NASAA 2020 Annual Conference Discusses Regulatory Initiatives

The 2020 NASAA Annual Conference was held in a virtual format in early September 2020. Items of note discussed during the conference included Regulation BI, an update on the effects of increased social isolation on senior and vulnerable adult clients during the Coronavirus Pandemic, investment advisor model rules, and the creation of a new interface for the FINRA Gateway.

Impact of the Coronavirus Pandemic

Lisa Hopkins, NASAA President and Senior Deputy Commissioner for the state of West Virginia announced NASAA is establishing a Crisis Planning and Recovery Committee to work with state and provincial securities regulators and external stakeholders. “Current events have proven the need and effectiveness of teamwork and collaboration,” she said. “We need fewer silos and more bridges. I look forward to continuing this collaboration long after the masks come off.”

Regulation BI

During the remainder of 2020 and into early 2021, FINRA and SEC examinations will focus on whether broker-dealers and investment advisors have made a meaningful effort to comply with the regulation. The reviews will focus on the content and mailing of the Form CRS to clients and the establishment of effective written policies and procedures.

It was also noted that only Rhode Island had a requirement that state-covered investment advisors domiciled in the state were required to create and provide the Form CRS to their clients.

Increased Isolation of Senior and Vulnerable Adult Clients

Since the start of the Coronavirus Pandemic, isolation of these individuals has caused increased health risks as well as an increased possibility of undetected financial exploitation. As a result, broker-dealers and investment advisors must become even more vigilant to prevent client funds from being removed from accounts as a result of exploitation of these clients.

Investment Advisor Model Rules

During 2019 and 2020 NASAA completed comment periods for model rules for a formal continuing education (“CE”) program for investment advisor representatives (“IARs”) and establishing standards for written policies and procedure manuals for state-covered investment advisors. The formal CE program will generally require only those IARs not subject to the current FINRA CE Program to participate in the state-mandated program. The model rules are anticipated to be voted on by the NASAA membership in late 2020 or early 2021. Once adopted each state would then need to adopt the model rules by legislation or rule promulgation for the requirement to be effective in that state.

FINRA Gateway Interface

As a result of significant investments in new technology, FINRA announced that in various stages during 2021 the FINRA Gateway will have a new interface for industry and regulatory stakeholders. The new interface, which is more “pleasing on the eyes,” will provide for more dynamic reporting, presentation and data collection. Regulators indicated the data appearing on the Gateway will continue be drawn from existing forms, i.e. Forms BD, ADV, U4, currently in use by industry participants.

For more information about the NASAA conference, how state regulations may affect your firm or how Oyster can help your firm achieve regulatory compliance, contact us or call (804) 965-5400 and we will be happy to help you.

About the Author: Bill Reilly leverages his examination expertise and relationships with state and federal regulators and self-regulatory organizations to guide broker-dealers and investment advisers through both proactive and reactive regulatory processes and compliance issues. Among others Bill conducts FINRA Rule 3120, Supervisory Control Reviews, Annual Compliance Reviews for federally and state-covered investment advisers, creates and/or updates policies and procedures for opening and monitoring senior and vulnerable adult client accounts, has been retained as an expert witness by law firms representing industry participants in arbitrations and regulatory matters, updates policies and procedures for both broker dealer and investment advisers, and acts as an independent third party in reviewing firm activity prior to and as a result of regulatory actions and settlements.