Welcome to the July 17, 2026 edition of On The Docket, which includes the following content:
- Takeaways from the SEC Reg S-P Compliance Outreach for Small Firms
- SEC E-Delivery Modernization Efforts
- Thanks to Catherine Tindall, CPA for an enjoyable conversation!
- Always Disclose Conflicts of Interest
- New York Endeavors to Tackle Outdated & Burdensome Regulations, Policies, and Practices
- SEC to Adjust “Qualified Client” Thresholds for Inflation
- A Great Take on AI and Lawyers
- Schwab AI Summits
- SIFMA Urges SEC to Overhaul Outdated Communication Retention Rules
- Decoding the SEC’s Draft Strategic Plan for 2026-2030
- SEC Enforcement Action: Undisclosed Conflicts and Compliance Deficiencies
- SEC Risk Alert: Investment Adviser Obligations Related to Economic Conflicts of Interest
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Happy reading.
– Chris
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Takeaways from the SEC Reg S-P Compliance Outreach for Small Firms
The compliance date for SEC-registered RIAs w/ <$1.5B AUM to comply with newly-amended Reg S-P was June 3, 2026.
I attended the SEC’s recent virtual Compliance Outreach on Reg S-P for “small firms,” and have summarized my takeaways below. The Compliance Outreach itself was recorded and posted to Youtube, and is linked below.
• • • • • TLDR summary of what newly-amended Reg S-P requires • • • • •
- Written policies/procedures to detect, respond to, and recover from unauthorized access to client info (i.e., a data breach response program).
- In the event of unauthorized access to “sensitive” client info, written notification to affected clients as soon as reasonably practicable (but no later than 30 days after discovery).
- Enhanced service provider oversight, including to ensure service providers notify advisers w/in 72 hours of discovery of unauthorized access to their client info.
• • • • • My takeaways from the Compliance Outreach event • • • • •
- Create and maintain a risk-based inventory of (1) where client data physically and digitally resides, and (2) the third-party service providers that have access to such client data. Review and update this inventory regularly to keep it current.
- Implement reasonably-designed technological barriers to (1) prevent client data from being accessed without authorization or exfiltrated from the firm, and (2) detect/monitor for unauthorized access. What is ‘reasonable’ for a solo RIA may look very different from a larger, multi-office ensemble practice.
- Ensure written policies/procedures match actual practice; don’t overcommit to a cybersecurity infrastructure that can’t be substantiated. While the NIST Cybersecurity Framework for small businesses can be a helpful resource, it is not a one-size-fits-all solution for all RIAs.
- Education/train employees about the prescriptive requirement to report suspected data breach incidents so they can be timely addressed.
- Don’t neglect basic, low-hanging protective measures like multi-factor authentication, need-to-know access rights, encrypting sensitive data in transit and at rest, complex password requirements, etc.
🔖 Watch the Reg S-P Compliance Outreach recording here.
SEC E-Delivery Modernization Efforts
Is the era of “microfilm” and “microfiche” references in the SEC’s Recordkeeping Rule coming to an end?
“During a recent oversight hearing before the House Financial Services Committee, Chairman Paul Atkins said the agency is examining recordkeeping expectations for digital communications and ways to increase flexibility around electronic delivery of shareholder and investor materials. He also emphasized the need for more uniform communication retention standards across market participants, noting that today’s patchwork requirements can create confusion and operational challenges.”
On July 16, 2026, the SEC took the first step to follow through on its electronic delivery efficiency goals by proposing Regulation E-Delivery – which includes requirements and conditions under which required information could be delivered to clients and investors electronically without first obtaining such client/investor’s affirmative consent. It generally would supersede the SEC’s decades-old, guidance-based e-delivery approach and apply broadly to prospectuses for funds and other issuers, fund annual and semi-annual shareholder reports, proxy statements, trade confirmations, disclosures pursuant to Form CRS, and Form ADV Part 2 Brochures.
The comment period for Regulation E-Delivery is open 60 days.
🔖 SEC signals modernization of off-channel communications & e-delivery rules
🔖 Regulation E-Delivery Press Release
🔖 Regulation E-Delivery Fact Sheet
🔖 Regulation E-Delivery Proposed Rule
Thanks to Catherine Tindall, CPA for an enjoyable conversation!
