In a word, 2021 was – tricky. It was a year where firms continued to feel the effects of the ongoing pandemic while working diligently to meet their annual compliance obligations with a (mostly) remote workforce. Luckily, many firms have shown their ability to adapt to the regulatory challenges thrown their way, regardless of their working conditions.
Before we put 2021 fully behind us, we wanted to reflect on the year to review what firms and regulators were up to, and to pin point some of the successes as well as the downfalls. Without further ado, let’s look back on some of the top takeaways from the year and briefly discuss some of the anticipated regulatory changes coming our way in 2022.
Top Training Courses (Firm Element)
Looking back, we can gauge which topics and industry trends firms were most focused on by simply looking into the training courses that were completed throughout the year. While we continued to deal with the uncertainty of the pandemic, it’s not surprising that firms were delivering courses focused on cybersecurity and business continuity planning. Cybersecurity has been in the limelight for several years now, but it’s become even more popular with the growth in remote workforces. On top of that, firms placed an emphasis on Regulation Best Interest (Reg BI) training, which has been in effect for nearly 18 months.
Here are Quest CE’s top ten firm Element courses, based on completions in 2021.
- Annual AML Update: COVID-19 Risks, Legislative Updates, and Enforcement Actions
- Reg BI Compliance for Broker Dealer Representatives and Principals
- Regulation Best Interest (Reg BI) and Associated Materials
- Conducting Business in a Pandemic: BCP and Regulatory Guidance
- Ethics and Professional Conduct
- Anti-Money Laundering and the Red Flag Rule
- Cybersecurity & FINRA
- Anti-Money Laundering Compliance Obligations for Retail Representatives
- Cybersecurity for Registered Representatives
To browse our complete course catalog, click here.
While firms continued to focus on Reg BI and cybersecurity, regulators were busy creating and amending rules across the industry. For starters, the SEC kicked off the new year by adopting a modernized marketing rule for Investment Advisers. The new Marketing Rule replaced two rules under the Advisers Act, rule 206(4)-1 (Marketing Rule), originally adopted in 1961, and rule 206(4)-3 (Solicitation Rule), originally adopted in 1979. The new rule reflects market, technological and regulatory changes that have occurred since the rules were originally adopted.
The SEC’s new Marketing Rule may have been one of the most influential updates to take off in 2021, but it certainly wasn’t the only one. Some other notable updates include, the addition of the country’s second data protection act, which will go into effect in Virginia on January 1, 2023, the adoption of the NAIC Best Interest annuity training requirement in several jurisdictions, the strike down of New York’s Regulation 187, and several more. To take a deeper dive into some of the regulatory changes from the past year, check out the respective articles below.
- SEC Marketing Rule for IAs
- Virginia Consumer Data Protection Act.
- NY Strikes Down Regulation 187
- FINRA Short Interest Reporting
- FINRA Annual Regulatory CE
- NAIC Best Interest Adoption
SEC Risk Alerts:
The SEC’s Division of Examinations kept busy in 2021 issuing a total of nine risk alerts. This year’s observations ranged in topics from ESG investing shortfalls to concerns involving digital asset securities. As a refresher, we’re including some of the risk alerts that were most influential to broker-dealers and registered investment advisors.
- Continued Focus on Digital Asset Securities
- Suspicious Activity Monitoring and Reporting at Broker-Dealers
- Review of ESG Investing
Shortfalls: Where did BDs/RIAs come up short on their compliance obligations?
While going live in the midst of a global pandemic, it’s not all that surprising that firms have proven to fall short of their Reg BI obligations. In a recent report from NASAA, it was discovered that many Reg BI firms were found to be operating under the suitability standard, versus the the new Reg BI standard. While it was a big contributor to firm issues in 2021, Reg BI wasn’t the only area firms fell short. The SEC issued a press release in late November discussing some of the top enforcement actions from the year. These include, failing to file and deliver Form CRS in a timely manner, regulation crowd funding, securities fraud, and much more. The articles below provide further detail on the shortfalls from the past year.
What to Expect in 2022
We may not know every change that’s coming in 2022 and beyond, but we do know one thing – for the first time, investment adviser representatives (IARs) will be required to complete a specified number of continuing education (CE) credits on an annual basis. NASAA’s newly adopted IAR CE model rule intends to put IARs on the same playing field as broker-dealer agents, insurance agents, financial planners and other professionals in the industry who are required to complete CE on a regular basis.
Despite NASAA adopting this new model rule, not all registered IARs will need to fulfill the requirement for the first year, or even at all. Starting January 1, 2022, IARs that are registered in jurisdictions that have adopted the model rule will be subject to comply with NASAA’s requirements. While some states may elect to adopt the model rule in its first year, others may choose to adopt the rule at a later date, if at all. While states determine whether to adopt the model rule, IARs should be aware of the requirements and be prepared to meet them if/when the time comes.
Follow the links below for more information on the IAR CE model rule.