SEC Launches Sweep of RIAs' T+1 Compliance

Specifically, the K&L Gates attorneys say the sweep asks RIAs to share the following documents relating to the T+1 settlement process:

• Written compliance and operational policies and procedures addressing processes or operational protocols affected by the ACA Process or securities transaction settlement cycle (generally) or the T+1 settlement and any material amendments thereto (including any procedures specifically relating to the ACA Process and associated recordkeeping requirements)
• Assessments or tests regarding the ACA Process conducted by the RIA, including a listing of risks and conflicts associated with the RIA’s trading
• RIA compliance testing of the ACA Process
• A listing of automated compliance tools associated with the RIA’s trading, including the ACA Process;
• Compliance training relating to the ACA Process;
• Compliance exceptions relating to the ACA Process; and
• Communications the RIA sent to or received from its clients relating to the ACA Process.

The request also asks for “certain other items that are not directly related to the conversion to T+1 or the ACA Process, such as a listing of potential litigation, a listing of private investments, and a listing of client custodians,” the alert states.

The scope of the SEC requests “go beyond the regulatory requirements for RIAs arising from the T+1 transition,” the alert states.

For instance, advisors are not specifically required to perform a compliance assessment of their ACA process.

Further, certain requests “may be overbroad and implicate communications that could be subject to privilege (e.g., the compliance training).”

And the “exam period” for some requests “are measured from the May 2024 compliance date, yet other requests — contracts, clients, policies, compliance training, communications — reach back to 15 February 2023, the T+1 Rule’s  adoption date,” the attorneys state.