In case you missed it, I recently appeared on the Financial Advisors Want to Know podcast with Catherine Tindall, CPA. In the episode, we talked about how advisory firms can start the year by getting their compliance infrastructure in good shape.
Always Disclose Conflicts of Interest
I’ve said it before and I’ll say it again: always disclose conflicts of interest.
In a recent SEC administrative proceeding, the respondent RIA “failed to adequately disclose all material facts, including its conflicts of interest,” in setting a cash allocation in client accounts that caused its affiliated broker-dealer to financially benefit as a result.
Perhaps more interestingly, the SEC also took issue with the respondent RIA’s ADV Part 2A disclosure about the use of Modern Portfolio Theory, asserting that MPT was not used to determine the cash allocation of client accounts (i.e., MPT was only used to determine non-cash securities allocation decisions).
While the affiliate conflict of interest disclosure is fairly black-and-white, the MPT disclosure suggests additional nuance may need to be considered when describing an RIA’s investment strategies in Item 8 of Form ADV Part 2A.
🔖 Read the Administrative Proceeding here.
New York Endeavors to Tackle Outdated & Burdensome Regulations, Policies, and Practices
New York is one of the only states that requires any new LLC to publish an announcement of the LLC’s creation in 2 local newspapers for 6 weeks.
This “publication requirement” is antiquated, expensive, and serves no material purpose. Seems like a perfect candidate for the chopping block 🪓.
SEC to Adjust “Qualified Client” Thresholds for Inflation
Effective June 29, 2026, inflationary adjustments to the definition of “qualified client” under the Advisers Act take effect: the assets-under-management test is increased from $1,100,000 to $1,400,000 and the net worth test is increased from $2,200,000 to $2,700,000. The AUM and net worth tests are important, as they correlate to the particular clients that can be charged performance-based fees.
A Great Take on AI and Lawyers
I wholeheartedly second Aaron’s sentiments as expressed in the screenshot tweet/post below (for better or worse). AI enables/streamlines the ability to render legal advice, it doesn’t replace it.
Maybe it expands the resources available to on-the-fence DIYers, but DIYers shouldn’t necessarily be the target market of a lawyer anyway.
Schwab AI Summits
Sharing the stage with Adam Moseley, Lisa Salvi, Joel Bruckenstein, and John O’Connell, MBA at the recent Schwab AI Summits in Newport Beach and New York was enjoyable in its own right, but reconnecting with long-time Schwab friends and meeting the top-shelf advisor attendees was icing on the cake.
If you haven’t attended a Schwab event before, I highly recommend it. Their conference game is on point. Here’s a link to a brief highlight reel from the Newport Beach event; you might recognize a brief appearance from a certain someone…
And if you didn’t happen to catch my Schwab Compliance Review on AI Compliance Considerations, it is linked below.
Onwards to the next and final AI Summit in Chicago on August 27th!
🔖 Schwab Compliance Review: Artificial Intelligence Compliance Considerations for Investment Advisers
SIFMA Urges SEC to Overhaul Outdated Communication Retention Rules
According to a recent SIFMA survey, RIA participants are retaining ~96,000 to ~1,000,000 communications PER DAY.
SIFMA contends that this systemic over-retention – as well as the associated financial cost, fragmented and archaic regulatory framework, and operational burden – justify an overhaul of the SEC’s communications and record retention rules.
SIFMA first urged the SEC to modernize the comms/recordkeeping rules back in October 2025, and supplemented its request just this month to include the results of the survey cited above.
The artificial intelligence freight train has only further exposed how the existing comms/recordkeeping regulatory framework is no longer suited to clearly address new technologies.
Who knows if the SEC will touch the recordkeeping rule under the Advisers Act in the near term, but SIFMA makes a compelling case that it’s time to dust off the microfilm/microfiche and review the recordkeeping rule through a 21st century lens.
Decoding the SEC’s Draft Strategic Plan for 2026-2030
Anyone trying to read the tea leaves for what the SEC will be up to over the next few years should review its recently-published draft Strategic Plan for 2026-2030.
A few interesting tidbits:
- There is a clear thematic emphasis on establishing a regulatory framework for digital assets (crypto) and distributed ledger technologies (blockchain).
