Implementing the SEC’s new ad and marketing rule is the number one worry among registered investment advisors heading into the fall, according to a new survey by the Investment Adviser Association (IAA).
Some 58% of advisory firms identified the ad rule as the “hottest compliance topic,” up 33% from a year ago, according to the latest IAA survey of 350 RIA firms of all types and sizes.
Firms have until November 4, 2022, to come into full compliance with the new ad rule, which allows advisors to use testimonials and endorsements for the first time, subject to certain conditions. The changes create a merged rule that will replace both the current advertising and cash solicitation rules and will “modernize their marketing and advertising programs,” said Karen Barr, president and CEO of the IAA.
In the number two spot, cybersecurity and challenges and SEC expectations are a pressing concern for 53% of RIA compliance professionals, according to the survey, now in its 16th year.
With the Biden administration and SEC Chairman Gary Gensler making climate change and ESG one of their top priorities, it’s not surprising that the topics climbed to third place in compliance officers’ list of hot topics. The topic was named by 45% of RIAs this year, up from 14% last year.
Rounding out the five most pressing topics is Covid-specific business and continuity plan concerns and digital assets, which both came in at 17%, according to the IAA.
The brightest spot in the survey findings are the way firms have handled the impact of Covid-19. None of the 350 RIAs surveyed reported any material compliance violations as a result of their business continuation plans or regulatory fallout from the pandemic.
This is “evidence of strong compliance programs and effective business continuity plans,” the IAA said. “While the pandemic continues to disrupt businesses, and firms have had to address a host of new concerns and issues related to their risk assessments and compliance programs, the industry by and large appears to be passing the test.”
At the same time, the vast majority of firms (82%) reported no increase in personal trading violations, something that concerns RIAs even more as more advisors work remotely.
A majority of firms had all personnel working from home (62%). Other firms reported having only certain employees teleworking (37%). About a third of firms (35%) reported having the office temporarily closed.