The Colorado Division of Securities recently issued its 2023 examination priorities for state-registered investment adviser firms registered with the State of Colorado.
The following are the most common deficiencies identified by the staff of Colorado Securities Division during examinations of investment adviser firms in 2022:
- Books & Records – Failing to provide a complete set of financial statements, written supervisory procedures, and updated comprehensive client suitability information including notes from client meetings that serves as the basis for every recommendation;
- Client Agreements – Failing to update the investment advisory agreements of clients when services or fee change and calculating investment advisory fee in a manner not consistent with the client agreement;
- Supervisory Procedures – Not maintaining supervisory procedures relevant to the investment adviser firm’s business model, using generic templates that were insufficiently customized or having procedures that lacked detail on the actions taken to complete a compliance task;
- Cybersecurity – Not including cybersecurity as part of an annual risk assessment or not disclosing to clients the risks of using electronic communications;
- Advertising – Websites or social media sites containing outdated and/or inaccurate information inconsistent with the investment adviser firm’s practices; and
- Custody – Third-party money managers providing insufficiently detailed invoices – an investment adviser firm is responsible for detailed invoices and must either directly provide the itemized invoices or ensure that the third party money manager provides the sufficiently itemized invoice.
For additional details about these common examination deficiencies or guidance on the new investment adviser rules in Colorado, please visit https://securities.colorado.gov/press-release/alert-the-colorado-division-of-securities-announces-2023-investment-adviser .
On Thursday, February 23, 2023, Bryan Hill, President of RIA Compliance Consultants, Inc., will review the U.S. Securities and Exchange Commission’s published investment adviser examination priorities for 2023 and also discuss NASAA’s examination sweep results for state registered investment advisers. Please click upon the following link to purchase a seat to this webinar: https://www.ria-compliance-consultants.com/product/2023-investment-adviser-exam-priorities/ .
The following are previous posts of RIA Compliance Consultants, Inc. related directly or indirectly to the topics discussed in this blog post.
- SEC Announces 2021 Examination Priorities for RIAs (3/15/2021)
- 2019 SEC Examination Priorities (12/27/2018)
- Colorado Provides Investment Advisers with Guidance on Disclosing PPP Loans (5/18/2020)
RIA Compliance Consultants has also developed several sample forms and checklists to assist an investment adviser firm in preparing for an examination.
- SEC Exam – Mock Exam Document Request List
- SEC Exam – Best Practices Checklist
- SEC Exam – Log of Requested Docs & Info
- SEC Exam – Investment Adviser’s Confirmation of New Deadline for Response
- SEC Exam – Response to Deficiency or Findings Letter from Securities Regulator
- SEC Exam – Privilege Log
- SEC Exam – Sample Letters Requesting Confidential Treatment under FOIA
The information contained in this blog post is general in nature intended for educational purposes only and is not intended to be a comprehensive analysis of this topic. Investment adviser examinations by a securities regulator are not limited to the examination priorities listed above. This post is not intended to constitute compliance consulting advice or apply to any particular investment adviser firm’s specific situation. Please consult the applicable securities regulator’s rules and published guidance for more details about the topics referenced above. For more information about the limitations of this blog post and information on our website, please see our Disclosures webpage.
Posted by Bryan Hill
Labels: Colorado Investment Advisor, Examination Priorities
Tagged: Examination Priorities (primary)