SDDco Perspective Newsletter

May 1, 2019  |  Vol 8. Edition 1

Dear SDDco Clients and Colleagues: Our SDDco Perspective includes industry news, guidance, regulatory rule updates, deadlines, and other timely matters impacting brokers, advisors, fintech firms, taxpayers, investors, and their service professionals. The SDDco Perspective is made available on our website monthly at http://sddco.com/resources-newsletter.

FINANCIAL INDUSTRY & CRYPTOCURRENCY

Bryon Lyons


Bryon Lyons
CEO, SDDco Brokerage Advisors LLC

New Treasury Regulations Please Most Opportunity Zone Investors

In April, the Treasury Department issued the second in a promised series of new regulations and guidance that provide more clarity and benefits for investors contemplating Opportunity Zone investments into distressed areas. Investors received specific guidance on setting up funds of more than one investment, and have been given a more flexible timeline to invest that fund based cash. Investors also now have a one-year grace period to sell assets and reinvest those proceeds in order to continue to qualify for the extraordinary tax breaks that can include tax free gains for investments of more than ten (10) years. The new rules also help support business and job creation and not simply real estate development.

Bloomberg on the New Opportunity Zone Rules
New York Times on the New Opportunity Zone Rules
Investing in Qualified Opportunity Funds Department of the Treasury (IRS)


Finland Institutes Virtual Currency Anti-Money Laundering Obligations

On May 1, 2019, the ACT ON VIRTUAL CURRENCY PROVIDERS becomes effective in Finland. Based on the European Union’s anti-money laundering legislation, the Finnish Financial Supervisory Authority (“FIN-FSA”) will enforce statutory requirements on virtual currency exchange providers, custodian wallet providers, and issuers of virtual currencies, holding them responsible for good business practices relating to the custody and protection of client money, segregating client money and proprietary funds, marketing practices, and ensuring compliance with anti-money laundering regulations.

Finland’s New Cryptocurrency Regulations
Finland’s Financial Supervisory Authority (“FIN-FSA”) April 26, 2019 Release

CYBERSECURITY

Erin Furtado


Erin Furtado
Head of Marketing

Are we sleepwalking into a cyberattack crisis?! The next wave of risks is one we are NOT prepared for…

With 91% of banks being targeted, cyber-attacks have become a real concern for all financial institutions. The threats are becoming more cutting-edge and are sure to cause potential risk. Soon, 5G mobile technology will be implemented leading to a surge in data collection by businesses, multiplying cyber risks. Recently, a new threat has emerged with quantum computers, which can solve mathematical problems we once thought to be unsolvable such as crypto code breaking.

To shed some light on this threat: a standard computer encryption is so secure that it could take 6 quadrillion years to break the code but quantum computers could break the code in a matter of minutes.

Read More >


Cybersecurity myths debunked- don’t get caught in the weeds

Myth #1: "Cybersecurity is IT's job." Data breaches and cyberattacks affect the entire organization. It is the executive team that must manage operational risks and communications internally and externally.

Myth #2: "We don't need to worry--only the big banks are at risk of cyberattacks." Wrong. In 2016, 81% of cyberattacks were financial institutions with less than $35 million in revenue, a 54% increase from 2015.

Myth #3: "We can gain a competitive advantage by being good at cybersecurity." Simply put, no, you can’t. It takes a lot of resources to lead the pack on cybersecurity, small to medium sized firms simply do not have an abundance of resources to carry the task out well enough to deem themselves as experts.

Myth #4: "A national digital identity scheme will emerge to improve cybersecurity efforts." This doesn’t seem to be on the government’s horizon and banks who are looking to fulfill this task might find some resistance.

Myth #5: "We're doing fine as long as we pass our annual exams." Some might argue that the law cannot keep up with technological change.

Cybersecurity success relies on intricate measurement and management. Regulators have put cyber guidance in place at a bare minimum; however, financial intuitions need to get in front of these myths to mitigate risk, so you do not end up a statistic.

Read More >

See our Cybersecurity brochure to view more myths that have been debunked

SDDco CYBER
COMPLIANCE & SUPPORT OFFERING

  • Become compliant with all state and federal requirements including FINRA, NYDFS, SEC, etc.
  • Infrastructure Testing including Penetration Testing
  • Customized and Tested Policies and Procedures
  • Fully Managed Incident Response Coverage
  • Data Security Training
  • Vendor Due Diligence
  • Risk Assessments
Cybersecurity graphic

Speak with an SDDco consultant about how we can help you navigate the nuances of armoring your firm through SDDco Cyber.

