| Americas | Articles
With 2022 soon ending, financial regulators worldwide are beginning to set their sights on 2023 objectives and goals. In the US, the SEC recently published its Strategic Plan for fiscal years 2022 through 2026. The SEC’s strategic plan establishes three primary goals for the commission:
- Protect the investing public against fraud, manipulation, and misconduct
- Develop and implement a robust regulatory framework that keeps pace with evolving markets, business models, and technologies
- Support a skilled workforce that is diverse, equitable, inclusive and is fully equipped to advance agency objectives
What do these regulator goals mean for investment advisors on the enforcement and the rule-making front? If Q4 2022 SEC activity is any indication, we will most likely see an increase in rulemaking, examination requests, and enforcement actions in 2023.
SEC enforcement themes Q4 2022
In just November and December alone, there were a slew of enforcement actions covering topics such as failing to follow policies and procedures involving ESG investments, failing to make required disclosures around affiliated transactions and cross trades, failure to follow policies and procedures surrounding suitability. One firm was charged with misleading investors about its Anti-Money Laundering compliance failures.
There were numerous enforcement actions involving market manipulation through the usage of social media platforms such as Twitter and Discord. And one recent enforcement focused on front-running at a large asset manager in the US. In addition, charges were brought against Samuel Bankman-Fried and a few other individuals at a separate crypto firm on defrauding investors in the crypto asset trading arena.
Finally, at another US asset management firm, both the CEO and CCO were fined for failing to implement reasonably designed compliances policies and procedures, conduct annual reviews of its compliance program, and maintain and enforce a written code of ethics as required by the Advisers Act of 1940.
SEC rules coming up in 2023
On the rulemaking front, investment advisers should be continuing to evaluate and prepare for the following in 2023:
- Rule 206(4)-11, the SEC proposes new oversight requirements for certain services outsourced by Investment Advisers.
- SEC adopts amendments to modernize Rule 10b5-1 insider trading plans and related disclosures.
- SEC proposes rules impacting private funds and advisers. The new rules could have a significant impact on private fund disclosures, reporting, fees and expenses, and operations
- Amendments to Form PF to Amend Reporting Requirements for All Filers and Large Hedge Fund Advisers.
- Proposed environmental, social, and governance disclosures for Investment Advisers and Investment Companies.
- Proposed cybersecurity risk management, strategy, governance, and incident disclosure rules for Investment Advisers and Investment Companies.
- In March of 2022, President Biden signed an Executive Order ensuring responsible development of digital assets. The order instructs certain government departments to work together to perform research and create a regulatory framework for digital assets. With the recent upheaval in the crypto market and FTX, the industry should be expecting swift regulatory action across the globe on the crypto front.
The takeaway from these enforcement actions and rulemaking is that the regulators are not just focusing on any one area during examinations and rule proposals but are looking broadly at every aspect of the investment adviser’s business and compliance programs. With a few weeks left in the year, investment advisers should be mirroring regulator behaviour and looking ahead at planning for risk assessments and compliance program reviews to ensure regulatory compliance in the new year.
How we can help
We can help you understand which regulatory changes apply to you and design and implement regulatory change programs. We can also support your ongoing compliance and work with you to develop risk assessments and compliance monitoring programs to make sure your framework is robust. Our SEC experts can help you prepare for an SEC examination though by carrying out a full SEC Mock Examination exercise which will help to surface issues you may need to address and get your team ready for the real thing.
Get in touch
