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Rules and Interpretations to Enhance Protections and Preserve Choice for Retail Investors in their Relationships with Financial Professionals

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SEC rules package published June 5, 2019
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This past June, the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) adopted two rules and issued two interpretations, each of which pertain to standard of conduct requirements for broker-dealers and investment advisers. The rules package addresses the following aspects of broker/dealer and investment adviser client disclosures and registrant comportment to the fiduciary standard of care:

Regulation Best Interest (Regulation BI), a new rule imposing a “best interest” standard of conduct on broker-dealers making recommendations to retail clients (compliance date: June 30, 2020)

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SEC Risk Alert: Safeguarding Customer Records and Information in Network Storage – Use of Third-Party Security Features

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issued May 23, 2019

The U.S. Securities and Exchange Commission (“SEC” or the “Commission”) has again commenced a series of cybersecurity examinations of registered investment advisers. The SEC distributed numerous request letters in May to gather registrant information pertaining to vendor diligence and oversight of cloud providers. The Commission is scrutinizing adviser policies and procedures which relate to the identification and monitoring of risks attendant to client information stored on third party vendor platforms. In general, advisers have a fiduciary duty and regulatory obligation pursuant to privacy regulations and cybersecurity guidance to ensure that non-public client information residing on third-party platforms remains secure and protected from misappropriation.

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SEC Risk Alert: Compliance Issues with Privacy Notices and Safeguard Policies

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issued April 16, 2019

On April 16, 2019 the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert related to Privacy Notice and safeguard policy compliance issues. This regulatory communication is applicable to investment advisers and broker-dealers (“registrants”) alike.  OCIE cited issues identified in deficiency letters from broker-dealer and adviser exams completed by the Staff during the past two years. It should be noted by SEC registrants that the Commission has issued deficiency notices and pursued enforcement actions on the basis of registrant non-compliance with Risk Alerts, including on the basis of guidance in the absence of a rule.

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SEC Risk Alert – Electronic Messaging and 2019 Exam Priorities

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Introduction

The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) just delivered a holiday and new year greeting to registered investment advisers … just in case the volatile markets were not enough to keep you on your toes!  On December 14th, OCIE issued a Risk Alert related to electronic messaging and on December 20th released its 2019 examination priorities. It may be the busiest time of the year, but when OCIE talks, it is worth listening!

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