Before you go racing off into the weekend I wanted to share a few things that happened this week to keep you up to date with all things SEC and compliance and the happenings in the My RIA Lawyer office.?
- The SEC has issued a 10-year prohibition against an investment advisor who it said lost his clients millions of dollars after putting them in private placements that were unsuitable for them. The SEC cited a district court decision dated August 16, 2022 against Jacob Glick, which found he violated the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. According to the regulator’s complaint relating to the case, Glick used his discretionary authority to place clients in unsuitable and risky investments between mid-2016 and mid-2018, leading to losses of almost $2 million. The regulators aren’t playing games and are bringing strong measures against anyone found violating the regulations and harming investors. You can read the full order here.?
- FINRA has fined RBC Capital Markets $75,000 after finding the firm failed to provide mutual fund sales charge waivers and fee rebates to eligible clients. FINRA found deficiencies in the firm’s supervisory system, which failed to offer rights of reinstatement benefits to over 1,450 accounts, resulting in clients paying $264,939 in unnecessary sales charges and fees. RBC’s system’s alert parameters were set to identify only transactions with a principal amount exceeding $1,000 and reinstatement windows of 100 days or less. This meant that many eligible transactions were not detected by the alert system. According to FINRA, about 80 percent of the missed rights of reinstatement benefits between January 2016 and December 2021 involved transactions that either had a principal amount under $1,000 or had a reinstatement window longer than 100 days. You can read more about this case HERE.?
- FINRA has sent out a notice to remind member firms of the regulatory obligations when using generative AI and large language models. FINRA intends for its rules and guidance to be technologically neutral and to function dynamically with evolutions in technology and member firms’ processes. The rules apply when member firms use AI, including Gen AI or similar technologies, in the course of their business, just as they apply when member firms use any other technology or tool. For example, pursuant to Rule 3110 (Supervision), a member firm must have a reasonably designed supervisory system tailored to its business. If a firm is using Gen AI tools as part of its supervisory system—for the review of electronic correspondence, for instance—its policies and procedures should address technology governance, including model risk management, data privacy and integrity, reliability and accuracy of the AI model. Moreover, FINRA rules apply whether member firms are directly developing Gen AI tools for their proprietary use or when leveraging the technology of a third party, including through embedded features in existing third-party products. Now is a good time to check the policies and procedures you have around the use of AI in your firm and to make sure that you are keeping up to date with any regulation changes being implemented by the regulators. You can read the full notice from FINRA HERE.?
To find out more about any of these individual cases we strongly recommend you check out the SEC’s website.?
2 Things that happened in My RIA Lawyer office!
- My RIA Lawyer in the media! Something that I don’t think is talked about enough when it comes to RIA firms and their clients is the fact that we all get older.? And as we age our priorities change. This means that as your clients grow with you their priorities are always changing. Not only does this mean you need to be aware of the needs of your client, but you also need to be aware of the compliance obligations that change as they age as well. Not sure what I’m talking about? I was recently asked to give me thoughts on planning to 95 and what that means for your firm and your compliance. Check out the full article here.?
- It’s time to be conscious about the compliance decisions you are making for your firm. Imagine having all your compliance needs met in one place, seamlessly integrated and managed for you. That’s where our Outsourced Compliance Department comes in. We offer a comprehensive solution that handles everything, so you don’t have to pay multiple providers or deal with the inefficiencies of a piecemeal approach. Ready to simplify your compliance process and cut through the clutter? Reach out today to find out how our Outsourced Compliance Department can do it all for you, efficiently and effectively, in one place.?
Know someone that is looking for the next breakthrough speaker at their event, conference or continuing education event? I am currently booking opportunities for the end of 2024 and start of 2025, and would love nothing more than to totally change the way a room of finance professionals view compliance. I have extensive experience guiding start-ups as well as acting as the CCO or general counsel to RIAs BDs and TAMPs with billions of dollars in assets under their management. Having spoken this year at events such as:?
KITCES IAR Ethics Continuing Education Day?
Fearless Investing Summit?
Invest in Women Conference?
Next Level Tax Planning Summit
Dimensional Fund Advisors Deals & Succession Conference
