Florida Gov. Ron DeSantis (R) announced an alliance with 18 other states to push back against President Biden’s support for ESG investing. The states argue that Biden’s backing for socially conscious ESG investing, under which investors weigh sustainability and ethical considerations, is a threat to the U.S. economy.
DeSantis joined with the governors of Alabama, Alaska, Arkansas, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Tennessee, Utah, West Virginia and Wyoming in the alliance.
The 19 states in their joint statement said they plan to lead state-level initiatives “to protect individuals from the ESG movement,” including potentially blocking ESG at the state and local levels and withholding state pension funds and state-controlled investments from firms that use ESG. (The Hill)
SEC MONITORING OF COMMUNICATIONS POSES CHALLENGES
The Securities and Exchange Commission’s deep dive into how financial firms are using messaging apps and other forms of electronic communication to conduct business is presenting one of the biggest compliance challenges to confront the investment advice sector. The SEC is concerned that financial firms are failing to monitor and preserve off-channel communications, a deficiency that could hamstring the agency’s examination and enforcement efforts. “We think record-keeping obligations are vital to the integrity of the markets,” said Corey Schuster, co-chief of the asset management unit of the SEC’s Enforcement Division. The agency has found that firms aren’t putting into practice the language in compliance programs related to electronic communications. The SEC has made electronic communications an examination priority. (InvestmentNews)
SEC WARNS NEW ADVISERS
The SEC has warned that newly registered advisers’ compliance policies aren’t up to snuff, including their marketing practices, which appear to contain false or misleading information. In a just-released risk alert, the SEC’s Office of Examinations cites three deficiencies in newly registered advisers’ compliance practices: compliance policies and procedures, disclosure documents and filings and marketing. Some required disclosure documents “also contained omissions or inaccurate information and untimely filings,” the agency said. For the past several years, the exam division states that it has prioritized examining newly registered advisers “within a reasonable period of time” after their SEC registration has become effective. (ThinkAdvisor)
FINRA SAYS 1,000 REG BI EXAMS COMING THIS YEAR
The Financial Industry Regulatory Authority is planning to complete at least 1,000 Regulation Best Interest exams of broker/dealers by year’s end, a FINRA enforcement executive said. That will mean that by year end one-third of FINRA’s 3,300 member firms will be examined for compliance with Reg BI, the SEC’s retail advice rule, which went into effect on June 30, 2020, according to Bill St. Louis, executive vice president and head of FINRA's National Cause and Financial Crimes Detection Program. While the regulator has been examining for Reg BI violations since the rule went live, officials have chosen almost exclusively to report violations in industry-wide notices such as the 2023 FINRA Report on Exam and Risk Monitoring Program rather than seeking enforcement actions against firms or reps. But a year and a half after Reg BI went live, the enforcement gloves are coming off, FINRA officials said. (Financial Advisor Magazine)
SEC WANTS BROKER/DEALERS TO FILE FORMS ELECTRONICALLY
The SEC proposed a rule to require broker/dealers and other registrants to submit forms electronically. The plan “would advance the commission’s efforts to modernize filing for a wide range of registrants,” said SEC Chairman Gary Gensler. As proposed, the amendments would require entities under the Exchange Act to file electronically a range of annual and quarterly forms currently filed on paper, said Gensler. For example, “brokers and other filers would need to submit electronically their annual audit filings and risk assessment reports,” Gensler explained. (ThinkAdvisor)
This report was compiled by the Alternative & Direct Investment Securities Association (ADISA). Visit the ADISA website (http://adisa.org/home) to stay current on all of the organization’s advocacy initiatives.
