Rep. Maxine Waters, D-Calif., maintains her spot as chairwoman of theHouse Financial Services Committee.
Simon said he expects that committee’s
SEC EXAM PRIORITIES —
newly created Diversity and Inclusion
Subcommittee, which was created last
year, “may focus on the asset management
industry sometime in this Congress.”
As a result, “there will be
a large focus [by both cham-
bers] on urging and pressuring
the Biden administration to do
rulemaking from a unilateral
perspective,” Emerson said, as
well as “a push and pressure
on the [regulatory] agencies to
The SEC’s Division ofExaminations released in earlyMarch its exam priorities for
2021 — with a compliance with Reg BI,Form CRS and whether RIAs have fulfilled their fiduciary duties of care andloyalties as the top issues being probed.
Amy Lynch, president of FrontLineCompliance, stated in an alert that“it’s important to note that the [2021exam] Letter was issued prior to thenew Chair’s arrival to the Commission.”Once Gensler “is in place (assuming official confirmation) the list of prioritiesThe SEC noted in its letter that thescope of Reg BI exams also will beexpanded. They will focus on whetherBDs are making recommendations thatthey have a reasonable basis to believeare in customers’ best interests and evaluating BD processes for compliance andalterations made to product offerings.
John Polise, associate director
of the SEC’s National Broker-Dealer
and Exchange Program within the
exam division, warned in early March
during a webcast held by the Securities
Industry and Financial Markets
Association that the agency has moved
beyond the Phase 1 “good faith effort”
Reg BI exam cycle.
That said, the agency is “not lookingto do gotcha exams or make enforcement referrals per se,” Polise said.“We’re still understanding that the ruleis complicated, that there are myriadways for individual firms to address thefour core obligations” in Reg BI.
Reg BI “is a serious obligation,” Polise
added. “In our good-faith exams we saw
very good efforts and attempts by peo-
ple to comply with the rule but there
were some areas that could certainly be
improved. Would they rise to the level of
enforcement referrals? Probably not —
more like deficiency letters to encourage
people to take a more aggressive approach
towards some of those requirements.”
Other exam priorities will be Libor,
anti-money laundering, RIAs’ compli-
ance programs, reviews of business con-
tinuity and disaster plans, as well as
fintech and digital assets.
The exam division said that its coverage of RIAs in 2020, a year in which theRIA population continued to increase“and the pandemic necessitated a midyear shift to remote examining,” was 15%.
The SEC completed 2,952 exams in fiscal 2020, a 4.4% decrease from fiscal 2019.
The growth of the advisory industry
“continues to escalate, and certainly the
complexity does too,” said Pete Driscoll,
head of the division, said during the IAA
The exam division is “hoping for 15%exam coverage of advisors,” as examiners were able to achieve in 2020, “butit’s going to be tough without additionalresources,” he added.
Driscoll noted the “nutty year” so
SEC AD RULE
far with COVID, market volatility and
meme stocks. “There’s just a lot of
areas where we have to pivot from a
The SEC noted in releasing
its 2021 exam priorities that
in the last five years, the num-
ber of RIAs the SEC oversees
increased to more than 13,900
from about 12,000, and assets
under management of RIAs
increased to $97 trillion from
approximately $67 trillion.
The SEC’s final rule on RIAadvertising and marketingpractices was published in theFederal Register on March 5 —setting in motion a May 4 effective date.
RIAs have 18 months to come intocompliance with the new rule.
The SEC passed the ad rule changesin late December. The rule allows advisors to use testimonials and endorsements, which include traditionalreferral and solicitation activity, subjectto certain conditions.
The amendments create a mergedrule that will replace both the currentadvertising and cash solicitation rules.
Karen Barr, president and CEO ofthe Investment Adviser Association,told IA in an email that publication“means the rule won’t be delayedfor further review, and investmentadvisors now have a firm compliancedeadline of Nov. 4, 2022,” with 18months to modernize their marketingand advertising programs.
Washington Bureau Chief Melanie Waddell canbe reached at firstname.lastname@example.org.
The SEC [noted that] Reg BI
exams also will be expanded [to]
focus on whether BDs are making
recommendations that they have
a reasonable basis to believe
are in customers’ best interests
and evaluating BD processes
for compliance and alterations
made to product offerings.