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Friday, March 9, 2012

SEC Issues No-Action Letter Clarifying Stance on Multiple Entities Filing a Single Form ADV

On January 18, 2012, the staff of the U.S. Securities and Exchange Commission (“SEC”) issued a no-action letter addressing the investment adviser registration requirements for Special Purposes Vehicles (“SPV”).

This SEC no-action letter, which reaffirms an SEC Staff letter from December 2005, states that while an investment adviser and its affiliates can choose to separately file Form ADV, an investment adviser can file a single Form ADV that covers the adviser and its affiliates.  However, the affiliates must be controlled by or under common control of the investment adviser and the investment adviser and its affiliates must conduct a single advisory business.  This applies to investment advisers with a single SPV, or multiple SPVs and SPVs with independent directors.  However, each SPV or affiliated adviser must be independently eligible to register with the SEC (i.e. must have more than $100 million in assets under management).

When completing the Form ADV, the information provided should be the same as if each entity filed a separate Form ADV.  On Schedules A and B, advisers should list each direct and indirect owner, including relying advisers, and provide their title/status; even if this means listing more than 100 individuals.  Additionally, a disclosure needs to be made on Schedule D of Form ADV stating that the investment adviser and its affiliated advisers are filing a single ADV in reliance of the No-Action letter and Section 1.B. of Schedule D needs to be completed for each affiliated adviser.

Please refer to the SEC’s no-action letter for additional details, and you should consult with an investment adviser compliance professional before relying upon an SEC no-action letter.

Wednesday, March 7, 2012

Guidance for Advertising and Marketing

Advertising by investment advisors can generate significant risk exposure depending upon the advertising materials and circumstances.

Securities regulators broadly define 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) as an advertisement. Under Rule 206(4)-1 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), the U.S. Securities and Exchange Commission (“SEC”) has defined the term advertisement to include any notice, circular, letter or other written communication addressed to more than one person, or any notice or other announcement in any publication or by radio or television, which offers (1) any analysis, report, or publication concerning securities, or which is to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (2) any graph, chart, formula, or other device to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (3) any other investment advisory service with regard to securities.

A guiding principal for your investment advisor’s advertising can be found in Rule 206(4)-1, which prohibits an investment advisor from using advertising that includes any untrue, false or misleading statements of material fact. Some basic regulatory guidelines are the following:

General Guidelines for Advertising and Marketing:

  • Do not forget your fiduciary duty as an investment adviser;
  • Make no guarantees or promises;
  • Do not mislead – include all material facts when needed;
  • Support and prove everything stated;
  • Do not misstate facts such as number of clients, types of services provided, assets under management, level of expertise, etc.; and
  • Do not use testimonials.

You can be certain that during an examination of your investment advisor, the SEC or state securities regulator will thoroughly review advertising materials utilized by your investment advisor during the inspection period. In particular, the following are specifically prohibited by the SEC and state securities regulators: 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.

As a result, your investment advisor needs to have detailed advertising review policies and procedures memorialized within its compliance program. Further, your investment advisor is highly encouraged to establish a pre-approval process for all advertising, including marketing materials. When conducting an investment advisor’s annual compliance program assessment, the chief compliance officer needs to be sure to analyze and test the sufficiency of making compliance procedures.

If you need guidance on the performance advertising rules and other marketing rules and regulations, RIA Compliance Consultants will be conducting a webinar, Performance Advertising for Investment Advisers, on Thursday, March 15, 2012, at 12:00 CST. This webinar satisfies one hour continuing education requirements for CFP designees. Additionally, if you need help implementing performance reporting procedures or reviewing performance advertising materials RIA Compliance Consultants would be happy to assist you; click here to schedule a time to speak with one of our compliance consultants.

Monday, March 5, 2012

RIA Compliance Consultant’s Facebook Page

RIA Compliance Consultants encourages you to view our firm’s Facebook page. In the ever increasing use of social media to communicate, RIA Compliance Consultants is eager to have a simple way to keep our clients updated on compliance matters relating to your investment adviser firm.

RIA Compliance Consultants strives to update regularly our Facebook page, which provides instant access to our regulatory alerts and compliance tips. We also post up-to-date compliance articles and are able to offer complimentary webinar recordings and sample forms. The goal behind our Facebook page is to keep your investment adviser firm informed and abreast of critical compliance matters.

