Page 40 - Investment Advisor May 2021

saw this as an issue back in Dodd-
Frank, implemented it, and it’s taken
the SEC more than 10 years to get these
regulations in place.”
Family offices, according to Morgan,
“should expect political pressure for
greater public disclosures, even though
the reasons for not requiring disclo-
sure haven’t changed: sophisticated,
wealthy investors dealing with sophis-
ticated wealthy counterparties (in the
case of swaps) have the knowledge
and bargaining power to obtain all the
information they want. Not every failed
investment requires greater disclosure
or regulatory oversight.” “Prior to Archegos, [the SEC was looking
Amy Lynch, president and founder
of FrontLine Compliance, said that at] adding new guidance on exactly which
she does see the SEC looking into fam- types of family offices qualify… .” However,
ily offices and the current exemption
from registration. post Archegos, the SEC “will most likely
“Prior to Archegos, I believe [the SEC
was] going to look at it from the per- also consider the implications of large
spective of adding new guidance on
exactly which types of family offices family offices and how they can affect
qualify and giving further clarity on the
definition of a family office,” Lynch said. markets and counterparties.”
However, post Archegos, the SEC “will
most likely also consider the implica- —Amy Lynch, FrontLine Compliance
tions of large family offices and how
they can affect markets and counterpar- hard and may be struggling to be able led SEC may “pick up the 2016 invest-
ties,” she continued. to examine all the firms they need to,” ment advisor AML proposals which
“The SEC will either consider Shirkey said. “If they bring in the family have been sitting dormant at SEC for
bringing family offices under the reg- offices, they’re already saying they need the last four years.”
istration umbrella once they reach more resources.” AML offenses were the top fine-get-
a certain size or they may set new ter for the Financial Industry Regulatory
reporting requirements for them if AML RULE FOR RIAs? Authority in 2020. FINRA reported 14
their trading volumes and transaction The SEC exam division recently issued AML cases last year, resulting in $16.2
amounts reach a certain size or lever- a risk alert detailing broker-dealers’ million in fines.
age,” Lynch added. “The large family anti-money laundering compliance “There have been recent AML
offices that could pose a risk to coun- failures, specifically those related to enforcement actions, including some
terparties (like Archegos did) need filing suspicious activity reports. Ben with very large fines. This is a con-
some level of oversight and the SEC Marzouk, an attorney at Eversheds tinued focus for broker-dealer regula-
now knows this.” Sutherland, said that the recent chat- tors, such as FINRA and SEC. Given
Linda Shirkey, compliance manag- ter forewarns that likely incoming SEC the increased regulatory attention (and
ing director at Bates Group based in Chairman Gary Gensler may revive a fines) in this space, broker-dealers
Houston, and president and founder dormant AML policy plan for registered seem to be beefing up AML staffing
of The Advisor’s Resource, Inc., ques- investment advisors. to ensure adequate responses to red
tioned, however, whether the SEC has Investment advisors “are still not flags, sufficient SAR filings and more,”
the resources to examine family offices. technically subject to AML rules issued Marzouk said.
“The SEC has been pretty clear about by FinCEN,” the Treasury Financial
the fact that the RIA world is growing Crimes Enforcement Network, Washington Bureau Chief Melanie Waddell can Adobe Stock
very quickly and that they are working Marzouk said. However, a Gary Gensler- be reached at [email protected].

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