11 Big Advisor Regs That Moved Forward in 2022

2. SEC Marketing Rule

The SEC’s new Marketing Rule officially kicked in on Nov. 4. The rule applies to registered investment advisors of all types — including those to hedge funds, private funds and separately managed accounts. It “broadly defines ‘advertisement’ to generally include communications with investors and potential investors on securities advisory services, including testimonials, endorsements, and third-party ratings, but in large part excludes tailored one-on-one communications with investors,” the law firm BakerHostetler said. The SEC’s Division of Exams outlined priority exam areas in a Sept. 19 Risk Alert.

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3. FINRA Branch Office Inspections

FINRA extended through 2023 its rule to allow broker-dealers to continue to conduct branch-office inspections remotely. The rule change (Temporary Relief to Allow Remote Inspections for Calendar Year 2020 and Calendar Year 2021) is under FINRA Rule 3110 (Supervision). The extension of Rule 3110.17 is intended to alleviate ongoing operational challenges resulting from the COVID-19 pandemic that many member firms may continue to face.

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4. FINRA Home Office Rule

FINRA filed with the SEC in July proposed changes to FINRA Rule 3110 to allow a home office to be considered a non-branch “residential supervisory location” under certain conditions. Lawyers who represent investors say the plan is “fundamentally flawed” and “leaves considerable opportunity for advisors working from home to skirt the rules.” The rule is pending SEC review.

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5. SEC Whistleblower Program Expansion

The SEC adopted amendments to its whistleblower rules in late August that allow the agency to pay whistleblowers for information in connection with non-SEC actions as well as affirm the SEC’s authority to consider the dollar amount of a potential award for the limited purpose of increasing an award but not to reduce an award.

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6. Limits on Outsourcing by Investment Advisors

The SEC proposed on Oct. 26 a new rule to prohibit RIAs from outsourcing certain services and functions without conducting due diligence and monitoring of the service providers. The “proposing release does address outsourcing of compliance function,” according to William Birdthistle, director of the agency’s Investment Management Division.

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7. SEC Fund-Names Rule

The SEC proposed in May to require certain funds to adopt a policy to invest at least 80% of their assets in accordance with the investment focus that the fund’s name suggests, updating the rule’s notice requirements and establishing recordkeeping requirements. Eric Pan, president and CEO of the Investment Company Institute, told the SEC in a comment letter that its current fund names rule “has worked well for 20 years. It recognizes that a fund’s name does not, and cannot, communicate everything that investors want to know about a fund before investing.

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8. Streamlined Shareholder Reports for Funds and ETFs

The SEC voted Oct. 28 to require mutual funds and exchange-traded funds to provide concise, tailored shareholder reports that highlight fund expenses, performance and portfolio holdings.

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9. FINRA Machine-Readable Rulebook

FINRA said in late October that it’s developing a machine-readable rulebook to allow quick access to 40 of its most popularly searched rules. The initiative “is designed to enhance firms’ compliance efforts, reduce costs, and aid in risk management by making the rulebook more easily accessible and by facilitating efforts to automate compliance functions,” FINRA said. The rulebook, according to FINRA, includes an embedded taxonomy — a method of classifying and categorizing a hierarchy of key terms and concepts — that has been applied to the 40 rules.

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10. New FINRA CE Rules

As part of a revamp of the FINRA’s continuing education program, broker-dealers and their reps face new CE requirements in January, with courses likely to drill down on the SEC’s Regulation Best Interest. In November 2201, FINRA adopted changes to its CE and registration rules, which included, among other measures, requiring those registered with FINRA to complete continuing education requirements yearly instead of every three years.

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11. DOL Independent Contractor Rule

The Department of Labor in mid-October proposed a rule that would replace the existing 2021 test under the Fair Labor Standards Act used to determine worker classification as either an independent contractor or an employee. The new Labor rule would replace the 2021 rule that went into effect as a result of a ruling in March by the U.S. District Court for the Eastern District of Texas that Labor’s delay and withdrawal of its independent contractor rule violated the Administrative Procedure Act. The comment period on the rule expired Dec. 13.

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