Regulation of the financial services industry can be quite tedious, labor-intensive, and burdensome.
We’re not telling you anything you don’t already know.
One thing that makes regulatory compliance tedious is its cyclical nature and the fact that we must continue to learn new skills and apply new regulations while at the same time keeping up with the existing rules.
With the end of 2021 and the beginning of 2022 upon us, there’s no time like the present to ensure all compliance policies and procedures are in good order. Then, when new rules and regulations are rolled out, you can feel comfortable that your existing responsibilities are well in check.
Below are a few key matters we recommend compliance professionals keep on their review and housekeeping list as one year ends and a new one begins:
Regulation Best Interest and the Form CRS
Although not a new Rule, many firms tend to overlook the requirement to create and provide the Form CRS to both new and existing clients.
Many firms are diligent about providing the form to new clients. However, it’s also important to recall that the Regulation Best Interest rule requires Form CRS to be delivered to existing clients when the firm takes certain actions.
The Modernized Marketing Rule
Many believe that the Modernized Marketing Rule – new to advisers in 2021 –will finally allow testimonials.
It also gives advisers the ability to pay social media influencers to act as promoters.
However, firms would be unwise to boil this rule down to those two key points only and forget the requirements that go along with it.
There are certain measures to be taken and risks to be evaluated when a firm decides to use testimonials or partner with promoters. Be sure and review the Rule in full before jumping in with both feet.
New Fiduciary Advice Exemption: PTE 2020-02 (DOL PTE 2020-02)
Although a federal appeals court struck down the DOL Fiduciary Rule of 2015 in June 2018, parts have been rolled forward into new regulation in 2021.
This new piece of regulation, a leftover from the 2015 Rule, requires certain disclosures to be made in writing to plan participants under certain conditions. Failure to comply will cause the adviser to be in violation of its fiduciary duty to its client and most likely result in some type of regulatory action.
It goes without saying that it is crucial to be familiar with all rules under which one operates. However, at the same time, the new rules are top of mind for both regulators and firms (or they should be!).
We anticipate that regulators will be on alert for the issues mentioned above and prepare to enforce them. Many firms have sales goals top of mind as the new year kicks off, but we’d suggest that taking some additional time to ensure compliance is in order will stand you in good stead for the year – and the 2022 examinations – to come.
About Red Oak Compliance Solutions
Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry. It is a comprehensive suite of SEC 17A-4 compliant features that are 100% books and records compliant and provides clients with 35% faster approvals and 70% fewer touches or better. We also offer Smart Review(SM), which solves for the storage and maintenance of disclosures, helping firms reduce risk, decrease review times, and increase the speed of distribution of marketing materials. Smart Registration(SM) automates the licensing and registration management process to help reduce regulatory risk and time spent on manual processes. Overall, Red Oak allows firms to minimize risk, reduce costs, and increase compliance review process effectiveness and efficiencies.