FINRA’s New And Improved Fund Analyzer Tool

FINRA’s New And Improved Fund Analyzer Tool

FINRA has recently given us all a new and improved Fund Analyzer tool. With the recent emphasis on Share Class selection, Regulation Best Interest (Reg BI) for broker-dealers, and the fiduciary duty of Registered Investment Advisers. Firms are encouraged to train their staff on using this new tool.

The new analyzer allows individuals to sort through and compare more than 30,000 products and run a wide variety of investment scenarios. The tool’s enhancements enable users to better calculate how a fund’s fees, expenses, and discounts impact the value of a fund over time.

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Cybersecurity Exam Observations and Effective Practices

Cybersecurity Exam Observations and Effective Practices

Cybersecurity remains one of the principal operational risks facing broker-dealers and Registered Investment Advisers. Accordingly, FINRA and the SEC’s examiners expect firms to have reasonably designed cybersecurity programs and controls consistent with the firm business model and scale of operations to ensure that sensitive data, including client information, is not lost or misused, or accessed by unauthorized users.

Examiners continue to inquire into the Firm’s controls regarding firewalls, vulnerability, penetration testing, and training during office examinations.

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Investment Adviser Marketing Rule

Investment Adviser Marketing Rule

Effective May 4, 2021, the SEC’s recently adopted amendment to rule 206(4)-1 of the Advisers Act went into effect.  The Advertising Rule, 206(4)-1, which addressed how advisers marketed their services to clients and investors, had not been updated with any substance since it was adopted in 1961.  The same is true for the “solicitation rule” adopted in 1979. The new investment adviser marketing rule amends the existing rule 206(4)-1, known as “the advertising rule,” and replaces rule 206(4)-3, the “solicitation rule.” The SEC believed it was appropriate to regulate both the investment adviser advertising and the solicitation activity of an adviser through a single rule: The Marketing Rule.

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How to Qualify for Puerto Rico’s Act 22

How to Qualify for Puerto Rico’s Act 22

Also, Act 22, known as “The Individual Investors Act” targets high net worth investors with the promise of 0% tax on interest, dividends, and capital gains obtained while residing in Puerto Rico as a bona fide resident. This act, along with a few others, were the response to Puerto Rico’s ballooning national debt that started accumulating when the US government cut federal subsidies to the island in 1996. Beginning in 2012, Puerto Rico used its special status within the United States to create unique tax incentives that would lure successful employers down to the island to bring capital and create jobs. The tax benefits Puerto Rico’s Act 22 offers are as follows:

  • 100% tax exemption from Puerto Rico income taxes on all dividend and interest income; and
  • All capital gains accrued after becoming a New Resident will be 100% exempt from Puerto Rico taxes.

In this blog we will highlight some of the major steps you need to take to qualify for Puerto Rico’s Act 22.

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Gifts and Gratuities

Gifts and Gratuities

Advisory representatives are prohibited from accepting anything of value that might influence their investment decisions or serve to reward them in connection with their investment advisory activities. Additionally, advisory representatives are expected to refrain from knowingly conducting advisory business with any individuals or entities that use gifts, gratuities, or other items of value to bribe or influence others.

The provision and receipt of gifts and business entertainment by investment advisers and their employees are subject to pervasive regulation. Firms are to supervise and document all gifts and gratuities given to or received from any clients and prospective clients. The rule protects against the improprieties that may arise when firms or their associated persons gives gifts or gratuities. Firms must take any action to identify or examine the nature, frequency, extent and dollar amount to determine if such gifts and/or gratuities are in compliance with the firm’s policies. RIA’s are to adopt a policy governing professional conduct and conflicts of interest. Such policy is to provide that all associated persons have high standards of performance, integrity, productivity and professionalism. The firm should monitor for any and all conflicts of interest that could result, including instances of preferential treatment over other clients.

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Schedule 13(d) and 13(g)

Schedule 13(d) and 13(g)

Sections 13(d) and 13(g) of the Securities Exchange Act of 1934 require certain market participants to file reports with the SEC. The reporting obligations under sections 13(d) and 13(g) generally focus on the concept of “beneficial ownership” and depend upon numerous factors, including the class and amount of securities acquired, and the purpose and intent with which the particular position is held. Generally, any person (including any entity) who is the “beneficial owner” of more than 5% of any class of equity securities, as defined in Rule 13d-1(i) of the Exchange Act, is subject to the beneficial ownership reporting requirements of section 13(d) of the Exchange Act.

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