2018 Regulatory Checklist for Financial Advisors

by | Mar 16, 2018 | Blog

FINRA and the Office of Compliance Inspections and Examinations (OCIE) of the SEC both released their exam priorities for 2018. It’s no surprise that many of the events of 2017 including Irma, Maria, Harvey, the Equifax breach have greatly influenced this year’s focus for both regulatory agencies.

Since your firm could be structured in any number of ways and therefore fall under the jurisdiction of one or both regulators, it can be confusing to identify what you need to focus on this year.

To help you determine if you are on the right track, we’ve compiled a list of questions to ask your broker-dealer, internal compliance officer, or trusted outsourced compliance resource.


  • Senior Investors – What steps are in place to protect seniors? How do we confirm that the investment advice is suitable and sales presentations are fair and balanced?
  • Microcap Stocks – If buying microcap stocks, how do we confirm that due diligence, client suitability, disclosures, and adequate training has occurred?

Operational Risks

  • FINRA Rule 4370 – Does your firm have a business continuity plan (BCP) in place outlining how you will meet your obligations to your clients in the event you do not have access to your physical office location for an extended period? Does your BCP include how and when the plan goes into effect, which systems are mission critical or secondary, how you will accomplish data backup and recovery, and when and how to restore operations?


  • What is your firm’s cybersecurity program? Are you prepared to protect sensitive information, including personally identifiable information from both internal and external threats?


  • Are proper due diligence, client suitability, disclosures, and adequate training occurring for all products including these?
    • Interest Rate Sensitive Securities
    • Unit Investment Trusts (UITs)
    • Securities-Backed Lines of Credit (SBLOCs)

Initial Coin Offerings

  • What mechanisms are in place for supervisory, compliance and operational infrastructure to ensure compliance with relevant federal securities laws and regulations?

FINRA Supervision Rule Implementation

  • Have you implemented Rules 2165? And amendments to the CDD Rule, Rule 4512 and Rule 2232?

Since the number of newly registered investment advisors continues to grow, the SEC continues to make risk-based assessments and select investment advisors who have never been examined before or have elevated risk profiles.

SEC Share Class Selection Disclosure Initiative.

On February 12 the Securities and Exchange Commission on Monday launched an initiative to waive fines against investment advisers who come forward and admit that they had been putting clients into high-fee mutual fund classes and agree to reimburse those clients. The announcement cited Section 206 of the Investment Advisers Act of 1940, which imposes a fiduciary duty on advisers to act in the best interest of clients, including disclosing conflicts of interest. The SEC is giving advisers until June 12 to announce their intention to self-report.

  • Do your client accounts hold anything other than the lowest available share class? If so, have you analyzed and documented the total client expense? Can you verify the class of shares your clients hold is in their best interest, as it relates to total expense? How do you disclose share class and account expenses to clients? Do you have changes to make, and should you self-report according to this new initiative?

If you find yourself burdened by the new responsibilities of regulatory oversight, give us a call. We help lessen the load and ease the worry most advisors experience with owning an independent practice with limited or no home office support.