SEC Internal Compliance Program for Personal Securities Trading of Its Employees Is a Reminder to RIAs About Supervising PST of Its Access Persons
In a May 22, 2009 U.S. Securities and Exchange Commission ("SEC") press release, Mary Schapiro, SEC Chairman, outlined new steps being taken to strengthen the SEC's internal compliance program to guard against inappropriate personal securities trading by SEC employees. Previous internal rules for SEC employees prohibited, among other things, short selling, carrying securities on margin, engaging in options or futures transactions in instruments whose value is derived from an underlying security, and holding a security interest in broker-dealers and registered investment advisers. These existing internal rules of the SEC also required employees to hold stock they purchased for at least six months and to report all trades within five days of receiving confirmations.
The SEC's new compliance program for personal securities trading by its employees will include the following rules:
- SEC employees are required to pre-clear all of their personal securities transactions;
- SEC employees are prohibited from personal trading in securities of companies under SEC investigation regardless of whether the employee has personal knowledge of the investigation;
- SEC employees are prohibited from personal trading in any security if an employee has access to non-public information about a company's registration statement;
- SEC employees are prohibited from owning securities in publicly-traded exchanges and transfer agents, in addition to existing prohibitions against owning securities in broker-dealers, registered investment advisers, and others directly regulated by the SEC;
- SEC employees are required to authorize their brokers to provide duplicate confirmation statements to the agency; and
- SEC employees are required to certify before any personal securities trade that they do not process any non-public information about the company being traded.
In addition, the SEC will require its supervisors to perform periodic reviews to ensure SEC employees are in compliance with these internal rules for personal securities trading. The SEC is also contracting with an outside firm to develop a new computer system that will enable pre-clearance and tracking of all employee personal securities transactions for compliance with these internal rules.
This release and the new internal SEC rules should serve as a reminder to all registered investment advisers of the importance the SEC places on developing strong policies and procedures to supervise personal securities transactions for all access persons affiliated with the adviser. Investment advisers should review their current personal securities transactions policies and procedures to ensure that they are meeting all requirements under SEC Rule 204A-1 and that adequate controls and monitoring policies and procedures are currently in place to ensure that personal securities transactions do not disadvantage the adviser's clients in any way or raise any fiduciary requirements or anti-fraud provisions.
If your registered investment adviser needs assistance developing written policies and procedures for supervising the personal securities transactions of its access persons, please contact RIA Compliance Consultants.
Labels: PST
posted by bhill at 3:03 PM
First Quarter Personal Securities Transaction Reports
With the end of first quarter 2008, RIA Compliance Consultants would like to remind SEC registered investment advisors of their requirement to collect or prepare updated personal securities transaction reports from all access persons. The information on the reports must reflect transactions that took place during first quarter of 2008 and must officially be reported to the firm no later than 30 days after the end of the quarter. Therefore, all reports must have been collected by April 30. As part of the SEC Code of Ethics rule, all SEC registered investment advisor firms are required to review the activity of their access persons' securities holdings at the end of every calendar quarter. The quarterly reports and documented review/approval of each report must be retained as part of a registered investment advisor firm's official books and records.
It is important for investment advisor firms to not only collect these reports, but to also establish a system of reviewing and documenting the reviews of all reports. In particular, the review of personal securities transactions should attempt to detect instances or patterns when the interests of the firm or its access persons are placed ahead of the interests of clients. Depending on your firm's specific procedures, reviews may focus on restricted lists, black-out periods, and other conditions placed on access persons trading activities.
If your firm has questions or concerns about your firm's requirements to monitor and review personal securities transactions, please give us a call to find out how we can develop a customized suite of compliance services designed specifically for your firm.
It is important for investment advisor firms to not only collect these reports, but to also establish a system of reviewing and documenting the reviews of all reports. In particular, the review of personal securities transactions should attempt to detect instances or patterns when the interests of the firm or its access persons are placed ahead of the interests of clients. Depending on your firm's specific procedures, reviews may focus on restricted lists, black-out periods, and other conditions placed on access persons trading activities.
If your firm has questions or concerns about your firm's requirements to monitor and review personal securities transactions, please give us a call to find out how we can develop a customized suite of compliance services designed specifically for your firm.
Labels: Compliance Program, Enforcement, PST
posted by bhill at 9:58 AM
Third Quarter Personal Securities Transaction Reports
With the end of third quarter 2007, RIA Compliance Consultants would like to remind all SEC registered investment advisors of their requirement to collect or prepare updated personal securities transaction reports from all access persons. The information on the reports must reflect transactions that took place during the third quarter and must officially be reported to the firm no later than 30 days after the end of the quarter. Therefore, all reports must be collected by October 30. As part of the SEC Code of Ethics rule, all SEC registered investment advisor firms are required to review the activity of their access persons' securities holdings at the end of every calendar quarter. The quarterly reports and documented review/approval of each report must be retained as part of a registered investment advisor firm’s official books and records.
