New SEC Marketing Rule FAQ Tackles Fees, Testimonials

SEC Zeroes On RIA Paid Testimonials And Performance Fees As Exams Intensify

Lori Weston, shares her insights in a recent Financial Advisor Magazine article on the SEC’s renewed focus on marketing rule compliance.

Compliance experts urge vigilance despite SEC rules pullback

While the Securities and Exchange Commission (SEC) has decided to withdraw several rule proposals that would have applied to RIAs, compliance experts said advisors and executives shouldn’t take their eye off the ball as the regulatory agency is expected to continue evaluating the underlying issues in examinations.

The SEC under the Biden administration issued rule proposals that sought to govern advisors’ use of third-party vendors and artificial intelligence (AI), as well as their cybersecurity and asset custody practices, only to have those proposals scrapped earlier this month by the Commission. The agency is now chaired by president Donald Trump’s nominee, Paul Atkins.

In its own guidance, compliance consultancy STP Investment Services urged RIAs to monitor developments with the Treasury’s Financial Crimes Enforcement Network (FinCEN) which promulgated the rule. STP further encouraged RIAs to implement cybersecurity programs that document risks and adequately train employees. Diligence on third-party service providers also remains critical.

‘For firms that have already invested time and resources to implement aspects of the withdrawn rules, those efforts are not in vain as many of these frameworks include components that are recommended as best practices,’ said Cynthia Kelly, managing director of compliance at STP. ‘This is an ideal time to reaffirm cybersecurity protocols, vendor oversight processes and governance controls.’

Read what Cynthia and other subject matter experts had to say in Citywire RIA here.

SEC Fines PE Shop for Overcharging Clients

The Securities and Exchange Commission reached a settlement agreement with TZP Management Associates over allegations that the firm had charged its private fund clients more than $500,000 in excess management fees.

SEC to Reconsider Closed-End Fund Retail Restrictions

Securities and Exchange Commission Chair Paul Atkins said Monday he is directing the agency to reconsider two decade-old rules that prohibit retail investors from tapping into closed-end funds, such as interval funds and business development companies.

Atkins said the SEC will reexamine a 23-year-old practice in which closed-end funds that allocate 15% or more to alternatives require $25,000 initial investment minimums and are open only to accredited investors.