RIA Compliance Consultants, Inc.

A recent jury decision in a significant SEC enforcement action underscores the risks and complexities facing investment adviser firms whose representatives also hold insurance licenses and sell fixed indexed annuities (FIAs). The SEC secured a jury verdict against an investment adviser firm and its representative for breaching fiduciary duties, primarily through inadequate disclosure of substantial commissions from FIA sales. The jury found that the adviser and its representative failed to disclose to their clients significant upfront commissions, among other conflicts of interest. Specifically, the SEC asserted that the representative allegedly received approximately 7% commissions on FIA sales, significantly higher than the firm's standard asset management fees (approximately 1.5% to 2.0%). Additionally, the representative allegedly recommended clients replace existing annuities prematurely, resulting in substantial surrender charges for clients and new commissions for the adviser. The recent SEC jury decision is a clear warning to all investment adviser firms involved in FIA sales. Adherence to robust disclosure practices, required client acknowledgment, adjustments to compensation structure, and rigorous supervisory measures are essential to mitigate regulatory risks and uphold fiduciary duties. For details about best practices to mitigate this type of conflict of interest, please consider purchasing our IAR CE course, SEC Enforcement of Investment Adviser Recommending Fixed Indexed Annuities, available at https://lnkd.in/eTFgkmKD . Important Disclosure: This blog post is provided for informational purposes only and should not be considered as legal advice or a comprehensive analysis of the topics discussed. Readers are encouraged to consult with their compliance professional or attorney for specific guidance relevant to their circumstances. The information presented is based on publicly available details, and accuracy cannot be guaranteed. #SEC #RIACompliance #InvestmentAdvisers #FIAs

Under the new leadership of Acting Chair Mark Uyeda, the U.S. Securities and Exchange Commission (“SEC”) recently issued and settled a cease-and-desist order that serves as a stark reminder: the fiduciary duty to act in a client’s best interest remains the bedrock for an investment adviser. According to the SEC order, an investment adviser firm and one of its representatives allegedly failed to provide adequate fee disclosures when converting certain clients from brokerage accounts to investment advisory accounts. The SEC asserted that these newly converted advisory accounts were charged fees based on a percentage of assets under management, rather than brokerage commissions. Given that many of the converted accounts had relatively minimal trading activity, the shift purportedly led to higher overall costs for clients. According to the SEC, the clients allegedly did not receive additional services or benefits commensurate with this increase in costs. For more details and best practices that an investment adviser might consider, please see the link in the comments. While the order does not necessarily signal a change in the SEC’s enforcement approach, it underscores the fact that fundamental obligations – providing full disclosure of any conflicts of interest and only giving investment advice in the best interest of the client —still matter as much as ever, irrespective of who is at the helm. #RIACompliance #InvestmentAdvisers #InvestmentAdvisors #Fiduciary Disclaimer: The information contained in this post is general in nature intended for educational purposes only and is not a comprehensive analysis of this topic. This is merely a summary and does not necessarily include all material facts from the proceeding or order. The author has not verified the accuracy of the regulator’s press release or order and is not offering any opinion whether the allegations made by the securities regulator are accurate. This post is not intended to constitute compliance consulting advice or apply to any particular investment adviser firm’s specific situation. Please consult the applicable securities regulator’s order, rules, and published guidance for more details about the topics referenced above.

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Last Call for Form 13F! If your investment adviser firm exercised investment discretion over $100 million or more of Section 13(f) securities as of the last trading of any calendar month in 2024, your investment adviser firm is required to file the Form 13F by Friday, February 14, 2025. Form 13F must be filed within 45 days of the end of the calendar year when the threshold was reached by the investment adviser firm, and three subsequent reports are required to be filed within 45 days of the end of the first three calendar quarters of the year: Q1 2025: May 15, 2025; Q2 2025: August 14, 2025; and Q3 2025: November 14, 2025. Failure to file Form 13F on time can result in significant penalties.

If your investment adviser firm is a large trader, have you verified whether it is required to file Form 13H? Under Section 13(h) of the Securities Exchange Act of 1934, investment adviser firms that meet the definition of a large trader must file Form 13H with the SEC. An investment adviser firm qualifies as a large trader if it exercises discretionary authority over accounts that, in aggregate, execute transactions in exchange-listed securities meeting either of the following thresholds: 📌 2 million shares or $20 million in a single trading day; or 📌 20 million shares or $200 million in a single calendar month. An investment adviser firm that meets the large trader thresholds must file Form 13H within 10 days of qualifying. The SEC then assigns a large trader identification number (LTID), which the investment adviser must disclose to all broker-dealers executing transactions on its behalf. This disclosure must include a list of all applicable accounts held at each broker-dealer. Often, an investment adviser firm may become aware of its large trader status through a notification from a qualified custodian, particularly if all trades are placed through a single custodian. However, investment advisers should proactively monitor their trading activity to determine whether they meet the filing threshold. After the initial filing, investment adviser firms must file Form 13H annually within 45 days after the end of each calendar year. Additionally, firms must submit amended filings promptly at the end of any calendar quarter in which information on the Form 13H has become inaccurate. In December 2020, the SEC issued a Risk Alert regarding its assessment of investment advisers’ and broker-dealers’ compliance with Rule 13h-1 and Form 13H obligations. SEC-registered investment advisers should ensure their compliance policies and procedures address large trader reporting requirements and that their trading activity is being actively monitored. #SEC #InvestmentAdvisers #InvestmentAdvisors #Form13H Disclosure: This regulatory alert is a brief summary which is general in nature and offered only for educational purposes. It should not be considered as a comprehensive review or analysis of this obligation. There are certain requirements and exceptions outlined in the rule which are not covered in this regulatory alert. This communication is not intended to constitute compliance consulting advice or apply to any particular investment adviser firm’s specific situation without further analysis. This regulatory alert is not a safe harbor. The reader should study the actual guidance, rule or enforcement action in detail and consult with his or her compliance professionals. This information in this regulatory alert may become out of date. RIA Compliance Consultants, Inc. is not a law firm and does not provide legal services. This communication is not legal advice.

