One-Day Audits Being Conducted on Newly Registered SEC Investment Advisers
The U.S. Securities and Exchange Commission (SEC) has been examining certain recently registered investment advisers by conducting limited scope, one-day examinations. According to the SEC’s cover letter sent in advance of these audits, “the purpose of these examinations is to assess and discuss important risk areas presented be the registered investment advisers’ operations and the related compliance policies and procedures implemented by the registered investment advisers to manage those risks.”
RIA Compliance Consultants, Inc. (RCC) has had first-hand experience with these limited scope examinations. A handful of RCC clients have been visited by their respective SEC regional offices this year. Specifically, RCC is aware of the Philadelphia Regional Office and the Atlanta Regional Office conducting these audits. To find out which SEC regional office has jurisdiction over your firm, click here. It appears the SEC is conducting visits of registered investment advisers that have been approved for approximately one year. The examinations appear to be an effort by the SEC to make sure registered investment advisers are on the right track.
As part of the one-day visit, the SEC expects to speak to at least one member of senior management and/or the Chief Compliance Officer to obtain an overall view of the registered investment adviser’s organization, business, control environment, and compliance culture. The following are some of the topics discussed during the visits: the adequacy of the firm’s compliance program; portfolio management decisions being consistent with client mandates; disclosures to clients; brokerage arrangements; allocations among client accounts; personal trading activities of access persons; fiduciary obligations; performance and other information in marketing and advertising; and the safety of client information. Special attention has been paid to firms that manage hedge funds and other pooled accounts.
In preparation of the examinations, the SEC has been requesting a limited list of books and records. The following includes some of the documents requested during these examinations: Form ADV Part II and Schedules; organizational charts (both internal and of all affiliated entities); compliance policies and procedures; client lists including calculations of assets under management; and financial statements.
If you are a newly registered investment adviser, give RCC a call to find out about our mock-regulatory examination and training visits. We can discuss how our consulting services can help you prepare for an examination as discussed in this article or a full-blown routine SEC examination.
RIA Compliance Consultants, Inc. (RCC) has had first-hand experience with these limited scope examinations. A handful of RCC clients have been visited by their respective SEC regional offices this year. Specifically, RCC is aware of the Philadelphia Regional Office and the Atlanta Regional Office conducting these audits. To find out which SEC regional office has jurisdiction over your firm, click here. It appears the SEC is conducting visits of registered investment advisers that have been approved for approximately one year. The examinations appear to be an effort by the SEC to make sure registered investment advisers are on the right track.
As part of the one-day visit, the SEC expects to speak to at least one member of senior management and/or the Chief Compliance Officer to obtain an overall view of the registered investment adviser’s organization, business, control environment, and compliance culture. The following are some of the topics discussed during the visits: the adequacy of the firm’s compliance program; portfolio management decisions being consistent with client mandates; disclosures to clients; brokerage arrangements; allocations among client accounts; personal trading activities of access persons; fiduciary obligations; performance and other information in marketing and advertising; and the safety of client information. Special attention has been paid to firms that manage hedge funds and other pooled accounts.
In preparation of the examinations, the SEC has been requesting a limited list of books and records. The following includes some of the documents requested during these examinations: Form ADV Part II and Schedules; organizational charts (both internal and of all affiliated entities); compliance policies and procedures; client lists including calculations of assets under management; and financial statements.
If you are a newly registered investment adviser, give RCC a call to find out about our mock-regulatory examination and training visits. We can discuss how our consulting services can help you prepare for an examination as discussed in this article or a full-blown routine SEC examination.
Labels: Compliance Training, Regulatory Inspections, SEC
posted by bhill at 2:22 PM
Attention SEC Registered Investment Advisors: Are You in Compliance with Your Home State’s Rules?
If your firm is registered with the SEC, RIA Compliance Consultants wants you to be aware that the Investment Advisers Act of 1940 provides state regulators authority over federally registered investment advisors and their employees, albeit on a limited scope. Many SEC firms believe that because they are not registered with a state regulator, they are therefore exempt from all requirements and provisions states have mandated. While it is true that SEC firms should focus their attention on the Advisers Act and its rules, SEC firms need to be cognizant of the authority provided to state regulators under Section 203A of the Advisers Act. The following summarizes the actions state regulators may take under Section 203A.
