Approving Advertising & Marketing Materials for an Investment Advisor
Does your registered investment advisor have strong supervisory and compliance procedures designed to approve and monitor adverting and marketing materials?
Did you know that an the advertising and marketing materials of an investment advisor registered with the U.S. Securities and Exchange Commission ("SEC") fall under the anti-fraud provision of the Investment Advisers Act of 1940? This means it may be deemed a fraudulent, deceptive, or manipulative act to publish marketing materials that do not comply with SEC Rule 206(4)-1 under the Advisers Act and the various no-action letters issued by the SEC. Federally registered investment advisors are routinely cited examination deficiencies for issuing non-compliant advertising materials. Much less, investment advisor firms have been cited for simply not establishing reasonably designed compliance policies and procedures for the creation, review and approval of advertising materials.
For many SEC registered investment advisors, advertising materials can generate increased risk exposure. Using advertising claims that cannot be supported or proven, that are promissory, that are misleading or materially inaccurate must be avoided. You can be certain that during an examination, the SEC will thoroughly review advertising materials issued during the inspection period. Specifically prohibited are: testimonials; the use of past specific recommendations that were profitable, unless the adviser includes a list of all recommendations made during the past year; a representation that any graph, chart, or formula can in and of itself be used to determine which securities to buy or sell; and advertisements stating that any report, analysis, or service is free, unless it really is free. An advertisement could include both a written publication (such as a website, blog newsletter or marketing brochure) as well as oral communications (such as an announcement made on radio or television).
All SEC registered investment advisors need to have detailed policies and procedures for advertising materials memorialized within their compliance program. Further, we highly recommend the pre-approval of all marketing materials. When conducting a firm's annual compliance program assessment, the Chief Compliance Officer needs to be sure to analyze and test the sufficiency of marketing compliance procedures.
The importance of strong compliance controls for advertising and marketing materials is not limited to SEC registered investment advisor firms. In a September 29, 2009 release, the North American Securities Administrators Association (NASAA) once again included advertising as one of the common deficiencies noted during investment advisor examinations conducted by state securities regulators. As part of a strong compliance culture, NASAA recommends that state registered investment advisors review all advertisements, including websites and performance advertising, for accuracy.
On Thursday, May 13, RIA Compliance Consultants will host a webinar focused on compliance policies and procedures related to advertising. The webinar, "Approving Marketing Materials", will focus on SEC no-action letters and enforcement actions related to marketing materials used by investment advisors. Our consultants will also discuss best practices and sample disclosures. Take this opportunity to purchase your seat to this webinar for only $59.95.
Did you know that an the advertising and marketing materials of an investment advisor registered with the U.S. Securities and Exchange Commission ("SEC") fall under the anti-fraud provision of the Investment Advisers Act of 1940? This means it may be deemed a fraudulent, deceptive, or manipulative act to publish marketing materials that do not comply with SEC Rule 206(4)-1 under the Advisers Act and the various no-action letters issued by the SEC. Federally registered investment advisors are routinely cited examination deficiencies for issuing non-compliant advertising materials. Much less, investment advisor firms have been cited for simply not establishing reasonably designed compliance policies and procedures for the creation, review and approval of advertising materials.
For many SEC registered investment advisors, advertising materials can generate increased risk exposure. Using advertising claims that cannot be supported or proven, that are promissory, that are misleading or materially inaccurate must be avoided. You can be certain that during an examination, the SEC will thoroughly review advertising materials issued during the inspection period. Specifically prohibited are: testimonials; the use of past specific recommendations that were profitable, unless the adviser includes a list of all recommendations made during the past year; a representation that any graph, chart, or formula can in and of itself be used to determine which securities to buy or sell; and advertisements stating that any report, analysis, or service is free, unless it really is free. An advertisement could include both a written publication (such as a website, blog newsletter or marketing brochure) as well as oral communications (such as an announcement made on radio or television).
All SEC registered investment advisors need to have detailed policies and procedures for advertising materials memorialized within their compliance program. Further, we highly recommend the pre-approval of all marketing materials. When conducting a firm's annual compliance program assessment, the Chief Compliance Officer needs to be sure to analyze and test the sufficiency of marketing compliance procedures.
The importance of strong compliance controls for advertising and marketing materials is not limited to SEC registered investment advisor firms. In a September 29, 2009 release, the North American Securities Administrators Association (NASAA) once again included advertising as one of the common deficiencies noted during investment advisor examinations conducted by state securities regulators. As part of a strong compliance culture, NASAA recommends that state registered investment advisors review all advertisements, including websites and performance advertising, for accuracy.
On Thursday, May 13, RIA Compliance Consultants will host a webinar focused on compliance policies and procedures related to advertising. The webinar, "Approving Marketing Materials", will focus on SEC no-action letters and enforcement actions related to marketing materials used by investment advisors. Our consultants will also discuss best practices and sample disclosures. Take this opportunity to purchase your seat to this webinar for only $59.95.
Labels: Advertising, Webinar
posted by bhill at 7:53 PM
Beyond the Privacy Notice - Safeguarding Confidential Client Information
Has your registered investment adviser firm gone beyond developing a privacy policy under Regulation S-P and established internal controls to protect confidential client information?
This is the emerging expectation of state and federal securities regulators. For instance, the State of Massachusetts recently adopted a comprehensive and restrictive set of requirements to prevent client data security breaches, which must be met by any investment adviser with a client residing in Massachusetts. Under the this new regulation, an investment adviser firm with a client residing in Massachusetts must develop, implement, maintain and monitor a comprehensive written information security program and ensure that confidential client information stored on portable devices is encrypted.
Likewise, the U.S. Securities and Exchange Commission ("SEC") has heightened its focus upon how investment adviser firms are safeguarding confidential client information. This increased attention upon the protection of confidential client data has manifested itself in an SEC enforcement action under Regulation S-P against a broker-dealer/investment adviser that was a victim of hacking and a proposal by the SEC to amend Regulation S-P with more specific safeguards for protecting confidential client information.
If you would like to learn more about the proposed and recently passed requirements for protecting confidential client data and best practices, please join us for our webinar, Beyond the Privacy Notice, on Thursday, April 15, 2010, from 12:00 - 1:00 p.m. Central. You can purchase your seat for $59.95 by clicking here.
This is the emerging expectation of state and federal securities regulators. For instance, the State of Massachusetts recently adopted a comprehensive and restrictive set of requirements to prevent client data security breaches, which must be met by any investment adviser with a client residing in Massachusetts. Under the this new regulation, an investment adviser firm with a client residing in Massachusetts must develop, implement, maintain and monitor a comprehensive written information security program and ensure that confidential client information stored on portable devices is encrypted.
Likewise, the U.S. Securities and Exchange Commission ("SEC") has heightened its focus upon how investment adviser firms are safeguarding confidential client information. This increased attention upon the protection of confidential client data has manifested itself in an SEC enforcement action under Regulation S-P against a broker-dealer/investment adviser that was a victim of hacking and a proposal by the SEC to amend Regulation S-P with more specific safeguards for protecting confidential client information.
