Regulatory Compliance E-newsletter – May 2017

Feature of the Month

NRS Spring 2017 Compliance Conference Highlights

In a period of widespread speculation and uncertainty regarding the future of the US regulatory landscape, attendees at the NRS Spring Conference in Nashville, TN were afforded a moment of lucidity from Daniel Kahl, SEC Chief Counsel, Office of Compliance Inspection and Examinations (“OCIE”). Speaking on the Regulatory Perspectives panel of the conference, held on May 1st. Mr. Kahl expressed his staid expectation that, under a Trump administration, we will see “business as usual” at OCIE. As such, advisers were assured that their time is well-spent in continuing efforts to test and maintain their compliance programs in preparation for examination rather than guessing at any future shift in regulatory focus.  Advisers were reminded of the importance of disclosures being clear, understandable, and reflective of firm activities.  They were cautioned about the use of “may” as an effective conflict of interest disclosure to clients.  In an acknowledgment of the SEC’s access to “big data” during examinations and its relationship to smaller firms, advisers were reassured that administering reasonably designed compliance programs, supported by risk assessments and adequate testing, is the best way to prepare. 

Despite uncertainty in the adoption of proposed AML and BCP rules, conference attendees were reminded that focusing on core SEC priorities such as custody, protection of retail clients, protection of senior clients and appropriateness of selected investment instruments will persist.

Day one included topics such as the latest regulatory developments in cybersecurity, assessing branch office conflicts, and the regulatory share class initiative.  It wrapped up with peer sharing cybersecurity break-out sessions, and a compliance professional summit on “big data.”

Day two of the conference began with a keynote from M. Owen Donley, III, SEC Chief Counsel, Office of Investor Education and Advocacy, who provided insight into the SEC’s interest in the use of social media and the opportunity advisers have in using it for educational purposes.  Advisers also attended sessions on the current status of the DOL rule, insider trading developments and regulatory examinations.  Both conference and online attendees participated in a lively ethics session using various scenario-based training examples to demonstrate the importance of ethical decision-making in the administration of a firm’s Code of Ethics program.   The second day ended with attendees to the New Issues and Requirements Facing Wrap Fee Sponsors and Participants session receiving the following counsel from Mederic Daigneault, Director, Consulting Operations, NRS: “In light of recent enforcement cases and OCIE’s continuing examination priorities spotlighting wrap fee program sponsors and sub-advisers, any adviser that provides portfolio management services to both wrap and non-wrap fee program client accounts should carefully consider a bifurcated approach to its brokerage practices.  The SEC’s best execution standard obliges an adviser to seek the most favorable execution for the client under the circumstances of the trade.  Clearly, circumstances are not the same when deciding to step out a trade for a wrap fee program client versus a non-wrap fee program client.”

The final day of the conference began with an opening address, The World According to Trump. Attendees were provided with insight by David Tittsworth, Counsel, Ropes and Gray LLP, on the new administration, the status of changes and priorities at the SEC, as well as some general observations regarding the regulatory road ahead.  Prior to the conference wrap, attendees took time to address other regulatory hot topics such as robo-advisers, social media, conflicts of interests, disclosures, and due diligence.

The conference began and ended with a set of critical skills sessions.  The first focused on Managing Your Resources in Unsettled Times where speakers and participants openly discussed challenges and the importance of “soft skills.”  Session attendees heard state regulator Joseph Borg (NASAA President-Elect) share how Alabama encourages relationship building outside of the examination process as a way to learn from one another.  The second critical skills session Redefining Compliance during Uncertain Times – Procedural Development, Compliance Training and Testing provided an interactive opportunity to discuss best practices by working through a hypothetical regulatory rule.   The session’s practical application was a fitting conference end by helping attendees manage compliance in an uncertain regulatory environment.  

For more face-to-face discussions on the latest issues the compliance industry grapples with today, join NRS at our Fall 2017 Compliance Conference being held at the Four Seasons Hotel, Las Vegas, Nevada on October 23 – 26.

Take a step to stay ahead of compliance expectations and register today for the NRS Fall 2017 Compliance Conference. 

