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3 Tips for Navigating Compliance Changes and Regulations


With the end of the year quickly approaching, many firms are reminded of the required annual compliance review as regulated by the SEC. A large portion of this review includes updating policies and procedures to accurately reflect new guidelines and rules, as well as implementing firm-wide compliance training.

We’ve compiled a list of recent and upcoming regulatory changes advisors should review and address – and how to easily stay on top of your firm’s compliance going forward.

3 Regulatory Updates that Financial Advisors Need to Know

Successful compliance hinges on being informed and taking proactive steps to avoid regulatory breaches. Here are three steps your firm can take to stay on top of their compliance game in 2022 and 2023.

1. Update Your Firm’s Approach to Marketing

We’ve finally reached the compliance date for the SEC’s new advertising rule (as of November 4th) – here’s what you need to know.

The updates to Rule 206(4)-1 (“The Advertising Rule”) make drastic changes to how advisors can market their firms, and the new rule also includes adjustments to other things advisors need to be aware of, like books and records and Form ADV updates.

  • Under the new rule, advisors can now utilize client testimonials in their marketing campaigns, with certain guidelines.
  • You can also now reference and promote third-party ratings, such as Google reviews (again, there are restrictions).
  • Lastly, firms now have better guidance for how and when performance returns can be used in marketing.

While the restrictions on these updated rules are extensive, they also give your firm clear guidance on what’s allowed and what’s not.

This is a good opportunity to review and make updates to your firm’s compliance program and policies – and to conduct new firm-wide compliance training.

2. Create Compliant Performance Reports

A recent investor bulletin from the SEC aims to raise awareness for clients on how performance metrics are calculated. Namely, investors should know that fees and expenses may be included in performance calculations.

The SEC has made it clear that clients (and prospective clients) need to be aware of how investment performance information is attained by your firm, and whether it takes into account the individual investor’s demographic data as well as current market conditions. And it’s doubly necessary that you are clear and transparent about how performance is calculated.

Since the SEC is focusing on performance metrics and methodology, this is a great time for your firm to review your process. Here are a few tips to keep in mind when calculating performance for your clients:

  • Don’t cherry-pick data
  • If any fees or expenses are excluded from performance reports, make sure to clearly state why, as well as how those numbers would affect the outcome if they were to be included
  • Avoid performance guarantees
  • Avoid relying on historical data or benchmark performance in your reports

3. Use Technology to Look Ahead

A successful compliance program is built on a proactive approach. It’s always best to get ahead of potential issues — like concentrated positions, misaligned investment objectives or even assets owned but that client may not want (such as an ESG-focused client owning positions that are decidedly not ESG-friendly).

If you have the right tools in your tech suite, it can be the frontline in helping you stay proactive and identify those potential issues early on, before they turn into problems.

Tech can remove the need to manually spot check client accounts and standardize compliance checks. With the latest in tech solutions, your firm can even filter accounts based on unique criteria like acquisition date or the specific advisor assigned to a client.

With the latest and greatest in your tech stack, you can become automatically alerted to potential compliance issues like inappropriate investments or misaligned objectives.

Compliance for Broker Dealers

We’d be remiss if we didn’t also take a larger look across the financial advice industry, because compliance isn’t just for RIAs – broker-dealers overseen by FINRA also have unique (but often similar) requirements. The area of most focus right now? Cybersecurity.

In addition to monitoring your internal tech against cyber breaches, firms must also be vigilant against vendor risks.

As cyberattacks have increased in number and sophistication during recent years, it’s crucial to review your third-party tech vendors for areas of risk and take action against any foreseeable points of weakness.

Looking Ahead to 2023

According to recent SEC reports, the organization will be stepping up enforcement efforts to address a growing number of complaints. In accordance with that goal, a larger portion of the SEC’s budget will be allocated toward identifying compliance issues. More than ever, firms need to be vigilant about their compliance policies and practices.

Along with increased compliance surveillance, the SEC will also hone in on ESG, crypto, and the IT practices of firms in the new year.

Take Control with Command Center

Now, the proven framework that advisory firms have used to grow the business can empower compliance teams to protect it with Riskalyze Command Center.

Command Center doesn’t operate as a your last defense, it’s a full-fledged solution that puts your compliance team on offence.
With manual account spot-checking, powerful filters, and detailed saved searches, it’s easy to stay on top of compliance. You can even sort clients according to their Risk Number®.

With Command Center, misaligned investment objectives, concentrated positions, and other compliance issues can become a thing of the past. Now you can find accounts that need attention, dive into the holdings, and find solutions for issues without breaking a sweat.

Navigating compliance and regulatory changes is a constant challenge for advisory firms. With Riskalyze, you have more time to focus on what matters: your clients.

Keep Compliant with Riskalyze’s Command Center

Your firm’s compliance is Riskalyze’s top priority.

Click here to learn more or schedule a complimentary tour of our Command Center solution today.