If you would like to learn more about the proposed and recently passed requirements for protecting confidential client data and best practices, please join us for our webinar, Beyond the Privacy Notice, on Thursday, April 15, 2010, from 12:00 - 1:00 p.m. Central. You can purchase your seat for $59.95 by clicking here.
posted by bhill at 10:44 AM
Is Your RIA Aware of the New Custody Rule's Implications for Affiliated Intro B-Ds, Qualified Custodians and Pooled Investment Vehicles?
Does your SEC registered investment adviser or its affiliate serve as an introducing broker-dealer or qualified custodian for investment advisory accounts? If so, are you aware of the new internal control report requirements of the U.S. Securities and Exchange Commission ("SEC")?
Our webinar, Impact of New Custody Rule on an RIA Operating a B-D, Qualified Custodian or Private Investment Fund, recorded on March 25, 2010, is a must for investment advisers using affiliated qualified custodians and affiliated introducing broker/dealers. Jarrod James and Tammy Emsick discuss custody rule guidance issued in March 2010 by the staff of the SEC’s Division of Investment Management. Our presenters give SEC registered investment advisers with introducing broker-dealers specific examples of how to avoid being deemed by the SEC as having custody under the new rule. Finally, specific attention is given to requirements affecting investment advisers that own or operate pooled investment vehicles such as hedge funds, private real estate deals and other private placement securities.
Take this opportunity to understand the implications of the SEC's new custody rule as relates to the activities of your affiliated introducing broker-dealer, qualified custodian and pooled investment vehicle. You can purchase your seat to this recorded webinar by clicking here.
Our webinar, Impact of New Custody Rule on an RIA Operating a B-D, Qualified Custodian or Private Investment Fund, recorded on March 25, 2010, is a must for investment advisers using affiliated qualified custodians and affiliated introducing broker/dealers. Jarrod James and Tammy Emsick discuss custody rule guidance issued in March 2010 by the staff of the SEC’s Division of Investment Management. Our presenters give SEC registered investment advisers with introducing broker-dealers specific examples of how to avoid being deemed by the SEC as having custody under the new rule. Finally, specific attention is given to requirements affecting investment advisers that own or operate pooled investment vehicles such as hedge funds, private real estate deals and other private placement securities.
Take this opportunity to understand the implications of the SEC's new custody rule as relates to the activities of your affiliated introducing broker-dealer, qualified custodian and pooled investment vehicle. You can purchase your seat to this recorded webinar by clicking here.
Labels: Custody, Pooled Investment Vehicle, Webinar
posted by bhill at 9:33 AM
Many Investment Advisers Are Not Prepared for SEC's New Custody Rule
Although the recent changes by the U.S. Securities and Exchange Commission ("SEC") to the custody rule for federally registered investment advisers went into effect on March 12, 2010, it appears that many investment advisers mistakenly assume they don’t have custody, misinterpret the definition of custody or believe they are somehow exempt from the custody rule requirements.
As a result, RIA Compliance Consultants is encouraging SEC registered investment advisers to listen to the recording of our February 25, 2010 webinar, Exploring the SEC's New Custody Rule . During this webinar Jarrod James and Bryan Hill of RIA Compliance Consultants explore common investment adviser practices that result in custody as defined by the SEC and answer questions about the new custody rule’s impact on investment advisers. Focus is given to the deduction of advisory fees, acceptance of third-party checks from clients, trustee relationships, withdrawal authorization from client accounts and other common custody situations.
All federally registered investment adviser firms are encouraged to listen to this important webinar to better understand the SEC new custody rule’s impact on their operations. Click here to purchase your seat to this recording.
As a result, RIA Compliance Consultants is encouraging SEC registered investment advisers to listen to the recording of our February 25, 2010 webinar, Exploring the SEC's New Custody Rule . During this webinar Jarrod James and Bryan Hill of RIA Compliance Consultants explore common investment adviser practices that result in custody as defined by the SEC and answer questions about the new custody rule’s impact on investment advisers. Focus is given to the deduction of advisory fees, acceptance of third-party checks from clients, trustee relationships, withdrawal authorization from client accounts and other common custody situations.
All federally registered investment adviser firms are encouraged to listen to this important webinar to better understand the SEC new custody rule’s impact on their operations. Click here to purchase your seat to this recording.
posted by bhill at 9:10 AM
Is Your Pooled Investment Vehicle In Compliance with the SEC's New Custody Rule for Investment Advisers
The recent changes by the U.S. Securities and Exchange Commission ("SEC") to Rule 206(4)-2 under the Investment Advisers Act of 1940 include an important development for investment advisers that operate so called pooled investment vehicles. Pooled investment vehicle is an SEC term and includes private investments such as limited liability companies and limited partnerships not registered as investment companies. For example, unregistered hedge funds fall under this category.
Investment advisers that operate pooled investment vehicles are required to: use a qualified custodian (e.g. a registered broker/dealer or registered bank) to hold assets of the pooled investment vehicle; form a reasonable belief that the qualified custodian delivers account statements to all investors; and comply with the annual surprise verification examination. Many pooled investment vehicles own or hold assets, such as real estate, not held at a qualified custodian. Therefore, complying with the qualified custodian, account statements and surprise verification examination requirements will prove impossible. For this reason, the SEC has provided relief to these requirements so long as the pooled investment vehicle is subject to an annual financial statement audit performed by an independent accounting firm; the audit is performed within 120 days after the pooled investment vehicle’s fiscal year-end; and the results of the audit are delivered to all investors of the pooled investment vehicle.
Many pooled investment vehicles are already subject to annual financial statement audits and deliver the results to investors so the new rule will have little impact in this regard. However, the new rule requires pooled investment vehicles to hire and retain independent accounting firms that are registered with and inspected by the Public Company Accounting Oversight Board (PCAOB). Pooled investment vehicles that are not subject to an annual financial statement audit performed by a PCAOB registered and inspected accounting firm and/or do not deliver the results of such an audit to investors, must ensure assets are held with a qualified custodian, all investors receive statements directly from the qualified custodian(s), and ensure compliance with the annual surprise examination requirements.
This Thursday, March 25, we will be hosting our second webinar on the new SEC custody rule. The webinar will begin at 12:00 p.m. Central and will focus specifically on how the rule applies to pooled invest vehicles and investment advisers operating a qualified custodian and/or introducing broker-dealer. We discuss the annual audit requirements and many other pressing issues for pooled investment vehicles. Click here to enroll.
Investment advisers that operate pooled investment vehicles are required to: use a qualified custodian (e.g. a registered broker/dealer or registered bank) to hold assets of the pooled investment vehicle; form a reasonable belief that the qualified custodian delivers account statements to all investors; and comply with the annual surprise verification examination. Many pooled investment vehicles own or hold assets, such as real estate, not held at a qualified custodian. Therefore, complying with the qualified custodian, account statements and surprise verification examination requirements will prove impossible. For this reason, the SEC has provided relief to these requirements so long as the pooled investment vehicle is subject to an annual financial statement audit performed by an independent accounting firm; the audit is performed within 120 days after the pooled investment vehicle’s fiscal year-end; and the results of the audit are delivered to all investors of the pooled investment vehicle.