If you’d like access to our regulatory alerts, compliance tips and periodic release of complimentary webinar recordings and sample forms, please click here to “Like” RIA Compliance Consultants on Facebook now. As a show of our appreciation, RIA Compliance Consultants will provide you with a free sample Annual Compliance Calendar Checklist that will serve to help your investment adviser stay proactive with its on-going compliance program.

Please understand that clicking the “Like” button does not constitute a testimonial for or endorsement of RIA Compliance Consultants, any associated person, or our services. “Like” is not meant in the traditional sense; the clicking of the “Like” button is merely a mechanism to circulate our Facebook page. RIA Compliance Consultants requests that any postings to our Facebook page should refrain from recommending us or providing testimonials for our compliance consulting firm.

Friday, March 2, 2012

Massachusetts Releases Social Media Guidance

The Massachusetts Securities Division recently released a report providing guidance on social media use by investment advisers.  As we wrote earlier, the Massachusetts Securities Division has been investigating social media use by investment advisers.  This investigation has resulted in the Massachusetts Securities Division issuing this report to provide guidance on the most common issues identified during their investigation.

In the report, the Massachusetts Securities Division reaffirmed that connecting with clients through social media is acceptable, but investment advisers need to keep records of such communications and they need to have policies and procedures in place for monitoring the social media outlets.  One of the more noteworthy topics addressed by the Massachusetts Securities Division concerns the content posted by third parties.  If an investment adviser removes negative comments, while leaving positive ones, securities regulators may view this as misleading and an adoption of the positive comments.  Consequently, an investment adviser should consider adopting a policy and procedure requiring the review of material posted by third parties and outlining the criteria for removal.

The Massachusetts Securities Division also reminded investment advisers that any business-related content posted on social media sites is considered advertising and is therefore subject to the state securities regulator’s advertising rules, including the ban on testimonials.  However, the Massachusetts Securities Division has taken the position that if a client “Likes” an investment adviser’s Facebook page, without taking any further action, the “Like” is not considered a testimonial.  Whereas, the U.S. Securities and Exchange Commission (“SEC”) has stated that use of the “Like” feature by a client on an investment adviser’s social media page “could be deemed to be a testimonial if it is an explicit or implicit statement of a client’s … experience with an investment adviser.”  Although the SEC’s position does not necessarily contradict the Massachusetts Securities Division’s position, it is not clear what the SEC’s position is when a client “Likes” an investment adviser’s corporate Facebook webpage.  The only example the SEC has provided is if an investment adviser solicits the public to “Like” the biography of its investment adviser representative, the “Like” is considered a prohibited testimonial.

For investment adviser firms that choose to establish Facebook pages, we recommend including a disclosure on the investment adviser’s Facebook page that is similar to the following:

The clicking of the “Like” button by other individuals should not be considered a positive reflection or recommendation of the [Investment Advisor] or investment advisory services offered by [Investment Advisor].  The clicking of “Like” button should only be considered as a means to circulate and receive news updates from [Investment Advisor] via Facebook. Visitors to this Facebook page must avoid posting positive reviews of their experiences with the adviser or its services as such testimonials are prohibited under state and federal securities laws and may not reflect the experience of all clients of [Investment Advisor].

Although the Massachusetts Securities Division suggests using a similar disclosure, at this moment, it is unclear to us whether such a disclosure based approach will be accepted by the SEC or other securities regulators.  Based upon the SEC’s comments regarding the “Like” feature and the lack of regulatory precedents specifically relating to the unique “Like” feature on corporate Facebook pages, an investment adviser should exercise caution and consult with its own compliance professional for a recommendation specific to the particular investment adviser’s situation.

We cannot over emphasize how important it is for investment advisers to have policies and procedures in place regarding the use of social media, even if your investment adviser simply bans the use of it.  If your investment adviser has not yet implemented any policies and procedures regarding the use of social media, the report by the Massachusetts Securities Division along with the regulatory alert recently released by the SEC provide a good framework to use when developing such policies and procedures.  If you need any assistance with developing social media policies and procedures for your firm, you may click here to schedule a time to speak with one of our consultants.