As we move into 2025, it is crucial for investment adviser firms to stay on top of their regulatory obligations, particularly the requirement to file Form 13F. This filing is mandated by the U.S. Securities and Exchange Commission (SEC) for investment adviser firms which exercise investment discretion over $100 million or more in Section 13(f) securities as of the last trading day of any month during the past calendar year. Determining Whether Required to File: In order to determine whether your investment adviser firm had discretion over $100 million or more of 13(f) securities on the last trading day of any month during the past calendar year, here’s a link to the current list of 13(f) securities at the website of the SEC.  Form 13F must be filed within 45 days of the end of the calendar year when the threshold was reached, and three subsequent reports are required to be filed within 45 days of the end of the first three calendar quarters of the year. Updated Filing Deadlines: The SEC has updated the filing deadlines for Form 13F for the calendar year 2025. Here are the key dates to remember: Q4 2024: February 14, 2025; Q1 2025: May 15, 2025; Q2 2025: August 14, 2025; Q3 2025: November 14, 2025; and Q4 2025: February 14, 2026. Importance of Timely Filing: Failure to file Form 13F on time can result in significant penalties. The SEC has been vigilant in enforcing these requirements, as evidenced by recent fines imposed on firms for non-compliance. It is essential to ensure that your filings are accurate and submitted by the deadlines to avoid any regulatory issues. Disclosure: This regulatory alert is a brief summary which is general in nature and offered only for educational purposes. It should not be considered as a comprehensive review or analysis of this obligation. There are certain requirements and exceptions outlined in the rule which are not covered in this regulatory alert. This communication is not intended to constitute compliance consulting advice or apply to any particular investment adviser firm’s specific situation without further analysis. This regulatory alert is not a safe harbor. The reader should study the actual guidance, rule or enforcement action in detail and consult with his or her compliance professionals. This information in this regulatory alert may become out of date. RIA Compliance Consultants, Inc. is not a law firm and does not provide legal services. This communication is not legal advice. An investment adviser firm which has failed to file Form 13F in accordance with the Securities and Exchange Act of 1934 should immediately consult with qualified legal counsel about self-disclosing such violations to the SEC. #RIACompliance #SEC #InvestmentAdvisers #InvestmentAdvisors #13F

An investment adviser firm’s Final Renewal Statement is now available in the firm’s IARD account and should be carefully reviewed by the firm (and depending upon the circumstance certain additional action may be required by the firm). An investment adviser firm’s Final Renewal Statement reconciles what was charged on the Preliminary Renewal Statement with what is actually owed as the start of the new calendar year. The Final Renewal Statement confirms whether an investment adviser firm must pay an additional amount, received a refund (i.e. credit) to its Flex-Funding Account or is Paid-in-Full. When reviewing the Final Renewal Statement, an investment adviser firm should confirm whether the renewal fees have been paid in full or whether additional funds are required to be paid. The investment adviser firm should also confirm that the investment adviser firm and its investment adviser representatives (“IARs”) are properly registered or noticed filed in the applicable jurisdictions. If the Final Renewal Statement indicates “Failed to Renew”, an investment adviser firm will need to contact immediately each applicable state securities regulator to determine what will be required by the state securities regulator. If an investment adviser firm owes additional fees on the Final Renewal Statement, the investment adviser firm must pay by the Final Renewal Statement’s due date (for 2025 renewals, the due date is Friday, January 24, 2025). An investment adviser firm should check IARD.com for each year’s renewal program calendar for the exact date when payments are due for the Final Renewal Statement. #IARD #RIACompliance #InvestmentAdvisers #InvestmentAdvisors ⚠️ Important Information This post is for general educational purposes only and should not be considered advice to the reader. This post is not comprehensive and merely a summary of certain requirements. It does not address all of the licensing requirements or any exceptions of the securities regulator. A client relationship is not created by merely reading this post. For additional information or specific guidance, the reader should consult with his or her compliance consultant for advice tailored to the reader’s specific circumstances.

In order to ensure that Investment Adviser Representative Continuing Education (“IAR CE”) credits are processed before the CRD system’s year-end shutdown, Investment Adviser Representatives with an IAR CE obligation for 2024 will have until Friday, December 20, 2024 to complete all required IAR CE credits through CE4Advisers.com. This is especially critical for individuals relying on IAR CE credits to prevent their registration from failing to renew. For those still in need of IAR CE for 2024, RIA Compliance Consultants offers a la carte courses for $20 each, or a bundle of 12 courses for $200 available at https://lnkd.in/gQ7NZb4N. These courses are delivered in video format on our dedicated IAR CE website, CE4Advisers.com. Contact us with any questions at ContEd@ria-compliance-consultants.com.

Don’t let your IARD Renewals go off the rails! Time is running out to fund your investment adviser firm’s FINRA account for the 2025 IARD renewal season! The deadline to pay your firm’s Preliminary Renewal Statement in full is Monday, December 9, 2024. If you haven’t already made your payment, now’s the time to act! Double-check that your payment has posted so your registration renewal stays on track for 2025. Don’t start the new year with a compliance headache—take action now! #RIACompliance #InvestmentAdvisers #InvestmentAdvisors #IARDRenewal #DontMissTheDeadline ⚠️ Disclosure: This post is for general educational purposes only and should not be considered advice to the reader. A client relationship is not created by merely reading this post.