Many pooled investment vehicles are already subject to annual financial statement audits and deliver the results to investors so the new rule will have little impact in this regard. However, the new rule requires pooled investment vehicles to hire and retain independent accounting firms that are registered with and inspected by the Public Company Accounting Oversight Board (PCAOB). Pooled investment vehicles that are not subject to an annual financial statement audit performed by a PCAOB registered and inspected accounting firm and/or do not deliver the results of such an audit to investors, must ensure assets are held with a qualified custodian, all investors receive statements directly from the qualified custodian(s), and ensure compliance with the annual surprise examination requirements.
This Thursday, March 25, we will be hosting our second webinar on the new SEC custody rule. The webinar will begin at 12:00 p.m. Central and will focus specifically on how the rule applies to pooled invest vehicles and investment advisers operating a qualified custodian and/or introducing broker-dealer. We discuss the annual audit requirements and many other pressing issues for pooled investment vehicles. Click here to enroll.
Labels: Custody, Hedge Funds, Pooled Investment Vehicle, Webinar
posted by bhill at 11:31 AM
Does the SEC’s new Internal Control Report Requirement Impact your Investment Adviser Firm or Introducing Broker/Dealer?
Internal Control Report
Earlier this month, new requirements under SEC Rule 206(4)-2 of the Investment Advisers Act of 1940 went into effect. The most stringent (and expensive) of these requirements is the new internal control report rule. Investment advisers or their related persons that serve as qualified custodian for investment advisory client funds or securities must annually obtain, or receive from its related person, a written internal control report. The internal control report must include an opinion with respect to the investment adviser’s or the related person’s controls relating to custody of client assets. The internal control report must be issued by an independent public accountant who is registered with and subject to regular inspection by the Public Company Accounting Oversight Board (PCAOB). The investment adviser must maintain the internal control report in its records and make the report available to the SEC staff upon request. The independent public accountant preparing the internal control report must verify that the client funds and securities are reconciled to a custodian other than the adviser or its related person.
Operationally Independent
In addition to the internal control reports, investment advisers with custody of client funds and securities must attain an annual surprise examination verifying the location of client funds and securities. When an investment adviser uses a related person qualified custodian, the investment adviser can avoid the surprise verification examination if it can prove the investment adviser is operationally independent from the related person qualified custodian. However, proving operationally independent may prove difficult. According to the new SEC rule, a related person that holds or has authority to obtain possession of advisory client assets is presumed not to be operationally independent of the investment adviser unless the following conditions are met and no other circumstances can reasonably be expected to compromise the operational independence of the related person: (i) client assets in the custody of the related person are not subject to claims of the adviser’s creditors; (ii) advisory personnel do not have custody or possession of, or direct or indirect access to client assets of which the related person has custody, or the power to control the disposition of such client assets to third parties for the benefit of the adviser or its related persons, or otherwise have the opportunity to misappropriate such client assets; (iii) advisory personnel and personnel of the related person who have access to advisory client assets are not under common supervision; and (iv) advisory personnel do not hold any position with the related person or share premises with the related person. The SEC has specifically commented that it would not consider a related person that shares management persons with the investment adviser, including an owner that was actively involved in the management of the two firms, to be operationally independent.
Introducing Broker/Dealer
In light of the new SEC rule, many investment advisers are analyzing the new requirement’s impact in their operations as a dually registered introducing broker/dealer or their related person introducing broker/dealer. Based on our understanding of the procedures and functions performed by introducing broker/dealers, most introducing broker/dealers have custody of advisory client assets and securities thus they are subject to the surprise verification examination. In addition, introducing broker/dealers must analyze their operations to determine if they perform functions requiring an internal control report. Recently, the SEC provided guidance on the applicability of the new custody rule on introducing broker/dealers. The following questions and answers have been posted on the SEC’s Division of Investment Management website and should be examined by all introducing broker/dealers affiliated with or registered as investment advisers.
Question XIV.1
Q: An investment adviser may also act as an introducing broker or have a related person acting as an introducing broker for its clients. Introducing brokers may have a variety of different relationships with a carrying broker with respect to matters such as the handling of customer funds and securities and sending customer account statements. In some cases, an introducing broker may maintain some client funds or securities, on a temporary and/or on-going basis (e.g., introducing brokers subject to paragraph (a)(2)(iv) of Rule 15c3-1 under the Securities Exchange Act of 1934). Is the introducing broker subject to the internal control report requirement in these circumstances?
A: Yes. An internal control report is required whenever an adviser or its related person is acting as a qualified custodian for client assets. (Posted March 10, 2010)
Question XIV.2
Q: If an introducing broker that is also an adviser or an adviser's related person is not acting as a qualified custodian under the rule for funds or securities of the adviser's clients, is the introducing broker subject to the internal control report requirement?
A: No. We would not consider an introducing broker to be acting as a qualified custodian under the rule if all client funds and securities are maintained with a carrying broker (which is not a related person of the adviser). Such an introducing broker must not receive client funds or securities other than checks drawn by clients and made payable to third parties such as the carrying broker. (Posted March 10, 2010)
Question XIV.3
Q: Does an adviser that meets the conditions above in Question XIV. 2 have custody of client funds or securities?
A: It depends. An adviser or its related person may have custody of client funds and securities without maintaining those funds or securities as qualified custodian for purposes of paragraph (a)(6) of the rule. For example, if the adviser or its related person has authority to withdraw client funds or securities maintained by the carrying broker, the adviser has custody of those assets. In that case, the adviser would be subject to all the applicable requirements of the rule, including the surprise examination requirement under paragraph (a)(4) of the rule. (Posted March 10, 2010)
This Thursday, March 25, RIA Compliance Consultants will be hosting our second webinar on the new SEC custody rule for federally registered investment advisers. The webinar will begin at 12:00 p.m. Central and will focus specifically on how the SEC's rule applies to pooled invest vehicles and investment advisers operating a qualified custodian and/or introducing broker-dealer. Click here to register.
Earlier this month, new requirements under SEC Rule 206(4)-2 of the Investment Advisers Act of 1940 went into effect. The most stringent (and expensive) of these requirements is the new internal control report rule. Investment advisers or their related persons that serve as qualified custodian for investment advisory client funds or securities must annually obtain, or receive from its related person, a written internal control report. The internal control report must include an opinion with respect to the investment adviser’s or the related person’s controls relating to custody of client assets. The internal control report must be issued by an independent public accountant who is registered with and subject to regular inspection by the Public Company Accounting Oversight Board (PCAOB). The investment adviser must maintain the internal control report in its records and make the report available to the SEC staff upon request. The independent public accountant preparing the internal control report must verify that the client funds and securities are reconciled to a custodian other than the adviser or its related person.
