Welcome to the Aug 6, 2025 edition of On The Docket, which includes the following content:
- AML/CFT Rule delay
- Kitces IAR CE Day
- Beware of email phishers impersonating the SEC
- Disclose conflicts of interest & don’t backdate compliance docs
- The SEC’s ‘Finders Exemption’ proposal resurfaces
- The DOL Fiduciary Rule / PTE 2020-02 courtroom saga continues
- A few CYA tips when a client wants to disregard your advice…
- Is the SEC Raising the AUM Threshold?
- Google Workspace introduces support for FINRA compliance
- Celebrating 9 years
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Happy reading.
– Chris
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AML/CFT Rule delay
FinCEN to delay the effective date of its AML/CFT Rule from Jan 1, 2026 to Jan 1, 2028, during which time it will revisit the scope of the rule overall.
While I very much agree with the postponement/re-assessment, I very much take issue with the timing of the announcement. Just last week I finished researching and drafting revised AML/CFT compliance policies and procedures for our clients in anticipation of the Jan 1, 2026 effectiveness 😑.
The next major rule amendment on the horizon for advisers is Regulation S-P (Dec. 3, 2025 compliance date for advisers with $1.5B or more in RAUM, Jun. 3, 2026 compliance date for advisers with less than $1.5B in RAUM.
So help me God if it too gets punted right after I finalize preparations…
—–Resources—–
🔖 AML/CFT Rule Delay Press Release
Kitces IAR CE Day
Yours truly will be returning this year as a presenter for Michael Kitces’ IAR CE Day on August 28th.
Topic: AI compliance considerations for advisers.
Knock out your entire 6 hours of IAR Ethics CE, while also earning 6 hours of CE for CFP, CIMA, CPWA, American College, CPA, and other adviser designations.
Learn more and register at the link below. Hope to see you there!
🌐 Kitces IAR CE Day Registration
Beware of email phishers impersonating the SEC
The email domain ‘sec[dot]gov[dot]virumail[dot]com’ is not legit (nor is any other derivation thereof). Don’t respond, click links, download files, etc.
If you remotely suspect an SEC impersonator:
Email help@sec.gov to confirm authenticity, call your regional SEC office, and/or report the matter to the SEC Office of Inspector General at https://www.sec.gov/office-inspector-general or (833) 732-6441
🌐 RIAs targeted by phishing campaign impersonating SEC
Disclose conflicts of interest & don’t backdate compliance docs
Key takeaways from a recent SEC enforcement action:
1️⃣ — Conflicts Disclosure —
When disclosing a conflict of interest in your Form ADV Part 2A brochure, be sure to include sufficient detail about the nature and extent of the conflict. Beating around the bush, using “may” qualifiers, and including misleading statements are all problematic.
To quote the administrative proceeding: “While Respondent disclosed in its Brochure that it had a conflict of interest, and further disclosed that it had an incentive to recommend use of Affiliated Broker as introducing broker and Clearing Broker A as clearing broker, it did not fully and fairly disclose the nature and extent of the conflict.”
2️⃣ –Backdating Documents —
If you don’t have a document to substantiate that a compliance task was contemporaneously performed during the exam period, don’t create and backdate such document during the exam.
In this enforcement action, the adviser did not have documentation to support its annual compliance reviews during certain prior years. Rather than simply falling on the sword, the adviser created what purported to be annual compliance calendar checklists that were signed by the CCO during such prior years. In fact, the checklists were created after the exam was initiated and backdated to appear as if they were completed during the prior years.
DON’T DO THIS. It is far better to admit a lack of compliance documentation than to fabricate its prior existence.
🌐 Read the full settlement here.
The SEC’s ‘Finders Exemption’ proposal resurfaces
Back in 2020, the SEC floated the idea of a ‘finders exemption’ that would allow the receipt of transaction-based compensation without needing to register as a broker-dealer (or a registered rep of a broker-dealer). The exemption would have allowed finders to receive a cut of the capital raised or referred to a fund or otherwise as part of a securities offering.
Nothing ever came of the proposal, and since then the SEC has charged various individuals—including several IARs—for receiving finders fees without registering as broker-dealers or registered reps.
Under the new SEC leadership, the finders exemption may be back on the table.
The July 22 meeting of the SEC’s Small Business Capital Formation Advisory Committee includes “Deep Dive on “Finders”” as the main agenda item: “As part of this discussion, the Committee will explore potential principles, frameworks, conditions and safeguards that could permit certain “finders” to engage in limited capital-raising activities.”
TBD if a finders exemption is ultimately adopted, but such a move would at the very least reduce the regulatory opacity that has clouded this issue for years.
—–Resources—–
🔖 Original Finders Exemption Proposal
🔖 SEC Small Business Capital Formation Advisory Committee Agenda
🔖 “Unregistered broker activity” can result in SEC administrative proceedings
The DOL Fiduciary Rule / PTE 2020-02 courtroom saga continues
The DOL Fiduciary Rule / PTE 2020-02 courtroom saga continues… and still doesn’t seem to have an end in sight. How the DOL expects the average adviser to comply with the constant twists, turns, and contortions is beyond me.
TLDR: “[The judge] struck down parts of PTE 2020-02 that allowed the Department of Labor to treat certain relationships involving IRAs as evidence of a fiduciary role under ERISA. Specifically, the judge rejected the DOL’s attempt to consider a single rollover as the start of an ongoing advisory relationship, the assumption of possible future advice to IRAs and the view that a continuous advisory relationship covering both a workplace retirement plan and an IRA meets the “regular basis” requirement for fiduciary status. [The judge] found these interpretations went beyond the DOL’s legal authority and were unreasonably applied.”
This does NOT mean that PTE 2020-02 as a whole is dead, only that PTE 2020-02 is not required for certain rollovers with no historical advice relationship between the adviser and the pre-rollover plan. Also, TBD whether the DOL appeals the judge’s decision.
—-Resources—-
A few CYA tips when a client wants to disregard your advice…
With the benefit of 20/20 hindsight, here’s a few things an adviser can do to insulate against “you didn’t save me from myself” claims like the one referenced in this article (in which a client was duped into liquidating her investment portfolio and investing in a crypto scam):
- Verbally advise the client against the liquidation, with contemporaneous time-stamped notes in the CRM.
- Send a follow-up CYA email to the client memorializing the verbal warnings you provided.
- Require a signed “acknowledgement of risk” or “knowing disregard of my advice” form.
- If you reasonably suspect financial exploitation, know that some states may afford a safe harbor disbursement delay and reporting to appropriate authorities with the right fact pattern.
- Invoke the trusted contact form to reach out to said trusted contact and try to get them to intervene.
- Consider reporting the matter to the Internet Crime Complaint Center here.
Is the SEC Raising the AUM Threshold?
It’s still unknown whether the SEC will ultimately raise the $100M investment adviser registration threshold, but if the previous jump from $25M to $100M in 2010 is any indication, this SEC Investor Alert from 2011 may provide some tea leaves to read.
Google Workspace introduces support for FINRA compliance
Though WORM storage (write once, read many) is not required for RIAs under the Advisers Act recordkeeping rule, Google’s implementation of “FINRA compliant solutions” for Google Drive storage is interesting/helpful nonetheless. Read the full update from Google below:
🌐 FINRA Compliance for Google Workspace: Google Drive and Calendar Updates
Celebrating 9 years
Leave it to LinkedIn to remind me that Beach Street Legal LLC recently hit its 9th year anniversary.
The tweet below pretty much sums up my sentiments on the folks I’m lucky enough to work with. 🫡
