NSCP Currents On Demand

In this Issue:

• 2024 Author of the Year

• Risk-Based IA Compliance Testing by Janice Powell and Craig Watanabe 

• The New Age of Branch Office Inspections by Andrew T. Mount and Erin Preston

• Explaining What We Do in Compliance by Melissa Starr, Jane Riley, Craig Watanabe and Miriam Lefkowitz

• Documentation Under Reg BI – Requirements, Expectations and Reasonable Practices by Christopher J. Kelly and Miriam Lefkowitz

• A B C, Easy as 1 2 3: Acronyms and Initialisms in the Securities Industry by Brian Rubin

• Artificial Intelligence (AI) Articles

• Therapeutic Publishing: NSCP Call for Authors by Dr. Shawn Bostic

• 2024 NSCP Currents Articles

• 2024 NSCP Currents Live Webinars

Currents Live Webinar - "Understanding the Department of Justice's New Corporate Whistleblower Awards ...

Featuring Patrick Gushue, Acting Director, Corporate Whistleblower Awards (CWA) Pilot Program, Department of Justice and Lisa Colone, Chair, Securities Enforcement, CSG Law …View Webinar

12-12-2024

Artificial Intelligence: SEC Focus Areas and Best Practices for Asset Managers

By Ethan Corey and Clifford Kirsch

On July 26, 2023, the Securities and Exchange Commission (“SEC”) issued a release proposing a sweeping set of rules that, among other things, would regulate the use of artificial intelligence (“AI”) by SEC-registered investment advisers, including asset managers (“SEC Release”). [1] The rulemaking has proven to be controversial and the SEC’s Spring 2024 Regulatory Agenda notes that the SEC is considering “re-propos[ing] rules related to broker-dealer .... Continue Reading

12-05-2024

Marketing Rule Charges for Testimonials and Endorsements, Third-party Ratings, and Substantiation

By Jeremy McCamic

On September 9, 2024, the Securities and Exchange Commission (“SEC”) announced settled charges against nine registered investment advisers for violations of Rule 206(4)-1 under the Investment Advisers Act of 1940 (the “Marketing Rule”). [1 ] These enforcement actions under the Marketing Rule are the first actions unrelated to hypothetical performance since the rule’s adoption on November 4, 2022. Instead, these actions reveal how the SEC is interpreting two of the thorniest .... Continue Reading

11-27-2024

Currents Live Webinar - "T+1, Best Execution, and Trade Reporting Compliance for Broker-Dealers"

Featuring Jeff Gearhart, Managing Director, Oyster Consulting, Susan Light, Partner, Katten Muchin Rosenman LLP, and Daniel Wright, SVP, CCO, Head of Broker-Dealer Compliance, Alliance Bernstein … View Webinar

11-21-2024

2024 Year-End Checklist: Compliance Preparation for Investment Advisers

By Anna Schnitkey

As the new year approaches, now is a crucial time of year for investment advisers to ensure that their compliance programs are up to speed. Recent Risk Alerts and examination findings by the Securities and Exchange Commission or the “SEC,” offer important insight into areas currently under scrutiny, and provide a good starting point for firms when reviewing .... Continue Reading

11-14-2024

NSCP Celebrates... Native American Heritage Month

By Takesha Pollock

November marks Native American Heritage Month, a time to recognize and celebrate the rich history, culture, and contributions of Native Americans. Native Americans have long been underrepresented in many industries, including financial services. However, their contributions, particularly in building sustainable financial practices and advocating for financial equity, have been impactful. .... Continue Reading

11-07-2024

A Walk Down the New Wall Street: Managing the Arrival, Risks, and Promise of AI in Investment Manage ...