Operationally Independent
In addition to the internal control reports, investment advisers with custody of client funds and securities must attain an annual surprise examination verifying the location of client funds and securities. When an investment adviser uses a related person qualified custodian, the investment adviser can avoid the surprise verification examination if it can prove the investment adviser is operationally independent from the related person qualified custodian. However, proving operationally independent may prove difficult. According to the new SEC rule, a related person that holds or has authority to obtain possession of advisory client assets is presumed not to be operationally independent of the investment adviser unless the following conditions are met and no other circumstances can reasonably be expected to compromise the operational independence of the related person: (i) client assets in the custody of the related person are not subject to claims of the adviser’s creditors; (ii) advisory personnel do not have custody or possession of, or direct or indirect access to client assets of which the related person has custody, or the power to control the disposition of such client assets to third parties for the benefit of the adviser or its related persons, or otherwise have the opportunity to misappropriate such client assets; (iii) advisory personnel and personnel of the related person who have access to advisory client assets are not under common supervision; and (iv) advisory personnel do not hold any position with the related person or share premises with the related person. The SEC has specifically commented that it would not consider a related person that shares management persons with the investment adviser, including an owner that was actively involved in the management of the two firms, to be operationally independent.
Introducing Broker/Dealer
In light of the new SEC rule, many investment advisers are analyzing the new requirement’s impact in their operations as a dually registered introducing broker/dealer or their related person introducing broker/dealer. Based on our understanding of the procedures and functions performed by introducing broker/dealers, most introducing broker/dealers have custody of advisory client assets and securities thus they are subject to the surprise verification examination. In addition, introducing broker/dealers must analyze their operations to determine if they perform functions requiring an internal control report. Recently, the SEC provided guidance on the applicability of the new custody rule on introducing broker/dealers. The following questions and answers have been posted on the SEC’s Division of Investment Management website and should be examined by all introducing broker/dealers affiliated with or registered as investment advisers.
Question XIV.1
Q: An investment adviser may also act as an introducing broker or have a related person acting as an introducing broker for its clients. Introducing brokers may have a variety of different relationships with a carrying broker with respect to matters such as the handling of customer funds and securities and sending customer account statements. In some cases, an introducing broker may maintain some client funds or securities, on a temporary and/or on-going basis (e.g., introducing brokers subject to paragraph (a)(2)(iv) of Rule 15c3-1 under the Securities Exchange Act of 1934). Is the introducing broker subject to the internal control report requirement in these circumstances?
A: Yes. An internal control report is required whenever an adviser or its related person is acting as a qualified custodian for client assets. (Posted March 10, 2010)
Question XIV.2
Q: If an introducing broker that is also an adviser or an adviser's related person is not acting as a qualified custodian under the rule for funds or securities of the adviser's clients, is the introducing broker subject to the internal control report requirement?
A: No. We would not consider an introducing broker to be acting as a qualified custodian under the rule if all client funds and securities are maintained with a carrying broker (which is not a related person of the adviser). Such an introducing broker must not receive client funds or securities other than checks drawn by clients and made payable to third parties such as the carrying broker. (Posted March 10, 2010)
Question XIV.3
Q: Does an adviser that meets the conditions above in Question XIV. 2 have custody of client funds or securities?
A: It depends. An adviser or its related person may have custody of client funds and securities without maintaining those funds or securities as qualified custodian for purposes of paragraph (a)(6) of the rule. For example, if the adviser or its related person has authority to withdraw client funds or securities maintained by the carrying broker, the adviser has custody of those assets. In that case, the adviser would be subject to all the applicable requirements of the rule, including the surprise examination requirement under paragraph (a)(4) of the rule. (Posted March 10, 2010)
This Thursday, March 25, RIA Compliance Consultants will be hosting our second webinar on the new SEC custody rule for federally registered investment advisers. The webinar will begin at 12:00 p.m. Central and will focus specifically on how the SEC's rule applies to pooled invest vehicles and investment advisers operating a qualified custodian and/or introducing broker-dealer. Click here to register.
posted by bhill at 11:08 AM
Free Webinar - the Nuts & Bolts of Registering an Investment Advisor
Join us for our complimentary webinar, the "The Nuts & Bolts of Registering an Investment Advisor," on Wednesday, April 21, 2010 at 12:00 p.m. Central.
During this webinar, RIA Compliance Consultants will explain in detail the process and documents necessary for registering a firm as an investment advisor, the criteria for determining whether a firm should register with the SEC or state securities regulators, and the common pitfalls or mistakes experienced by applicants. Additionally, our consultants will give numerous best practices used by applicants when registering as an investment advisor. Finally, we will review some of the ongoing obligations of a newly registered investment advisor.
Register now for this free webinar so you can start planning your new investment advisor firm. Click here to enroll.
During this webinar, RIA Compliance Consultants will explain in detail the process and documents necessary for registering a firm as an investment advisor, the criteria for determining whether a firm should register with the SEC or state securities regulators, and the common pitfalls or mistakes experienced by applicants. Additionally, our consultants will give numerous best practices used by applicants when registering as an investment advisor. Finally, we will review some of the ongoing obligations of a newly registered investment advisor.
Register now for this free webinar so you can start planning your new investment advisor firm. Click here to enroll.
Labels: Webinar
posted by bhill at 9:50 AM
Does your Investment Adviser Have Effective Procedures to Monitor and Approve Performance Advertisements?
Advertising continues to be one of the primary focus areas of the SEC during investment adviser examinations. More specifically, performance advertising is one of the more common deficiencies found during SEC examinations and one that needs effective compliance oversight. During examinations, the SEC is interested in whether investment advisers have effective policies and procedures to make sure that their claims about past investment performance, their advertisements, and other marketing materials, among other things, contain accurate information, are not misleading, are not promissory, and have been reviewed by compliance.
Unfortunately, SEC Rule 206(4)-1 (Advertisements by Investment Advisers) under the Investment Advisers Act of 1940 provides little guidance on performance advertising. Much of the SEC's guidance is spelled out in no-action letters, with probably the most important one being Clover Capital Management, Inc., and enforcement actions. Investment advisers that regularly advertise performance need be familiar with the parameters outlined in Clover. The importance of Clover is heightened by the fact that the SEC staff, as a matter of policy, does not review specific advertisements except when conducting an examination of an investment adviser.
The following is a general summary of proper performance advertising compliance outlined by the SEC’s Division of Investment Management and Office of Compliance.
The SEC staff has said that, if you advertise your past investment performance record, you should disclose all material facts necessary to avoid any unwarranted inference. For example, SEC staff has indicated that it may view performance data to be misleading if it:
· does not disclose prominently that the results portrayed relate only to a select group of the adviser’s clients, the basis on which the selection was made, and the effect of this practice on the results portrayed, if material;
· does not disclose the effect of material market or economic conditions on the results portrayed (e.g., an advertisement stating that the accounts of the adviser’s clients appreciated in value 25% without disclosing that the market generally appreciated 40% during the same period);
· does not reflect the deduction of advisory fees, brokerage or other commissions, and any other expenses that accounts would have or actually paid;
· does not disclose whether and to what extent the results portrayed reflect the reinvestment of dividends and other earnings;
· suggests or makes claims about the potential for profit without also disclosing the possibility of loss;
· compares model or actual results to an index without disclosing all material facts relevant to the comparison (e.g., an advertisement that compares model results to an index without disclosing that the volatility of the index is materially different from that of the model portfolio); and
· does not disclose any material conditions, objectives, or investment strategies used to obtain the results portrayed (e.g., the model portfolio contains equity stocks that are managed with a view towards capital appreciation).
