Aer Compliance

Our CEO Owen Rapaport joined industry leaders at StarCompliance's Synergy24 in Boston to discuss the evolving crypto regulatory landscape. As digital currencies transform finance, we're at the forefront of adapting compliance strategies for firms globally.

It has been a big week for crypto, with two enforcement actions signaling years of cases to come. First was the SEC’s case against Cumberland DRW, a major market maker, for operating as an unregistered broker. This continues SEC claims that many cryptocurrencies are securities although now against a new type of intermediary (vs. past cases against exchanges). Second, the USAO for Massachusetts brought the first ever claims against crypto firms for wash trading in crypto. This included the FBI launching its own token for market makers to wash trade. The message is that federal officials are increasingly paying attention to trading firms in the space, beyond exchanges and token issuers. These firms need to monitor their own activity because you can be sure other people are doing the same. If you’re a buy side firm concerned about market surveillance, reach out. And if you want to hear more about this, join our cofounder Owen who’s speaking about crypto and compliance at the National Society of Compliance Professionals conference in Dallas on October 30.

Navigating MiCA: Insights on Crypto Regulations and Personal Trading Yesterday, we hosted a webinar discussing the upcoming Markets in Crypto-Assets (MiCA) regulations. We thank everyone who attended for contributing to a thoughtful and dynamic conversation, and for those who missed it, we’ve summarized the key, actionable points below: 1. Unique Crypto Challenges: The crypto sector's emphasis on anonymity creates distinct hurdles in personal account disclosure compared to traditional finance. 2. Reputational Risks: Beyond market manipulation concerns, personal trading can significantly impact a firm's reputation, especially for employees with strong brand associations or equity stakes. 3. Regulatory Deadline: By December 30, 2024, market surveillance and personal trading controls must be implemented (MiCA Title VI). 4. Proactive Compliance: Firms are urged to develop internal oversight mechanisms to ensure regulatory adherence. Key Message: Given the nuance of MiCA Title VI’s grandfather clauses, waiting is no longer an option. Crypto firms must act promptly to establish compliant personal trading controls and implement robust oversight mechanisms. Thoughts on balancing regulatory compliance with the innovative spirit of crypto? Reach out to discuss how your CASP can navigate these new regulatory waters effectively.

Our team is in Barcelona this week at the European Blockchain Convention. Why? Because MiCA is coming, and if you want to offer crypto-related services in the EU you're going to need a license very soon. Particularly relevant to us at Aer is that MiCA's Title VI, about market abuse and surveillance, does not have a grandfathering clause. That means anyone operating a CASP in the EU will need to abide by it as of December 31, 2024. From our conversations on the ground here, it's clear this is on compliance officers' minds. If you're not in Barcelona, but want to learn more about how leaders in the field are planning to address these risks, come to our webinar next Tuesday at 2:30pm UK / 9:30am ET. Sign up here:

With our event already attracting over 50 signups from compliance and legal folks at Europe’s top banks, exchanges, and funds, we’ll be capping our attendee list soon! Make sure to sign up and reserve your spot before it’s too late (registration link in the comments)

ESMA's impending MiCA regulation is reshaping the landscape for Virtual Asset Service Providers and token issuers in the EU. Don't miss our upcoming webinar, MiCA: Conflicts of Interest, Market Surveillance, and the Journey to Registration, which offers attendees the opportunity to gain insights from legal and regulatory leaders. Information as follows: Date: October 1, 2024 Time: 9:30 AM ET / 2:30 PM UK / 3:30 PM EU Location: Zoom link to be sent to registrants Featuring expert speakers: - Richard Bruger: Partner at Wilmer Hale, ex-FCA Lawyer - Jonathan Dixon: Head of Surveillance at eflow Global, ex-Kraken - Josh Peschko: Global Head of Compliance Strategy at Talos, ex-AQR Capital Management Topics include: - Best practices for managing conflicts of interest - Implementing effective market surveillance - Navigating the registration process Stay ahead of the regulatory curve and register at the link below to secure your spot! https://lnkd.in/e8BG-zd3 #MiCA #Crypto #Regulation #Compliance

Yesterday, the SEC continued its marketing sweep into investment advisers by charging and settling 9 RIAs, for over $1M. These charges are especially interesting as they highlight the Commission's focus on newer aspects of the rule, such as testimonials and endorsements, which had not featured prominently in enforcement prior to the new rule. For instance, as the SEC noted, one of the firms "disseminated advertisements claiming to contain two testimonials, but neither actually came from current clients. It also advertised endorsements that did not disclose that the endorser was a paid, non-client of [the Firm] in videos, on social media, and on physical objects such as bags and flags." This is a heads up to all investment advisers: there will be no leniency even in newer parts of the rule during an information request or exam.

Yesterday, the SEC continued its marketing sweep into investment advisers by charging and settling 9 RIAs, for over $1M. These charges are especially interesting as they highlight the Commission's focus on newer aspects of the rule, such as testimonials and endorsements, which had not featured prominently in enforcement prior to the new rule. For instance, as the SEC noted, one of the firms "disseminated advertisements claiming to contain two testimonials, but neither actually came from current clients. It also advertised endorsements that did not disclose that the endorser was a paid, non-client of [the Firm] in videos, on social media, and on physical objects such as bags and flags." This is a heads up to all investment advisers: there will be no leniency even in newer parts of the rule during an information request or exam.

RIAs from $25-100B in AUM are often international marketers, in addition to having similar challenges to those discussed already. They want to raise money from LPs beyond just US investors and institutions, especially in tighter private markets conditions like today's. This increases knowledge requirements and the corresponding spend on lawyers who might be able to plug in-house gaps. Those lawyers bill full rates, knowing any firm that markets internationally is willing to pay a premium. For an AI model, this can be a more tractable problem. It is in the abstract a conditional: IF geography, THEN add additional rule to the context window. But internationally, while the rule on the books may say one thing, the practical reality may be very different - and no firm wants to be too far behind their competitors by sticking tightly to the rule. Our model works to address this today via disclosures, as the primary modification firms make to their marketing content when going international. The model can learn from your historic pieces' disclosures - how you disclose when sending pieces to Saudi Arabia vs. the UK vs. Hong Kong - as well as from your ongoing refinements. This lets even larger clients be flexible to market internationally, in a way that has been full of risk for forgetting a disclosure or not properly applying it in the past.

As we head into RIAs between $10B and $25B in AUM, we start seeing multiple strategies and offerings at the same firm. That's where complexity really comes into play: how can you make sure your private equity piece is aligned to your private credit piece, or that your SMA offering is consistent with your bespoke asset management offering, when different teams create the content and different compliance officers review it. Issues arise when there is a cut in for a different strategy, suddenly being reviewed by an unfamiliar team who doesn't know how the firm normally markets this offering. This is where our disclosures library comes in. Many of the mistakes made are around disclosures. The library, built bottoms up from a firm's existing pieces, correlates key metadata about the piece (audience, geographies, types of marketing) with the necessary disclosures. Our model then suggests what's needed for each particular situation. Do you have over a hundred different disclosures in your marketing and can't track them all? Let us know if we can help.