliance and regulatory initiatives. FINRA Regulatory Notices Per Regulatory Notice 24-06, FINRA has adopted amendments to disseminate individual transactions in active U.S. Treasury securities at the end of the day and historically, and to set related fees for members and other professionals w ..read more

What: The SEC announced that it settled charges against two investment advisers for making false and misleading statements about their purported use of artificial intelligence (AI). The firms agreed to settle the SEC’s charges and pay $400,000 in total civil penalties. Who: Delphia (USA) Inc. and Global Predictions Inc. When: March 18, 2024 Why: The SEC’s concerns stem from firms selling AI solutions that they cannot deliver on or where the use or benefits of AI are overstated as part of an investment advisory service. Gary Gensler notes “[w]e’ve seen time and again that when new technologies ..read more

As detailed more fully in Regulatory Notice 23-19, FINRA has adopted a short-form membership application process for certain firms that must become FINRA members due to the recent amendments to Rule 15b9-1 of the Securities Exchange Act of 1934. The amendments to Rule 15b9-1 eliminated the de minimis allowance and proprietary trading exclusion. Rescinding these provisions generally eliminated (subject to the exemptions in the amended rule) the ability for proprietary trading dealer firms to rely on Rule 15b9-1 to effect off-member-exchange securities transactions without joining FINRA. This s ..read more

As the regulatory landscape is constantly evolving, Compliance Risk Concepts (“CRC”) is issuing its monthly review and summary of various FINRA, SEC, NFA, and FinCEN publications to assist our clients in keeping abreast of notable regulatory developments and deadlines in an effort to strengthen their compliance and regulatory initiatives. FINRA Regulatory Notices Per Regulatory Notice 24-01, FINRA’s Renewal Program supports the collection and disbursement of fees related to the renewal of broker-dealer (BD) and investment adviser (IA) registrations, exempt reporting and notice filings with pa ..read more

What: The proposed rule would require some investment advisers to apply certain anti-money-laundering and countering the financing of terrorism (AML/CFT) requirements pursuant to the Bank Secrecy Act (BSA). Who: SEC-registered investment advisers and investment advisers that report to the SEC as exempt reporting advisers (ERAs) would be included in the definition of “financial institution” under the BSA. When: Proposed rule announced on February 13, 2024 (Federal Register publish date expected February 15, 2024). The comment period for the proposed rule is open until April 15, 2024. Why: A ris ..read more

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NEW YORK--(BUSINESS WIRE)--Compliance Risk Concepts (“CRC”), through its parent company, Re-Sourcing Group, has received a significant investment from MidOcean Partners to advance its position as a valued compliance partner to the financial services industry. This investment will support the continued growth of CRC’s unique brand of business-focused compliance and risk management advisory services. The compliance and risk management industry has evolved in recent years, amid new regulations, rule modifications and heightened government oversight. These changes come amid consolidatio ..read more

Today FINRA issued its latest iterative report on its examination and risk monitoring program. This article focuses on the new topics and material introduced this year, specifically selected examination findings. It also covers topics that FINRA noted in the report as “Emerging Risks,” which represent potentially concerning practices that may pose new or additional risk. Lastly, several targeted exam or sweep updates are referenced from the report. New Topics for 2024 – Selected Examination, Surveillance, Investigation, or Enforcement Findings Crypto Asset Developments Failing to appropriat ..read more