Webinar Replay

Click Here to Download the Summary Below

🔍 Key Compliance Themes & SEC Focus Areas for 2025

1. SEC's Examination Objectives

• Investor Protection: To ensure IARs are acting in clients’ best interests.
• Market Integrity & Risk Monitoring: Identifying emerging risks and adapting regulation.
• Enforcement Through Fiduciary Duty: When no explicit rule applies, the SEC may enforce through the broad principle of fiduciary duty—a concept that’s evolving.

📌 Learn more about the SEC’s Office of Compliance Inspections and Examinations (OCIE):
https://www.sec.gov/ocie

2. Top Deficiencies and Compliance Risks

➤ Marketing Rule Violations

• Many firms still misunderstand the SEC Marketing Rule (adopted May 2021).
• Applies to even a single recipient if performance info is shown.
• Must disclose all assumptions and methodologies in hypothetical performance scenarios.
• Third-party ratings require disclosures about selection criteria, total surveyed, and independence.

📘 Rule reference: SEC Investment Adviser Marketing Rule (Rule 206(4)-1)
https://www.sec.gov/investment/im-guidance-2021-01.pdf

➤ Form CRS Deficiencies

• Most common exam deficiency in recent years.
• Must:
  • Be prominently linked directly from your website
  • Show the most recent review date (even if nothing changed)
  • Include all required SEC “conversation starters” verbatim
  • Avoid internal references like “see above”
• Records of delivery (digital or physical) are required.

📘 Form CRS FAQs:
https://www.sec.gov/investment/form-crs-frequently-asked-questions

➤ Custody Rule Oversights

• Having the ability to move client money = custody.
• Being a trustee, executor, or having SLOAs to third parties may trigger custody rules.
• Custody requires:
  • Amending Form ADV to reflect custody
  • Surprise audits by a PCAOB-registered auditor
• Even successor trusteeship or login access to client accounts using their credentials may count.

📘 Custody Rule Overview:
https://www.sec.gov/investment/custody-faq

3. Fiduciary Duty: Loyalty and Care

• Loyalty: Always put the client’s interest above your own—even in small matters like accepting a discount from a client.
• Care: Make recommendations based on your expertise as if you were in the client’s position.

📘 Fiduciary Duty Guidance:
https://www.sec.gov/investment/im-guidance-2019-01.pdf

4. Disclosures & Regulatory Filings

• “Say what you do, and do what you say.”
• All disclosures across:
  • Form ADV Part 1 and 2
  • Form CRS
  • Advisory Agreements
  • Website and marketing materials
    ...must match and be updated concurrently.
• Avoid disclosing risks for services you don’t actually offer—this is considered misleading.

5. Fees and Compensation Risks

• States may consider >2% advisory fees “excessive” (e.g., Maryland).
• Watch for:
  • Hidden fees
  • Inconsistencies in ADV, agreements, and custodial billing
  • Charging for financial plans + AUM (risk of "double dipping")

Check competitor pricing using:
https://www.adviserinfo.sec.gov (use the zip code search)

🔐 Cybersecurity and Emerging Tech

• Cyber threats remain a priority.
• New issues around AI note-taking tools and client privacy (e.g., sharing SSNs on recorded Zoom calls).
• Must implement policies and train staff on use of AI, digital assets, and other tech tools.

📘 Reg S-P and cybersecurity compliance guidance:
https://www.sec.gov/rules/proposed/2023/34-96975.pdf

📋 Operational Best Practices

➤ Written Policies Must:

• Be tailored to your firm
• Specify who is responsible for updates (especially for Form CRS)
• Avoid "off-the-shelf" templates that list irrelevant services

➤ Recommended Blotters/Logs:

• Trade error log
• Client complaint log
• Gift log (including gifts received)
• Terminated clients
• Personal securities transactions
• SLOA and custody reviews
• Cybersecurity incident log

🧠 Training, Testing, and Documentation

• Annual reviews are not enough—quarterly check-ins advised.
• Email and trade reviews should be done weekly or quarterly, depending on activity.
• Document all compliance testing and decisions.
• Compliance culture must be top-down: management must lead by example.

🧾 Examination Process Overview

1. Initial Call/Notice
2. Document Request Letter
3. Secure Uploads with Responses
4. Follow-up Requests
5. Exit Interview & Letter
6. Respond to Deficiencies

📝 Tip: Only answer the questions asked. Don’t over-explain or open new doors.

🎯 Final Takeaways

• The SEC expects a mature understanding of compliance, especially as you grow from state to SEC registration.
• AI, crypto, and tech are increasingly under scrutiny.
• Document. Disclose. Train. Test. Repeat.