Red Oak made a strong showing at this year’s NSCP National Conference in Dallas, and our consultants compiled their top 10 takeaways from the event.
1. Off-Channel Communications: A High-Risk Area
The SEC has levied $2.2 billion in fines since 2021 for firms failing to monitor off-channel communications, such as texts and chats, especially on personal devices. This session underscored the need for strict policies and enforcement mechanisms to ensure all client interactions are captured and compliant with firm standards. Firms must not only set procedures but also ensure their effectiveness through regular training and audits—especially as both the SEC and state regulators are paying close attention.
2. Effective Supervisory Programs for Smaller Firms
With limited resources, smaller firms often face unique supervisory challenges. However, they aren’t exempt from the same regulatory obligations as larger organizations. Tailored compliance programs—aligned with the specific structure and needs of these smaller firms—are critical for effective supervision. By leveraging adaptive strategies and technology, compliance can become a manageable and integral part of business operations, rather than an overwhelming burden.
3. Reg BI Compliance: Current Landscape and Challenges
The Reg BI session highlighted two significant points. First, most firms still rely on a blend of manual and technological processes, which can create bottlenecks in maintaining compliant workflows. Advisors must document the rationale behind each recommendation, a process that becomes burdensome without streamlined, technology-enhanced systems. Second, firms must ensure their Reg BI programs address care obligations, conflict resolutions, and documentation rigorously. For compliance leadership, understanding the firm’s highest priority needs and allocating resources effectively is paramount.
4. Mitigating Enforcement Risks through Self-Reporting
Proactively identifying and reporting potential deficiencies is a best practice that can significantly reduce regulatory risk. The speakers emphasized that regulators tend to view firms favorably if they show a commitment to addressing issues transparently and promptly. Having a strong self-reporting mechanism not only decreases potential liabilities but can also result in reduced penalties and strengthened relationships with regulators.
5. AML Compliance for Investment Advisers
Starting January 2026, FinCEN’s AML rules will extend to registered investment advisers, classifying them as financial institutions subject to anti-money laundering requirements. For firms unprepared for this shift, AML compliance could be a significant focal point for auditors, making robust policies essential. Adhering to these standards early will allow firms to manage risk and avoid audit issues, especially in light of heightened scrutiny from regulators.
6. Cybersecurity: A Top Priority Regardless of Regulation
Cybersecurity remains central to regulatory exams, regardless of whether the SEC’s proposed rule is officially adopted. Both SEC and state-level regulators are focusing on cybersecurity, necessitating that firms prioritize data security and ensure compliance with best practices. Building a solid cybersecurity infrastructure will not only protect client information but also fulfill the expectations of a rigorous regulatory landscape.
7. Marketing Rule Compliance: Maintaining Accuracy in Disclosures
Marketing regulations now emphasize the accuracy and completeness of disclosures, particularly regarding testimonials and endorsements. Firms should also ensure that their Forms ADV and ADV Part 2 are consistently updated to reflect any marketing practices. This is an area where small inaccuracies can lead to substantial compliance risks; thus, regular reviews and alignment with evolving guidelines are critical.
8. AI in Compliance: Adapting to a Rapidly Changing Landscape
AI was a recurring theme at this year’s conference, as compliance departments increasingly consider the use of AI-driven solutions. However, firms must review third-party agreements carefully to understand requirements for recordkeeping and compliance around AI interactions, including potential recordings on platforms like Zoom and Teams. With an expanding number of AI-driven vendors in the market, firms have more options than ever to leverage technology, although compliance diligence in these partnerships is crucial.
9. Red Oak Stood Out
Our presence at the NSCP conference this year was highly visible, from sponsoring the conference Wi-Fi to featuring our logo on attendee badges. These efforts underscored our commitment to the industry. Being prominently positioned allowed our team to connect extensively with clients and showcase the solutions we offer.
10. ROC the House Event: Networking and Collaboration
Our “ROC the House” event provided an informal setting for meaningful interactions and lots of fun with clients and prospective partners. Our team members and attendees enjoyed an evening of networking over food and drinks, building relationships that are integral to a collaborative compliance community.
Conclusion
The 2024 NSCP National Conference offered valuable insights into the trends and regulatory challenges facing today’s compliance professionals. Connecting with familiar and new faces energized our team, and we look forward to seeing how these insights continue to shape compliance strategies. We anticipate another dynamic event in 2025, where the NSCP will undoubtedly provide further opportunities for knowledge-sharing and growth.