Finally, RIA Compliance Consultants has recorded a webinar, “Compliance for Social Media Site,” which discusses the key issues and best practices to consider when designing policies and procedures for social media.  (Please note that this webinar was recorded last fall prior to the recent guidance from the Massachusetts Securities Division and SEC and therefore does not include their more recent analysis, opinion, and interpretations as part of the webinar.)  You can purchase a recording of this webinar by clicking here.

Wednesday, February 22, 2012

Performance Advertising for Investment Advisers

Although not specifically prohibited, investment advisers should be cautious when using performance data in advertising as the securities regulator may claim that the performance advertisement contains untrue statements of a material fact or is otherwise false or misleading. The U.S. Securities and Exchange Commission (“SEC”) has explained that advertisements shall be considered false or misleading depending on the facts and circumstances involved in its use, including:

  • The form and context of the advertisement;
  • The implications or inferences arising out of the advertisement in its total context;
  • The sophistication of the client or prospective client.

Rule 206(4)-1 – Advertisements by Investment Advisers under the Investment Advisers Act of 1940 does not specifically address performance advertising.  However, to assist investment advisers, the SEC has issued a series of no-action letters explaining a number of performance advertising practices that it believes are inappropriate given Rule 206(4)-1′s restrictions.  The most influential no-action letter is dated October 28, 1986 and  written to Clover Capital Management, Inc. outlining the items that in the SEC staff’s view are prohibited under Rule 206(4)-1 in relation to performance advertising:

A performance advertisement containing either Model or Actual results may be considered misleading if it:

  • Fails to disclose the effect material market or economic conditions on the results portrayed;
  • Includes model or actual results that do not reflect the deduction of advisory fees, brokerage or other commissions, and any other expenses that a client would have paid or actually paid;
  • Fails to 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;
  • Fails to disclose any material conditions, objectives, or investment strategies used to obtain the results portrayed.

In connection with Model results, the following additional omissions or practices would be misleading:

  • Fails to disclose prominently the limitations inherent in model results, particularly the fact that such results do not represent actual trading and that they may not reflect the impact that material economic and market factors might have had on the advisory’s decision-making if the adviser were actually managing the clients’ money;
  • Fails to disclose, if applicable, that the conditions, objectives, or investment strategies of the model portfolio changed materially during the time period portrayed in the advertisement and, if so, the effect of such change on the results portrayed;
  • Fails to disclose, if applicable that any of the securities contained in, or the investment strategies followed with respect to, the model portfolio do not relate, or only partially relate, to the type of advisory services currently offered by the adviser;
  • Fails to disclose, if applicable, that the adviser’s clients had investment results materially different from the results portrayed in the model.

 In connection with Actual results, the following additional omission would be misleading:

  • Fails to disclose prominently, if applicable, that the results portrayed related 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.

The SEC concludes its letter to Clover Capital Management, Inc. by declaring that investment advisers using models or results in advertising must ensure the advertisement is not false or misleading and that the lists above are not intended to be all-inclusive or provide a safe harbor.

Since issuing the Clover Capital Management, Inc. no-action letter, the SEC has published several additional no-action letters clarifying and in some cases relaxing certain standards set forth under Clover Capital Management, Inc.  If your investment adviser issues performance advertising, it is important to understand all guidelines and restrictions issued by the SEC in their performance advertising no-action letters.

If you need guidance on the performance advertising rules and other marketing rules and regulations, RIA Compliance Consultants will be conducting a webinar, Performance Advertising for Investment Advisers, on Thursday, March 15, 2012, at 12:00 CST. This webinar satisfies one hour continuing education requirements for CFP designees. Additionally, if you need help implementing performance reporting procedures or reviewing performance advertising materials RIA Compliance Consultants would be happy to assist you; click here to schedule a time to speak with one of our compliance consultants.

Wednesday, February 15, 2012

Correction on Form U5 Leads to SEC Action for Improper Performance Claims

The United States Securities and Exchange Commission (“SEC”) recently issued an order instituting cease-and-desist proceedings against an investment adviser representative for misstating performance numbers on performance reports distributed to clients.  According to the SEC’s order, the representative overstated client performance numbers and understated losses on individual portfolio performance reports provide to his clients.  The investment adviser representative is now barred from associating with another investment adviser firm and required to pay a civil penalty of $60,000.