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NRS Releases ComplianceMAX OBA Improvements

On May 21st, NRS will release a significant improvement to the ComplianceMAX Outside Business Activities (OBA) product that will enable broker-dealers to manage OBA disclosures more efficiency and monitor data more accurately.  The release will deliver several new benefits, highlighted below.

  • Greater Control and Efficiency – manage, track and report on individual OBA’s, AND automate FINRA U4 amendment filings to Web CRD.
  • Quick Identification of Issues – data discrepancies between FINRA and NRS, if found, are sent daily to NRS Customer Support and Client Administrators.  Also, if there are any issues encountered when creating the consolidated OBA text block, an alert is immediately sent so corrective action can be taken.
  • Preventative measures and checks and balances to ensure that the right information is sent to FINRA.  A new feature enables you to preview the data before filing, and in the case of data discrepancies, compare the before and after, prior to approving the filing.

If you would like to know more about the release or the NRS’ ComplianceMAX OBA product, please contact NRS Product at or try a ComplianceMAX demo today.

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Advisers Act Compliance Education Delivered in Convenient U.S. Cities

When was the last time you looked at the Investment Advisers Act of 1940 or one of its related Rule amendments? SEC examination deficiencies and enforcement actions reveal it’s been less frequently than needed for some firms.

The NRS Investment Adviser Compliance Symposium gives compliance professionals an opportunity to dig into the Advisers Act and support the firm’s compliance program with updated knowledge and tools to minimize risk.

As Steve Jobs (Apple) shared, “There is always one more thing to learn.”

Attend in-person sessions on topics of current interest to exchange ideas with seasoned instructors and peers in an all-day forum for one or more days. Participate in lecture and discussion-based learning in an interactive classroom.

Given the current and future changes in the regulatory environment, each NRS Investment Adviser Symposium holds added significance. Through a deep dive into the Advisers Act and related Rules, compliance professionals get:

  • The facts – information and implications of new and existing regulations and regulatory examinations;
  • An exchange of ideas on how to maintain a robust compliance program to help keep the firm compliant;
  • Soft skills to help support implementation of an ethical compliance culture;
  • An electronic library of material;
  • A network of compliance professionals; and more

Whether you are eager to complete a portion of the education requirement of the NRS Investment Adviser Certified Compliance Professional® (IACCP®) or Core Compliance programs, want to sharpen your understanding of individual compliance topics, or want to earn continuing education credits, these in-person NRS Education events identify key industry requirements and best practices that effectively support compliance programs in the toughest regulatory environment.

NRS Education events are designed to meet criteria for continuing education credits for attorneys, CPA/accountants, certified financial planners, compliance professionals, and other financial securities professionals. Earn CLE, CPE, CFP® and IACCP® credits while updating and strengthening your firm’s compliance program.

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“Business as usual.” Daniel Kahl, Chief Counsel, SEC Office of Compliance Inspections and Examinations, NRS Spring Compliance Conference

The past few months have been full of change and uncertainty for Advisers, and NRS Consulting has fielded countless client questions as many have sought clarity in the midst of confusion. The NRS Spring 2017 Compliance Conference proved to be a wonderful opportunity for attendees to gain insight and reassurance as speakers cut through all the “noise” and soundbite fatigue to deliver prescient and timely content. Although a full description of sessions is beyond the scope of this article, the overarching takeaway was best embodied by Daniel Kahl, Chief Counsel, SEC Office of Compliance Inspections and Examinations, who stated that, regardless of Presidential Executive Orders and other changes, he doesn’t foresee any vast undoing of SEC rules. Kahl said that the SEC Staff is largely the same, as is their mandate; he confirmed his expectation that on the exam side it will be “business as usual.”

Advisers who find themselves stymied by uncertainty and indecision should realize that they, too, must focus on business as usual. Ensure that annual reviews have been conducted, comprehensive risk assessments have been completed, policies and procedures are properly customized and updated, that testing protocols are robust, and that  “plain English” disclosures consider conflicts of interest and avoid hedging language such as “may.” NRS has been assisting firms with these and other compliance matters for over 30 years; contact us to see how we can help!

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