Regulatory Compliance E-newsletter – September 2016

Feature of the Month

New!  NRS Insights Blog

Welcome to the NRS Insights Blog, your source for news, commentary and observations related to SEC and FINRA regulations.

From regulatory updates to industry news articles, we’ll help you navigate the complex maze of regulatory compliance. In addition to these timely insights, we encourage you to reach out to us with your questions, comments and concerns surrounding SEC and FINRA. Just send an email to and we’ll do our best to answer your questions.

Click here to access the NRS Insights Blog.


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SEC Adopts Changes to Form ADV – ComplianceGuardian Alert

The Securities and Exchange Commission has adopted amendments to several Investment Advisers Act rules and the investment adviser registration and reporting form (Form ADV) to enhance the reporting and disclosure of information by investment advisers.  

Beginning on October 1, 2017, investment advisers filing initial or amended Form ADVs will be required to provide the additional information regarding their separately managed account business, including aggregate data related to the use of borrowings and derivatives, and information about other aspects of their advisory business, including branch office operations and the use of social media.   In addition, the amendments will facilitate streamlined registration and reporting for groups of private fund adviser entities operating a single advisory business. Advisers filing annual updating amendments will begin to use the form for those amendments after October 1, 2017. Thus, many advisers will use the new form with the amendments due by March 31, 2018.

Additionally, amendments to Investment Advisers Act Rule 204-2 will require advisers to maintain additional records related to the calculation and distribution of performance information. These records will be useful to the Commission’s examinations staff in evaluating an adviser’s performance claim, and could reduce the incidence of misleading or fraudulent advertising and communications by advisers.

The amendments will be published on the Commission’s website and in the Federal Register.   They will become effective 60 days after publication in the Federal Register, and advisers will need to begin complying with the amendments on Oct. 1, 2017.

NRS ComplianceGuardianTM tracks regulatory changes and alerts users on an ongoing basis. The user-friendly design, comprehensive collection of materials, powerful alerts and detailed reporting capabilities provides you with the tools you need to keep your firm compliant. 

See what ComplianceGuardian has to offer your compliance program.

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Conquer Three Critical Compliance Challenges Facing Investment Advisers and Broker-Dealers

Updates on cybersecurity, advertising and the DOL’s new fiduciary rule are foremost in the minds of investment adviser and broker-dealer compliance professionals. The NRS Compliance Forum in New York on Monday, September 19 gives you an opportunity to focus exclusively on three compliance challenges that rise to the top of priority lists for firms and regulators:

  • Cybersecurity: Regulators have placed an increased emphasis on cybersecurity as an area of concern highlighted by recent high-profile data breaches leading to compromised personally-identifiable nonpublic information for millions of individuals. Recent enforcement actions against firms without robust cybersecurity policies and procedures should serve as a warning to firms of all sizes who have been slow to act in addressing this area of intense regulatory focus.
  • Advertising: Numerous rules, no-action letters, alerts, regulatory guidance and conflicting interpretations can make advertising a perilous area for investment advisers and broker-dealers alike. SEC and FINRA examiners, almost always without fail, dedicate a large portion of their time to reviewing marketing and advertising materials, both to learn more about the firm’s business and to assure that no specific rules or widely-accepted fiduciary principles have been violated. 
  • DOL’s New Fiduciary Rule: With numerous initiatives in senior client protection emanating from both the SEC and FINRA, nothing has a greater potential for disrupting business-as-usual than the DOL’s new fiduciary rule. It is imperative for advisers and broker-dealers to draft a plan that tackles this complex regulation.

Register now to refresh and update your compliance knowledge, and to help plan and craft solutions for these three imminent compliance challenges.


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Comment Period Ends for SEC Proposed Rule Requiring Investment Advisers to Adopt Business Continuity and Transition Plans

On June 28th, 2016, the SEC proposed a new rule under the Investment Advisers Act of 1940 that would require SEC-registered advisers to adopt and implement written business continuity and transition plans and to maintain relevant records of those plans, in order to facilitate business continuity and transition planning and to minimize client and investor harm, during periods of disruption. They opened a comment period ending 60 days after publication in the Federal Register (September 6, 2016).

“While an adviser may not always be able to prevent significant disruptions to its operations, advance planning and preparation can help mitigate the effects of such disruptions and in some cases, minimize the likelihood of their occurrence, which is an objective of this rule,” SEC Chair Mary Jo White said in a statement.

Proposed rule 206(4)-4 goes beyond more general requirements for business continuity planning (“BCP”) noted in the adopting release for rule 206(4)-7. The proposed rule would prohibit an SEC-registered investment adviser from providing investment advice unless the adviser adopts and implements a written business continuity and transition plan and reviews that plan at least annually.

The proposed amendments to rule 204-2 would require those advisers to make and keep copies of all written business continuity and transition plans that are in effect or were in effect at any time during the last five years, as well as any records documenting the adviser’s annual review of its business continuity and transition programs. 

Regardless of whether or not the proposed rule is enacted, investment advisers have a fiduciary duty to their clients.  As such, advisers need to consider and prepare for potential disruptions to services provided to clients.  SEC-registered advisers will be better prepared to deal with business continuity and transition events, if and when they occur, if advisers consider the robustness of their business continuity and transition programs as well as the business continuity programs of their third-party service providers/partners.

With the experience gained from providing customized compliance services and solutions to the financial services industry for over 30 years, NRS is singularly positioned to help firms deal with these challenges. An NRS consultant can work with you to determine how best to be prepared for any additional compliance requirements the regulators may impose on your firm.

If you would like to make sure your firm’s business continuity and transition planning procedures are sufficient for any potential regulatory scrutiny, please contact us today.


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