If your investment adviser utilizes performance advertising, you should attend our webinar, “Approving Performance Advertising,” on Wednesday, January 27, 2010 from 12:00 p.m. to 1:00 p.m. CST to learn more about developing strong compliance policies and procedures for preparing, approving and maintaining records related to performance advertising. During this webinar, our consultants will examine the SEC's advertising rule, the SEC no-actions concerning performance advertising and related SEC enforcement actions. RIA Compliance Consultants will provide best practices and disclosures for investment advisers utilizing performance advertising.
Labels: Advertising, Webinar
posted by bhill at 11:01 AM
Upcoming Webinar: Supervising Gifts & Political Contributions of Investment Adviser Representatives
Although the U.S. Securities and Exchange Commission (“SEC”) does not currently have any specific rules associated with the giving or receiving gifts or political contributions by representatives affiliated with a federally registered investment adviser, the influencing of others through gifts and political contributions in the context of an investment advisory relationship creates a potential conflict of interest, which must be addressed and mitigated by an investment adviser.
If you are interested in learning more about recent enforcement actions against investment advisers which lacked safeguards related to gifts and political contributions, please consider purchasing a seat for only $59.95 to our upcoming webinar, “Supervising Gifts and Political Contributions,” on Wednesday, October 28, 2009 from 12:00 – 1:00 p.m.
During this webinar, our speaker, Bryan Hill, will share best practices for supervising gifts and political contributions while reviewing recent SEC enforcement actions against investment advisers, the proposed political contribution rule for investment adviser reps, current rules of FINRA and the U.S. Department of Labor which may apply to some investment adviser representatives and guidance from certain professional accrediting organizations on this subject.
Purchase your webinar seat for $59.95: www.RIA-Compliance-Consultants.com/webinars.
If you are interested in learning more about recent enforcement actions against investment advisers which lacked safeguards related to gifts and political contributions, please consider purchasing a seat for only $59.95 to our upcoming webinar, “Supervising Gifts and Political Contributions,” on Wednesday, October 28, 2009 from 12:00 – 1:00 p.m.
During this webinar, our speaker, Bryan Hill, will share best practices for supervising gifts and political contributions while reviewing recent SEC enforcement actions against investment advisers, the proposed political contribution rule for investment adviser reps, current rules of FINRA and the U.S. Department of Labor which may apply to some investment adviser representatives and guidance from certain professional accrediting organizations on this subject.
Purchase your webinar seat for $59.95: www.RIA-Compliance-Consultants.com/webinars.
Labels: Gifts, Political Contributions, Webinar
posted by bhill at 11:03 AM
Is Your RIA Supervising the Gifts and Political Contributions of Its Investment Adviser Reps - Learn About the SEC's Proposed Pay-to-Play Rule
The U.S. Securities and Exchange Commission ("SEC") recently proposed new SEC Rule 206(4)-5 under the Investment Advisers Act of 1940. According to the SEC, the proposed rule is intended to curtail "pay to play" practices by registered investment advisers that seek to manage money for state and local governments.
This SEC proposal relates to money managed by state and local governments under public programs such as public pension plans for government employees, retirement plans in which teachers and other government employees can invest monies, and 529 plans that allow families to invest money for college. The state and local governments often hire and pay outside registered investment advisers to provide advisory services such as direct investment management or recommendations about which investments to make. The outside registered investment advisers often are selected by one or more trustees who have been appointed by elected officials. The term "pay to play" has been coined because the selection of such trustees can be undermined if elected officials ask investment advisers for political contributions or if elected officials otherwise make it understood that only investment advisers who make contributions will be selected to provide advisory services to the public programs subject to the control of the elected official.
Pay to play practices have been recognized as a significant problem. During the past several years, the SEC has brought enforcement actions in New York, New Mexico, and Connecticut, and likewise, there also have been criminal prosecutions in New York, New Mexico, Illinois, Ohio, Connecticut, and Florida over pay to play schemes.
If you are interested in learning more about recent actions related to registered investment advisers involved in "pay to play" schemes and the SEC's proposed rule to limit "pay to play" practices, please purchase your seat for only $59.95 to our upcoming webinar, "Supervising Gifts and Political Contributions," on Wednesday, October 28, 2009 from 12:00 - 1:00 p.m. CST.
This SEC proposal relates to money managed by state and local governments under public programs such as public pension plans for government employees, retirement plans in which teachers and other government employees can invest monies, and 529 plans that allow families to invest money for college. The state and local governments often hire and pay outside registered investment advisers to provide advisory services such as direct investment management or recommendations about which investments to make. The outside registered investment advisers often are selected by one or more trustees who have been appointed by elected officials. The term "pay to play" has been coined because the selection of such trustees can be undermined if elected officials ask investment advisers for political contributions or if elected officials otherwise make it understood that only investment advisers who make contributions will be selected to provide advisory services to the public programs subject to the control of the elected official.
Pay to play practices have been recognized as a significant problem. During the past several years, the SEC has brought enforcement actions in New York, New Mexico, and Connecticut, and likewise, there also have been criminal prosecutions in New York, New Mexico, Illinois, Ohio, Connecticut, and Florida over pay to play schemes.
If you are interested in learning more about recent actions related to registered investment advisers involved in "pay to play" schemes and the SEC's proposed rule to limit "pay to play" practices, please purchase your seat for only $59.95 to our upcoming webinar, "Supervising Gifts and Political Contributions," on Wednesday, October 28, 2009 from 12:00 - 1:00 p.m. CST.
Labels: Code of Ethics, Political Contributions, Webinar
posted by bhill at 8:41 PM
Join Our Webinar - Auditing Investment Advisory Fee Calculations, Deductions & Refunds
Earlier this year, the U.S. Securities and Exchange Commission ("SEC") proposed new requirements for registered investment advisor firms that have custody of clients funds and securities. According to current SEC Rule 206(4)-2, Custody or Possession of Funds of Securities of Clients, custody is defined as “holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them. Custody includes –
(i) Possession of client funds or securities, (but not of checks drawn by clients and made payable to third parties,) unless you receive them inadvertently and you return them to the sender promptly but in any case within three business days of receiving them;
(ii) Any arrangement (including a general power of attorney) under which you are authorized or permitted to withdraw client funds or securities maintained with a custodian upon your instruction to the custodian; and
(iii) Any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives you or your supervised person legal ownership of or access to client funds or securities.
The SEC’s proposed changes to Rule 206(4)-2 do not change the definition of custody or change what is considered custody, but impose additional requirements such as hiring a public accounting firm to perform an annual surprise examination for purpose of verifying client assets. Not surprisingly the proposed rule changes prompted significant discussion and resistance. Most of the investment advisory industry’s resistance has been aimed at the applicability of the audit requirements for the most common form of custody, automatic fee deductions from client accounts. It is estimated by the SEC that a large majority of SEC registered investment advisors automatically deduct their advisory fees from client accounts. The SEC considers this practice to be a type of custody covered under item (ii) above.