Licensing fees. States can impose and collect filing, registration, or licensing fees.
Investment adviser representative licensing. States have the ability to license, register, or otherwise qualify an investment adviser representative who has a place of business in the state.
Enforcement actions for fraud and deceit. States may have the authority to investigate and bring enforcement actions with respect to fraud or deceit against an investment adviser or person associated with an investment adviser.
Notice filings. States have the authority to require the filing of any documents filed with the Commission pursuant to the securities laws solely for notice purposes, together with a consent to service of process, and any required fee.
SEC firms need to make sure they are in compliance with the applicable requirements in each state in which the firm conducts business. RIA Compliance Consultants wants to ensure SEC-registered firms are aware that a state can bring an enforcement action against the firm for actions of fraud and deceit. Many states have specific prohibited acts SEC firms and their advisor representatives must follow in order to avoid enforcement actions.
Some of the common fraudulent, dishonest or unethical practices we see listed state statutes include: placing an order for a client account without authority to do so; exercising discretionary trading authorization without written authority; inducing trading in a client's account that is excessive in size and frequency in view of the client's financial resources and investment objectives, and character of the account; charging excessive advisory fees; loaning money to a client or borrowing money from a client; failing to enter into written agreements; and failing to provide disclosure of material conflicts of interest, including the receipt of possible dual fees.
If you have questions about the rules of a state in which you conduct business, please give us a call to see how we can help your firm and its advisor representatives stay in compliance with all applicable laws and regulations.
Licensing fees. States can impose and collect filing, registration, or licensing fees.
Investment adviser representative licensing. States have the ability to license, register, or otherwise qualify an investment adviser representative who has a place of business in the state.
Enforcement actions for fraud and deceit. States may have the authority to investigate and bring enforcement actions with respect to fraud or deceit against an investment adviser or person associated with an investment adviser.
Notice filings. States have the authority to require the filing of any documents filed with the Commission pursuant to the securities laws solely for notice purposes, together with a consent to service of process, and any required fee.
SEC firms need to make sure they are in compliance with the applicable requirements in each state in which the firm conducts business. RIA Compliance Consultants wants to ensure SEC-registered firms are aware that a state can bring an enforcement action against the firm for actions of fraud and deceit. Many states have specific prohibited acts SEC firms and their advisor representatives must follow in order to avoid enforcement actions.
Some of the common fraudulent, dishonest or unethical practices we see listed state statutes include: placing an order for a client account without authority to do so; exercising discretionary trading authorization without written authority; inducing trading in a client's account that is excessive in size and frequency in view of the client's financial resources and investment objectives, and character of the account; charging excessive advisory fees; loaning money to a client or borrowing money from a client; failing to enter into written agreements; and failing to provide disclosure of material conflicts of interest, including the receipt of possible dual fees.
If you have questions about the rules of a state in which you conduct business, please give us a call to see how we can help your firm and its advisor representatives stay in compliance with all applicable laws and regulations.
Labels: Compliance Training, SEC
posted by bhill at 9:07 AM
Compliance Training
Our next installment of the "Year-End Compliance Tips" series is a reminder to advisors about compliance training. This time of year is a great time to hold compliance training for all employees and representatives. This is because many firms implement new policies or advisory programs set to take effect at the beginning of the year. Any time a new rule or program is implemented, it is imperative that proper training be provided so all employees are aware of the changes. While we recommend more frequent training sessions or meetings, an annual process is essential in today's regulatory landscape.
While we are trying to focus on items all advisor firms are required to complete, it is important that you refer to your regulatory authority to ensure you have an all inclusive list of the requirements your firm must meet. If you would like suggestions about training topics or are interested in having RIA Compliance Consultants provide training to your firm, please give us a call.
While we are trying to focus on items all advisor firms are required to complete, it is important that you refer to your regulatory authority to ensure you have an all inclusive list of the requirements your firm must meet. If you would like suggestions about training topics or are interested in having RIA Compliance Consultants provide training to your firm, please give us a call.
