News in Personal Trading Software & Compliance Monitoring Tools

What’s in the news: the top five compliance articles for October 1 – October 14, 2022

Compliance innovation moves fast, but the news moves faster. To keep you and your team up to speed on the latest happenings and goings-on in the compliance world, we’ve aggregated the top five articles from the past few weeks to provide you with an in-depth look at the regulatory ecosystem.

Stay up-to-date and in the know on everything happening in the compliance world as of Oct. 14, 2022.

Top five compliance articles

Kim Kardashian to Pay $1.26 Million to Settle SEC Investigation Into Role in Crypto Deal – Author Dave Michaels

The Securities and Exchange Commission (SEC) recently announced charges against Kim Kardashian. These charges were made after Kardashian allegedly touted on social media a crypto asset security offered and sold by EthereumMax without disclosing that she was paid $250,000 for the promotion. Kardashian has agreed to settle the charges, pay $1.26 million in penalties, disgorgement, and interest and cooperate with the Commission’s ongoing investigation.

“This case is a reminder that, when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that those investment products are right for all investors,” said SEC Chair Gary Gensler. “We encourage investors to consider an investment’s potential risks and opportunities in light of their own financial goals.”

The North American Securities Administrators Association is working on a model rule that “mirrors” the SEC regulation – Author Mark Schoeff Jr.

The SEC Marketing Rule will allow registered advisors to use testimonials in their marketing materials. However, whether advisors who are registered at the state level can take advantage of the same opportunity depends on whether their state adopts the SEC rule or something similar. The rule goes into effect on Nov. 4, and so far, 23 states have said that they will not follow the rule, 12 said that they will follow it, one states that it will do so in 2023, and 11 haven’t mentioned their plans.

The North American Securities Administrators Association (NASAA) will try to provide states with guidance on how they can update their advertising regulations.

According to Stephen Brey, a Michigan securities regulator, “We’re working on a model rule that will largely mirror the SEC rule.” That could be great news for state-level advisers who want to take advantage of the opportunities the new rule offers and start airing testimonials.

Potential Delay of SEC Climate Disclosures Rule Due to Reopening of Comments Period to Address Technical Issue – Author Mintz

The SEC recently reopened the comment period on its climate disclosures rule for a period of “fourteen days following publication of the reopening release in the Federal Register.” The SEC decision to reopen comments was due to a “technological error that resulted in a number of public comments submitted through the Commission’s internet comment form not being received by the Commission.”

While this delay will allow individuals affected by the proposed rule to share their comments and voice their concerns, it will likely delay the publication of the final climate disclosures rule for several weeks, if not more.

Get Ready: FINRA’s New CE Rules Start in January – Author Melanie Waddell

As a part of a revamp of the Financial Industry Regulatory Authority’s (FINRA) continuing education (CE) program, broker-dealers and their representatives face new CE requirements. Some of the most notable changes are:

  • Those registered with FINRA must complete continuing education requirements yearly instead of every three years.
  • Eligible individuals who terminate any of their representative or principle registration categories have the option of maintaining their qualification for any terminated registration categories by completing annual CE through a new program, the Maintaining Qualifications Program (MQP).
  • Firms can consider other required training toward satisfying an individual’s annual CE Firm Element and extend the Firm Element requirement to all registered persons.

These requirements go into effect on January 1, 2023.

SEC Votes to Modernize How BDs Can Preserve Electronic Records – Author Jeff Berman

The SEC recently voted to adopt amendments which will modernize how broker-dealers (BDs) preserve electronic records. The changes also cover the prompt production of records and third-party recordkeeping service requirements that are applicable to BDs, security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs). The amendments were developed in light of technological advancements which have been made in the last few decades and which will make the rule adaptable to new technologies in electronic recordkeeping.

Some of the most notable changes are:

  • Firms must preserve electronic records exclusively in a non-rewriteable, non-erasable format, known as the “write once, ready many” format.
  • There is an audit-trail alternative under which electronic records can be preserved in a manner which allows for the recreation of an original record if it is altered, over-written or erased.
  • To facilitate examinations and make them more efficient, BDs and all types of SBSDs and MSBSPs must produce electronic records to securities regulators in a “reasonably usable electronic format.”

These new requirements go into effect six months after publication in the Federal Register in the case of BDs and 12 months after publication in the Federal Register in the case of SBSDs and MSBSPs.