No Uncertainty for Regulators


Learn more

These past months have been full of change and uncertainty for registered adviser and broker-dealer firms, and regardless of Presidential Executive Orders and other changes, Daniel Kahl, Chief Counsel, SEC Office of Compliance Inspections and Examinations, stated at a recent NRS conference that he doesn’t foresee any vast undoing of SEC rules. In fact, the activity during the first half of fiscal 2017 has not slowed especially as it relates to broker-dealers. Overall, the SEC filed 231 actions against broker dealers for new matters during the first half of 2017, which was slightly higher than the 225 actions filed during the same period in 2016.

Information developed by Cornerstone Research’s proprietary model for enforcement cases showed a sizable increase in the number of cases against broker-dealers. Specifically, actions against these firms increased 20 percent—comprising 25 percent of total enforcement activity in the first half of 2017 compared to 20 percent during the same period in 2016.

What does this mean? On the face of it, it appears regulatory uncertainty is not having an impact on regulatory examinations and enforcement. In fact, it appears that it is business as usual on the adviser and broker-dealer exam side. Therefore, it should be business as usual for adviser and broker-dealer compliance professionals. Now is not the time to abandon core compliance responsibilities that not only protect the firm, but also protect the firm’s clients and the integrity of the market.

So, what can you do?  CONTINUE. Yes, CONTINUE. Your need for a strong compliance program and your requirements to mitigate business risks are not changing. Uncertainty in the regulatory environment is a given. It’s your job to continue to build and maintain a sound compliance program. Don’t lose focus of the core compliance requirements because SEC and FINRA examiners are focused on those requirements. Outside business activities, advertising, senior investor protection, custody, disclosure of conflicts of interest are all high risk areas that will continue to be examined.

Learn more