Prior to the order, the principals of the investment adviser representative’s employing firm discovered allegedly inaccurate performance reports and, after completing their internal review, terminated the representative.  However, the principals did not originally report the internal review on the representative’s Form U5.  The Form U5 is the official form used by investment adviser firms and broker/dealer firms to notify regulators of a licensed individual’s termination from the firm.  Several months later, after receiving advice from a consultant, the principals amended the Form U5 to fully disclose the reason for termination.  This amendment to the Form U5 drew the attention of the SEC who initiated an investigation resulting in the order.

Communications with clients is always a top focus during SEC routine examinations and the SEC’s investigation into this matter is another example of the close scrutiny placed on performance claims whether they are in marketing materials or individual reports provided to clients.  If you need guidance on the performance advertising rules and other marketing rules and regulations, RIA Compliance Consultants will be conducting a webinar, Performance Advertising for Investment Advisers, on Thursday, March 15. Additionally, if you need help implementing performance reporting procedures or reviewing performance advertising materials, RIA Compliance Consultants would be happy to assist you; click here to schedule a time to speak with one of our compliance consultants.

Wednesday, February 8, 2012

Compliance and Ethics Are Not Solely the Responsibility of an Investment Adviser’s CCO

On January 31, 2012, the U.S. Securities and Exchange Commission (“SEC”) held a Compliance Outreach Program National Seminar in Washington, D.C. for investment advisers and investment companies. In the past, these seminars were generally referred to as “CCO Outreach Programs.” During the introductory remarks for the seminar, Carlo V. di Florio, Director, Office of Compliance Inspections and Examinations for the SEC, explained the reason for the changed program title. Mr. di Florio indicated that the change is based on the SEC’s desire through both its outreach programs and its examination program to “elevate the role of compliance by underscoring that it is not a responsibility that stops at the desk of the CCO” and that the SEC’s intention is to continue its outreach and support for investment adviser’s chief compliance officers (“CCO”).

During his speech, he went on to emphasize the importance of strong risk management controls including strong compliance programs and he emphasized the importance of senior management in implementing an investment adviser’s culture of compliance throughout the firm. Mr. di Florio stated, “Strong risk management controls, including a solid compliance program, are a key responsibility of everyone in a regulated entity, but the right culture and tone at the top are especially the responsibility of senior management and the board. A CCO who does not have the full support and engagement of senior management and the board is not going to be effective, and there is nothing we want more than to help CCOs to be effective. We will focus most intently on firms where we sense that senior management and the board are not setting the appropriate tone and are failing to support key risk and control functions with adequate resources, independence, standing and authority.”

One thing that was clear in his speech is that senior management should expect to be more involved in the audit process going forward. He indicated that one thing revealed during the financial crisis was the need for better oversight at senior management levels. As a result of this, the SEC will be seeking to engage senior management on critical business, risk and regulatory issues. Senior management should take the primary role in “reinforcing the tone at the top, driving a culture of compliance and ethics and ensuring effective implementation of risk management in key business processes, including strategic planning, capital allocation, performance management and compensation incentives.”

These are some key points that an investment adviser should keep in mind this year when it is conducting its annual assessment of its written compliance program and determining how prepared it is for a regulatory exam. Investment advisers should examine the role of senior management in the compliance review process and the compliance program in general. Part of the assessment should always include an analysis of whether the investment adviser is dedicating enough resources and putting enough emphasis on the importance of the investment adviser’s compliance program.

RIA Compliance Consultants can assist you with developing, reviewing, or conducting an annual assessment of your investment adviser’s compliance program. If you are interested is speaking with one of our consultants about the support RIA Compliance Consultants can provide to your investment adviser, contact your consultant or click here to schedule a time to speak with one of our consultants.

Tuesday, February 7, 2012

The Code of Ethics Rule

Under Rule 204A-1 (“Code of Ethics Rule”) of the Investment Advisers Act of 1940 (“Investment Advisers Act”), each investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) is required to adopt and implement a code of ethics that sets forth required standards of conduct for all supervised persons of the registered investment adviser and addresses conflicts that arise from personal trading by advisory personnel. Most state securities regulators have similar requirements.

The Code of Ethics Rule does not require investment advisers to adopt a particular standard of conduct, but does necessitate that each investment adviser adopt a code that reflects the fiduciary obligations of the investment adviser and its supervised persons as applicable to the investment adviser’s business model. The Code of Ethics Rule sets forth minimum requirements but investment advisers are free to set higher standards for their supervised persons.

