15 Biggest Compliance Challenges for Advisors in 2023

Compliance with the Securities and Exchange Commission's marketing rule has been named advisors' top chore for the third year in a row. That's according to the latest Investment Management Compliance Testing Survey, conducted by the Investment Adviser Association, ACA Group and Yuter Compliance Consulting. Advertising/marketing was identified by 70% of survey respondents as the "hottest" compliance topic. Respondents were asked to pick three. The SEC warned in early June that examiners are beefing up scrutiny of advisors' compliance with its new marketing rule by zeroing in on testimonials and endorsements, third-party ratings and Form ADV. The securities regulator's exam division warned that while it will continue to focus on policies and procedures, substantiation, performance advertising and books and records, exam staff is now "increasing its focus" on other marketing rule-related areas. Compliance professionals at 581 investment advisor firms participated in the survey. All firm sizes were represented, with 26% of respondents managing less than $1 billion in assets, 41% managing $1 billion to $10 billion, and 34% managing more than $10 billion. According to the report, cybersecurity was the second hottest topic, named by 52% of compliance officers, and electronic communications surveillance climbed to third, named by 35% of respondents. Last week, a new potential compliance headache emerged. Aaron Pinnick, manager of Thought Leadership at ACA Group, told ThinkAdvisor Thursday in an email that Meta's new Threads platform "is yet another communications channel that firms will need to monitor and manage, and like all new forms of communications, firms will need to balance the potential opportunities of this new platform with the compliance costs associated with monitoring its use." As the survey notes, electronic communications is "a hot topic for compliance professionals, and an area of interest for the SEC so firms will need to think through if/how they will permit their employees to use this new communications method," Pinnick continued. Also worth noting, Pinnick said, is that "42% of firms only permit the use of business email and business phone for business communications (the most common approach according to our survey) with very few firms allowing individuals to use other social media sites (e.g., Facebook, LinkedIn) for business purposes. So, I would guess that most firms will formally ban their employees from using Threads for business purposes." Read the gallery for the other top compliance challenges for advisors this year, according to the survey.