How do you play the game when the rules keep changing?
Changing compliance regulations compel financial advisors to ask this question. How do I remain both profitable and compliant, when firms and advisors must follow constantly changing regulations, provide a client experience that builds trust, keeps investments safe, streamline audits and avoid penalties for being out of compliance–all at the same time?
Compliance regulations are shifting, and fees are increasing — the SEC reported a 7% increase in enforcement actions in 2021 — meaning it’s never been more crucial for advisors to stay updated with regulatory changes.
But staying up to date can feel like a full-time job on top of advisors’ many other responsibilities. Here are a few ways to stay on top of changing regulations.
Who Owns Compliance?
Compliance affects everyone, but most firms delegate one person or department to lead the effort. Many firms have a Chief Compliance Officer or dedicated compliance team to stay informed about new and updated regulations and share pertinent information with the rest of the firm through regular memos or training.
But even firms without the resources for a dedicated compliance officer can designate a back office agent or advisor to perform similar tasks. This person should know the standards and work across teams to promote compliance within the organization. The compliance designee also acts as the gatekeeper for SEC, FINRA, and local regulatory changes and alerts advisors about any necessary updates or changes.
Everyone in the firm plays a role in compliance efforts by ensuring they follow the standards that are relevant to their position. But finding the information they need to follow compliance standards in their role can be overwhelming, especially if they aren’t sure where to look or if their responsibilities overlap with those of another employee. When one employee or a small team of employees monitors regulatory changes, it prevents important information from being overlooked.
Stay in Tune with FINRA and the SEC
FINRA and the SEC regularly share new changes and invite advisors and the public to comment. Staying up to date requires maintaining contact with relevant agencies and groups and participating in their communication channels.
Firms and advisors can stay informed through various channels, including:
- SEC and FINRA rule filing status reports. These comprehensive lists provide regular updates about pending changes, including what they entail, when they were filed, and if they are approved. New regulations and changes are posted on the SEC and FINRA websites before they go into effect.
- SEC and FINRA send emails to registered advisors. The SEC and FINRA regularly email all registered advisors about compliance concerns, common issues, changes, and updates. Brokers should keep their email addresses updated and read official emails.
- The SEC’s Division of Examinations (formerly the OCIE) conducts examinations and inspections of firms. To ensure transparency, the Division shares common deficiencies, risk alerts, and changes.
- Industry professional and networking groups, such as the National Association of Personal Financial Advisors, Investment Adviser Association, North American Securities Administrators Administration, and many other organizations regularly update members about pertinent changes and best practices for compliance.
Provide Advisors and Employees with Regular Training
Understanding the changes is only half the battle–following them is the other. As compliance specialists and advisors stay up to date with changing regulations, it is vital to keep the entire firm informed through regular training. When compliance remains a high priority in everyone’s minds and advisors and employees engage with resources for current regulations, firms can more easily implement compliance standards and address the firm’s highest areas of risk potential.
Posting a summary of current regulations on the firm’s intranet or another easily accessible and secure location helps advisors and employees understand the most recent rules so they can follow them without having to sort through numerous emails and memos.
Staying on top of changing compliance issues can seem daunting. But with the right systems, communication, and training, compliance updates become routine. When the compliance process runs smoothly, it’s easier to focus your firm’s efforts on providing clients with an efficient and secure advising experience.
If you have questions about compliance or want to streamline your back office operations, schedule a free demonstration with Docupace.