Many within the investment advisory industry believe automatic fee deductions pose lower risk than other forms of custody. While this may be true, there are significant risks and potential conflicts associated with automatically deducting advisory fees from client accounts. The fact of the matter is that the SEC and state securities regulators have brought several enforcement actions alleging fraudulent conduct involving the misappropriation and/or misuse of client funds directly related to automatic fee deductions. Fee deduction activities continue to be a focal point during regulatory examinations. Investment advisor firms need to have strong checks and balances to ensure their fee deduction policies and procedures are sufficient. Testing mechanisms need to be reasonably designed and then implemented to prevent, detect and correct errors from occurring during the fee calculation and deduction process. More importantly, supervisory procedures need to protect against fraudulent activity. All registered investment advisor firms need to make sure their compliance procedures go beyond the minimum regulatory requirements of having written client authorization to deduct fees from accounts and ensuring fee calculations appear on client account statements. Procedures need to include ongoing monitoring and auditing of the process.
Some of the more common deficiencies we often note when conducting mock regulatory reviews and annual assessments for our clients include (1) investment advisory fees being deducting from the wrong account; (2) miscalculation of quarterly or monthly investment advisory fees; (3) the agreed upon investment advisory fee between the client and advisor incorrectly entered into the investment advisor’s client database system; (4) the misconception that the client’s qualified custodian is auditing the accuracy of the investment advisor’s investment advisory fee calculations; (5) the investment advisor intentionally or unintentionally overcharging client accounts; and (6) the investment advisor failing to develop procedures to supervise and monitor the investment advisory fee calculation and deduction process.
Does your registered investment advisor firm adequately monitor its fee deduction process? Do you have questions about this important compliance function? If so, join us on Thursday, October 8 at 12:00 p.m. CST for a live webcast titled “Auditing Investment Advisory Fee Calculations, Deductions & Refunds”. During this informative one-hour online event, we will discuss the implications of proposed changes to SEC Rule 206(4)-2, recent regulatory enforcement actions, and best practices with respect to fee calculations, deductions and refunds. The fee to sign up for the webcast is $59.95. You can register now by clicking the link below.
(i) Possession of client funds or securities, (but not of checks drawn by clients and made payable to third parties,) unless you receive them inadvertently and you return them to the sender promptly but in any case within three business days of receiving them;
(ii) Any arrangement (including a general power of attorney) under which you are authorized or permitted to withdraw client funds or securities maintained with a custodian upon your instruction to the custodian; and
(iii) Any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives you or your supervised person legal ownership of or access to client funds or securities.
The SEC’s proposed changes to Rule 206(4)-2 do not change the definition of custody or change what is considered custody, but impose additional requirements such as hiring a public accounting firm to perform an annual surprise examination for purpose of verifying client assets. Not surprisingly the proposed rule changes prompted significant discussion and resistance. Most of the investment advisory industry’s resistance has been aimed at the applicability of the audit requirements for the most common form of custody, automatic fee deductions from client accounts. It is estimated by the SEC that a large majority of SEC registered investment advisors automatically deduct their advisory fees from client accounts. The SEC considers this practice to be a type of custody covered under item (ii) above.
Many within the investment advisory industry believe automatic fee deductions pose lower risk than other forms of custody. While this may be true, there are significant risks and potential conflicts associated with automatically deducting advisory fees from client accounts. The fact of the matter is that the SEC and state securities regulators have brought several enforcement actions alleging fraudulent conduct involving the misappropriation and/or misuse of client funds directly related to automatic fee deductions. Fee deduction activities continue to be a focal point during regulatory examinations. Investment advisor firms need to have strong checks and balances to ensure their fee deduction policies and procedures are sufficient. Testing mechanisms need to be reasonably designed and then implemented to prevent, detect and correct errors from occurring during the fee calculation and deduction process. More importantly, supervisory procedures need to protect against fraudulent activity. All registered investment advisor firms need to make sure their compliance procedures go beyond the minimum regulatory requirements of having written client authorization to deduct fees from accounts and ensuring fee calculations appear on client account statements. Procedures need to include ongoing monitoring and auditing of the process.
Some of the more common deficiencies we often note when conducting mock regulatory reviews and annual assessments for our clients include (1) investment advisory fees being deducting from the wrong account; (2) miscalculation of quarterly or monthly investment advisory fees; (3) the agreed upon investment advisory fee between the client and advisor incorrectly entered into the investment advisor’s client database system; (4) the misconception that the client’s qualified custodian is auditing the accuracy of the investment advisor’s investment advisory fee calculations; (5) the investment advisor intentionally or unintentionally overcharging client accounts; and (6) the investment advisor failing to develop procedures to supervise and monitor the investment advisory fee calculation and deduction process.
Does your registered investment advisor firm adequately monitor its fee deduction process? Do you have questions about this important compliance function? If so, join us on Thursday, October 8 at 12:00 p.m. CST for a live webcast titled “Auditing Investment Advisory Fee Calculations, Deductions & Refunds”. During this informative one-hour online event, we will discuss the implications of proposed changes to SEC Rule 206(4)-2, recent regulatory enforcement actions, and best practices with respect to fee calculations, deductions and refunds. The fee to sign up for the webcast is $59.95. You can register now by clicking the link below.
Labels: Custody, Fee Audit, Webinar
posted by bhill at 3:04 PM
NASAA Proposes Model Rule Regarding Solicitors for Registered Investment Advisors
The Investment Adviser Regulatory Policy and Review Project Group of the North American Securities Administrators Association (known as "NASAA" and essentially consisting of state securities regulators) recently solicited comments from the public on a proposed model rule regarding solicitors for registered investment advisors. The comment period ended in August and NASAA has not yet released a final version of the model rule. According to NASAA’s website, the model rule “is necessary and appropriate to facilitate the regulation of solicitor activity for the benefit of investors, to promote uniformity among the states and between states and federal rules, and to provide guidance to the industry.”
The proposed model rule for solicitor arrangements reaffirms the solicitor/investment advisor written agreement and client disclosure requirements that are already on the books in many states. But the proposed model rule goes further to make very clear that the solicitor must be licensed as an investment advisor representative. While most states require solicitors to license as investment advisor representatives, there is a high level of confusion within the industry regarding solicitor registration and qualifications. Currently, only about 10 states do not require solicitors to license as investment advisors so the model rule includes a provision exempting solicitors from the investment advisor representative licensing requirements for states that choose to do so. The model rule is designed to mirror Rule 206(4)-3 of the U.S. Securities and Exchange Commission ("SEC") provisions for statutory disqualifications, written agreements and disclosures to clients.
NASAA’s proposed rules are being provided under the Uniform Securities Act of 1956 and under the Uniform Securities Act of 2002. Therefore it is important to note that just because NASAA adopts a new model rule, it does not mean every state will automatically adopt the rule. While many states strictly follow the Uniform Securities Act’s provisions for investment advisors, some do not. Also, the adoption of any new rule must be made by the individual state. For example, in some states the securities division is given more latitude to implement new rules while other states securities division may require specific authorization from the state legislature. You can read more about the proposed rule on the NASAA website.
