Aer Compliance

Navigating MiCA: Insights on Crypto Regulations and Personal Trading Yesterday, we hosted a webinar discussing the upcoming Markets in Crypto-Assets (MiCA) regulations. We thank everyone who attended for contributing to a thoughtful and dynamic conversation, and for those who missed it, we’ve summarized the key, actionable points below: 1. Unique Crypto Challenges: The crypto sector's emphasis on anonymity creates distinct hurdles in personal account disclosure compared to traditional finance. 2. Reputational Risks: Beyond market manipulation concerns, personal trading can significantly impact a firm's reputation, especially for employees with strong brand associations or equity stakes. 3. Regulatory Deadline: By December 30, 2024, market surveillance and personal trading controls must be implemented (MiCA Title VI). 4. Proactive Compliance: Firms are urged to develop internal oversight mechanisms to ensure regulatory adherence. Key Message: Given the nuance of MiCA Title VI’s grandfather clauses, waiting is no longer an option. Crypto firms must act promptly to establish compliant personal trading controls and implement robust oversight mechanisms. Thoughts on balancing regulatory compliance with the innovative spirit of crypto? Reach out to discuss how your CASP can navigate these new regulatory waters effectively.

Our team is in Barcelona this week at the European Blockchain Convention. Why? Because MiCA is coming, and if you want to offer crypto-related services in the EU you're going to need a license very soon. Particularly relevant to us at Aer is that MiCA's Title VI, about market abuse and surveillance, does not have a grandfathering clause. That means anyone operating a CASP in the EU will need to abide by it as of December 31, 2024. From our conversations on the ground here, it's clear this is on compliance officers' minds. If you're not in Barcelona, but want to learn more about how leaders in the field are planning to address these risks, come to our webinar next Tuesday at 2:30pm UK / 9:30am ET. Sign up here:

With our event already attracting over 50 signups from compliance and legal folks at Europe’s top banks, exchanges, and funds, we’ll be capping our attendee list soon! Make sure to sign up and reserve your spot before it’s too late (registration link in the comments)

ESMA's impending MiCA regulation is reshaping the landscape for Virtual Asset Service Providers and token issuers in the EU. Don't miss our upcoming webinar, MiCA: Conflicts of Interest, Market Surveillance, and the Journey to Registration, which offers attendees the opportunity to gain insights from legal and regulatory leaders. Information as follows: Date: October 1, 2024 Time: 9:30 AM ET / 2:30 PM UK / 3:30 PM EU Location: Zoom link to be sent to registrants Featuring expert speakers: - Richard Bruger: Partner at Wilmer Hale, ex-FCA Lawyer - Jonathan Dixon: Head of Surveillance at eflow Global, ex-Kraken - Josh Peschko: Global Head of Compliance Strategy at Talos, ex-AQR Capital Management Topics include: - Best practices for managing conflicts of interest - Implementing effective market surveillance - Navigating the registration process Stay ahead of the regulatory curve and register at the link below to secure your spot! https://lnkd.in/e8BG-zd3 #MiCA #Crypto #Regulation #Compliance

Yesterday, the SEC continued its marketing sweep into investment advisers by charging and settling 9 RIAs, for over $1M. These charges are especially interesting as they highlight the Commission's focus on newer aspects of the rule, such as testimonials and endorsements, which had not featured prominently in enforcement prior to the new rule. For instance, as the SEC noted, one of the firms "disseminated advertisements claiming to contain two testimonials, but neither actually came from current clients. It also advertised endorsements that did not disclose that the endorser was a paid, non-client of [the Firm] in videos, on social media, and on physical objects such as bags and flags." This is a heads up to all investment advisers: there will be no leniency even in newer parts of the rule during an information request or exam.

