Navigating the Regulatory Fairway

Anniversary Letter

When Rory McIlroy finally captured golf’s elusive career Grand Slam this spring in Augusta, fans around the world were reminded of an enduring truth that such achievements often demand patience, resilience, focus, and the ability to adapt under ever-changing conditions. For those of us navigating the regulatory fairways of the investment advisory world, the past year required similar skill and endurance.

Between unprecedented Supreme Court decisions reshaping the SEC’s enforcement authority, and the SEC’s recent pullback of numerous proposed rules in a rare move, the compliance landscape has shifted dramatically during this past year. Two important Supreme Court rulings have had significant impacts.  The first overturned the longstanding Chevron Doctrine, removing decades of judicial deference granted to agencies like the SEC, thereby increasing the scrutiny that future rulemaking will likely face. The second ruling required SEC civil enforcement actions seeking penalties to be tried before juries rather than through internal administrative proceedings, which will also likely impact the SEC’s enforcement strategy going forward.

Reflecting on these changes and navigating the current political realities following the November 2024 election cycle, the SEC formally withdrew 14 proposed rules, which were subject of much debate within the industry and included topics such as predictive data analytics, human capital reporting requirements, various ESG disclosures, and even aspects of climate-related financial risk reporting. Although the withdrawals signaled a regulatory modification, the SEC remained vigilant on other critical fronts.

Artificial intelligence (“AI”) continues to be a notable focal point, with the proposed “Conflicted Practices” Rule still pending, aimed at addressing potential conflicts arising from AI-driven client interactions and portfolio recommendations. RIAs must now carefully evaluate how AI influences client outcomes and whether those influences are properly disclosed and managed.

Enforcement actions related to the Marketing Rule were present, particularly around hypothetical performance and testimonials/endorsements. Firms were reminded that social media and modern digital platforms require compliance oversight every bit as much as traditional marketing.

Cybersecurity and off-channel communications remain areas of review and enforcement, with continued emphasis on strong oversight, clear documentation, and effective incident response processes. Additionally, states continued to adopt NASAA’s Investment Adviser Representative Continuing Education model, adding another layer of compliance for advisory firms to manage. At the same time, FinCEN and the SEC continued discussions around proposed Anti-Money Laundering and Countering Financing of Terrorism rules for RIAs, signaling another potential compliance shift still ahead.

Amid all these undulations, that include both legal, as well as political realignments, and what seem to be ever-changing regulatory expectations, you have all continued to demonstrate remarkable adaptability and remained focused on your clients’ interests and financial well-being.

At The Consortium, we’re proud to support your efforts, ensuring you remain informed, prepared, and compliant through every change. As you reflect on this Independence Day, we hope you’ll take pride in navigating the changing regulatory landscape. Your dedication mirrors the patience and perseverance exemplified by champions like Rory McIlroy playing the long game, adapting to uncertainty, and ultimately achieving a desired outcome.

Have a safe and enjoyable 4^th of July, everyone!

–Todd Sakoda
–John T. Carr
–Lisanne M. Butterfield
–Greg Walsh

The Consortium has been lifting the burden of compliance for advisors since July 4, 1989.

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If you are the Owner, CEO, President, Chief Compliance Officer – even the person in charge of marketing – you have a burden to comply with the securities laws. Our team of Professional Weightlifters has an array of compliance services and resources to lift that burden off your shoulders.

If you need a compliance partner providing boots on the ground support, our on-going consulting services may be the solution for you.

If you’re looking for cost effective ways to stay in the loop, checkout our regular publications:

If you are a do-it-yourself type person, we offer a number of compliance resources and programs:

RIA Fast Track Program

Includes compliance resources and consultations to get your operations up and running. Designed as a start-up service for new RIA firms, it is a part do-it-yourself and part “Ask the Expert.” If you are creating a new RIA, contact us for details.

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RIA Pump It Up Refresher Course

Includes compliance resources and consultations to get your operations in tip-top shape.  Designed to lift the burden of compliance off your shoulders in an efficient and economic manner, it is a part do-it-yourself and part “Ask the Expert.”  If you need to dust off your compliance files, contact us for details.

Compliance Resources

Both educational and easily customizable to your practice are available for your use.

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If you need a compliance partner providing boots on the ground support, our on-going consulting services may be the solution for you.

• Our Professional Weightlifters are available to help you stay on top of the compliance environment and help you remember all those compliance do’s and don’ts.
• Need more time in your day? We assist you with the implementation of your compliance responsibilities.
• Contact The Consortium to see how we can be of assistance to you: [email protected] or (971) 801-1346.