News & Events – Bates Research

On August 3, 2022, SEC staff issued new guidance addressing conflicts of interest under the Regulation Best Interest (“Reg BI”) standard for broker-dealers and the fiduciary standard for investment advisers. While the staff bulletin states clearly that the guidance is intended only to be a reflection of internal views on the subject, its tone, comprehensiveness (replete with numerous examples), and even its pragmatic question-and-answer format warrant careful attention. Read our full analysis for details on this new guidance and how it could impact your firm or clients.

The mandatory compliance deadline for the SEC marketing rule—which replaced the former Advertising Rule and the Cash Solicitation Rule—is November 4, 2022. Advisers should be reviewing, revising, and preparing to implement procedures and policies to prevent potential violations. There’s still time, but there’s also a lot to consider, as the rule consolidates previous SEC guidance, no-action letters and exam findings on questions concerning recommendations, testimonials, and the presentation of performance metrics. Here’s what you need to know.

FINRA has filed with the SEC proposed changes to FINRA Rule 3110 to add new Supplementary Material 3110.19 (Residential Supervisory Location). The changes allow a home office to be considered a non-branch “residential supervisory location” under certain conditions. By this proposal, FINRA is adapting to a new, post-pandemic model in which employees work at both conventional offices and in their private residences—a model which FINRA acknowledges is likely to “endure.” Read the full article for details on these proposed rule changes.

An inevitable—if somewhat subtle—milestone was reached this month for Regulation Best Interest. Posted on FINRA’s monthly dispute resolution statistics page are numbers related to the top 15 security types in customer arbitrations, and coming in at number 14 (through May 2022) was Reg BI. Other recent developments in dispute resolution include movement on rule proposals concerning accelerating processes for elderly claimants, and amendments to align the arbitration code with a new federal law on sexual assault and harassment. FINRA also committed to producing a plan to enhance the transparency of the arbitrator selection process. In addition, the SEC has issued a new primer on arbitration and mediation. Here are the highlights to note.

Timed to coincide with World Elder Abuse Awareness Day on June 15, 2022, federal and state government officials issued proclamations, advisories, and new resources to help in the fight against senior financial abuse. Despite many government initiatives now in place to go after the perpetrators of elder financial abuse, the problem continues to grow. Taken together, these latest government alerts offer a snapshot of where things stand. In this article, we take a look at the most significant developments.

It has been clear for some time that regulators are targeting special purpose acquisition companies (“SPACs”) for increased scrutiny, tighter rules, and aggressive enforcement. Both the SEC and Senate legislators are proposing new rules and laws governing SPACs. This regulatory and legislative activity comes amid poor overall SPAC performance and volatility. In this post, we review the proposed SEC regulation, Senator Elizabeth Warren’s SPAC report, the anticipated legislation, and current conditions.

What is a Non-Fungible Token (NFT)? We've all heard of NFTs by now, and when this term comes up in the news or a talk with friends, there is no shortage of opinions. In this article, we examine what NFTs are, how they work, and some of their potential risks and benefits. 

In a conversation with FINRA President Robert Cook at FINRA’s annual conference last week, SEC Chair Gary Gensler discussed his agency’s rulemaking agenda by explaining that the market is in the midst of a transformation that requires adjustments, modernizations and updates to existing regulations. The next day, Chair Gensler addressed an audience of State securities regulators on the implication of digital engagement practices on broker-dealer and adviser obligations. Here are some of the highlights from both events.

As part of SEC Chair Gary Gensler's ambitious cybersecurity agenda, the SEC has proposed rules and and made strides to address a number of its 2022 priorities. In a January 2022 speech before the Northwestern Pritzker School of Law’s Annual Securities Regulation Institute, Chair Gensler listed four targets for revised regulatory policy: (i) SEC registrants; (ii) public companies; (iii) service providers that work with SEC registrants; and (iv) the SEC itself. To date, he has moved the ball forward on the first two of these targets, and his most recent announcements suggest more to come. In this article, we review the recent SEC rule proposals and look at the most recent developments. 

In its annual priorities report, the SEC Examinations Division focused on areas of “heightened risk to investors, registrants and the markets.” The priorities list serves as both a reflection of new and evolving threats, and as a reminder for firms to address compliance gaps or deficiencies the Division observed over the past fiscal year. In this article, Bates reviews the report in detail as we adapt our own annual summary Chart to track the SEC's evolving priorities.

In a recent article assessing the regulatory horizon for cryptocurrency, Bates identified several areas of uncertainty which raised certain questions. We may now have answers to those questions in the form of an Executive Order and accompanying Fact Sheet on “ensuring responsible development of digital assets,” issued by President Biden on March 9, 2022. Here is an overview of the main points.  

The SEC Division of Examinations has just released its 2022 examination priorities report, focusing on Private Funds, ESG Investing, Standards of Conduct (including Regulation Best Interest, Fiduciary Duty, and Form CRS), Information Security and Operational Resiliency, and Emerging Technologies and Crypto-Assets. Stay tuned for our annual commentary, coming soon.

As cryptocurrency becomes more mainstream, many people are looking to learn more, including bankers and regulators. Financial institutions are also currently trying to determine how to integrate cryptocurrency into the traditional banking and investment worlds. Read the full article from Managing Director Brandi B. Reynolds and Consulting Expert Paul Nelson to learn about five common cryptocurrency misconceptions and how Bates can help your firm.

A determined litigant is hoping to define, or redefine, a type of cryptocurrency through a lawsuit against the Internal Revenue Service. The cryptocurrency involved is Tezos, one of several cryptocurrencies that rely on “proof of stake” as the validation method for additions to a blockchain. This matter is significant, as Tezos has a unit value of about $4 and a market value of about $8 billion. Tezos is one of the currencies available for use in smart contracts—self executing contracts where the parties can verify performance without an intermediary. Learn more about how this suit may redefine Cryptocurrency for tax purposes in this article authored by Bates consulting expert Paul Nelson.

Determining if you are a money transmitter and then navigating the licensing requirements can be a daunting task. This guide is meant to ease the pain of that process with some helpful tips as well as great resources. We'll take a look at who needs a money transmitter license, what the licensing process involves, and other helpful resources.

On January 1, 2021, the Anti-Money Laundering Act ("AMLA") became law. The far-reaching legislation expanded the Bank Secrecy Act regulatory framework by, among other things, establishing a beneficial non-public ownership database and reporting requirements under AMLA’s Corporate Transparency Act; promoting technology and other innovation to support enforcement, particularly concerning SARs; expanding enforcement authority over art, antiquities and real estate; and increasing penalties for AML violations. The story of FinCEN’s regulatory efforts since the passage of AMLA is the story of the agency working to effectuate those mandates. In this post, Bates looks at where we are in that story with the following regulatory developments.