Category Archives: Compliance Training
 

Repeat Compliance Program Deficiencies Result in SEC Enforcement Actions for Investment Advisers

November 05, 2013

On October 23, 2013, the U.S. Securities and Exchange Commission (“SEC”) issued a press release (Release No. 2013-226) indicating that it sanctioned three investment adviser firms “for repeatedly ignoring problems with their compliance programs.” The SEC’s enforcement actions are the result of the investment adviser firms each failing to effectively act upon previous warnings and correct compliance deficiencies that had been previously identified.  In the press release Andrew Bowden, director of the SEC’s National Examination Program, stated that, “After SEC examiners identified significant deficiencies, these firms did little or nothing to address them by the next examination. Firms must fix deficiencies identified by our examiners.”

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Investment Advisers Must Customize Their Compliance Programs

October 01, 2013

As we previously indicated, many investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) still have trouble meeting the requirements of Rule 206(4)-7 under the Investment Advisers Act of 1940 (“Investment Advisers Act”).  Pursuant to Rule 206(4)-7, investment advisers registered with the SEC are required to establish and maintain written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act and the rules under the Investment Adviser Act. Most state securities regulations have similar requirements and many state registered investment advisers also have trouble complying with these requirements.

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A Refresher on the Requirements for Investment Advisers’ Written Policies and Procedures

September 25, 2013

Rule 206(4)–7 under the Investment Advisers Act of 1940 (“Investment Advisers Act”) became effective in February of 2004, yet for many investment advisers this continues to be a common area where regulatory deficiencies are found.  Under Rule 206(4)-7, investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) are required to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act. While Rule 206(4)-7 does not detail specific items that investment advisers must include in their policies and procedures, the final rule release indicates that investment advisers are required to “consider their fiduciary and regulatory obligations under the [Investment] Advisers Act and to formalize policies and procedures to address them.” Most state securities regulations have similar requirements for state registered investment advisers; however, every registered investment adviser must familiarize itself with the specific regulatory requirements of its governing regulatory authority.

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Developing and Implementing an Effective Customized Compliance Programs

September 19, 2013

RIA Compliance Consultants is hosting a webinar during which we will provide an overview of the requirement for an investment adviser to develop written supervisory policies and procedures in accordance with Rule 206(4)-7 under the Investment Advisers Act of 1940 (“Investment Advisers Act”). Under this rule U.S. Securities and Exchange Commission (“SEC”) registered investment advisers are required to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act and the rules that the SEC has adopted under the Act. Most state securities regulations have similar requirements. During this webinar, RIA Compliance Consultants will:

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SEC Issues Risk Alert Concerning Investment Adviser Business Continuity Plans

September 04, 2013

Rule 206(4)-7 under the Investment Advisers Act of 1940 (“Investment Advisers Act) requires registered investment advisers to have in place written supervisory policies and procedures. Although the rule does not specifically indicate the areas that must be addressed in an investment adviser’s written supervisory policies and procedures, the final rule release indicated some issues that should be addressed in all investment advisers’ written supervisory policies and procedures to the extent they are relevant to the investment adviser; one of these issues is business continuity plans.   As a fiduciary, an investment adviser has a responsibility to take the appropriate steps to protect the clients’ interests from risks resulting from the investment adviser’s inability to provide advisory services due to a disruption in business, like a natural disaster; therefore, all investment advisers should have a business continuity and disaster recovery plan.  The business continuity and disaster recovery plan should provide guidance regarding the steps and actions that should be taken in the event of an unanticipated interruption of normal business operations.  When developing a plan specific to the advisory firm, each investment adviser is encouraged to consider all of the firm’s advisory services and functions, consider any possible significant business disruptions that may occur, and determine a plan of action for each of these potential disruptions.

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The Examiners are Coming – Is your Investment Adviser Ready?

July 01, 2013

Over the past year, we have written several articles warning investment advisers to prepare for regulatory examinations as both the U.S. Securities and Exchange Commission (“SEC”) and state securities regulators have indicated that investment advisers should expect to see an increase in the number of exams being conducted.  RIA Compliance Consultants is seeing the effects of more frequent investment adviser exams.  Lately, we have experienced an increase in the number of calls from clients and prospective clients because they have recently been trough an SEC or state investment adviser exam or have been notified by an SEC or state securities regulator that their investment advisers will be audited in the near future.  One of the most common inquiries we are receiving is regarding what we can do to assist with preparing or updating the investment adviser’s written policies and procedures.  Too often, we are hearing that, although the investment adviser has been registered for some time, the investment adviser does not have customized written supervisory policies and procedures or has not properly maintained current and customized policies and procedures.

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Best Practices and Guidance for Social Media and Email Communication use for Investment Advisers

June 19, 2013

Social media presents a challenge for investment advisers in their effort to comply with the Investment Advisers Act of 1940 (“Investment Advisers Act”) and other regulations. The Risk Alert regarding Investment Adviser Use of Social Media issued by the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations states that investment advisers using social media should adopt and review their policies and procedures periodically; “Firms should create usage guidelines on appropriate and inappropriate use of social media and should consider adopting policies and procedures to address conducting firm business on personal social media sites.” Additionally, investment advisers have recordkeeping requirements that require certain communications made through social media sites to be retained.  According to the Risk Alert “registered investment advisers that communicate through social media must retain records of those communications if they contain information that satisfies the recordkeeping obligations under the [Investment] Advisers Act.”

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Common Mistakes Investment Advisers Make with Client Agreements

June 13, 2013

Although the Investment Advisers Act of 1940 (“Investment Advisers Act”) does not explicitly require investment advisory contracts to be written, Section 205 of the Investment Advisers Act requires all advisory contracts to include certain provisions and prohibits investment advisory contracts from including other provisions.  Most state securities regulations require written agreements between the investment adviser and each client.  Regardless of whether a written contract is required by the investment adviser’s primary regulator, the use of a written agreement with each client is generally considered best practice and in the best interest of the investment adviser and the investment advisory client.  A properly drafted investment advisory agreement can help limit an investment adviser’s professional liability. During an investment adviser examination, the U.S. Securities and Exchange Commission (“SEC”) or state securities regulator will likely review an investment adviser’s written client contracts and the following are some of the common deficiencies that an investment adviser may encounter:

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Investment Advisers Should Have Compliance Policies and Procedures for the Use of Social Media

June 12, 2013

The use of social media and networking websites is becoming an increasingly common communication and marketing tool. If an investment adviser permits the use of social media and networking websites by its supervised persons, the investment adviser must have in place strong compliance policies and procedures that clearly define acceptable use and address key areas such as supervision and record retention.

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