Advisers

FYI: Financial Services Industry Cyber Survey Results

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FYI: Results of the 2018 NSCP/ACA Aponix Cyber Survey have been released, showing practices, trends and experiences from over 200 responding firms regarding cybersecurity compliance. Among the areas surveyed were cybersecurity governance, vendor management, technical controls, budgets and breach response. These types of surveys are a great way to get ideas about what firms of all types and sizes are doing to address compliance challenges and to benchmark against others in the industry. Particularly interesting highlights from this survey included: –Regulatory cyber exams have increased among respondents since last year….the SEC by 21%, FINRA by 30% and the NFA by […]

Advisers

FYI: FINRA Launches 529 Plan Share Class Initiative

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FYI: Perhaps taking a page from the SEC’s playbook, FINRA has launched its first-ever self-reporting initiative for member BDs. Under the initiative, BDs are encouraged to review their supervisory systems and procedures governing 529 plan share-class recommendations and self-report to FINRA any supervisory violations found, along with a plan to remediate harmed customers. In response, according to FINRA’s news release, FINRA’s Department of Enforcement will recommend that FINRA accept a settlement that includes restitution for the impact on affected customers and a censure, but no fine. Although FINRA’s initiative is only aimed at share class recommendations made for customers’ 529 […]

Advisers

FYI: FINRA Issues 2019 Examinations Priorities

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FYI: FINRA has issued its 2019 Annual Risk Monitoring and Examination Priorities Letter, outlining areas of emphasis for FINRA’s risk monitoring and examination program for broker-dealers in the coming year. Among the most interesting areas identified were: NEW AREAS OF FOCUS • Online distribution platforms (especially firms/platforms involved in the online distribution of privately placed securities). • Regulatory technology (aiming to understand how firms are using RegTech tools to address risks, challenges or regulatory concerns in areas such as supervision and governance, third-party vendor management, safeguarding customer data and cybersecurity). • Senior investors (specifically looking at heightened supervision imposed by […]

Advisers

FYI: More Share Class Selection Violations Charged

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FYI: Two more advisers settled charges with the SEC over investing client assets in mutual fund share classes that paid 12b-1 fees to the firms’ IARs, when less expensive classes were available. According to the SEC orders, one adviser incorrectly disclosed to clients that its IARs either did not receive 12b-1 fees or only selected the more expensive share classes when less expensive share classes of the same fund were unavailable. The other adviser incorrectly stated that it selected higher-cost share classes for the “long-term benefit” of clients and only where less expensive share classes of the same fund were […]

Advisers

FYI: Robos Charged with Violations

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FYI: Perhaps in an effort to emphasize that robo advisers have to adhere to the same rules as other advisers, the SEC announced settled charges with two robos yesterday, citing various violations under the anti-fraud, advertising and books and records rules. According to the SEC orders, the first case involved violations stemming from: –False disclosures that said the robo’s tax loss harvesting strategy monitored for “wash sales” when it did not, resulting in numerous wash sales occurring over the relevant period. –Retweeting on its Twitter feed positive statements made about the robo by other Twitter users, including in some cases […]

Advisers

FYI: OCIE Issues 2019 Exam Priorities

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FYI: OCIE issued its 2019 exam priorities report, listing the following areas of focus for examinations in 2019: 1. Retail investors, including seniors and those saving for retirement: –fees and expenses: disclosure of the costs of investing –conflicts of interest –senior investors and retirement accounts and products –portfolio management and trading –never-before or not recently-examined investment advisers –mutual funds and exchange traded funds –municipal advisors –broker-dealers entrusted with customer assets –microcap securities 2. Compliance and risk in registrants responsible for critical market infrastructure: –clearing agencies –entities subject to regulation systems compliance and integrity –transfer agents –national securities exchanges 3. Oversight […]

Advisers

FYI: Risk Alert on Electronic Messaging

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FYI: OCIE has issued a Risk Alert on electronic messaging aimed at reminding IAs of their obligations in light of the increased use of various types of messaging for business-related communications. The Risk Alert does NOT address firm email, as firms now have decades of experience with that. Rather, the Risk Alert focuses on electronic messaging occurring OUTSIDE the normal firm email system and which could therefore pose greater compliance risks, such as private email, texting, IMs, personal or private messaging through social media, etc., taking place on any firm or personal devices. From the Risk Alert, it is clear […]

Advisers

FYI: 2019 Compliance Outreach Program for Municipal Advisors

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FYI: The 2019 Compliance Outreach Program for municipal advisors has been scheduled for February 7, 2019, in San Francisco, jointly sponsored by the SEC, FINRA and MSRB. The agenda will include: –Rule G-42 fiduciary duty; –New MSRB rules, including those on advertising and professional qualifications; –Considerations for underwriters and advisors, including roles, registration and supervisory obligations; –Examination and enforcement. While the program is designed for municipal advisors, many of these topics are likely to be of interest to all advisers, and certain brokers as well, covering such issues as standards of conduct, conflicts of interest and advertising. The program will […]

Advisers

FYI: OCIE Risk-Based Exam Initiatives for Investment Companies

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FYI: OCIE has issued a Risk Alert announcing a series of exam initiatives focused on certain mutual funds and ETFs, their advisers and their boards, targeting circumstances in which retail investors could be disadvantaged and reviewing whether registrants have met their regulatory and other legal obligations. Funds in one or more of the following categories will be the focus of the initiatives: — Index funds that track custom-built indexes; — Smaller ETFs and/or ETFs with little secondary market trading volume; — Mutual funds with higher allocations to certain securitized assets (e.g., securitized auto loans, student loans, credit card receivables or […]

Advisers

FYI: Enforcement Based on IA’s Lack of Compliance Resources

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FYI: The CEO of an investment advisory firm settled an enforcement action with the SEC based on the CEO’s role in failing to adequately resource the firm’s compliance program. According to the SEC’s order, the CEO was aware that the firm’s compliance program lacked sufficient resources but failed timely to address this deficiency, which contributed to the firm’s compliance rule violations. Facts indicated that the firm’s CCO informed management on numerous occasions that the firm’s compliance resources were inadequate, but the CEO continuously decided not to add resources. Sanctions imposed against the CEO personally included a censure, cease and desist […]