The Securities and Exchange Commission's recent review of the investment adviser registration threshold could have significant consequences for thousands of registered investment advisers (“RIAs”). If the SEC ultimately raises the assets-under-management (“AUM”) threshold required for federal registration, many advisers currently registered with the SEC could be required to withdraw their federal registrations and return to state regulation.

Regulatory inquiries from FINRA, the SEC, the DFPI, or the California Department of Insurance often raise an uncomfortable question for financial-services firms and their personnel: who pays for the employee’s lawyer? Under California Labor Code section 2802, employers must indemnify employees for necessary expenses incurred as a direct consequence of performing their job duties. In Grissom v. Vons Companies, Inc., the California Court of Appeal held that this obligation can include reimbursement of attorney’s fees incurred by an employee who reasonably retains independent counsel in connection with matters arising from the course and scope of employment.

Social media has become a major source of investment information. Investors now encounter stock tips, options strategies, crypto promotions, private placements, alternative investment products, and claims about financial markets on TikTok, Instagram, YouTube, Reddit, Discord, Telegram, WhatsApp, X, and other platforms. While some of this content educates investors, much of it does not. When online personalities promote securities, exaggerate returns, hide compensation, impersonate registered professionals, or pressure investors into risky trades, social media content can become investment fraud, securities fraud, or market manipulation.

Artificial intelligence (“AI”) has rapidly become part of everyday life. Millions of people now use AI systems such as ChatGPT, Gemini, Claude, and similar programs to draft emails, summarize documents, answer questions, conduct research, and create written content. Businesses are using AI to improve efficiency, reduce costs, and automate tasks that previously required significant human involvement.

A Rule 8210 letter from the Financial Industry Regulatory Authority, or FINRA, is not ordinary correspondence. For financial advisors, registered representatives, supervisors, broker-dealer executives, and other financial professionals, it is often the first formal sign that FINRA is examining conduct, communications, customer account activity, disclosures, sales practices, outside business activities, private securities transactions, or other potential compliance or regulatory issues. In some matters, the recipient is only a witness. In others, the recipient is the focus of the investigation. Either way, an 8210 request deserves immediate attention.

Artificial intelligence is no longer a back-office tool in financial services. It is now embedded directly in how retail investors—particularly self-directed clients—research, evaluate, and execute investment decisions. For broker-dealers, registered investment advisors, and registered representatives, this shift is not merely technological. It is creating a new and evolving layer of regulatory exposure, litigation risk, and supervisory complexity.

Artificial intelligence is no longer a back-office tool in financial services. It is now embedded directly in how retail investors—particularly self-directed clients—research, evaluate, and execute investment decisions. For broker-dealers, registered investment advisors, and registered representatives, this shift is not merely technological. It is creating a new and evolving layer of regulatory exposure, litigation risk, and supervisory complexity.

Customer arbitration is one of the most common forums for resolving disputes between financial institutions and their clients. For broker-dealers and registered representatives in particular, FINRA arbitration serves as the primary venue for claims involving alleged misconduct, unsuitable investment recommendations, and supervisory failures. Although arbitration is often faster and less formal than court litigation, it does not carry lower risk. Certain missteps during the customer relationship, or during the arbitration itself, can significantly increase liability exposure.

FINRA has begun a broad review of the rules governing its arbitration forum. In Regulatory Notice 26-06 (“RN26-06”), FINRA requested public comment on a wide range of potential changes to arbitration procedures and policies. The request forms part of the organization’s broader FINRA Forward initiative, which aims to modernize FINRA’s rulebook and regulatory systems.

FINRA and the SEC have proposed replacing FINRA Rules 3270 and 3280 with a single new Rule 3290 designed to narrow reporting to investment-related activities and preserve stricter controls for outside securities transactions, especially when selling compensation is involved. This proposed regulation is currently before the SEC and may be adopted this spring.

California is close to putting generative AI obligations for lawyers into a statute. Senate Bill 574 (SB 574), authored by Senator Thomas Umberg, would add explicit duties for attorneys who use generative AI in the practice of law and would restrict certain uses of AI by arbitrators.

The U.S. Department of Labor has issued a new Notice of Proposed Rulemaking addressing how to determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act. The proposal would rescind the Department’s 2024 final rule and largely restore the framework adopted in 2021, with certain modifications.

On November 17, 2025, the staff of the Securities and Exchange Commission (“SEC”) issued a no-action letter to the Financial Services Institute that meaningfully alters the regulatory landscape governing how registered representatives may receive transaction-based compensation. Previously, there was an absolute ban on broker-dealers paying transaction-based compensation to anyone other than the registered person generating the commissions. For the first time, however, the SEC staff stated it would not recommend enforcement action when a broker-dealer pays transaction-based compensation to an unregistered, pass-through, personal services entity wholly owned by one or more registered representatives, provided a detailed set of conditions is satisfied.

Effective January 1, 2026, AB 692 marks California’s newest effort to limit employer-imposed restraints on workers by banning repayment obligations tied to separation from employment. The law builds on California’s aggressive pro-mobility statutory framework, particularly recent expansions to Business & Professions Code § 16600, and creates new compliance obligations for employers who use training-repayment agreements, “clawback” provisions, or similar contract structures.

On November 17, 2025, the SEC Division of Examinations (the “Division”) issued its annual Examination Priorities (“Exam Priorities”) for fiscal year 2026. Exam Priorities outline the key areas where the SEC intends to focus its oversight in the coming year, including heightened attention to cybersecurity, operational controls, and core investment adviser compliance obligations.

The deadline for California-registered investment adviser representatives (“IARs”) to complete their required Investment Adviser Representative Continuing Education (“IAR CE”) hours is quickly approaching. Every IAR registered in California must comply with these requirements, regardless of whether they are associated with a state-registered or federally covered investment adviser.

Do you have a plan for your business’s future? What would happen to your business if a sudden unforeseen event made you unable to work? Would your family or estate know who to contact or how to operate the business in your absence? Planning ahead is an essential part of protecting your business, your clients, and your legacy.

This article originally appeared in the Daily Journal on August 18, 2025. Read online at the Daily Journal here. Download a PDF to read here.

Earlier this year, FINRA released its proposal to update Rule 3220, Influencing or Rewarding Employees of Others (the “Gift Rule”)[1]. The Gift Rule prohibits any member or person associated with a member, directly or indirectly, from giving or allowing to be given anything of value in excess of $100 to any person where such gift is in relation to the business of the recipient[2]. Similar to the current rule, this proposed rule would not apply to gifts from a member to its own associated persons, or gifts from a member or its associated person to an individual retail customer[3]

On June 12, 2025, the SEC withdrew fourteen regulations that were proposed over the past three years, stating they have no intent to issue final rules regarding the proposed.[1] When asked about the mass withdrawal, the SEC stated it is “getting back to [its] roots.”[2] Amongst the rules withdrawn included: