As investment markets evolve, so does the need for additional regulatory oversight. While much of the recent focus has been on what is effectively a global investment market with national subsectors, it’s important to maintain sight of your core market. As a Registered Investment Advisor (RIA), it’s crucial that you take a proactive approach to compliance and prepare your business and personnel for the future.
In this article, we will examine the emergence of new compliance trends in 2025 (focusing on the SEC’s 2025 Examination Priorities) and how compliance software solutions can help RIAs adapt to these changes. We will also consider a range of additional topics, including regulatory shifts, the adoption of automation and new technology, data security and privacy, and much more. The idea is simple: to help RIAs adapt to and prepare for regulatory and compliance changes in 2025.
US regulatory shifts and updates
There is no doubt that the relationship between RIAs (and the broader financial services community) and regulators has improved in recent years. The fading of the “us and them” position of years gone by has given way to a more proactive relationship. This brings us to the recent publication of the SEC’s 2025 Examination Priorities, which is, in effect, a warning for RIAs as to which direction regulation compliance is expected to travel in 2025.
RIAs can leverage compliance software solutions to stay updated on these new regulations and streamline adherence processes. It’s safe to say we can expect more regulations on the horizon in 2025, taking in several broad topics such as:-
Fiduciary standards
This is an ever-evolving area of regulation, but we know that the SEC will focus on fiduciary standards in 2025. In their most basic form, the standards ensure that RIAs:-
- Act in the best interests of clients
- Avoid conflicts of interest (where possible)
- Make sound decisions
- Disclosure potential conflicts of interest
- Don’t profit from client positions
The standards also apply to investment advisers and certified financial planners, as the regulators look to capture the majority of those providing financial advice.
Advertising rules
As we alluded to earlier, while the SEC is seen as the headline regulator, the Financial Industry Regulatory Authority (FINRA) also plays an active role. The rules regarding advertising financial services and investments are continually changing and tightening.
SEC Marketing Rule (Rule 206 (4)-1)
This element of the SEC rule book has seen recent changes, which include:-
- A unified framework: Over the last few years, we have seen the consolidation of advertising and cash solicitation rules
- Definition of advertisements: This element now includes direct and indirect advertisements, endorsements, and testimonials.
- Prohibited practices: This is constantly updated to cover misleading statements, unsubstantiated claims, and omitting important facts.
- Performance advertising: A controversial topic, there are now strict regulations regarding the presentation of performance results.
FINRA Advertising Regulation (Rule 2210)
While FINRA is a self-regulatory organization regulating member brokerage firms and exchange markets, it’s important not to underestimate its power and influence. When it comes to advertising regulations, we constantly see tweaks and more clearly defined definitions:-
- Communication categories: There are three specific categories: retail communications, correspondence, and institutional communications, each with individual filing requirements.
- Content standards: All content promoting securities, the industry, or services must be fair, balanced, and not misleading.
- Performance information: There is a regulatory requirement to ensure that data is accurate and not misleading and that context is provided with appropriate disclosures.
- Filing requirements: Specific types of advertising campaigns must be filed with FINRA before or within ten business days of launch.
- Record keeping: A copy of all communications and details of who prepared and approved each communication must be retained for at least three years.
In recent years, we have seen a general move towards tighter regulations regarding advertising financial products and services. This will continue into 2025 and beyond.
Anti-money-laundering regulations
It would be unfair to suggest that we have not seen significant progress with anti-money laundering (AML) regulations in recent years. Still, as regulators catch up with criminals, new technology can often prompt them to move in a different direction.
Looking at this from a broader perspective, not just the SEC, there are several changes in the pipeline:-
- Beneficial ownership information: From 1 January 2025, domestic and foreign companies operating in the US must report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).
- Modernization of AML/CFT regulations: These changes require financial institutions to adopt effective, risk-based, and reasonably designed AML/CFT monitoring services, including a mandatory risk assessment for each client.
- Real estate sector regulations: A popular home for illicit funds, starting in December 2025, there will be greater policing of all cash transactions and more reporting obligations.
- Enhanced scrutiny and enforcement: While an AML program should already be in place, financial institutions with gaps in their data/processes will be exposed to significant financial penalties.
