Year-End Recap and CCO Compliance Checklist

2019 Regulatory Updates and Rule Implementations

A number of regulatory updates and industry developments happened in 2019 that may impact how year-end compliance tasks are prioritized and 2020 initiatives are set. Below are some of the key regulatory updates and industry highlights from this year:

U.S. Regulatory Rulings and Changes

• In an effort to ensure that the regulations applying to investment advisers remain relevant in the digital age, the staff of the SEC announced significant changes to marketing and advertising rules.
• The SEC passed Regulation Best Interest (Reg BI) and the Form CRS Relationship Summary (Form CRS) that establish standards of conduct for broker-dealers and investment advisers.
• The SEC adopted a new rule requiring certain exchange-traded funds (ETFs) to operate without exemptive relief if they satisfy conditions designed to promote investor protection.
• The SEC published two sets of guidance on proxy voting.
• The IIA published position papers to help financial institutions create an Internal Audit charter and establish a relationship of trust between the Internal Audit function and the Internal Audit Committee.
• The SEC’s Division of Trading and Markets and FINRA’s Office of General Counsel issued a joint statement on the application of securities laws to digital asset securities.
• The SEC’s OCIE issued a risk alert highlighting deficiencies in compliance, supervision, and disclosure of conflicts of interest.
• The OCC released a risk perspective outlining the key risk areas and emerging threats to the federal banking system that are monitored by the OCC's National Risk Committee.
• FINRA provided guidance regarding suspicious activity monitoring and reporting obligations.
• FinCEN set a precedent by penalizing the first peer-to-peer cryptocurrency exchange for violating AML regulations.
• The SEC’s OCIE updated their document request list to include proof of branch office and investment adviser representative monitoring and protection of client non-public information (NPI) related to governance, access controls, data loss prevention, vendor management, training, and incident response.
• The SEC’s OCIE issued a risk alert highlighting the concerns and issues associated with certain types of transfer agents (TAs) that also serve as paying agents.
• The SEC issued a three-year extension to its no-action letters regarding the EU MiFID II rules relating to paying for research services.

Privacy Laws

• California signed the California Consumer Privacy Act (CCPA) into law this fall. It will go into effect on January 1, 2020.
• The Brazilian government’s Lei Geral de Proteção de Dados (LGPD) goes into effect on February 15, 2020. Similar to GDPR and other privacy regulations, the LGPD provides a wide range of consumer rights regarding personal data and demands multiple compliance steps by affected companies.

Cybersecurity Regulations

• New York State passed the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act) to expand the definitions of a breach and private information and requires businesses to have controls in place for breach prevention. The SHIELD Act goes into effect in March of 2020.

Performance Updates

• CFA Institute released the 2020 Global Investment Performance Standards (GIPS®) with the goal of universal adoption, acceptance, and support around the world by allowing more applicability and flexibility for asset managers and asset owners alike.
• CFA Institute issued the 2020 edition of the GIPS Standards making GIPS compliance easier for alternative managers.

UK/EU Regulatory Rulings and Changes

• The FCA released a consultation paper explaining the FCA’s approach to the assessment of, adequate financial resources in threshold conditions and principles for business.
• The Senior Managers & Certification Regime (SM&CR) went into effect on December 9, 2019 in the UK.
• The European Council adopted a Directive on the Cross-Border Distribution of Collective Investment Funds (CBDF Directive) and an amending regulation providing on how pre-marketing and AIFMD-marketing interact and when pre-marketing actually starts and ends.
• The amended European Market Infrastructure Regulation (EMIR REFIT or REFIT) came into force in June designed to simplify a derivatives regime.
• The FCA published findings of a review they conducted of principal firms in the investment management sector that summarized its concerns and the infractions it found.
• The FCA published its Business Plan for 2019/2020, setting out its key priorities and specific activities for the coming year.
• The European Parliament and Member States struck an agreement on how to move forward with the implementation of the new prudential framework.
• FCA reports good progress with the industry’s implementation of the MiFID II reforms around research unbundling.

Brexit

• FCA introduces Temporary Permissions Regime for firms and funds currently passporting into the UK as part of its planning for a no-deal scenario.
• Luxembourg established a statutory regime to allow for contract continuity of existing relationships established and serviced via passporting rights under various EU directives. However, UK entities will need to submit the relevant ‘Brexit Notification forms’ to take advantage of this provision.

What You Can Do

With the above and other upcoming developments in mind, we’ve compiled a checklist to help guide you through key areas as you work to meet your 2019 obligations and head into 2020. Click the button below to download the checklist.

Download Checklist

Europe and the UK have seen a number of new developments this year. To best support firms that comply with FCA or EU regulations, we’ve also developed a checklist specific to those regulatory obligations. Click below to download our European checklist.

Download European Checklist

Learn More

Compliance Year in Review Webcast

Listen on-demand to our annual Compliance Year in Review webcast. ACA Compliance Group's Erik Olsen, Managing Director, and Anne Wallace, Consultant, shared SEC compliance developments from 2019, and discussed what to expect in 2020. Listen here.

Consultant’s Corner Q&A: Preparing and Prioritizing for 2020

Listen to our recent podcast with ACA Consultant Leigh Emery, to get about the year-end obstacles CCOs face, how to overcome them, and what trends to prepare for in 2020. Listen here.

Questions

If you have questions about these updates or would like more information about how ACA can help enhance or strengthen your compliance program in 2020, please reach out to your ACA consultant or contact us here.