11 hot topics in regulation for 2012

The rapid pace of regulatory change in the U.S. investment industry shows no sign of letting up in 2012. In the NICSA webinar, “A Review of the Regulatory Landscape,” held on January 25, 2012, we took a quick look at the hottest topics for the coming year. Panelists Jay Regan from Deloitte, Keith Robinson from Dechert and Tony Seiffert from American Funds highlighted the following 11 issues as most critical for NICSA members:

  1. Investment adviser registration. Affiliates of NICSA member firms – particularly non-U.S. affiliates – may qualify for one of the exemptions under Dodd-Frank, but firms will need to review the structure of affiliate relationships carefully to determine whether that is indeed the case.
  2. New reporting requirements. Advisers must prepare to provide information on private funds on Forms ADV and PF. Producing consistent information will require considerable coordination within the organization and with service providers.
  3. Money market funds. The SEC continues to consider more changes in the rules governing money market funds. While nothing is certain, the “3 and 30” option leads the pack at this point. Under this proposal, 3% of shareholder assets would go into a separate class of shares with a floating NAV and subject to redemption restrictions. In a related development, it doesn’t look as if the Financial Stability Oversight Council will include money market funds on its list of systemically important financial institutions.
  4. Cost basis reporting. For mutual funds, cost basis reporting rules went live on January 1, 2012. The industry must follow up to make sure that all systems are working properly to produce tax reports in early 2013.
  5. Social media. Firms need to make sure that their compliance efforts keep pace with the ballooning usage and evolving regulation of social media.
  6. Records management. Archiving requirements for social media highlight the importance of a comprehensive records management program.
  7. Insider trading and expert networks. Given the SEC’s focus on this issue, firms should review procedures and make sure that they’re being followed. Training should be a key component of a compliance program.
  8. Derivatives. The SEC is reevaluating its overall approach to regulating derivatives. Nothing will happen soon, but the review is likely to allow new methodologies for measuring risk, subject to increased independent director oversight.
  9. CFTC regulation. A proposal to subject mutual funds to greater CFTC oversight is still pending, but likely to be amended substantially. Stay tuned.
  10. Fiduciary rules. The Department of Labor will repropose a rule revising the definition of a fiduciary under ERISA, while the SEC continues to consider applying fiduciary standard to broker-dealers. Because changes to the fiduciary standard may impact an advisor’s compensation structure, the SEC may wait to pick up its review of 12b-1 fees until the fiduciary issue is resolved.
  11. FATCA. These IRS rules will have a broad impact across the financial industry. Firms are beginning to prepare systems in anticipation of compliance beginning in 2013.

Want to hear more? NICSA members have unlimited free access to the full webinar through our archives. Or join us at NICSA’s 30th Annual Conference and Expo to continue the conversation.



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