News & Events – Bates Research

In a significant number of directed actions, the SEC has communicated that it intends to move aggressively to encourage ESG investing and to develop frameworks for compliance. The emphasis on ESG-related compliance in the alert follows from the agency’s elevated focus on climate change as an emergent priority. It also stems from a host of moves by SEC Acting Chair Allison Herren Lee on the subject, including the creation of an ESG taskforce, the issuance of investor guidance on ESG funds, and the adoption of a new strategic approach, among others. In this article, we highlight current compliance triggers in the context of recent SEC ESG-related activity.

Federal and state legislation to legalize cannabis and regulate related businesses moved forward this month with a bipartisan reintroduction of the federal Secure and Fair Enforcement (“SAFE”) Banking Act and the passage of a New York law creating a regulatory licensure and taxation framework for producers, distributors, and retailers of marijuana. The implications of these actions are significant. In this article, we look at the New York law and revisit the bipartisan SAFE Act, two efforts that cover the spectrum on cannabis regulation. Learn how these developments might impact your firm and clients.

The new Anti-Money Laundering Act (AMLA), which became law on January 1, 2021, expanded the Bank Secrecy Act regulatory framework, requiring substantial attention to additional regulator guidance and AMLA-related proposed rulemakings. On April 1, 2021, FinCEN issued an Advance Notice of Proposed Rulemaking (ANPRM) on beneficial ownership reporting. On March 29, 2021, the SEC Division of Examinations issued a risk alert on AML program compliance, and, in particular, red flag areas where broker dealers can improve their suspicious activity monitoring and reporting. In this article, Bates takes a closer look at these two new AML developments and what it means for your firm.

Recent FINRA activity demonstrates the continuous set of demands on the organization to maintain progress on ongoing initiatives (addressing broker misconduct); keep up with market events (risks associated with social media-driven trading); and continue providing services (arbitration and dispute resolution) during unprecedented conditions (the pandemic). Bates takes a look at FINRA’s new rules and guidance in this article.

On March 10, 2021, the SEC published an alert in which the Office of Investor Education and Advocacy cautioned investors to be wary of buying into so-called Special Purpose Acquisition Companies (“SPACs”) on the basis of endorsements by celebrities. That alert came out only three months after the SEC Division of Corporation Finance issued its own disclosure guidance on the investment mechanism. FINRA also recently weighed in on emerging anti-money laundering risks associated with SPACs. These efforts indicate that the regulators are paying close attention to the increasing—some say frenzied—popularity of SPAC investments during the current market volatility. In this article, Bates takes a closer look at the emerging SPAC risks, heightened regulatory concerns, and regulatory guidance.

The Securities and Exchange Commission’s Division of Examinations announced its 2021 examination priorities, focusing on climate-related risks, Regulation Best Interest, fiduciary duty for investment advisers, adequacy of disclosures (including for fees and expenses), and attendant risks relating to information security and FinTech, to name a few. In his leadership message, SEC Division of Examinations Director Peter Driscoll described the regulatory and operational challenges of delivering financial services during the pandemic, emergent risks (including on cybersecurity), and the rollout of Reg BI and Form CRS. Bates takes an in-depth look at this, the Division's 2021 priorities, what they could mean for your firm, and how they compare to previous years in our annual chart.

On February 15, 2021, FINRA issued an alert warning firms to pay attention to risks associated with low-priced securities activities. The Notice highlights the basic compliance tools that should be reviewed to address current concerns, including a review of red flag indicators of suspicious activity, adequacy of monitoring systems, and systems for consistent and accurate reporting. In light of their concern that bad actors, looking to take advantage of market urgencies like the COVID pandemic, will continue to perpetrate “pump and dump” and other schemes that exploit those attributes, FINRA underscores the risks of low-priced security transactions as a compliance priority.

Read the article to learn about FINRA's concerns and recommendations for your practice.

The SEC Division of Examinations announced its 2021 examination priorities today, focusing on climate-related risks, conflicts of interest for brokers (Regulation Best Interest) and investment advisers (fiduciary duty), and attendant risks relating to FinTech in its initiatives and examinations. Stay tuned for our annual commentary, coming soon.

Bates continues to track regulatory developments that have long-term impact. Here, we highlight in brief several ongoing matters that affect regulatory compliance, including:

• FINRA Small Broker Annual Report Filing Extension
• DOL Class Exemption
• Lessons from COVID-19 Pandemic
• FINRA Rule on Registered Member Being Named a Customer Beneficiary
• New York Investment Adviser Registration
• NASAA Model Rule on Continuing Education for IARs

Federal enforcement agencies and financial regulators have been warning of increased cyber risks to public and private databases, financial institution infrastructure and retail investors. As financial institutions embrace new fintech solutions while shifting more permanently to remote online work, the pressure to ramp up cybersecurity efforts continues to grow. New York’s influential Department of Financial Services recently estimated that the market for cyber insurance will be over $20 billion in 2025. In this article, we take a closer look at the NYDFS’ Cyber Insurance Risk Framework and note recent communications on cybersecurity federal and state regulators.

In a new publication combining its annual report on observations and exam findings with its report on risk monitoring and program priorities, FINRA is offering a “single authoritative source” for members to turn to for the purposes of adapting their compliance programs and preparing for “emerging issues for the coming year.” In this article we take a look at the highlights from the report and provide our updated annual Bates chart which keeps track of FINRA’s articulated priorities from year-to-year.

In May 2019, Bates Compliance published a review of the supervision, inspection and operational considerations for broker-dealer branch office compliance. Since then, FINRA has broadened its examination priorities, while the COVID-19 pandemic has heightened compliance risks. This updated white paper discusses the responsibilities placed on the supervisors of broker-dealer branches in light of FINRA's broadened priorities and recently updated guidance on remote supervision.

FINRA has announced the publication of the 2021 Report on FINRA's Examination and Risk Monitoring Program. The new Report combines and replaces two previously published annual reports, the Report on Examination Findings and Observations and the Risk Monitoring and Examination Program Priorities Letter.

The new Anti-Money Laundering Act (AMLA) became law on January 1, 2021, extending the “risk-based” AML approach to regulation and enforcement. AMLA is the most significant update to the Bank Secrecy Act rules since the USA PATRIOT Act in 2001. It incorporates substantial changes to the laws governing the combatting of money laundering and terrorist financing. Read the full article to learn about key final provisions that will lead to many changes in industry rules and practices going forward, and how Bates AML and Financial Crimes can support your.

Just prior to the new year, the SEC finalized significant changes to rules and forms governing advertising and cash solicitations under the Investment Advisers Act, replacing both the prior Advertising Rule and Cash Solicitation Rule with a single, broad, “modernized” marketing rule. The new rule also amends investment adviser registration Form ADV and the books and records rule to reflect the related changes. In this article, we detail key provisions of the new rule and how Bates will help your firm navigate and implement this significant rule change.

On December 2, 2020, federal law enforcement cracked down on money mules again in a joint operation involving nine federal law enforcement agencies to “disrupt the networks through which transnational fraudsters move the proceeds of their crimes.” Bates reviews the highlights and takeaways from the recent announcement by the DOJ and partner agencies. Read the full article to learn about this nationwide initiative and the variety of scams utilizing money mules targeting your financial firm, customers, and elder clients in particular.