It is important for investment advisor firms to not only collect these reports, but to also establish a system of reviewing and documenting the reviews of all reports. In particular, the review of personal securities transactions should attempt to detect instances or patterns when the interests of the firm or its access persons are placed ahead of the interests of clients.
Most states also require registered investment advisor firms to maintain, as part of their books and records, a record of every transaction within a personal account. Most states require the transaction to be reported within 10 days after the end of the calendar quarter in which the transaction occurred. State firms must also implement policies restricting insider trading.
If your firm has questions or concerns about your firm's requirements to monitor and review personal securities transactions, please give us a call to discuss how we can help your firm meet its regulatory obligations.
It is important for investment advisor firms to not only collect these reports, but to also establish a system of reviewing and documenting the reviews of all reports. In particular, the review of personal securities transactions should attempt to detect instances or patterns when the interests of the firm or its access persons are placed ahead of the interests of clients.
Most states also require registered investment advisor firms to maintain, as part of their books and records, a record of every transaction within a personal account. Most states require the transaction to be reported within 10 days after the end of the calendar quarter in which the transaction occurred. State firms must also implement policies restricting insider trading.
If your firm has questions or concerns about your firm's requirements to monitor and review personal securities transactions, please give us a call to discuss how we can help your firm meet its regulatory obligations.
Labels: PST
posted by bhill at 11:28 AM
First Quarter 2007 Personal Securities Transactions
RIA Compliance Consultants, Inc. would like to remind all SEC registered advisor firms of their obligation to collect and review first quarter personal securities transactions. These reports should have been officially collected by the end of April. If your investment advisor firm has not collected its reports, please make sure you do so as soon as possible. Quarterly transaction reports must be submitted no later than 30 days after the end of each calendar quarter. According to the SEC's Investment Adviser Codes of Ethics rule, specifically Rule 204A-1(b)(2), a federally registered investment advisor's code of ethics must require access persons to submit to the chief compliance officer, or other persons designated in the code of ethics, quarterly securities transaction reports that meet the following requirements:
(i) Content of transaction reports. Each transaction report must contain, at a minimum, the following information about each transaction involving a reportable security in which the access person had, or as a result of the transaction acquired, any direct or indirect beneficial ownership:
(A) The date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and principal amount of each reportable security involved;
(B) The nature of the transaction ( i.e. , purchase, sale or any other type of acquisition or disposition);
(C) The price of the security at which the transaction was effected;
(D) The name of the broker, dealer or bank with or through which the transaction was effected; and
(E) The date the access person submits the report.
It is important for investment advisor firms to not only collect these reports, but to also establish a system of reviewing and documenting the reviews of all reports. In particular, the review of personal securities transactions should attempt to detect instances or patterns of when the interests of the firm or its associated persons, including investment advisor reps, are placed ahead of the interests of the clients. Most states also require investment advisor firms to maintain, as part of their books and records, a record of every transaction within a personal account. Most states require the transaction to be reported within 10 days after the end of the calendar quarter in which the transaction occurred. State firms must also implement policies restricting insider trading. If you have questions or concerns about your registered investment advisor firm's requirements to monitor and review personal securities transactions such as what securities are considered reportable securities under the rule, who should review personal securities, and who should be deemed an access person, please consider calling our investment advisor compliance firm to see how we can answer these questions and many more.
(i) Content of transaction reports. Each transaction report must contain, at a minimum, the following information about each transaction involving a reportable security in which the access person had, or as a result of the transaction acquired, any direct or indirect beneficial ownership:
(A) The date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and principal amount of each reportable security involved;
(B) The nature of the transaction ( i.e. , purchase, sale or any other type of acquisition or disposition);
(C) The price of the security at which the transaction was effected;
(D) The name of the broker, dealer or bank with or through which the transaction was effected; and
(E) The date the access person submits the report.
It is important for investment advisor firms to not only collect these reports, but to also establish a system of reviewing and documenting the reviews of all reports. In particular, the review of personal securities transactions should attempt to detect instances or patterns of when the interests of the firm or its associated persons, including investment advisor reps, are placed ahead of the interests of the clients. Most states also require investment advisor firms to maintain, as part of their books and records, a record of every transaction within a personal account. Most states require the transaction to be reported within 10 days after the end of the calendar quarter in which the transaction occurred. State firms must also implement policies restricting insider trading. If you have questions or concerns about your registered investment advisor firm's requirements to monitor and review personal securities transactions such as what securities are considered reportable securities under the rule, who should review personal securities, and who should be deemed an access person, please consider calling our investment advisor compliance firm to see how we can answer these questions and many more.
Labels: Compliance Program, PST
posted by bhill at 2:22 PM
Personal Securities Holdings and Transactions
Over the next several weeks, our electronic newsletter will be focusing upon some of those compliance requirements that every investment advisor firm should consider at the end of the year. Although we will attempt to identify some of the most common investment advisor requirements, it is important to recognize that there are different requirements among the various securities regulators.
