IAA Urges RIA Rule Changes in Letter to SEC Chairman

On May 1^st, the Investment Adviser Association (IAA), sent a letter to the SEC’s new Chairman, Paul Atkins. The IAA is a nonprofit advocacy organization representing the interests of registered investment advisers.

The IAA’s letter essentially acts as a call to action for the Commission’s new regime. In the letter, the IAA’s President and CEO, Karen Barr, applauds then-Acting Chairman Mark Uyeda’s pivot from the “one-size-fits-all” approach of former Chairman Gary Gensler.

Barr continued to outline eight major recommendations:

1. Anti-money Laundering (AML)/Customer Identification Program (CIP). The IAA has procedural and substantive concerns with the new AML rule and CIP Proposal, especially given that the CIP Proposal’s comment period closed before the AML Rule was finalized. The association recommends the SEC collaborate with FinCEN to (1) reopen the CIP Proposal and propose amendments to the AML Rule to address the IAA’s concerns; (2) postpone the AML Rule compliance date until after a CIP rule is finalized; and (3) provide a reasonable compliance period for both rules, once they are better tailored to the business models and resources of advisers, including their level of AML risk. The IAA suggests an 18-month extension for larger advisers and 24-month extension for advisers with 100 or fewer employees. “At a minimum, we ask for confirmation that enforcement and examination of the AML rule will not begin on the current compliance date” of 2026.
2. Regulation S-P. The IAA believes that recent Regulation S-P (Reg S-P) amendments introduce expansive new definitions and impose extensive disclosure and recordkeeping requirements, requiring advisers to overhaul processes and infrastructures to meet new standards for handling unauthorized access to client information. Advisers must also negotiate or renegotiate vendor relationships to address challenging elements like the 72-hour breach notification rule. The IAA suggests (1) the compliance period for Reg S-P amendments be extended for one year to provide advisers with more time to adapt and (2) for the SEC to work with industry leaders to “refine and clarify” the terms and requirements.
3. E-Delivery. The IAA recommends that the SEC facilitate e-delivery by making it the default option for required client disclosures while maintaining an opt-out for investors who prefer paper delivery.
4. Marketing Rule. The IAA recommends that the SEC issue guidance addressing the restriction on marketing predecessor performance
5. Form PF. The IAA suggests extending the compliance date for the new Form PF by three months to September 12 “to allow advisers to incorporate the newly released technical requirements” into their programs.
6. Custody/Safeguarding. The IAA recommends the SEC withdraw the current safeguarding proposal and replacing it with clear confirmation that the authorized trading exception applies regardless of the mode of settlement.
7. Expanding access for all investors to a broad array of investment opportunities. The IAA recommends the Commission expand the accredited investor and QIB definitions, streamline the exemptive application process, and improve the IPO to reduce entry barriers for emerging companies in public markets.
8. Pay-to-play rule. The IAA recommends the SEC address the Pay-to-play rule, calling it “unnecessarily complex, draconian, costly, and burdensome.” The IAA recommends the SEC: (1) reduce the two-year “time out period” for providing compensated advisory services following certain triggering contributions; (2) find ways to reduce or eliminate the due diligence burdens associated with the look-back provisions, particularly with respect to employee contributions prior to their hiring; (3) increase the de minimis contribution exceptions; (4) streamline the process for granting exemptive orders relating to the two-year time-out; and (5) provide certain self-executing exemptions for inadvertent or minor violations.

Based on the IAA’s letter, the organization hopes to be more aligned with this SEC regime than the previous one. With that said, there are obviously several concerns the IAA is urging the new administration to address. With several regulatory questions on the docket, it will be imperative for any practitioner to seek expert counsel on the changing compliance landscape.

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