NRS Insights Blog

Learn more about what to expect from SEC exams in 2023 and how your firm can prepare for an examination.

Here are the top compliance news stories as of Mar. 7.

Establishing a Code of Ethics isn’t something that’s just nice to do, it’s required by federal and state regulators. In fact, the SEC continues to crack down on firms that forego their fiduciary duty to clients, and the penalties can be severe. If your firm hasn’t nailed down the requirements to comply with the SEC Code of Ethics mandates, here’s an overview of how to get started.

On Feb. 15, 2023, the Securities and Exchange Commission (SEC) published for comment amendments to the custody rule and related recordkeeping and Form ADV changes. The proposal would redesignate current custody rule 206(4)-2 as new rule 223-1 under the Advisers Act to be called the Safeguarding Client Assets Rule. 

Find out how your investment firm can manage its MNPI risk and avoid a compliance violation like the ones brought by the SEC over the past few years.

The Securities and Exchange Commission (SEC) has made it no secret, cybersecurity is a top priority…and will likely remain so for the foreseeable future. And rightly so. The threat and impact of a cybersecurity breach has never been higher, with new and more sophisticated methodologies, cyberattacks can result in a significant loss to both a firm and its clients. In order to comply with SEC cybersecurity requirements, financial advisory firms must incorporate effective cybersecurity regulatory compliance initiatives into their overarching regulatory compliance program.

On Feb. 7, 2023, the Securities and Exchange Commission’s (SEC) Division of Examinations issued its 2023 examination priorities, which included, among other items, compliance with the new Marketing Rule, fiduciary obligation, Form CRS delivery, ESG investing and operational resiliency plans. One key area of note? A focus on private fund advisers or private fund RIAs. According to the SEC, “RIAs to private funds represent a significant portion of the RIA population. Currently, more than 5,500 RIAs, totaling over 35% of all RIAs, manage approximately 50,000 private funds with gross assets exceeding $21 trillion. Private fund assets continue to grow. In the past five years, there has been an 80% increase in the gross assets of private funds, with retirement plans steadily contributing to this growth. These assets are deployed through a variety of investment strategies used by hedge funds, private equity funds, and real estate-related funds, among others.”

On Nov. 2, 2022, a cryptocurrency exchange collapsed. Since then, regulators have been more vocal about plans to implement additional regulations on cryptocurrencies. 2023 will be a year of change, and your investment firm will be expected to keep up. Here’s how your investment firm can adjust its compliance program to meet the expectations of clients and regulators.

Year after year, the Financial Industry Regulatory Authority (FINRA) releases its annual exam report, highlighting critical areas of risk to investors and the markets, providing insight into findings from recent examinations of FINRA registered firms. On Jan. 10, 2023, this year’s FINRA Exam Report was released and included a total of 24 topic areas, four of which, were new this year.

At a brokerage firm, details falling through the cracks can be detrimental to clients, investors and the firm’s reputation. Therefore, your brokerage firm cannot afford to let that happen. An outside compliance consultant can enhance your firm’s compliance program in several ways, like mitigating risk of noncompliance. Here are some indicators that it’s time for your firm to bring in an outside compliance consultant and a few ways that an outside compliance consultant can enhance your firm’s compliance program.