COMPLIANCE & REGULATORY

Gary Fox


Gary Fox
Director

Nature Abhors a Vacuum, and Apparently State Lawmakers Do Too

That giant whooshing sound you’re hearing is most likely the pages and pages of competing laws and regulations being printed out for review.

In between the demise of the Department of Labor's (DOL) Fiduciary Rule and the eventual enactment of some form of the Security and Exchange Commission’s (SEC) Regulation Best Interest, some states’ legislative bodies have decided that they must act sooner on behalf of residents of their states.

On Monday, April 15, the state of New Jersey issued Rule Proposal 51 N.J.R. 493(a) entitled “Fiduciary Duty of Broker-Dealers, Agents, Investment Advisers, and Investment Adviser Representatives”. Specifically, the law seeks to impose a fiduciary standard on broker-dealers and their agents, as well as to codify the existing fiduciary standard applied to investment advisers and their representatives. The state is soliciting comments until June 14, 2019. New Jersey specifically cited what it considered deficiencies in the SEC’s proposals, as well as the current political tension in Washington D.C., as the catalysts for action.

Currently, Connecticut and New York have some form of law on the books. Nevada also has a law, but it only provides authorization to the Secretary of State of Nevada to adopt fiduciary regulations. These regulations, presumably, are in development. Illinois may follow suit, based on the fact that in February a bill was introduced in Springfield called the “Investment Advisor Disclosure Act”. The bill itself has no official language yet.

Industry experts and observers are split in their opinions on the value, or damage, brought by the piecemeal approach to a fiduciary or similar standard for broker-dealers, as well as the impact it may have on small firms doing business in the various states. A consensus seems to be growing that the SEC needs to act before more states add to the potential patchwork of regulatory requirements. The DOL also plans to return to the power struggle with its intention to release a new version of the DOL Fiduciary Rule in the Autumn of 2019.

https://www.njconsumeraffairs.gov/Proposals/Pages/bos-04152019-proposal.aspx
https://www.investmentnews.com/article/20190415/FREE/190419957/new-jersey-releases-rule-to-impose-fiduciary-duty-on-brokers

Ross Marlin


Ross Marlin
Associate Director

FINRA Provides Guidance on Customer Communications Related to Departing Registered Representatives

On April 5, 2019, FINRA issued a Regulatory Notice to address the responsibilities of member firms when communicating with customers about departing registered representatives. FINRA’s guidance included the expectations that: (1) the member firm should promptly and clearly communicate to affected customers how their accounts will continue to be serviced; and (2) the firm should provide customers with timely and complete answers, if known, when the customer asks questions about a departing registered representative.

Read more >


To learn more about how SDDco can help strengthen your firm’s compliance program, click here .

ACCOUNTING & TAX

Bob Fortino


Bob Fortino
Managing Partner

Blockchain’s influence on the future of Accounting

In this TED talk, Jacob Lewtan discusses how accounting professionals can keep pace with innovation using Blockchain technology. Lewtan sees this industrial uprising as a persistent threat to the accounting profession and deliberates the power of analytics, fraud, and monitoring to connect how accountants can advance through the use of emerging technologies.

Tedx BryantU Keys to the Future video

LEGAL

Casey Muller


Casey Muller
Director of Legal & Internal Compliance

Registration has opened for FINRA’s National Compliance Outreach Program for Broker-Dealers

The Securities and Exchange Commission (SEC) and FINRA have opened registration for their National Compliance Outreach Program for Broker-Dealers to be held on June 27, 2019, at the Federal Reserve Bank of Chicago. The program will provide an open forum for industry professionals to discuss and promote current, effective compliance practices for investor protection as well as other regulatory hot topics, such as digital assets and cybersecurity.

Read more >

IN THE SPOTLIGHT

Don't Miss the Broker/Dealer Conference on May 8 - Register Today and Save $50

Janice Parise

SDDco's Janice Parise, Accounting Partner will be a featured speaker.

May 8, 2019
8:15 a.m.–5:20 p.m.

Baruch College
55 Lexington Avenue, Vertical Campus 14th Floor,
Room 14-220, New York, NY 10010

In-Person Registration
Webcast Registration
View and Download Conference Brochure >

FINRA Logo

Keep a look out for us at the FINRA Annual Conference
BOOTH 5

Washington, DC | May 15-17, 2019

Marriott Marquis Washington, DC
901 Massachusetts Avenue, NW
Washington, DC 20001

SDDco Group makes this general information available for educational purposes only, the contents of which were not originated from SDDco. SDDco is not affiliated with any of the publishing persons or entities of the articles herein. The information provided should not be construed as legal advice. This email may constitute an advertisement under U.S. law.

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