To learn information about the regulatory requirements for investment advisor solicitor arrangements, you can purchase our webinar, “Establishing & Supervising Solicitor Arrangements," recorded on August 19, 2009 and view on-demand for a purchase price of $59.95. During this webinar, our consultants review in detail the requirements of SEC Rule 206(4)-3, the registration requirements of certain states and best supervisory practices for an investment adviser utilizing solicitors.
Purchase this on-demand webinar, “Establishing & Supervising Solicitor Arrangements," for $59.95 by clicking below.
The proposed model rule for solicitor arrangements reaffirms the solicitor/investment advisor written agreement and client disclosure requirements that are already on the books in many states. But the proposed model rule goes further to make very clear that the solicitor must be licensed as an investment advisor representative. While most states require solicitors to license as investment advisor representatives, there is a high level of confusion within the industry regarding solicitor registration and qualifications. Currently, only about 10 states do not require solicitors to license as investment advisors so the model rule includes a provision exempting solicitors from the investment advisor representative licensing requirements for states that choose to do so. The model rule is designed to mirror Rule 206(4)-3 of the U.S. Securities and Exchange Commission ("SEC") provisions for statutory disqualifications, written agreements and disclosures to clients.
NASAA’s proposed rules are being provided under the Uniform Securities Act of 1956 and under the Uniform Securities Act of 2002. Therefore it is important to note that just because NASAA adopts a new model rule, it does not mean every state will automatically adopt the rule. While many states strictly follow the Uniform Securities Act’s provisions for investment advisors, some do not. Also, the adoption of any new rule must be made by the individual state. For example, in some states the securities division is given more latitude to implement new rules while other states securities division may require specific authorization from the state legislature. You can read more about the proposed rule on the NASAA website.
To learn information about the regulatory requirements for investment advisor solicitor arrangements, you can purchase our webinar, “Establishing & Supervising Solicitor Arrangements," recorded on August 19, 2009 and view on-demand for a purchase price of $59.95. During this webinar, our consultants review in detail the requirements of SEC Rule 206(4)-3, the registration requirements of certain states and best supervisory practices for an investment adviser utilizing solicitors.
Purchase this on-demand webinar, “Establishing & Supervising Solicitor Arrangements," for $59.95 by clicking below.
Labels: Solicitors, Webinar
posted by bhill at 7:48 PM
Registered Investment Advisors Need to Monitor Outside Business Activities of Investment Advisor Representatives
The establishment of policies and procedures designed to monitor the outside business activities ("OBAs") of supervised persons (i.e. officers, directors, partners, investment advisor representatives, and employees) should be part of every registered investment advisor firm's written compliance programs. RIA Compliance Consultants, Inc. suggests that some type of "outside business activities form" be created and all supervised persons be required to complete the form on an annual basis and whenever changes are needed. A supervised person should disclose and seek approval of an outside business activity prior to engaging in the activity.
There are two important regulatory reasons for monitoring outside business activities: (a) Form ADV disclosure purposes, and (b) Form U4 disclosure purposes. A registered investment advisor is required to disclose to clients all potential and real conflicts of interests including outside activities of the firm and its related persons. Item 8 of Form ADV Part II outlines specific business activities or affiliations of the firm's related persons that must be disclosed. These include affiliations with institutions such as banks, real estate brokers, and broker/dealers. Individuals listed under Item 6 of Form ADV Part II need to provide detailed business background for the preceding five years. Finally, Item 7.C. of the Form ADV Part II may require the registered investment advisor firm to provide a description of the supervised person's outside activity and the amount of time spent on that activity.
In addition to disclosing outside activities on the Form ADV, investment advisor representatives ("IARs") must disclose their employment history for the previous 10 years and their current outside business activity on the Form U4. It is the investment advisor representative's ultimate responsibility to keep the Form U4 current and complete, particularly his/her employment and other business background.
Registered investment advisors need to be cognizant of the 30 day deadline for making material updates to the Form ADV and Form U4. Whenever an individual or firm's outside business activities change, those activities need to be updated on the Form ADV and/or Form U4 within 30 days of the change.
Jarrod James, Vice President of RIA Compliance Consultants, will be the featured speaker during our webinar, "Addressing Outside Business Activities and Conflicts of Interest," on Tuesday, September 15, 2009 from 12:00 p.m. to 1:00 p.m. CST.
Purchase your webinar seat for $59.95:
www.RIA-Compliance-Consultants.com/webinars.
There are two important regulatory reasons for monitoring outside business activities: (a) Form ADV disclosure purposes, and (b) Form U4 disclosure purposes. A registered investment advisor is required to disclose to clients all potential and real conflicts of interests including outside activities of the firm and its related persons. Item 8 of Form ADV Part II outlines specific business activities or affiliations of the firm's related persons that must be disclosed. These include affiliations with institutions such as banks, real estate brokers, and broker/dealers. Individuals listed under Item 6 of Form ADV Part II need to provide detailed business background for the preceding five years. Finally, Item 7.C. of the Form ADV Part II may require the registered investment advisor firm to provide a description of the supervised person's outside activity and the amount of time spent on that activity.
In addition to disclosing outside activities on the Form ADV, investment advisor representatives ("IARs") must disclose their employment history for the previous 10 years and their current outside business activity on the Form U4. It is the investment advisor representative's ultimate responsibility to keep the Form U4 current and complete, particularly his/her employment and other business background.
Registered investment advisors need to be cognizant of the 30 day deadline for making material updates to the Form ADV and Form U4. Whenever an individual or firm's outside business activities change, those activities need to be updated on the Form ADV and/or Form U4 within 30 days of the change.
Jarrod James, Vice President of RIA Compliance Consultants, will be the featured speaker during our webinar, "Addressing Outside Business Activities and Conflicts of Interest," on Tuesday, September 15, 2009 from 12:00 p.m. to 1:00 p.m. CST.
Purchase your webinar seat for $59.95:
www.RIA-Compliance-Consultants.com/webinars.
Labels: Form ADV, IAR Licensing, Outside Business Activities, Webinar
posted by bhill at 6:17 PM
RIAs Required to Disclose Conflicts of Interest & Outside Business Activities
A registered investment advisor has a fiduciary duty to disclose all real and potential conflicts of interests to clients as well as all material arrangements. Often times this broad requirement encompasses outside business activities the registered investment advisor considers non-advisory and would otherwise not disclose to clients. For example, a registered investment advisor that spends only 10% of its time on investment advisory activities and 90% of its time on non-advisory activities is required to disclose this fact. It must be made clear to all clients that the registered investment advisor will not devote all of its time to investment advisory functions unlike other registered investment advisor firms whose only activity is acting as an investment advisor.
An outside business activity may create an incentive to the registered investment advisor that is not in the best interests of the client. For example, an investment advisor representative that is also an insurance agent may decide to recommend a particular insurance product based on an incentive to sell the product (e.g. higher commission, soft-dollars, trips, marketing allowance) rather than recommending the product solely based on the needs of the client. This is a classic conflict of interest that must be disclosed to investment advisory clients. A registered investment advisor’s failure to disclose outside business activities and the outside business activities of its supervised persons is an all-too-often deficiency during examinations by the U.S. Securities and Exchange Commission ("SEC") and state securities regulators.
