The SEC's Whistleblower Program and FinCEN’s AML/CFT’s Impact on Investment Advisers

In the highly regulated financial securities industry, change is ongoing to meet marketplace demands and technological advancements. When the Securities and Exchange Commission (“SEC”) adopts new regulations, interpretation on how to apply a regulation is not always readily available, leaving many investment advisers to rely on their own interpretation on how to apply it.  

On October 23, 2024, EisnerAmper held its quarterly Chief Compliance Officer (“CCO”) Roundtable Luncheon with law firm Mayer Brown at Avra Rockefeller Center in New York City. The event addressed some of the latest regulatory topics including (1) the SEC Whistleblower Program; and (2) the Financial Crimes Enforcement Network (“FinCEN”) Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers (“AML/CFT Rule”). This rule was adopted on August 28, 2024, with a compliance date scheduled to go into effect on January 1, 2026. 

The event was hosted by: 

-Louis Bruno, Partner, EisnerAmper Compliance Desk  
-Joe Castelluccio, Partner, Mayer Brown  
-Glen Kopp, Partner, Mayer Brown  
-Tram Nguyen, Partner, Mayer Brown  
-Gina Parlovecchio, Partner, Mayer Brown  
-TaNeka Ray, Senior Manager, EisnerAmper Compliance Desk 

SEC Whistleblower Program 

The SEC Whistleblower Program was created by Congress to provide incentives to whistleblowers who report possible securities law violations to the SEC. Under the Whistleblower Program, the SEC is authorized to award incentives in the form of monetary awards in exchange for specific, timely, and credible information that leads to SEC enforcement action involving a sanction of more than $1 million. The SEC may award a whistleblower from 10% to 30% of the monetary sanctions collected in connection with the enforcement action. The program is complimented by the SEC’s rules that protect against employer retaliation against whistleblowers who provide the SEC information about possible securities law violations involving their employer.    

FinCEN’s AML/CFT Rule 

The final AML/CFT Rule added investment advisers to the definition of financial institutions under the Bank Secrecy Act of 1970 (“BSA”), which now requires investment advisers to maintain AML compliance programs that meet certain requirements. The AML/CFT Rule applies to registered investments advisers (“RIAs”) and exempt investment advisers (“ERAs”) who fall within the definition of financial institution and specifically excludes certain other RIAs. Investment advisers covered under the AML/CFT Rule will be required to: 

• Implement a risk-based and reasonably designed AML/CFT compliance program. 

• File SARs with FinCEN pursuant to the BSA.  

• Provide independent testing of AML/CFT compliance program. 

• Maintain certain records.  

• Implement risk-based procedures for conducting ongoing customer due diligence. 

The AML/CFT Rule allows covered RIAs and ERAs to outsource their AML/CFT compliance program to third-party vendors. While the AML/CFT obligation is delegable, each RIA and ERA remains responsible for the AML/CFT program’s compliance with the rule.