The five key areas that the Division will be examining in 2025 are:
- fiduciary duty
- standards of conduct
- cybersecurity
- artificial intelligence.
You can find the full report here.
Category Archives: Enforcement
Celebrating the SEC at 90!
Good people, important problems and workable laws – celebrating the SEC at 90!
On July 17, PLI hosted The SEC at 90: A Celebration and Retrospective in our New York Conference Center. The program, chaired by longtime Securities faculty Clifford Kirsch, featured SEC Commissioner Hester Peirce, author Diana Henriques (Taming the Street and The Wizard of Lies), former SEC Commissioners Robert J. Jackson, Jr. and Troy Paredes, and other expert panelists. Speakers discussed the SEC’s formation, challenges it faces, opportunities in the next 90 years and beyond, and where SEC practice has been, is, and will be.
New SEC Cybersecurity Incident rules for RIAs
The SEC has just finalized rules requiring RIAs to adopt new measures for responding to cybersecurity incidents and notifying clients of such incidents.
RIAs and broker-dealers , among others, will now be required to develop, implement, and maintain written policies and procedures for an incident response program reasonably designed to detect, respond to, and recover from unauthorized access to or use of customer information.
The policies and procedures must address assessment of the situation, containment of the situation, and notification of affected clients.
Large advisers (i.e., those with at least $1.5 billion in assets under management) would need to comply with the new rules within 18 months of the publication of the final rules in the Federal Register while smaller advisers would need to comply within 24 months of such publication date.
Read more here.
What’s the marketing piece that creates the most compliance risk for RIAs?
In my opinion, it’s the website.
With the SEC’s scrutiny of Marketing Rule compliance, I believe the SEC is closely scrutinizing Forms ADV filed by RIAs, and to the extent that RIAs indicate they are referencing testimonials, endorsements, third-party ratings, predecessor performance, hypothetical performance, or specific investment recommendations in their marketing materials, this gives the SEC an impetus to review the adviser’s marketing materials.
The marketing piece most easily accessible to the SEC is the RIA’s website, the address to which is also listed on the Form ADV.
Read more here.
Unfinished Business: IAs Are Potentially Back on the Hook for AML and Counterterrorism Reporting Requirements
In its latest attempt, the U.S. Department of Treasury, Financial Crimes Enforcement Network (“FinCEN”), will require certain investment advisers to implement compliance measures to detect and report suspected money laundering and the financing of terrorism. The newly proposed rule brings investment advisers under the purview of the Bank Secrecy Act (“BSA”), which requires financial institutions to implement risk-based anti-money-laundering and counterterrorism programs to protect the national security of the United States and aid law enforcement in the fight against money laundering. If the proposed rule is finalized, FinCEN could require investment advisers to collect records, such as those related to fund transfers, and file suspicious activity reports with FinCEN. The proposed rule would also allow information sharing between FinCEN and the SEC, who will be delegated with examination authority over investment advisers for compliance with the new rule.
Read more here.