- Legacy rules will be reassessed for continued relevance, the imposition of unnecessary burdens, suffocating innovation, or reduction in market efficiency.
- Enforcement will be refocused on clear violations of established law (fraud, manipulation, deception, etc.) rather than regulation by enforcement. “Success should be measured not by the number of cases or fines, but by the deterrent effect and the clarity it provides to the marketplace.”
- The SEC’s own internal organizational and technological infrastructure appears to be undergoing an overhaul, including the consolidation of duplicative functions, reviewing legacy systems (including EDGAR), and incorporating artificial intelligence and blockchain technologies.
The strategic plan is only a draft and is open for public comment through July 2nd.
It remains to be seen how this Strategic Plan will ultimately filter down to the rules under the Advisers Act, RIA exams, and enforcement actions, but it’s encouraging to see the SEC return to its core mission and dust off the regulatory cobwebs that have accumulated over the years.
SEC Enforcement Action: Undisclosed Conflicts and Compliance Deficiencies
With respect to RIA conflicts of interest, sunshine is the best disinfectant [against an SEC enforcement action].
Failing to transparently disclose conflicts of interest will continue to invite SEC administrative and cease-and-desist proceedings, as one RIA and its former CEO learned the hard way in yesterday’s settled charges summarized below.
The undisclosed conflicts at issue included:
- The CEO’s profit-sharing interest in a sub-adviser retained by the RIA
- The RIA’s expense sharing agreement with an ETF manager that incentivized the use of certain ETFs in client portfolios
- The CIO’s affiliation with other advisory firms that provided products or services to the RIA’s clients
For good measure, the settled action also cites the following compliance deficiencies:
- The CEO’s personal trading in an ETF that impacted the end-of-day price of the ETF
- Failure to implement its compliance policies and procedures
- Failure to conduct an annual compliance review for one year
- Failure to enforce the provisions of its code of ethics re: access persons’ personal trading
- Failure to identify the CIO as an access person for purposes of the code of ethics and reporting of personal trading
A conflict’s permissibility hinges on its full and fair disclosure [in Form ADV Part 2A or otherwise]. To quote the 5th Dimension, “let the sun shine in.”
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🔖 Administrative Proceeding Summary
SEC Risk Alert: Investment Adviser Obligations Related to Economic Conflicts of Interest
The same day that I posted “With respect to RIA conflicts of interest, sunshine is the best disinfectant [against an SEC enforcement action]…,” the SEC’s Division of Exams published a Risk Alert on “Investment Adviser Obligations Related to Economic Conflict of Interest.”
Coincidence? Yes, completely.
In a nutshell, the Risk Alert highlights observed failures related to:
• The full and fair disclosure of economic conflicts of interest associated with cash management recommendations, revenue sharing, custodian / broker-dealer credits and incentives, affiliate relationships, fund share class selection, and fee markups.
• Insufficient or inaccurate fee-related disclosures, contractual provisions that did not reflect actual billing practices (particularly w/r/t fee proration and fee refunds upon termination), and policies/procedures not reasonably designed to align with actual billing practices.
And to continue to drive home the point, the Risk Alert reiterated the SEC’s displeasure with prefacing a conflict’s disclosure with the word “may”:
“[D]isclosure that an adviser ‘may’ have a particular conflict, without more, is not adequate when the conflict actually exists. For example, we would consider the use of ‘may’ inappropriate when the conflict exists with respect to some (but not all) types or classes of clients, advice, or transactions without additional disclosure specifying the types or classes of clients, advice, or transactions with respect to which the conflict exists. In addition, the use of “may” would be inappropriate if it simply precedes a list of all possible or potential conflicts regardless of likelihood and obfuscates actual conflicts to the point that a client cannot provide informed consent.”
The TLDR takeaways are:
- If an adviser is incentivized to render advice or take an action that is not disinterested (i.e., conflicted), the adviser must specifically and transparently disclose such incentives and conflicts and how they are addressed.
- The description of fees in the brochure and client agreement must be sufficiently granular to convey how fees will actually be calculated, prorated, and charged to the client (and, of course, must be accurate).
Conflicts disclosure has been an SEC exam priority each year since 2021, and I suspect it will continue to be an SEC exam priority for many years to come.
🔖 Examinations Observations of Investment Adviser Obligations Related to Economic Conflicts of Interest
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