By Paul Felsch

With the ever-increasing fervor around the use if AI/GenAI, several colleagues have shared with me over the past several weeks how individuals are hungry for more than mere musings on the SEC’s now-rescinded rule proposal on conflicts of interest and predictive analytics. The general sentiment has been that, although content exists around .... Continue Reading

10-31-2024

How to Prepare for Amendments to Regulation S-P

By Michelle L. Jacko

Effective November 13, 2000, the U.S. Securities and Exchange Commission (“SEC”) adopted Regulation S-P to manage the use and protection of consumer non-public data by financial institutions. The regulation was put in place in response to the growing concern for consumers’ loss of data privacy. The Commission adopted Regulation S-P pursuant to Section 504 of the Gramm-Leach-Bliley Act, and pursuant to the Securities Exchange Act of 1934 [15 U.S.C. 78] .... Continue Reading

10-24-2024

Developmental Coaching of Junior Compliance Officers

By Ted McCutcheon, Shawn Bostic and Melissa Starr

Many organizations’ compliance programs don’t focus enough on junior officers’ professional development. Despite being the backbone of the company’s compliance program, less-experienced employees often find themselves lacking the necessary guidance and support from more senior professionals to thrive in their roles and shoulder increasing responsibility. This deficiency not only impacts the professional development and job satisfaction .... Continue Reading

10-17-2024

Breaches When MFA is in Place

By Madison Dewey

As cyber criminals have become more advanced, authentication has emerged as another safeguard to protect users and firms against certain kinds of cyber-attacks. Authentication is the process of verifying your identity to access networks, accounts, systems, etc. Over time, various authentication methods have been developed to combat the evolving nature of cyber-related threats. Two-Factor Authentication (“2FA”) and Multi-Factor Authentication .... Continue Reading

10-10-2024

NSCP Celebrates… LGBTQ+ History and National Disability Employment Awareness Month

By Takesha Pollock

October is a significant month for LGBTQ+ History and National Disability Employment Awareness. These observances reflect the progress, challenges, and contributions of two vital communities within our society. In the financial services sector, these communities have played crucial roles in fostering diversity, inclusion, and equity, essential to driving innovation, growth, and success. LGBTQ+ History Month: Contributions to Financial Services LGBTQ+ History Month recognizes .... Continue Reading

10-03-2024

Currents Live Webinar - "Navigating a Career in Compliance - Advice for Diverse Professionals and Their ...

Featuring Takesha Pollock, Executive Director, Sr. Compliance Manager, Wells Fargo Investment Institute Inc., Kona Mann, Chief Compliance Officer, State of Hawaii ERS, and Issa Hanna, Partner, Eversheds Sutherland (US) LLP … View Webinar

09-25-2024

Cybersecurity Update – Summer 2024

By Craig Watanabe

Hackers are constantly evolving and cyberattacks are becoming more sophisticated. Until recently, email accounts secured with two-factor authentication (“2FA”) were very secure, and breaches were rare. Unfortunately, this is no longer the case. 2024 has seen the use of artificial intelligence to augment cyberattacks. Specifically, using the Open Neural Network Exchange (“ONNX”), an open AI network, creates a phishing-as-a-service attack, which can defeat most .... Continue Reading

09-19-2024

Maintaining Audit-Ready Private Fund Investment Performance

By Kim Cash and Janice Kitzman

In the weeks since the U.S. Fifth Circuit of Appeals unanimously struck down the Securities and Exchange Commission’s (SEC’s) Private Fund Advisors Rule (PFAR) on the grounds of regulatory overreach, private funds and their investment advisors may be breathing a collective sigh of relief. Not so fast. While the Fifth Circuit ruled in favor of exempting private funds from new widely contested restrictions that would have included federal regulation – aimed at .... Continue Reading

09-12-2024

NSCP Celebrates… National Hispanic & Latinx Heritage Month

Signed into law in 1988, by President Ronald Reagan, September 15 – October 15 marks the annual celebration of National Hispanic Heritage Month. This September, NSCP recognizes the many contributions of Hispanic and Latinx Americans. While you are surely busy staying abreast of this year’s seemingly unending regulatory changes, why not take a break for a moment to see how institutions can commemorate this important month, and strengthen their Diversity, Equity and Inclusion workplace initiatives. .... Continue Reading

09-05-2024

Currents Live Webinar - "Artificial Intelligence and Technology Compliance Challenges”

Featuring Chad Nichols, Managing Director, Chief Compliance Officer at Charles Schwab & Co., Bart Layton, Chief Executive Officer at AI Guardian, and Kelly Koscuiszka, Partner and Co-Chair, Investment Management Regulatory & Compliance Group at Schulte Roth + Zabel … View Webinar

