Two years ago, we wondered in our blog post whether the staff of the US Securities and Exchange Commission (SEC) would have to further extend no-action relief to permit a broker-dealer to rely on an SEC registered investment adviser (RIA) to perform the broker-dealer’s customer identification program (CIP) requirements. And . . . here we are.
On December 12, the SEC staff issued the latest in a series of letters to the Securities Industry and Financial Markets Association (SIFMA). The letters conditionally extend no-action relief to allow a broker-dealer to rely on RIAs to perform some or all of the broker-dealer’s CIP requirements as well as the broker-dealer’s obligations under beneficial ownership requirements that went into full effect in May 2018.
The SEC staff extended the no-action relief for the earlier of (1) two years (December 18, 2020) or (2) such time that RIAs become subject to an anti-money laundering (AML) program rule. Although the Financial Crimes Enforcement Network re-proposed AML program rules for RIAs in 2015, it has not finalized those rules. We have not had a strong track record in speculating when that might occur, so we will not venture a guess now. However, we do wonder if we will still be writing about these letters in 2026, when the United States will again be subject to a mutual evaluation by the Financial Action Task Force, the intergovernmental body that sets AML standards. The last evaluation was in 2016, and before that, it was 2006. Both of these evaluations noted that even though RIAs are indirectly subject to AML requirements through the financial institutions with which they interact, there are no AML requirements specifically for RIAs.