NASAA Report on State Investment Advisor Exams

November 12, 2005

Back in September, the North American Securities Administrators Association (NASAA) released a series of recommended best practices for state advisor firms’ compliance programs. The best practices are a result of a NASAA sweep and subsequent report completed and released this year. According to a NASAA press release, the following are recommended best practices:

1) Review and revise Form ADV and the disclosure brochure annually to reflect current and accurate information;
2) Review and update all advisory contracts;
3) Prepare a written supervisory procedures manual relevant to the advisor’s business;
4) Prepare and distribute a privacy policy initially and annually;
5) Prepare and maintain all required records;
6) Maintain a surety bond, if required;
7) Prepare and maintain client profiles;
8) Calculate and document fees correctly;
9) Review and revise all advertisements, including performance and advertisements and websites; and
10) Implement appropriate custody safeguards, if applicable.

In addition to the best practice recommendations, a review of the report’s most common regulatory deficiencies are quite revealing. The most common deficiency cited relates to registration issues, particularly inaccurate information on the Form ADV, failing to provide clients with a copy of the firm disclosure brochure in a timely manner, and failing to provide or offer to provide a copy of the updated disclosure brochure each year. Other common deficiencies include inadequate supervisory programs and failing to provide a customer privacy statement to all clients. To read the entire NASAA report click here.

RIA Compliance Consultants is focused on helping advisor firms, of all sizes, establish well-run, customized compliance policies and procedures. Our firm specializes in conducting mock SEC and state audits that are focused on identifying and correcting deficiencies. Has your firm implemented NASAA’s recommended best practices? Are you confident your firm would pass the scrutiny of a regulator? If you are interested in discussing ways to improve your compliance programs and better prepare your firm for a regulatory review, give us a call.

Posted by Bryan Hill
Labels: Compliance Program, Regulatory Inspections