08-28-2024

Reps’ Breaking Bad: SEC and FINRA Enforcement Actions Against Individuals

By Brian Rubin and Joseph Szczesny

If you think about it, Walter White, the star of the 16-time Emmy award-winning drama series Breaking Bad , was similar in a lot of ways to individual representatives who were sanctioned by the Securities and Exchange Commission (SEC) and FINRA. They all (presumably) started out with a desire to do the right thing. For Walter, he taught high school chemistry and then “broke bad” after he was diagnosed with lung cancer. Walt turned to a life of crime as he began .... Continue Reading

08-22-2024

NSCP Currents National Conference Edition 2024

As we eagerly approach our much-anticipated 2024 NSCP National Conference, we are happy to present to you this special edition of NSCP Currents. This year’s conference not only marks the 36th anniversary of our annual gathering, but also our largest gathering of compliance professionals, service providers, regulators, exhibitors, and sponsors. We have designed this year’s conference to not only provide you with cutting-edge insights and tools to assist you with your compliance .... Continue Reading

08-15-2024

Black Swans and Gray Rhinos

By Craig Watanabe

There is great utility for a compliance program to look at risks from different angles and through different lenses. The concept of risk is well studied by academics and others in diverse fields such as management and even politics. This article presents several such ideas about risk identification and mitigation and offers action steps that can enhance your compliance program’s management of the most impactful kinds of risks. Risk Management Conventionally, .... Continue Reading

08-08-2024

The Case for Human Compliance Professionals in an AI World

By Adam Schaub

An often-asked question about the use of Artificial Intelligence (“AI”) is “Will it take my job?” In 2022 Elon Musk announced a humanoid robot named Optimus intended to replace humans in jobs that are considered dangerous or where there are labor shortages; however, broker-dealer & investment adviser compliance is not likely high on the list of the best use cases for human replacement with AI-powered technology, staffing challenges aside. While we may be safe from robots taking .... Continue Reading

08-01-2024

Currents Live Webinar - "The Current State of ESG"

Featuring India Williams, Partner and Co-Chair, ESG Risk and Investigations, Katten Muchin Rosenman LLP, Josh Jones, Chief Compliance Officer, Vulcan Value Partners, and Justin McGuffee, Compliance Officer, AVP, MFS Investment Management … View Webinar

07-24-2024

A B C, Easy as 1 2 3: Acronyms and Initialisms in the Securities Industry

By Brian Rubin

If you are new to securities compliance, your head sometimes spins: What is an RIA v. an IAR v. an IRA v. an AIR? (We made up the latter.) And is “IRA” pronounced “eye” “are” “aaayyy” (as Fonzie would say) or “Ira” (as in Gershwin and my cousin from Brooklyn)? If you’re a securities industry veteran, you may wonder: Why do they keep adding more acronyms every day? And are they really “acronyms” or something else? And why is Reg S-P hyphenated, but Reg BI is not? This article .... Continue Reading

07-18-2024

Proposed Customer Identification Program Rule for Advisers

By Melissa Starr and Craig Watanabe

As is often the case in compliance, laws enacted by Congress lead to rules enacted by regulators, which in turn leads to firms implementing policies and procedures. Anti-money laundering is complex because there are multiple laws, regulators, and rules, so it will be helpful to provide a foundation with the critical laws and rules. Anti-money laundering requirements stem .... Continue Reading

07-11-2024

A Look Back and A Look Ahead

By Patrick Hayes

As I reflect on my first couple months as the NSCP Board Chair, I am humbled by the outpouring of support from the Staff, the Board of Directors, and the entire NSCP membership. This incredible community of talented individuals has been such a positive and motivating force for me over the past decade, I am especially grateful now for the opportunity to serve its members, help lead this organization and continue the excellent work done by the two prior Chairs, Melissa Loner and .... Continue Reading

07-09-2024

NSCP Celebrates… Disability Pride Month

By Shannon Bean

In July of 1990, the United States passed the Americans with Disabilities Act, which is a civil rights law that prohibits discrimination based on disability. In honor of the passage of that ground-breaking law, Disability Pride month is now celebrated every July in the United States, as well as throughout much of the world. Disability affects 1 in 4 adults in the United States. While many think of disability as a medical diagnosis, disability can and does often become part .... Continue Reading

