What You Need to Know
- Cybersecurity is the second-hottest compliance topic of 2021, according to IAA.
- Firms also want the SEC to conduct investor testing on Form CRS.
- SEC is ramping up its examination and enforcement focus on cybersecurity, Baker McKenzie attorneys say.
Registered investment advisors view the Securities and Exchange Commission’s new marketing and advertising rule as the “hottest” compliance topic this year, with the second-hottest being cybersecurity, according to a recently released Investment Adviser Association poll.
IAA’s 2021 Investment Management Compliance Testing Survey, conducted with ACA Compliance Group, also found that firms would like the SEC to conduct investor testing on its Customer Relationship Summary Form, or Form CRS, and that the agency should conduct a comprehensive review and rewrite of the Custody Rule, Rule 206(4)-2 under the Advisers Act.
ACA and IAA announced Thursday that they’ve entered into a strategic partnership. “As a strategic partner, we are excited to collaborate further with the IAA on delivering thought leadership and guidance on how to address topical challenges for the benefit of our shared member/client community,” said Carlo di Florio, Chief Services Officer at ACA Group, in a statement.
The SEC’s advertising and marketing rule has been in effect since early May, but compliance experts are cautioning advisors to tread carefully when using testimonials and endorsements before the rule’s Nov. 4, 2022, compliance date.
The use of testimonials and endorsements “before the firm is fully compliant and updating its compliance [policies and procedures] … that is a huge risk to the firm,” Amy Lynch, founder and principal of FrontLine Compliance, said on a recent webcast held by ThinkAdvisor.
Daren Domina, a partner in the Investment Management and Private Equity Practice Groups at Haynes and Boone in New York, who also heads the Broker-Dealer Regulatory Practice Group, told ThinkAdvisor Thursday in an email that “because of the Marketing Rule’s permissibility of use, I expect to see more adviser arrangements and presentations with testimonials and endorsements, including increased use of social media.”