At a minimum, an investment adviser’s codes of ethics must include the following items:

1.      A standard of business conduct that the investment adviser requires of its supervised persons which reflects the fiduciary obligations of the adviser and its supervised persons;

2.      Provisions requiring supervised persons of the investment adviser to comply with applicable federal securities laws;

3.      Provisions that require all access persons of the investment adviser to report, and the investment adviser to review, their personal securities transactions and holdings periodically;

4.      Provisions requiring supervised persons of the investment adviser to report any violations of the investment adviser’s code of ethics promptly; and

5.      Provisions requiring the investment adviser to provide each of its supervised persons with a copy of its code of ethics and any amendments, and requiring its supervised persons to provide the investment adviser with a written acknowledgment of their receipt of the code and any amendments.

Additionally, each investment adviser must describe its code of ethics in its Form ADV Part 2 and provide a copy of its code of ethics to any prospective or current clients, upon request. Any amendments made to the investment adviser’s code of ethics must be provided to all supervised persons of the investment adviser and should be updated in Form ADV Part 2 accordingly.

An investment adviser’s code of ethics is an important element to any investment adviser’s compliance program. An investment adviser should review its code of ethics at least yearly as part of its annual compliance review process and make revisions as appropriate. While the investment adviser’s first obligation is to develop the code of ethics and ensure that it is meeting the minimum requirements of the Code of Ethics Rule, it is equally important that an investment adviser’s supervised persons are familiar with, understand the requirements of, and comply with the investment adviser’s Code of Ethics. At a minimum investment advisers have to obtain and maintain a signed acknowledgement of receipt of the investment adviser’s code of ethics and any amendments. Although not a requirement of the Code of Ethics Rule, developing procedures and on-going training for informing supervised persons about the investment adviser’s code of ethics is critical to creating a strong culture of compliance and avoiding inadvertent violations of the code.

RIA Compliance Consultants is hosting a webinar, Thursday, February 9, 2012, at 12:00 pm CST, “Professional Ethics for Investment Adviser Representatives.” During this webinar, one of our consultants will provide an overview of the Code of Ethics Rule. The primary focus of this webinar is to provide investment adviser representatives and supervised persons of the investment adviser with an understanding of why this rule exists and how it affects them. This webinar is intended to serve as an educational tool designed to assist investment advisers in providing on-going ethics training to its investment adviser representatives. This webinar will provide up to one hour of Continuing Education credit to meet the on-going requirements for maintaining the Certified Financial Planner (“CFP”) certification, approved by the CFP Board of Standards, Inc. To register for this webinar, please click here. To speak with one of our consultants for more information on how RIA Compliance Consultants can assist your firm in implementing or reviewing your firm’s code of ethics, click here.

Wednesday, January 25, 2012

An Investment Advisers Code of Ethics Should Reinforce its Fiduciary Duty

In August 2004, the U.S. Securities and Exchange Commission (“SEC”) adopted Rule 204A-1 under the Investment Advisers Act of 1940 (“Investment Advisers Act”) that required registered investment advisers to adopt codes of ethics.  Under SEC Rule 204A-1, an investment advisory firm must adopt and implement a code of ethics, establishing rules and conduct all supervised persons must adhere to as a fiduciary. SEC Rule 204A-1 was adopted in attempt to create a standard of conduct that would “prevent fraud by reinforcing fiduciary principles that must govern the conduct of advisory firms and their personnel.” Section 206 of the Investment Advisers Act imposes a fiduciary duty on investment advisers by making it unlawful for an investment adviser to engage in fraudulent, deceptive or manipulative conduct. In its role as a fiduciary, an investment adviser has a duty to serve the best interest of its clients; a duty to have a reasonable, independent basis for investment advice; a duty to ensure that its investment advice is suitable to the client’s objectives, needs and circumstances; and a duty to be loyal to client.

An investment adviser’s code of ethics must establish standard of business conduct that the investment adviser requires of all its supervised persons. SEC Rule 204A-1 does not require an investment adviser to adopt a particular standard, but the standard chosen must reflect the fiduciary obligations of the investment adviser and its supervised persons and must require compliance with the federal securities laws.  The SEC contends that while each investment adviser firm’s code of ethics must meet certain minimum provisions, the adopted rule allows for flexibility for investment advisers to adopt individualized codes that best suit the “structure, size and nature of [investment advisers] advisory businesses.”