A related type of deficiency is the failure to adequately monitor and approve outside business activities considered investment related. Certain financial related activities are considered higher risk for conflicts of interest between an investment advisor representative ("IAR") and his/her clients and even his/her firm. These activities include wholesaling investment products, affiliation with a broker/dealer, acting as a mortgage broker, working for a second registered investment advisor, and serving as a limited partner or managing member of a private investment. Before a registered investment advisor allows its supervised persons (which includes all officers, directors, partners, investment advisor representatives and employees) to engage in these types of activities, it is imperative that the supervised person fully disclose the activity and provide detailed documentation of how the activity will impact their affiliation with the registered investment advisor. If the activity does not comply with the registered investment advisor’s compliance policies and procedures, the registered investment advisor should not approve the activity.
For more information and guidance regarding outside business activities common to many registered investment advisors and to learn some best practices with respect to disclosure and mitigation of conflicts of interest, please consider attending our webinar, “Addressing Outside Business Activities and Conflicts of Interest,” on Tuesday, September 15, 2009 from 12:00 p.m. to 1:00 p.m. CST.
Purchase your webinar seat for $59.95 at www.RIA-Compliance-Consultants.com/webinars.
An outside business activity may create an incentive to the registered investment advisor that is not in the best interests of the client. For example, an investment advisor representative that is also an insurance agent may decide to recommend a particular insurance product based on an incentive to sell the product (e.g. higher commission, soft-dollars, trips, marketing allowance) rather than recommending the product solely based on the needs of the client. This is a classic conflict of interest that must be disclosed to investment advisory clients. A registered investment advisor’s failure to disclose outside business activities and the outside business activities of its supervised persons is an all-too-often deficiency during examinations by the U.S. Securities and Exchange Commission ("SEC") and state securities regulators.
A related type of deficiency is the failure to adequately monitor and approve outside business activities considered investment related. Certain financial related activities are considered higher risk for conflicts of interest between an investment advisor representative ("IAR") and his/her clients and even his/her firm. These activities include wholesaling investment products, affiliation with a broker/dealer, acting as a mortgage broker, working for a second registered investment advisor, and serving as a limited partner or managing member of a private investment. Before a registered investment advisor allows its supervised persons (which includes all officers, directors, partners, investment advisor representatives and employees) to engage in these types of activities, it is imperative that the supervised person fully disclose the activity and provide detailed documentation of how the activity will impact their affiliation with the registered investment advisor. If the activity does not comply with the registered investment advisor’s compliance policies and procedures, the registered investment advisor should not approve the activity.
For more information and guidance regarding outside business activities common to many registered investment advisors and to learn some best practices with respect to disclosure and mitigation of conflicts of interest, please consider attending our webinar, “Addressing Outside Business Activities and Conflicts of Interest,” on Tuesday, September 15, 2009 from 12:00 p.m. to 1:00 p.m. CST.
Purchase your webinar seat for $59.95 at www.RIA-Compliance-Consultants.com/webinars.
Labels: Conflict of Interest, Outside Business Activities, Webinar
posted by bhill at 3:30 PM
Upcoming Webinar Addressing Succession Planning for RIAs
Many individuals who operate their own registered investment adviser firms have a tendency to delay succession planning and deal almost exclusively with shorter-term business issues. However, succession planning is a critical issue, in particular, for a small registered investment adviser firm due to the risks that one key investment adviser representative could become unavailable, on either a temporary or permanent basis, to serve clients and operate the registered investment adviser firm. In the interest of both the investment advisory practice and its clients, it is critical to plan for continuity and succession of the registered investment adviser firm.
Ideally, a registered investment adviser's business succession plan should be in place well in advance of any investment adviser representative's planned or unplanned departure from the investment advisory practice. There are several components that comprise a successful succession plan, such as: (a) creating an ideal scenario for departure of the investment adviser representative; (b) identifying and evaluating potential buyers or other successors; (c) deciding how the registered investment adviser firm's responsibilities will be distributed to the successors; (d) if necessary, determining who will mentor the successors; (e) determining the value of your registered investment adviser firm; and (f) addressing tax implications of the succession and implementing strategies to reduce taxes.
Particularly, with respect to creating an ideal scenario for planned or unplanned departure of any investment adviser representative and in determining the value of your registered investment adviser firm, it is critical to be aware of financial industry regulations and requirements affecting a registered investment adviser. These include FINRA's Continuing Commissions policy and corresponding SEC guidance regarding continuing commissions for registered representatives of a broker-dealer; the privacy policies of relinquishing and receiving firms and custodians if the succession plan will involve a change of the actual investment adviser firm entity or the custodian for client accounts; licensing and registration requirements for the investment adviser firm and any affiliated investment advisory representatives; assignment provisions of the Investment Advisers Act, restrictive covenants, such as non-solicitation or non-compete agreements, affecting the investment adviser representative and/or intended successors; and continuity of existing business contracts.
For more information and guidance about the regulatory considerations when planning for succession within your registered investment adviser, purchase a webinar seat for "Planning for Succession" sponsored by RIA Compliance Consultants and presented by our affiliated law firm, Bryan Hill Attorney at Law, on Tuesday, September 8, 2009 from 12:00 -1:00 p.m. Central Standard Time. The charge for this webinar is $59.95.
Purchase for $59.95 your webinar seat now: www.RIA-Compliance-Consultants.com/webinars
Ideally, a registered investment adviser's business succession plan should be in place well in advance of any investment adviser representative's planned or unplanned departure from the investment advisory practice. There are several components that comprise a successful succession plan, such as: (a) creating an ideal scenario for departure of the investment adviser representative; (b) identifying and evaluating potential buyers or other successors; (c) deciding how the registered investment adviser firm's responsibilities will be distributed to the successors; (d) if necessary, determining who will mentor the successors; (e) determining the value of your registered investment adviser firm; and (f) addressing tax implications of the succession and implementing strategies to reduce taxes.
Particularly, with respect to creating an ideal scenario for planned or unplanned departure of any investment adviser representative and in determining the value of your registered investment adviser firm, it is critical to be aware of financial industry regulations and requirements affecting a registered investment adviser. These include FINRA's Continuing Commissions policy and corresponding SEC guidance regarding continuing commissions for registered representatives of a broker-dealer; the privacy policies of relinquishing and receiving firms and custodians if the succession plan will involve a change of the actual investment adviser firm entity or the custodian for client accounts; licensing and registration requirements for the investment adviser firm and any affiliated investment advisory representatives; assignment provisions of the Investment Advisers Act, restrictive covenants, such as non-solicitation or non-compete agreements, affecting the investment adviser representative and/or intended successors; and continuity of existing business contracts.
For more information and guidance about the regulatory considerations when planning for succession within your registered investment adviser, purchase a webinar seat for "Planning for Succession" sponsored by RIA Compliance Consultants and presented by our affiliated law firm, Bryan Hill Attorney at Law, on Tuesday, September 8, 2009 from 12:00 -1:00 p.m. Central Standard Time. The charge for this webinar is $59.95.
Purchase for $59.95 your webinar seat now: www.RIA-Compliance-Consultants.com/webinars
Labels: Assignment, Succession Planning, Webinar
posted by bhill at 9:40 PM