07-03-2024

Staying Compliant While Staying Connected: How to Think About Modern Collaboration Tools

By Marc Gilman and Aakash Alurkar

For the compliance officers operating in this golden age of collaboration applications, it is crucial to stay informed about the emerging feature sets of platforms like Zoom, Slack, Webex, and Microsoft Teams, as well as the compliance strategies associated with them. These platforms are essential tools for remote work and virtual collaboration, offering a wide range of features that enhance productivity and communication. In this article, we .... Continue Reading

06-27-2024

Currents Live Webinar - "The DOL Fiduciary Rule"

Featuring Jason Berkowitz, Chief Legal & Regulatory Affairs Officer, Insured Retirement Institute (“IRI”), David Kaleda, Principal, Groom Law Group, and Jane Riley, Chief Compliance Officer, The Leaders Group … View Webinar

06-25-2024

DOL’s Amended Definition of a Fiduciary

By Craig Watanabe

“Fiduciary” has multiple definitions. The one most of us are familiar with is the common law fiduciary, which applies to registered investment advisers. However, this article will focus on the ERISA Section 3(21)(A)(ii) and IRC Section 4975(e)(3)(B) definitions which are statutory and prescriptive as opposed to the principles-based common law definition. Final Rules On April 25, 2024, the final rules were published in the Federal Register in four separate releases: .... Continue Reading

06-20-2024

Documentation Under Reg BI – Requirements, Expectations and Reasonable Practices

By Christopher J. Kelly and Miriam Lefkowitz

Compliance professionals frequently incorporate interpretive guidance issued by SEC and FINRA Staff as they develop and maintain their compliance programs. Such guidance also helps firms prepare for the inevitable regulatory examinations, as the guidance often lays out expectations about how firms can demonstrate their implementation of applicable rules. Concerningly, however, guidance issued by the staff of regulators also can have the effect of .... Continue Reading

06-13-2024

NSCP Celebrates… Pride Month

By Shannon Bean

All across the country, June is celebrated as Pride Month, and NSCP is proud to be a participant in that celebration. Pride Month is celebrated in honor of the 1969 Stonewall Uprising, which marked a pivotal change in the LGBTQ+ rights movement. Now, 55 years later, a focus on diversity, equity, and inclusion continues to be a priority for NSCP, as well as many organizations across the country. Much like a lot of corporate America, financial services and investment management .... Continue Reading

06-06-2024

The Final Fiduciary Regulation and Exemptions: The Clock is Ticking

By Fred Reish

The Department of Labor (DOL) has issued its final regulation defining fiduciary advice together with related exemptions for conflicted fiduciary recommendations, Prohibited Transaction Exemptions (PTEs) 2020-02 and 84-24. The clock for compliance has started to run. The fiduciary rule—formally called the Retirement Security Rule: Definition of an Investment Advice Fiduciary–will be effective on September 23, 2024. Parts of the PTEs will also be effective on that date, and the .... Continue Reading

05-30-2024

Currents Live Webinar - "Navigating Regulatory Exams & Interacting with Regulators During Exams"

Featuring Pete Driscoll, Partner, PwC, Liz Legacy, Executive Director, CCO – CUSO SPF, Atria Wealth, and Paul Tyrell, Partner, Sidley Austin LLP … View Webinar

05-22-2024

Compliance Considerations for Spot Cryptocurrency ETFs

By Craig Watanabe and Ryan Smith

On January 11, 2024, the SEC approved 11 spot Bitcoin ETFs for trading. Importantly, these spot Bitcoin ETFs will own Bitcoin directly and not Bitcoin futures which is a distinction with a significant difference. Below are factors that compliance officers are well-served to consider when encountering this and similar products. Characteristics of the Cryptocurrency Markets Before delving into the specifics of the spot Bitcoin ETFs, it will be instructive .... Continue Reading

05-16-2024

Explaining What We Do in Compliance

By Melissa Starr, Jane Riley, Craig Watanabe and Miriam Lefkowitz

Have you ever had to explain what we do as Compliance Officers to someone who knows little to nothing about compliance? Or have you trained a new Compliance Staff member who has no experience in compliance? These are common occurrences, and in this article, four experienced Compliance Officers explain what they do and what training resources they provide. Even experienced Compliance Officers will .... Continue Reading

