On December 18, 2019, the SEC voted to propose amendments to the definition of accredited investor, one of the principal tests for who is eligible to participate in our private capital markets. The proposal seeks to update and improve the definition to more effectively identify institutional and individual investors that have the knowledge and expertise to participate in our private capital markets.
On January 7, 2020, the SEC's Office of Compliance Inspections and Examinations (OCIE) announced its 2020 examination priorities. OCIE publishes its examination priorities annually to enhance the transparency of its examination program and to provide insights into its risk-based approach, including the areas it believes present potential risks to investors and the integrity of the U.S. capital markets.
On December 6, 2019, the SEC's two Democratic members agreed Friday that the industry will need guidance from the securities regulator on how to comply with Regulation Best Interest before it goes into effect on June 30, 2020. Both, however, questioned whether FAQs would be enough.
On December 6, 2019, Financial Advisor IQ spoke to Sifma president and CEO Kenneth Bentsen who gave a media briefing saying that states pursuing fiduciary rules for broker-dealers run the risk of driving brokerage businesses away from their jurisdictions, ultimately hurting retail investors. Meanwhile, broker-dealer firms are busy preparing to comply with the SEC's Regulation Best Interest package and the costs are running into the "eight-figure" range for some firms, he said. Bentsen quoted "What's going to happen and what firms have reported to us is that rather than create multi-state compliance models and take on additional compliance liability, they will just go to the common denominator, which in many cases will just be: 'We just won't do brokerage in that state,'".
On November 5, 2019, the SEC approved amendments to the Financial Industry Regulatory Authority New Issue Rule (Rule 5130) and Anti-Spinning Rule (Rule 5131). FINRA will shortly publish a Regulatory Notice announcing that the Amendments will become effective no later than January 31, 2020. Absent an exemption, FINRA Rule 5130 prohibits securities industry insiders - such as broker-dealers, registered representatives, owners of broker-dealers, portfolio managers and finders and fiduciaries from purchasing new issues through any account in which they have a "beneficial interest." FINRA Rule 5131 prohibits the allocation of new issues to accounts in which executive officers or directors of a public company or a "covered non-public company" have a beneficial interest.
On November 4, 2019, the SEC approved the publication of a substantial release proposing significant amendments to the rules under the Investment Advisers Act of 1940 that govern advertising by investment advisers and the solicitation of advisory and fund investments, as well as related recordkeeping and SEC Form ADV disclosure requirements. This memorandum provides a summary of the proposed amendments to the advertising rule and related recordkeeping requirements; a separate memorandum addresses the proposed amendments to the solicitation rule.
On November 26, 2019, ThinkAdvisor reported that industry officials are finding a new compliance chore on their plate as the SEC plans a crackdown on 12b-1 fees as they relate to advisor disclosures and conflicts associated with bank deposit sweep programs. Stephanie Avakian, co-director of the SEC's enforcement division, signaled in a recent speech where the agency is headed with the BDSP initiative: "Cash in advisory accounts is often automatically swept into a money market mutual fund or a bank deposit sweep program," she said. "A dually registered adviser or an adviser with an affiliated broker-dealer may have a financial interest, a conflict, in recommending one cash investment over another," she warned.
On November 26, 2019, the SEC released an FAQ on the agency's Customer Relationship Summary, or Form CRS, part of the four-pronged advice standards package. The securities regulator's divisions of Investment Management and Trading and Markets said the Form CRS FAQ does not constitute a rule and that the industry can expect updates from the divisions as additional questions come in.
On November 6, 2019, the SEC's Division of Enforcement issued its annual report for fiscal year 2019. The report details the division's efforts and initiatives on behalf of investors, highlights several significant actions, and presents the activities of the division from both a qualitative and quantitative perspective.
Washington D.C., Nov. 4, 2019 —
The Securities and Exchange Commission today announced that it has voted to propose amendments to modernize the rules under the Investment Advisers Act addressing investment adviser advertisements and payments to solicitors. The proposed amendments are intended to update these rules to reflect changes in technology, the expectations of investors seeking advisory services, and the evolution of industry practices.