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In a recent enforcement action that is significant to broker-dealers and investment advisers alike, FINRA continues to emphasize the importance of making full and accurate disclosures in customer relationship summaries (Forms CRS) and of following the Form’s instructions.

Last month, FINRA settled a case with J.K. Financial regarding Form CRS disclosures. The California based, SEC-registered broker-dealer agreed to FINRA’s settlement without admitting or denying its allegations.

Also known to investment advisers as Form ADV Part 3, Form CRS is a brief introduction to the broker-dealer or investment adviser, providing retail clients with highlights and conversation starters regarding the adviser. A key conversation starter is Item 4’s “Do you or your financial professionals have legal or disciplinary history?” Form CRS’s instructions require advisers to respond “Yes” if the firm or any of its financial professionals are required to disclose disciplinary history on any regulatory disclosure forms. Continue reading ›

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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 ›

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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 ›

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On July 29, the North American Securities Administrators Association (“NASAA”) proposed amendments to four model investment adviser rules and requested comments, with the comment period ending August 28, 2025. NASAA’s model rules are not binding until formally adopted by the individual state securities administrator.

With this proposal, NASAA intends to “more closely align” state rules with the SEC’s investment adviser advertising rules. In 2020, the SEC amended Rule 206(4)-1, its investment adviser marketing rule, to, among other things, allow testimonials, endorsements, third-party ratings, and performance advertising so long as certain restrictions and/or conditions are met. NASAA’s proposal mirrors the SEC marketing rule by permitting the following marketing activities: Continue reading ›

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Both the SEC and the U.S. Department of the Treasury’s Financial Crime Enforcement Network (“FinCEN”) recently announced actions to delay or remove pending regulations that would have increased compliance obligations for RIAs. FinCEN announced that it was postponing the effective date of final rules regarding investment advisers’ obligations under anti-money laundering (“AML”) regulations. The SEC announced that it was withdrawing the proposed cybersecurity risk management rule for RIAs, investment companies, and BDCs. Continue reading ›

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The SEC recently settled cherry-picking charges against a Minnesota investment adviser and its sole owner. North East Asset Management Group and its owner, Gregory Zandlo, settled the Commission’s claims without admitting or denying its findings.

The SEC found that, through his firm, Mr. Zandlo shifted profitable trades to certain accounts from December 2020 through May 2022. Specifically, the SEC claimed the defendants were shifting profitable trades to accounts belonging to the firm, Mr. Zandlo, or people related to Mr. Zandlo (collectively, “Favored Accounts”). Continue reading ›

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On May 1st, the Investment Adviser Association (IAA), sent a letter to the SEC’s new Chairman, Paul Atkins. The IAA is a nonprofit advocacy organization representing the interests of registered investment advisers.

The IAA’s letter essentially acts as a call to action for the Commission’s new regime. In the letter, the IAA’s President and CEO, Karen Barr, applauds then-Acting Chairman Mark Uyeda’s pivot from the “one-size-fits-all” approach of former Chairman Gary Gensler.

Barr continued to outline eight major recommendations: Continue reading ›

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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 ›

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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 ›

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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 ›

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