Yesterday, the SEC continued its marketing sweep into investment advisers by charging and settling 9 RIAs, for over $1M. These charges are especially interesting as they highlight the Commission's focus on newer aspects of the rule, such as testimonials and endorsements, which had not featured prominently in enforcement prior to the new rule. For instance, as the SEC noted, one of the firms "disseminated advertisements claiming to contain two testimonials, but neither actually came from current clients. It also advertised endorsements that did not disclose that the endorser was a paid, non-client of [the Firm] in videos, on social media, and on physical objects such as bags and flags." This is a heads up to all investment advisers: there will be no leniency even in newer parts of the rule during an information request or exam.

RIAs from $25-100B in AUM are often international marketers, in addition to having similar challenges to those discussed already. They want to raise money from LPs beyond just US investors and institutions, especially in tighter private markets conditions like today's. This increases knowledge requirements and the corresponding spend on lawyers who might be able to plug in-house gaps. Those lawyers bill full rates, knowing any firm that markets internationally is willing to pay a premium. For an AI model, this can be a more tractable problem. It is in the abstract a conditional: IF geography, THEN add additional rule to the context window. But internationally, while the rule on the books may say one thing, the practical reality may be very different - and no firm wants to be too far behind their competitors by sticking tightly to the rule. Our model works to address this today via disclosures, as the primary modification firms make to their marketing content when going international. The model can learn from your historic pieces' disclosures - how you disclose when sending pieces to Saudi Arabia vs. the UK vs. Hong Kong - as well as from your ongoing refinements. This lets even larger clients be flexible to market internationally, in a way that has been full of risk for forgetting a disclosure or not properly applying it in the past.

As we head into RIAs between $10B and $25B in AUM, we start seeing multiple strategies and offerings at the same firm. That's where complexity really comes into play: how can you make sure your private equity piece is aligned to your private credit piece, or that your SMA offering is consistent with your bespoke asset management offering, when different teams create the content and different compliance officers review it. Issues arise when there is a cut in for a different strategy, suddenly being reviewed by an unfamiliar team who doesn't know how the firm normally markets this offering. This is where our disclosures library comes in. Many of the mistakes made are around disclosures. The library, built bottoms up from a firm's existing pieces, correlates key metadata about the piece (audience, geographies, types of marketing) with the necessary disclosures. Our model then suggests what's needed for each particular situation. Do you have over a hundred different disclosures in your marketing and can't track them all? Let us know if we can help.

We're now moving upmarket, looking at RIAs between $5 and $10B in AUM. Here too, firms are diverse in strategies and approaches across private and public markets. Once again, there's definitely an in-house CCO and probably even a second member of the compliance team. This is often where risks emerge due to multiple people involved in?the?marketing review process. These firms lack a robust books and records workflow.?While their compliance reviews are generally more robust due to having a dedicated colleague, the high volume of work creates challenges. It becomes easy for them to lose track of final documents or exactly what was sent to whom. Meanwhile, senior front office colleagues regularly send out decks that weren't approved. All of that poses risks, driving the need for automation. For these types of firms, we've built a custom workflow and report builder to track what pieces contain, when they're sent, and to whom. It's saving hours a week, and tens of hours during an SEC exam.

This past Friday, the SEC announced settled charges with a?registered investment advisor?(RIA), TPFG, for violations of the new marketing rule, specifically around showing hypothetical performance on their website that the retail public could see. TPFG is a nice lead into the next part in our series, focused on RIAs between $1 and $5B AUM. TPFG is right in the middle, with around $3B in AUM as of their July ADV filing. At this size, firms come in many shapes, from private equity and hedge funds to more traditional asset managers. TPFG, for instance, focuses?on?providing self-directed 401ks and similar accounts to investors through providers.?Here,?there's definitely an in-house CCO, and with more AUM comes higher risk marketing such as hypothetical performance, predecessor performance, and similar. These firms often nail the basics around marketing: they know not to hide net performance, they're presenting fair and balanced information. They trip up on less used parts of the rule, such as on testimonials and third-party ratings, or infrequent applications of known parts, such as TPFG's usage of hypothetical performance on their website. This can be a powerful reason for bringing on AI. The model knows the full rule, the parts that are rarely used just as well as those that are used everyday, and can apply it consistently. Reach out for a free AI-powered website audit to make sure you're not running afoul of any part of the rule!