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Regulatory

Regulatory recap: Q1 2023

As regulations evolve, it’s important to stay up to date. Here are findings from the SEC and FINRA that caught my eye in Q1 2023.

As the regulatory landscape constantly adapts to new events, technologies, and concerns, it’s important to stay abreast of where policies stand and how they may impact your firm and your work. I regularly review reports and risk alerts from financial services regulators—here are the findings from the SEC and FINRA that caught my eye in the first few months of 2023.

SEC

The SEC identified two issues in new advisors’ marketing materials:

  • Some materials appeared to contain false or misleading information, including inaccurate information about:
    • advisory personnel professional experience or credentials
    • third-party rankings
    • performance
  • Advisors were unable to substantiate certain factual claims.

The new SEC marketing rule also continues to create challenges in terms of:

  • advertising within social media
  • presenting performance advertising
  • using testimonials/endorsements

For more on the new rule, watch the webinar I co-hosted: Beyond the Fundamentals of the New SEC Marketing Rule.

FINRA

FINRA found that registered firms had distributed false and misleading promotions through social media and “push” notifications on mobile apps.

Improper recordkeeping of digital communications was also highlighted by FINRA. Some registered representatives had been using channels not approved of or controlled by the firm for business-related digital communications to customers. These channels included:

  • texting
  • messaging
  • social media
  • collaboration apps
  • “electronic sales seminars” in chatrooms

Regarding the content of promotions and communications, FINRA noted special focus on:

  • Crypto: Some communications failed to or improperly disclosed that crypto is not governed by federal securities laws or SIPA.
  • ESG: Some ESG claims were found to be inconsistent with fund documents.
  • Municipal securities advertising: Some advertisements included misleading claims about safety.

Though we can’t predict what regulators will do next, I hope these notes help you face today’s compliance challenges more confidently.

 

The opinions provided are those of the author and not necessarily those of Fidelity Investments or its affiliates.

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Allison Lagosh

Head of Compliance
Allison currently serves as the Compliance Advisor and Director for Saifr within Fidelity Labs. She previously was a management consultant focusing on data validation and conversions, disclosure design, and regulatory expertise for the Saifr team. Allison has extensive experience in the financial services industry with various legal, compliance, risk, and marketing compliance positions. Most recently, she was a Vice President for State Street Global Marketing, where she led the Risk Management and Controls Governance Program and advised on Marketing workflow tool management. Allison also worked at various senior compliance and marketing manager positions at Columbia Threadneedle, MFS, and Fidelity Investments.

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