05-09-2024

NSCP Celebrates… Asian American and Pacific Island Heritage Month & Mental Health Awareness Month

By Takesha Pollock

In our collective journey towards progress and inclusivity, it’s imperative to acknowledge and celebrate the rich tapestry of contributions made by the Asian American and Pacific Islander (AAPI) community. Join us as we embark on a journey of recognition, shedding light on the extraordinary achievements and enduring resilience of AAPI trailblazers who have paved the way for future generations. Source: .... Continue Reading

05-02-2024

Currents Live Webinar - "FINRA's Residential Supervisory Location (RSL) and Remote Inspection Pilot"

Featuring Jerry Danielson, Assistant Vice President Field Audit, Lincoln Financial Group Distribution, Andrew Mount, Senior Associate, Eversheds Sutherland (US) LLP, and Jennifer Szaro, Chief Compliance Officer, XML Financial Group, XML Securities, LLC … View Webinar

04-25-2024

The New Age of Branch Office Inspections

By Andrew T. Mount and Erin Preston

The COVID-19 pandemic changed how broker-dealers serve customers and supervise associated persons, and pushed regulators to consider how to adapt regulatory requirements to fit an environment where many, if not most, firms have embraced some form of remote work. On November 17, 2023, after two years of prolonged rulemaking, the SEC approved changes to FINRA Rule 3110 that introduced a three-year Remote Inspections Pilot Program and a new Residential Supervisory .... Continue Reading

04-18-2024

Proposed AML Rule for Advisers

Proposed AML Rule for Advisers By Melissa Starr and Craig Watanabe

The USA PATRIOT ACT of 2001 was passed by Congress following the wake of the terrorist attacks on September 11, 2001, and shortly thereafter, the National Association of Securities Dealers (“NASD”) enacted Rule 3011, which is now known as FINRA Rule 3310 – Anti-Money Laundering Compliance Program. While broker-dealers (“BDs”) have been required to have AML programs since 2002, investment .... Continue Reading

04-11-2024

Currents Live Webinar - "SEC Private Funds Adviser Rules - How Advisers are Preparing for Implementation”

Featuring Genna Garver, Partner, Troutman Pepper, Igor Rozenblit, Managing Partner, Iron Road Partners, and Scott Weisman, Partner, CCO, Senior Regulatory Counsel, Bain Capital, Boston Office … View Webinar

03-27-2024

Regulation SHO

By Christopher J. Kelly

A little-known provision of Regulation SHO is getting increased attention from regulators. Recently, regulators have signaled that they will be taking a close look at broker-dealers’ invocation of the so-called “bona fide market-maker” exception to Regulation SHO (“Reg SHO”), and firms that rely on this exception should be wary of the potential for future enforcement actions. The SEC adopted Reg SHO in response to potentially abusive “naked” short selling (or, the sale .... Continue Reading

03-21-2024

Compliance Department Leadership and Management

By Craig Watanabe

The Body of Knowledge for Leadership and Management Effectively managing a compliance department with two or more people requires basic leadership and management skills. Fortunately, there is a tremendous body of knowledge dedicated to leadership and management and it not necessary to “recreate the wheel.” Rather, this article will offer practical suggestions on how to apply sound leadership and management concepts specifically to managing a Compliance Department. The Difference .... Continue Reading

03-14-2024

NSCP Celebrates… Women’s History Month

By Takesha Pollock

Since 1995, March has been designated as Women’s History Month. Women’s History Month gives us the opportunity to formally celebrate the women who have paved the way for future women leaders in our industry. The Opportunity for a Bright (Pink) Future: Women in Leadership While steadily more women are holding high-level leadership roles in the financial services industry, according to Deloitte’s “Advancing .... Continue Reading

03-07-2024

Currents Live Webinar - "How to Uncover and Address Off-Channel Communications"

Featuring Myles Blechner, Director – Investment Advisory, ACA Group, Kim Chapman, Chief Compliance Officer, Berthel Fisher & Co Financial Services, and Patricia (“Trish”) Flynn, Vice President, CCO, PGIM Portfolio Advisory … View Webinar