- Investment adviser obligations: In August 2024, FinCEN sought to close regulatory gaps in oversight by bringing more investment advisers under the umbrella of AML regulations.
Financial institutions and other appropriate parties have been aware of AML regulations for some time. Many are implementing compliance software solutions to ensure adherence to scrutiny and enforcement, which are set to increase in 2025.
ESG compliance
Many experts believed that increased investor focus on Environmental, Social, and Governance (ESG) principles would be short-lived. The reality is that ESG is now an integral part of the investment landscape, and with ” greenwashing” a growing concern, we will see tighter regulations in this area during 2025.
Some of the more practical changes will include:-
- More specific documentation of ESG criteria
- Due diligence
- Transparency with client communications
Initially, this could introduce a significant element of caution within the RIA community. Many will turn to compliance software solutions to meet their regulatory obligation to ensure that ESG products and services deliver on their promises. The regulatory burden also falls further down the line with fund managers, listed entities and even company directors.
The range and scope of ESG laws and regulations can vary significantly between countries. As an RIA operating in the US, there are specific guidelines and regulations. For those operating further afield, it’s crucial to remain up-to-date with global changes. Not easy!
A proactive approach to regulatory changes
The publication of the SEC’s 2025 Examination Priorities is undoubtedly a significant help for compliance departments and compliance officers. It effectively warns RIAs about what to expect in 2025 and provides an opportunity to take a proactive approach using compliance software solutions.
Adoption of automation and technology in compliance
We have deep-seated knowledge and experience in utilizing automation and technology in compliance. While some financial institutions feel pressured to rush to incorporate the latest technology in their compliance operations, taking a structured approach is critical.
There are many areas where compliance software solutions can assist in enhancing protection, including:-
- Personal Trade surveillance for your employees
- Email, Website, Social Media, and Text Message archiving
- Regulatory reporting
- Alternative communication channels
Another critical tool for compliance departments is the ability to record and analyze structured and unstructured data, putting messaging and voice conversations into context. This was an area of weakness in years past, but technological developments have changed this.
Numerous benefits from automation include enhanced accuracy, reduced time, and, for many companies, significant cost savings. These elements play an integral part in the daily management of financial institutions and greatly assist with ongoing risk assessments.
Emerging tools and compliance technology
The latest RIA compliance software solutions in the US are veering towards customizable tracking systems and AI-powered document reviews. As the broad range of information required to comply with compliance regulations grows, focused compliance technology’s processing power and accuracy are priceless.
As a provider of compliance technology services, we appreciate the need to comply with existing regulations and adapt our services and processes for future changes. This is why the SEC’s 2025 Examination Priorities are proving useful, indicating the regulator’s thinking and potential changes for 2025.
While it is tempting to focus on national markets, it’s important to appreciate the availability of investment opportunities on a global basis. Flexibility is a critical element of our industry. It is crucial to offer clients services focused on their core markets while allowing them to trade globally in a safe, secure environment.
This brings up the topic of scalability, which is built into our compliance technology. We also appreciate the need to customize options, focusing on specific client needs and plans. Even though our services provide significant cost savings, we understand the need to remove excess features which could inflate costs and add a layer of complexity.
Enhanced data security and privacy regulations
While acknowledging the need to stay one step ahead of regulations and taking a proactive rather than reactive stance, it’s also essential to remain up-to-date with core issues such as data security and privacy regulations. We have seen a considerable increase in ransomware and phishing attacks, which can compromise sensitive client data.
A recent report suggested that more than 50% of ransomware attacks were focused on the financial services industry, highlighting the value of confidential data. This further emphasizes the importance of data security for maintaining compliance and protecting client trust.
