The U.S. Securities and Exchange Commission (“SEC”) has a long-standing rule requiring registered investment advisers to develop, maintain and periodically assess written compliance policies and procedures. A majority of state securities regulators also require state registered investment advisers to develop written compliance and supervisory procedures. For example, South Carolina is one of the many states that requires its state registered investment advisers to develop a written compliance manual. South Carolina makes this explicit through the South Carolina Uniform Securities Act Regulation 13-408(A)(19), which is found under the subheading “Record Requirements of Registered Investment Advisers.” This regulation requires a state registered investment advisers to have “…written procedures to supervise the activities of employees and investment adviser representatives that are reasonably designed to achieve compliance with applicable securities laws and regulations.”
RIA Compliance Consultants recently confirmed that the South Carolina Securities Division delivered a notice via email to South Carolina state registered investment advisers requesting a current and complete copy of the compliance manual for investment advisers state registered with South Carolina. A copy of the compliance manual needs to be submitted by the investment adviser firm to the South Carolina Securities Division by August 4, 2014. It is our understanding that the South Carolina Securities Division is willing to grant extensions to investment adviser firms that may need more time. If your investment adviser firm is state registered in South Carolina, you need to ensure a copy of your investment adviser firm’s compliance manual is submitted by the August 4 deadline or obtain an extension.
As we discuss on the Frequently Asked Questions Regarding Written Supervisory & Compliance Policies and Procedures page of our, securities regulators do not define everything that must be covered in a registered investment adviser’s policies and procedures. However, written policies and procedures should be customized to the registered investment adviser’s unique business model. The SEC has stated that they expect a registered investment adviser’s compliance policies and procedures, at a minimum, should address all of the following issues to the extent that they are relevant to the investment adviser firm’s practice:
- Portfolio management processes, including allocation of investment opportunities among investment advisory clients and consistency of portfolios with clients’ investment objectives, disclosures by the adviser, and applicable regulatory restrictions;
- Trading practices, including procedures by which the investment adviser satisfies its best execution obligation, use of client brokerage to obtain research and other services (“soft dollar arrangements”), and allocates aggregated trades among investment advisory clients;
Proprietary trading of the investment adviser and personal securities trading (“PST”) activities of supervised persons;
- The accuracy of disclosures made to investors, clients, and securities regulators, including account statements and advertisements;
- Safeguarding of investment advisory clients’ assets from conversion or inappropriate use by advisory personnel;
- The accurate creation of required records and their maintenance in a manner that secures them from unauthorized alteration or use and protects them from untimely destruction;
Marketing investment advisory services including the use of solicitors;
Processes to value investment advisory client holdings and assess investment adviser fees based on those valuations;
- Safeguards for the privacy protection of investment advisory client records and information; and
- Business continuity plans.
If your investment adviser firm needs assistance reviewing or updating your compliance manual, RIA Compliance Consultants can help. We offer compliance manual reviews and can provide updates. We also build customized investment adviser compliance manuals. Please contact us or click here to learn more about our compliance manual services and option.