In 2024, Registered Investment Advisers (RIAs) in the U.S. face a rapidly evolving regulatory landscape. Staying compliant with the Securities and Exchange Commission (SEC) regulations is more complex than ever, with new rules, amendments, and enforcement actions reshaping the compliance environment. As RIAs strive to keep pace, understanding the top challenges can help firms stay ahead of the curve and avoid potential pitfalls.

1). Adapting to New SEC Rule Changes

The SEC continuously updates its rules and regulations to address emerging risks and market developments. In 2024, RIAs must navigate several new rule changes that impact their compliance programs. These include amendments to marketing rules, changes in Form ADV reporting requirements, and updates to the custody rule. 

Challenge: 

Keeping track of these changes and ensuring that your compliance program reflects the latest requirements can be daunting. RIAs must regularly review and update their policies, procedures, and disclosures to remain compliant. 

Solution: 

Establish a process for staying informed about SEC rule changes. This could include subscribing to regulatory updates, attending industry webinars, and consulting with compliance experts to ensure your firm is always in alignment with the latest requirements.

2). Managing Increased SEC Enforcement Actions

The SEC has ramped up its enforcement efforts in recent years, particularly targeting firms that fail to comply with disclosure, custody, and recordkeeping requirements. In 2024, RIAs can expect continued scrutiny, with the SEC focusing on areas like conflicts of interest, cybersecurity, and the accuracy of Form ADV filings. 

Challenge: 

The increased likelihood of SEC examinations and enforcement actions means that RIAs must be proactive in identifying and addressing potential compliance issues before they escalate. 

Solution: 

Conduct regular internal audits and compliance reviews to identify vulnerabilities in your compliance program. Address any gaps promptly and ensure that your firm’s practices meet SEC expectations. 

3). Ensuring Accurate and Timely Disclosures

Accurate and timely disclosures are critical to SEC compliance. In 2024, RIAs must pay close attention to their Form ADV filings, performance advertising, and fee disclosures. Any inaccuracies or omissions can result in significant penalties and damage to your firm’s reputation. 

Challenge: 

Given the complexity of the disclosure requirements, ensuring accuracy can be challenging, especially for smaller firms with limited resources. 

Solution: 

Implement robust internal controls and review processes to ensure that all disclosures are accurate and complete. Consider engaging an external compliance expert to review your filings before submission to the SEC. 

4). Enhancing Cybersecurity Measures

While cybersecurity is not a new concern, the SEC’s focus on it has intensified. In 2024, RIAs are expected to have comprehensive cybersecurity programs in place to protect client data and maintain the integrity of their operations. 

Challenge: 

The SEC has made it clear that firms without adequate cybersecurity measures will face enforcement actions. RIAs must ensure that their cybersecurity protocols are up to date and capable of defending against increasingly sophisticated threats. 

Solution: 

Conduct a thorough assessment of your firm’s cybersecurity program, including policies, employee training, and technical controls. Regularly test your defenses through vulnerability assessments and update your cybersecurity plan as new threats emerge. 

5). Navigating Complex Custody Rules

The SEC’s custody rule remains a significant area of concern for RIAs. In 2024, RIAs that have custody of client assets must ensure they are fully compliant with the rule’s requirements, including surprise examinations and client account statement delivery. 

Challenge: 

Misinterpreting or failing to comply with the custody rule can lead to severe penalties. The rule’s complexity often leads to confusion, particularly regarding what constitutes custody. 

Solution: 

Work closely with legal and compliance professionals to clarify your firm’s custody status and implement procedures that ensure compliance with the rule. Regularly review your practices to ensure they align with the SEC’s latest guidance. 

Conclusion 

The regulatory environment for RIAs in 2024 is more challenging than ever, with the SEC introducing new rules, increasing enforcement actions, and maintaining a strict focus on areas like disclosures, cybersecurity, and custody. To navigate these challenges, RIAs must prioritize their compliance efforts, stay informed about regulatory changes, and proactively address any gaps in their compliance programs.

Take Action: 

To ensure your firm remains compliant with SEC regulations, consider a comprehensive compliance program review. At LawVisory, we specialize in helping RIAs navigate the complexities of SEC compliance. Contact us today for a free compliance review. You can also download and receive for free our regulatory updates: https://lawvisory.com/news-regulatory-updates/.