RIA Compliance BlogThe Securities and Exchange Commission recently proposed a new rule, Regulation E-Delivery, that looks to broaden the ability of financial industry professionals to deliver required compliance and regulatory information and documents to clients and proposed clients. If adopted, the proposed rule would modernize the regulatory framework by superseding the SEC’s current guidance for e-delivery while providing new requirements and conditions for electronic delivery. Continue reading ›
Articles Tagged with Compliance
SEC Risk Alert Highlights Economic Conflicts of Interest: What RIAs Need to Know
The SEC Division of Examinations issued a Risk Alert earlier this month detailing examination observations related to investment adviser economic conflicts of interest. The alert serves as a reminder that the SEC continues to prioritize the review of compensation arrangements, revenue-sharing programs, fee practices, and disclosure obligations during adviser examinations.
For registered investment advisers (RIAs), the message is clear: firms should review their disclosures, billing practices, and compliance programs to ensure they adequately address conflicts that could influence recommendations made to clients. Continue reading ›
SEC Raises Threshold for Qualified Clients
The SEC recently announced its intent to issue an order that will adjust the dollar amount necessary to be considered a “qualified client” under Section 205(a)(1) of the Investment Advisers Act of 1940 (“Advisers Act”). This increase, adjusted to reflect inflation, raises the minimum net worth or dollar amount of assets under management necessary for an investment adviser to charge a performance fee to the client.
SEC Issues Risk Alert Regarding Third-Party Ratings
On December 16, 2025, the SEC Division of Examinations released a Risk Alert containing observations regarding investment advisers’ compliance with Rule 206(4)-1 (the “Marketing Rule”). The Division provides risk alerts to inform and remind investment advisers and their stakeholders of advisers’ compliance requirements. Regarding third-party ratings in investment advisers’ advertisements, the Division noted that it has observed common deficiencies regarding compliance with the requirements relating to due diligence and disclosures.
The Marketing Rule prohibits the use of third-party ratings in advertisements unless the adviser has a reasonable basis for believing that any questionnaire or survey used in the preparation of the third-party ratings meet certain criteria, and that either the rating or the adviser discloses certain information related to the ratings. Continue reading ›
New Reg S-P Requirements for RIAs
The compliance deadlines for the SEC’s amendments to Regulation S-P, adopted on May 15, 2024, are approaching. For investment advisers with $1.5 billion or more in assets under management, the compliance deadline is December 3, 2025. Advisers with fewer than $1.5 billion in AUM have six more months, with a compliance deadline of June 3, 2026.
Critically, Reg S-P now requires RIAs to notify clients in the event of certain data breaches. Under the amended rule, RIAs must notify clients of any event that could endanger their personal data, unless the RIA has determined, after reasonable investigation, that sensitive client information has not been, and is not reasonably likely to be, used for substantial harm or inconvenience. Such notice must be sent as soon as practicable, and no later than 30 days after learning of the breach, to any affected or potentially affected clients. If the RIA cannot identify which clients may be affected, the RIA must notify all of its clients. Substantively, any such notification must: Continue reading ›
SEC Punishes Firms for Altering Records
Two recent SEC enforcement cases highlight the importance of registered investment advisers presenting true and accurate records to the Commission. While the facts of each case differ, they show that the documents’ falsification is worse than their insufficiency. Continue reading ›
Insufficient Conflict of Interest Disclosure Proves Costly
Regulators continue to emphasize the importance of registered investment advisers’ conflict-of-interest disclosures. The SEC recently settled a case with Transamerica Retirement Advisors, LLC (“Transamerica”) regarding account transfers with insufficient conflict of interest disclosure.
While Transamerica settled without admitting or denying the allegations, the Commission’s findings are as follows: Continue reading ›
SEC Cites Three Advisers for Failure to Timely Audit Private Funds
Custody presents a compliance danger for investment advisers, including advisers to private funds. Three recent enforcement cases illustrate the importance of diligent compliance for fund advisers with custody of client assets.
According to the Advisers Act, an investment adviser has custody of client assets if it holds, directly or indirectly, client funds or securities, or if it has the authority to obtain possession of those assets. See Advisers Act Rule 206(4)-2(d)(2). Continue reading ›
Dangers of Converting from Broker-Dealer to Advisory Accounts
Two recent enforcement cases highlight the pitfalls of conversion from broker-dealer accounts to investment adviser accounts. In both cases, client accounts were converted from broker-dealer to advisory accounts, leading to a change in client fees. In both cases, the adviser was penalized for mismanaging the change in fee arrangements.
The first case relates to One Oak Capital Management, LLC (“One Oak”), a registered investment adviser, and its dually registered investment adviser representative, Michael DeRosa. DeRosa, who was simultaneously employed at a separate broker-dealer, counseled several clients to convert their accounts from broker-dealer accounts and products to advisory accounts with One Oak. Continue reading ›
Investment Adviser Settles SEC Case on Model Security
The SEC recently charged New York-based investment advisers Two Sigma Investments LP and Two Sigma Advisers LP (collectively, “Two Sigma”) with breaching their fiduciary duties for failing to reasonably address known vulnerabilities in their investment models. In its Order, the SEC also found compliance and supervisory failures related to those violations, plus violation of the Commission’s whistleblower protections via Two Sigma’s employee separation agreements.
Two Sigma is a large quantitative-analytics-based hedge fund manager using computer-based algorithmic investment models when managing or advising client investments. The SEC claims that, by March 2019, multiple Two Sigma employees had informed senior management that various Two Sigma personnel could freely change variable inputs of their algorithmic models. These unchecked input modifications would alter the algorithm’s predictions and trades without notifying the firm, its representatives, or its clients. This autonomy of various personnel to rewrite the models’ data could materially impact investment decisions for Two Sigma clients. Continue reading ›