The Securities and Exchange Commission (
SEC) defines its mission to serve as an “agency that protects investors from misconduct, promotes fairness & efficiency in the securities markets, and facilitates capital formation for those looking to hire, innovate, and grow.” In October 2024, the SEC announced its
Examination Priorities for the 2025 fiscal year. This important document provides insight into those areas that the SEC staff will focus their examination efforts to, which t will assist financial advisers in determining where to focus compliance efforts in the months ahead.
Many of our clients have inquired how the
new administration may affect these areas. Those newer examination “hot topics” such as the new AML Rule, new Regulation S-P Rule, and use of AI will remain hot topics as they go to the heart of what the new administration cares about the most - protection of retail investors and fraud prevention. If you have additional questions about how the SEC’s updated expectations could affect your firm, r, consider enlisting the guidance of a highly qualified and knowledgeable
regulatory compliance attorney who can provide you with the customized support you need to proceed with clarity and confidence.
Expected Regulatory Changes Under the New SEC Leadership
Generally speaking, the SEC announced its intention to implement updates and changes that align with the shifting and ever-evolving marketplace. One of its
primary goals to “foster compliance with proactive communication and transparency.” We expect to see more regulatory guidance and less aggressive rulemaking. With this in mind, let’s turn to what you need to know for managing your compliance program.
Fiduciary Duty Remains at the Forefront
One of the SEC’s main goals is to provide strong oversight of its registrants to protect investors. This means that for investment advisers, they must always keep in mind the duty of loyalty (to disclose material information and conflicts of interest to allow investors to have informed consent into doing business with your firm), and the duty of care (to always act in the client’s best interest). Firms can expect to have the SEC staff continue to focus on disclosures made to investors, including disclosures provided related to fees, compensation arrangements, and conflicts.
Investment Recommendations
The SEC’s recently published updates state that its Division of Examinations will
focus on “investment advice provided to clients regarding products, investment strategies, and account types, and whether that advice satisfies the fiduciary obligations owed to their clients.” Additionally, EXAMS will focus on the recommendation of a high-cost client or alternative product to evaluate if it is suitable for that client and if all risks were disclosed. EXAMS also will concentrate on “the impact of advisers’ financial conflicts of interest on providing impartial advice and best execution, with consideration given for non-standard fee agreements.”.
Changes to ESG Investment Regulations
Prior to the new administration taking office, the SEC planned to continue focusing on Environmental, Social, and Government (ESG) disclosures and compliance. It’s important to recognize that the SEC recently
adopted rules to “enhance and standardize climate-related disclosures by public companies and in public offerings.” Under these amended rules, registrants must disclose additional information in an effort to promote transparency in ESG fund reporting. However, the
SEC’s acting chair announced that the agency “has taken steps to roll back its climate disclosure rule, which would require publicly traded companies to disclose climate-related risks.” Although the climate disclosure rule has effectively been overturned under this administration, larger companies may still be required to report this information. For now, it’s best to seek out a trusted regulatory compliance lawyer to understand your disclosure obligations.
Cryptocurrency and Digital Asset Regulations
Cryptocurrency regulations for advisers tend to be complex and ever-evolving. As cryptocurrency and blockchain technology become increasingly popular, the SEC signaled its commitment to implementing policies that account for these types of assets. In its latest
update, the SEC announced its intent to “continue to monitor and, when appropriate, conduct examinations of registrants offering crypto asset-related services.” However, the
new administration seems poised to protect and advance the interests of crypto companies, which may allow for more financial advisers to offer crypto to their clients. . During these evolving times, it’s best to seek legal guidance as needed to determine the most strategic course of action to maintain regulatory compliance.
How Investment Advisers Should Prepare
By now, you’re likely wondering what steps investment advisers can take to stay compliant with these regulatory shifts. .. First, it’s important for you and your firm to seek out the latest guidance about these changes so that you can strengthen your compliance programs and policies to minimize the risk of potential issues or complications. Confer with an experienced securities lawyer to strategize how best to implement changes with your own business model changes. This will allow you to move forward with greater confidence.
Frequently Asked Questions (FAQs) About the New SEC Administration Expectations
Investment advisers will naturally face several questions as they begin to familiarize themselves with the SEC’s updates and the pro-business priorities of the new administration. Let’s take a look at some of these common questions and information about the potential impact of these regulatory changes.
What Are the Biggest Regulatory Changes Expected Under the New SEC Administration?
The new administration has implied greater emphasis on fostering a pro-business approach and less on rule-making, especially in areas such as ESG, cryptocurrency regulations, and several other matters.
The new administration has shown a greater emphasis on fostering a pro-business approach, and less on rule-making especially in areas such as ESG, cryptocurrency regulations, and several others that can stifel ingenuity in the marketplace. .
How Will New SEC Regulations Impact Investment Advisers?
Advisers must still prepare to comply with new rules (such as the AML Rule and Regulation S-P Rule). While it is not anticipated that the AML Rule will be delayed, the compliance date for Regulation S-P may change. If you have questions about these regulations and how this will impact and effect your policies and procedures, consider discussing your with a knowledgeable
regulatory compliance lawyer.
Will ESG and Cryptocurrency Investments Face Tighter Regulations?
Before the new administration arrived, the SEC was expected to impose more stringent guidelines and disclosure requirements for both ESG funds and digital assets. Now, the administration’s priorities have shifted away from enforcement and towards protecting businesses by challenging the need for climate-based disclosures and other obligations.
What Should Investment Advisers Do to Stay Compliant?
The most strategic steps you can take are to keep up with SEC updates, enhance your internal compliance procedures, and consult with legal counsel and compliance professionals. No matter what your specific concerns may be, you can trust that working with a highly qualified
regulatory compliance attorney will help you feel more secure in your professional practices and regulatory compliance efforts.
At
Jacko Law Group, PC, we believe in providing every client with the comprehensive legal services they deserve. If you have questions about regulatory compliance, please contact our office at (619) 298-2880 to discuss your concerns with a highly qualified and experienced attorney.