Data privacy laws
Data privacy and protection are critical elements of any business, but they are particularly relevant to the financial services industry. To put this into context, this is a list of just some data privacy acts currently shaping data privacy regulations:-
- Health Insurance Portability and Accountability Act (HIPAA)
- Gramm-Leach-Bliley Act (GLBA)
- Fair Credit Reporting Act (FCRA)
- Electronic Communications Privacy Act (ECPA)
- Federal Trade Commission Act (FTC Act)
- California Consumer Privacy Act (CCPA)
There have been developments in numerous areas which will impact financial services, including:-
- Implementation of the American Privacy Rights Act
- Enhanced state-level data privacy laws
- Consumer Financial Protection Bureau Open Banking rules
Matching the legal obligations to retain detailed client information, investments, profiles and audit trails with the need to protect this information can be challenging. There are practical actions which can be taken by RIAs, such as:-
- Encrypted storage
- Two-factor authentication
- Secure data communication protocols
- Employee training
- Adherence with global standards
As an RIA, you must match your specific compliance requirements with those services provided by outside parties. Any gaps in your regulatory cover could lead to significant penalties and potentially terminal damage to your brand. If your customers and potential customers start to lose trust in not necessarily your financial advice but your security measures, this can be difficult to recover from.
Regulatory audits
Even though the number of reports that need to be lodged with regulators has expanded, we have also seen an increase in the number of regulatory audits. As an RIA operating in the US, it’s important to be ready for such audits, face regulatory scrutiny head-on, and reduce the risk of non-compliance.
The range of potential documentation involved in regulatory audits will depend upon the type and depth of your business, but these are some of the more common documents required:-
- Compliance policies and procedures
- Client records and agreements
- Advertising and marketing material
- Trade records and transaction documentation
- Code of ethics
- Custody related documents
- Business continuity and succession plans
These documents must be kept up-to-date, as many regulations operate in real-time. The introduction of compliance calendars, centralized document storage, and automated tracking provide critical support to this process. If you work on the assumption that the regulator could come knocking on your real or virtual door at any time, then you should be prepared!
The importance of transparency
As we mentioned earlier, the SEC plans to focus on several areas in 2025, one of which is transparency. This includes openness towards clients and investment markets to maintain a high level of trust. Other topics include fees, risk disclosures, and the ever-growing focus on ESG considerations.
While transparency is a regulatory obligation, it’s important not to overlook what many see as a moral obligation to clients. As much as RIAs look to avoid potential conflicts of interest, there will be occasions when this is unavoidable, which is where disclosure transparency is critical.
Fostering trust and respect
There is no doubt that transparency and disclosure significantly impact the advisor-client relationship. If we filter out the surrounding noise, regulations, and expectations, it comes down to trust. As an investment advisor, you will handle confidential information and have numerous personal discussions. How you use information and protect it will dictate the depth and longevity of your professional relationship.
Cost-effectiveness in compliance
As a leading light in the compliance technology sector, compliance professionals appreciate the broad range of benefits our services provide. The need to be flexible, create a customized package for individual companies, and securely store data while maintaining visibility throughout your firm, are top priorities. Simplifying often complex processes and expanding the range of services offered can look like:
- Provide a centralized compliance portal
- Compliance calendar with filing dates
- Email and SMS archiving technologies
- Monitoring trades through a secure portal
- Simplifying the filing process
- And producing electronic documentation
Looking at the broader benefits, Ria Compliance Technology assists clients in:
- Streamlining the compliance process
- Ensuring regulatory adherence
- Reducing operational risk
- Improving efficiency
RIAs can reduce operational costs by leveraging compliance software solutions while ensuring regulatory adherence. Even though cost is an essential element of any business, it should be considered in tandem with the broader benefits and the potential for scalability further down the line.
Key takeaways from 2025 Compliance Trends for RIAs: How to Leverage Compliance Software Solutions
While confirmation as to which areas the SEC will focus on in 2025 is helpful from a compliance point of view, paying attention to your broader responsibilities is essential. The introduction of cutting-edge AI technology has allowed companies like RIA Compliance Technology to take our services to a new level. However, we fully appreciate that this needs to be utilized within a controlled and structured environment, simplifying complex actions.
Partnering with a provider of compliance software solutions can help your firm stay ahead of regulatory changes. These are fast-moving times, with new challenges emerging regularly as we move closer to more consistent global regulatory oversight.
Ready to streamline your compliance strategy? Contact us today to explore solutions that simplify and support your firm’s ongoing regulatory obligations in the financial sector.
