Firms Face Choppy Water Navigating SEC Compliance Dates

Smaller firms may be put in an untenable position if the compliance dates for the increasing number of rules from the Securities and Exchange Commission land around the same time, according to speakers at the Investment Adviser Compliance Conference.

In a chat with SEC Commissioner Mark Uyeda during the event in Washington, D.C., Investment Adviser Association President and CEO Karen Barr said she worried even if those dates are staggered for smaller and larger firms, it could nevertheless place a massive strain on advisors.

“Even at large firms, the people implementing some of these rules are the same people implementing all of them, in compliance, legal, operations and business lines,” she said.

“Regulation does not exist in a vacuum.” 

Barr brought up the proposed amendments to the commission’s custody rule (which was recently voted on 4-1 in favor, including Uyeda), as well as proposed rules released last October about investment advisors’ requirements when outsourcing services, as particular concerns.

Uyeda agreed that if these rules are going to be finalized, they couldn’t all “hit at the same time.” 

Already, the commission has compliance dates for other final rules scheduled for Memorial Day and August 2024, which would demand “significant resources” from firms in order to comply.

“Are we going to add custody, cyber, outsourcing? When are those going to hit?” he asked. “Even if it’s the fall of 2024, that is really difficult to do.”

Uyeda also worried the commission could inadvertently make precedents in which regulators set compliance dates “almost with a wink,” leaving registrants with the belief that preparations could last beyond the date. 

“That’s a bad situation for both the regulator and the regulated entity to me,” he said. “We

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