02-28-2024

One Minute Trade Reporting: Considerations for Firms as They Prepare

by Jessica LeBlanc

In January 2024, the Financial Industry Regulatory Authority (FINRA) and the Municipal Securities Rulemaking Board (MSRB) filed their proposals with the Securities and Exchange Commission (SEC) to decrease the time to report fixed income securities transactions from fifteen minutes to one minute from the time of trade. If approved, these changes will have wide reaching impacts on the fixed income markets, and more specifically, firm compliance programs, perhaps more so .... Continue Reading

02-22-2024

A Day in the Life of a Financial Exploitation Compliance Professional

By Brett Lassoff

It was early in my career as a financial exploitation compliance professional, and I was on a conference call with a 94-year-old life insurance policyholder and various children and grandchildren, all vying to take control of the individual’s insurance policy. I was naïve at this point and assumed that everyone would remain cordial, and we could reach an understanding. But tensions rose and at one point everyone started yelling. One family member threatened to evict the policyholder .... Continue Reading

02-15-2024

Presenting Professionally: Three Key Steps to Becoming a Better Presenter

By Jocelin Martinez

As a compliance professional, you’re responsible for disseminating important regulatory information via training sessions and presentations. Whether you welcome the opportunity or view it unfavorably, much of your presentation prowess is tied to preconceived perceptions, and as I’ll tackle below, preparedness. It’s no secret most people dread being asked to present, but how can they overcome apprehension to maximize their time with audiences? The answer’s easier than you might .... Continue Reading

02-08-2024

NSCP Celebrates... Black History Month

By Takesha Pollock

Black History Month is a time to honor and celebrate the achievements and contributions of African Americans. Although officially recognized in the month of February, NSCP celebrates the countless achievements and contributions of African Americans all year round. Found below is a list of several ways you and members of your firm can observe, celebrate and learn about the rich history and culture of African Americans during this month. Also highlighted below are five African .... Continue Reading

02-01-2024

Currents Live Webinar - "How to Avoid CCO Liability"

Featuring Patrick Hayes, Chair, Investment Management, Calfee, Halter & Griswold LLP, Rosa Licea-Mailloux, CCO MFS Funds and Head of Compliance Americas, MFS Investment Management, and Brian Rubin, Partner, Co-Head of Securities, Enforcement Practices, Eversheds Sutherland (US) LLP … View Webinar

01-24-2024

A Comprehensive Risk-Based IA Testing Program

By Janice Powell and Craig Watanabe

A Comprehensive Risk-Based IA Testing Program What is the biggest hurdle to your compliance program? How do you incorporate changes to the program? In short, a common response is finding time to revamp the old and create a new, more efficient risk-based testing program. While not obvious, we should be in the mode of constant and never-ending improvement. This is our goal – work smarter, not harder, as the saying goes. The authors have a well-developed .... Continue Reading

01-18-2024

Launching a Diversity, Equity and Inclusion Program

By Amber Allen, Cameron Funderburk and Manning Peeler

Developing a Diversity, Equity and Inclusion (“DEI”) program at your organization can have many substantial benefits, such as increasing employee retention, improving recruitment strategies, encouraging employee professional development and ensuring company relevance, value and marketability. DEI policies are typically developed outside of a firm’s compliance policies and procedures. However, establishing a DEI .... Continue Reading

01-11-2024

A Look Ahead

By Melissa Loner

As we move into the New Year, I want to celebrate some of the accomplishments we’ve had and give a glimpse of what to look forward to. Celebrate 2023 We had one of the most successful National Conferences to date, with more than 960 attendees, 250 of those being first time attendees. For the first time we had more than 40 regulatory colleagues join us not just to present but to interact, learn together and build connections. We created and re-organized volunteer opportunities. .... Continue Reading

01-05-2024

A Look Back

By Jeff Blumberg

Those of you who were able to join us at the 2023 National Conference in Dallas have already heard some of this over lunch on the first day, but I wanted to take a moment to reflect on my year as the Chair of the Board for the NSCP. This past year has been a year of great strides for the organization – we spent the beginning of the year finalizing our revised strategic plan and the rest of the year implementing various facets of that plan. Our strategic plan has four primary .... Continue Reading

01-04-2024

All articles and previous issues of NSCP Currents are available for download in the NSCP Resource Library.