Labels: Compliance Training
posted by bhill at 12:10 PM
End of Year Compliance Items - Part 3
This is the third entry in a series of blogs RIA Compliance Consultants is posting concerning annual compliance requirements and end of year filings. While we are trying to touch upon the items that all advisor firms are required to complete, it is important that you refer to your regulatory authority to ensure you have an all inclusive list of the requirements your firm must meet. If your firm has questions or concerns about one of the items listed in this entry, please give us a call to discuss how we can help your firm meets its regulatory obligations.
Written Compliance Programs - The end of the year is a great time to complete a written review of your firm's compliance and procedures program. While we feel that a written compliance program should be reviewed continuously and updated whenever needed, regulators require advisor firms to review and update their compliance programs at least annually. Again, the key is to document those reviews. Once a review is completed, employees should be made aware of the changes and required to sign off on their understanding and acknowledgement of the policies. Even if no changes are made, we suggest that all employees agree to their understanding and acknowledgement of the firm's policies and procedures, in writing, each year.
Code of Ethics - The SEC and many states require advisor firms to have a Code of Ethics. Even if your firm does not require its employees to acknowledge their understanding of its compliance programs on an annual basis, all SEC firms must require all employees to read and agree to abide by the firm's Code of Ethics on an annual basis. The Code of Ethics must be reviewed by the firm on annual basis and if needed, updated. It is important to document any changes to the Code of Ethics and document each employee's agreement to abide by the code. Under the SEC's rule, a firm must include the review of employee's personal securities and its insider trading policy under the Code of Ethics.
Personal Securities Transactions - All SEC advisor firms must collect or prepare updated personal securities holdings reports from all access persons. The information on the report must be current as of a date no more than 45 days before the report is submitted. The annual report does not need to be done at the end of the calendar year; however, the timing of the report must be consistent from year to year. The holdings report is in addition to the review of fourth quarter transaction reports. As part of the Code of Ethics rule, all SEC advisor firms are required to review the activity of their access persons' securities holdings. Quarterly transaction reports must be submitted no later than 30 days after the end of each calendar quarter.
Compliance Training for Representatives and Employees - The end of the year is great time to hold compliance training for all employees and representatives. This is because many firms implement new policies or advisory programs set to take effect at the beginning of the year. Any time a new rule or program is implemented, it is imperative that proper training be provided so all employees are aware of the changes. While we recommend more frequent training sessions or meetings, an annual process is essential in today's regulatory landscape.
Written Compliance Programs - The end of the year is a great time to complete a written review of your firm's compliance and procedures program. While we feel that a written compliance program should be reviewed continuously and updated whenever needed, regulators require advisor firms to review and update their compliance programs at least annually. Again, the key is to document those reviews. Once a review is completed, employees should be made aware of the changes and required to sign off on their understanding and acknowledgement of the policies. Even if no changes are made, we suggest that all employees agree to their understanding and acknowledgement of the firm's policies and procedures, in writing, each year.
Code of Ethics - The SEC and many states require advisor firms to have a Code of Ethics. Even if your firm does not require its employees to acknowledge their understanding of its compliance programs on an annual basis, all SEC firms must require all employees to read and agree to abide by the firm's Code of Ethics on an annual basis. The Code of Ethics must be reviewed by the firm on annual basis and if needed, updated. It is important to document any changes to the Code of Ethics and document each employee's agreement to abide by the code. Under the SEC's rule, a firm must include the review of employee's personal securities and its insider trading policy under the Code of Ethics.
Personal Securities Transactions - All SEC advisor firms must collect or prepare updated personal securities holdings reports from all access persons. The information on the report must be current as of a date no more than 45 days before the report is submitted. The annual report does not need to be done at the end of the calendar year; however, the timing of the report must be consistent from year to year. The holdings report is in addition to the review of fourth quarter transaction reports. As part of the Code of Ethics rule, all SEC advisor firms are required to review the activity of their access persons' securities holdings. Quarterly transaction reports must be submitted no later than 30 days after the end of each calendar quarter.
Compliance Training for Representatives and Employees - The end of the year is great time to hold compliance training for all employees and representatives. This is because many firms implement new policies or advisory programs set to take effect at the beginning of the year. Any time a new rule or program is implemented, it is imperative that proper training be provided so all employees are aware of the changes. While we recommend more frequent training sessions or meetings, an annual process is essential in today's regulatory landscape.
Labels: Code of Ethics, Compliance Program, Compliance Training, PST
posted by bhill at 2:17 PM
