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The Securities and Exchange Commission s (SEC, or
Commission) Division of Examinations (Division) recently issued a
Risk Alert highlighting staff observations from
examinations of investment advisers, registered investment
companies and private funds (firms) engaged in environmental,
social, and governance (ESG) investing. This article summarizes the
Risk Alert, including focus areas and observations of
deficiencies and internal control weaknesses, as well as
recommendations of
effective practices relating to ESG
investing that may be helpful in developing and enhancing a
firm s compliance practices.
As investor demand for ESG information rises, the need for
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The Securities and Exchange Commission’s (SEC, or Commission) Division of Examinations (Division) recently issued a Risk Alert highlighting staff observations from examinations of investment advisers, registered investment companies and private funds (firms) engaged in environmental, social, and governance (ESG) investing. This article summarizes the Risk Alert, including focus areas and observations of
deficiencies and internal control weaknesses, as well as recommendations of
effective practices relating to ESG investing that may be helpful in developing and enhancing a firm’s compliance practices.
As investor demand for ESG information rises, the need for investment firms to align their disclosure with actual practice and to integrate compliance personnel into their ESG-related practices will continue to grow.
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Money laundering compliance is a critical area for banks, broker-dealers and others in the financial world. The importance of this area was recently highlighted by the passage of the Corporate Transparency Act or CTA to bolster the requirements. Indeed, Kenneth Blanco, the Director of the Financial Crimes Enforcement Network or FinCEN recently hailed the Act as a “landmark piece of legislation that will bolster the Untied States’ national security and help better protect the communities and people of this great country.” Kenneth A. Blanco, Remarks at Florida International Bankers Association AML Compliance Conference (March 22, 2021). FinCEN is preparing to write new regulations to implement the new legislation.
SEC To Expand Scope of Reg BI Exams in 2021 While previous exams looked at good faith efforts by firms to comply, next year the commission will focus on specific rule requirements that go beyond suitability standards.
After gauging firms’ compliance with Regulation Best Interest by ‘good faith’ efforts made since it was implemented earlier this year, the SEC will conduct “more focused examinations” in 2021, according to a statement from the Commission’s Division of Examinations.
“Building on staff’s initial assessments, Division staff intends to expand the scope of examinations in 2021 that focus on specific requirements of the Regulation, including those that go beyond suitability standards and require broker-dealers to have a reasonable basis to believe that recommendations are in retail customers’ best interests,” the statement said. “The Division also intends to conduct enhanced transaction testing designed to examine whether broker-dealers hav