An investment adviser’s code of ethics must meet the needs of its individual organization while achieving a proper balance of operational and aspirational elements. In the adopting release, the SEC stated:

“We urge advisers to take great care and thought in preparing their codes of ethics, which should be more than a compliance manual. Rather, a code of ethics should set out ideals for ethical conduct premised on fundamental principals of openness, integrity, honesty and trust. A good code of ethics should effectively convey to employees the value the advisory firm places on ethical conduct, and should challenge employees to live up not only to the letter of the law, but also to the ideals of the organization.”

Although SEC Rule 204A-1 does not require investment advisers to provide specific training regarding the firms code of ethics, the adopting release states, “An investment adviser’s procedures for informing its employees about its code of ethics are critical to obtaining good compliance and avoiding inadvertent violations of the code.”  The adopting release also indicates that the following are among best practices for investment advisers:

  • Holding periodic orientation or training sessions with new and existing employees to remind them of their obligations under the code of ethics;
  • Requiring employees to certify that they have read and understand the code of ethics; and
  • Requiring annual recertification that the employee has re-read, understands and has complied with the code.

RIA Compliance Consultants is hosting a webinar, Thursday, February 9, 2012, at 12:00pm CST, “Professional Ethics for Investment Adviser Representatives,” that will discuss the fiduciary duties of investment advisers as it relates to Section 206 of the Investment Advisers Act, including details on what it means to be a fiduciary, with supplemental examples of unethical behavior. The webinar will discuss the summary of requirements under SEC Rule 204A-1 and will expand on the reporting requirements of the rule. This webinar is intended to serve as an education tool designed to assist investment advisers in providing on-going ethics training to its investment adviser representatives. This webinar will provide up to one hour of Continuing Education credit to meet the on-going requirements for maintaining the Certified Financial Planner (“CFP”) certification, approved by the CFP Board of Standards, Inc. To register for this webinar, please click here. To speak with one of our consultants for more information on how RIA Compliance Consultants can assist your firm in implementing or reviewing your firm’s code of ethics, click here.

Friday, January 20, 2012

Is Your Investment Adviser Protected Against Client Claims?

Does your investment adviser have errors and omissions insurance (“E&O insurance”) to cover you and your firm in the event of an error or if a client claims your firm made an error?

While investment advisers are not required by regulation to maintain E&O insurance, RIA Compliance Consultants strongly recommends that all investment advisers maintain E&O insurance that is determined to be sufficient to cover the advisory services practice of the investment adviser firm.  As you might anticipate, legal fees can accumulate quickly even in situations where your firm is required to defend a claim that you believe to be frivolous.  E&O insurance typically will cover any settlements or judgments and the associated defense costs relating to any professional claims, including, for example, claims alleging lack of suitability, investment losses, errors in financial planning engagements, and meritless claims.

An adequate E&O policy will cover the investment adviser firm and all of its employees and representatives.  Most E&O insurance policies offer up to $1 million in coverage annually, although investment adviser firms with higher amounts of assets under management are advised to maintain more coverage.  Investment adviser firms are advised to attain an E&O policy that is tailored to the advisory services offered by the firm.  You should carefully review E&O policy provisions with your legal counsel and insurance broker to make a determination that the coverage provided by the E&O policy is sufficient coverage for the advisory services that your firm offers.  As an example, many policies do not extend coverage to claims related to private funds.  If your firm provides advisory services related to private funds, it is strongly recommended that you ensure that the E&O policy in place provides coverage for such activities.  If there is no coverage for such activities, then you either need to obtain insurance that will cover such activities or alternatively, need to amend the advisory services offered to eliminate activities for which your firm does not have insurance coverage.

 

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* RIA Compliance Consultants, Inc. ("RCC") is not a law firm and does not provide legal services. A compliance consulting relationship with RCC is not provided those legal and professional protections that normally exist under an attorney-client relationship. For more information, please visit our Disclosures webpage.

The determination to use a third-party compliance services provider is an important decision and should not be based solely upon advertisements or self-proclaimed expertise. A description or indication of limitation of our compliance services does not mean that an agency or board has certified RCC as a specialist or expert in investment advisor compliance. All potential clients are urged to make their own independent investigation and evaluation of RCC.

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