This issue addresses an SEC registered investment advisor firm's duty to 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 prepared 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 registered 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.
It is important for investment advisor firms to not only collect these reports, but to also establish a system of reviewing and documenting the reviews of all reports. In particular, the review of personal securities transactions should attempt to detect instances or patterns of when the interests of the firm or its associated persons are placed ahead of the interests of the clients.
Most states also require investment advisor firms to maintain, as part of their books and records, a record of every transaction within a personal account. Most states require the transaction to be reported within 10 days after the end of the calendar quarter in which the transaction occurred. State firms must also implement policies restricting insider trading.
If your firm has questions or concerns about your firm's requirements to monitor and review personal securities transactions, please give us a call to discuss how we can help your firm meet its regulatory obligations.
This issue addresses an SEC registered investment advisor firm's duty to 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 prepared 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 registered 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.
It is important for investment advisor firms to not only collect these reports, but to also establish a system of reviewing and documenting the reviews of all reports. In particular, the review of personal securities transactions should attempt to detect instances or patterns of when the interests of the firm or its associated persons are placed ahead of the interests of the clients.
Most states also require investment advisor firms to maintain, as part of their books and records, a record of every transaction within a personal account. Most states require the transaction to be reported within 10 days after the end of the calendar quarter in which the transaction occurred. State firms must also implement policies restricting insider trading.
If your firm has questions or concerns about your firm's requirements to monitor and review personal securities transactions, please give us a call to discuss how we can help your firm meet its regulatory obligations.
Labels: PST
posted by bhill at 2:10 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
Reportable Securities under the Codes of Ethics Rule
In an earlier blog posting, we discussed the fact that investment advisor firms must determine their access persons and ensure appropriate procedures are implemented to review all access persons' household accounts. In their efforts to meet this requirement, many advisor firms have been asking exactly which types of securities holdings and transactions need to be reviewed.
In their final rule release, the SEC provided specific requirements under the Codes of Ethics rule. While an advisor firm may require access persons to report all securities, the SEC did provide an exception for five types of securities. According to the rule, the following types of securities are not required to be reported by access persons:
a. Transactions and holdings in direct obligations of the Government of the United States.
b. Money market instruments - bankers' acceptances, bank certificates of deposit, commercial paper, repurchase agreements and other high quality short-term debt instruments.
c. Shares of money market funds.
d. Transactions and holdings in shares of other types of mutual funds, unless the adviser or a control affiliate acts as the investment adviser or principal underwriter for the fund. This exception includes
e. Transactions in units of a unit investment trust if the unit investment trust is invested exclusively in unaffiliated mutual funds. (This exception is designed to also cover the sub-accounts organized as unit investment trusts of a seperate account of a variable insurance contract.)
It is important to note that the rule does requires access persons to report shares of mutual funds advised by the advisor firm or one of its affiliates. The SEC obviously believes that this is necessary so advisor firms and the SEC, during routine examinations, can detect abusive trading by employees who have access to information about the mutual fund's portfolio.
Does your firm have sufficient procedures in place to identify improper trades or patterns of trading by access persons? Is your CCO reviewing the personal securities transaction reports or have you designated another person to conduct the review? RIA Compliance Consultants is available to answer your questions on the review and supervision of personal accounts.
In their final rule release, the SEC provided specific requirements under the Codes of Ethics rule. While an advisor firm may require access persons to report all securities, the SEC did provide an exception for five types of securities. According to the rule, the following types of securities are not required to be reported by access persons:
a. Transactions and holdings in direct obligations of the Government of the United States.
b. Money market instruments - bankers' acceptances, bank certificates of deposit, commercial paper, repurchase agreements and other high quality short-term debt instruments.
c. Shares of money market funds.
d. Transactions and holdings in shares of other types of mutual funds, unless the adviser or a control affiliate acts as the investment adviser or principal underwriter for the fund. This exception includes
e. Transactions in units of a unit investment trust if the unit investment trust is invested exclusively in unaffiliated mutual funds. (This exception is designed to also cover the sub-accounts organized as unit investment trusts of a seperate account of a variable insurance contract.)
It is important to note that the rule does requires access persons to report shares of mutual funds advised by the advisor firm or one of its affiliates. The SEC obviously believes that this is necessary so advisor firms and the SEC, during routine examinations, can detect abusive trading by employees who have access to information about the mutual fund's portfolio.
Does your firm have sufficient procedures in place to identify improper trades or patterns of trading by access persons? Is your CCO reviewing the personal securities transaction reports or have you designated another person to conduct the review? RIA Compliance Consultants is available to answer your questions on the review and supervision of personal accounts.
Labels: Code of Ethics, PST
posted by bhill at 8:33 AM
