Category Archives: Common Deficiencies

SEC Risk Alert – Electronic Messaging

December 19, 2018

December 17, 2018 the Office of Compliance Inspections and Examinations (“OCIE”) of the U.S. Securities and Exchange Commission (“SEC”) released a new National Exam Program Risk Alert Relating to Electronic Messaging. The purpose of the risk alert is to remind SEC registered investment advisers of their obligations when their supervised persons use electronic messaging and to help SEC registered investment advisers improve their systems, policies, and procedures by sharing the SEC staff’s observations from its investment adviser examinations.

Continue Reading

SEC Risk Alert: Observations from Cybersecurity Examinations of Investment Advisers

August 14, 2017

On August 7, 2017, the Office of Compliance Inspections and Examinations (“OCIE”) of U.S. Securities and Exchange Commission (“SEC”) released a Risk Alert which details its examination of the cybersecurity preparedness of 75 broker-dealers, investment advisers and investment companies in the U.S.  In comparison to prior cybersecurity examinations, this exam involved more active testing and validation of the firms’ procedures and controls related to cybersecurity. Click here to read the Risk Alert.

Continue Reading

Websites a Common Place for Advertising Deficiencies

June 02, 2015

Nearly all investment adviser firms have at least one if not more websites and their prevalence continues to grow, but have you reviewed your investment adviser firm’s website recently? Websites are a great way to advertise your firm’s business and attract new clients, but they can also be a treasure trove for securities regulators.

Continue Reading

NASAA’s Model Rule on Business Continuity and Succession Planning for State Registered Advisers – Do You Have Your Business Continuity and Succession Plan Prepared?

May 27, 2015

The North American Securities Administrators Association, Inc. (“NASAA”) has created a model rule on Business Continuity and Succession Planning (“NASAA Model Rule”) for state registered investment adviser firms.  NASAA’s Model Rule provides guidance to state registered investment advisers when creating Business Continuity and Succession Plans (“BCP”) for their registered investment adviser firms.   The most common purpose of the BCP is to have processes and procedures in place to ensure that critical business functions can continue during and after a disaster or other significant business interruption, whether internal or external.

Continue Reading

Repeat Compliance Program Deficiencies Result in SEC Enforcement Actions for Investment Advisers

November 05, 2013

On October 23, 2013, the U.S. Securities and Exchange Commission (“SEC”) issued a press release (Release No. 2013-226) indicating that it sanctioned three investment adviser firms “for repeatedly ignoring problems with their compliance programs.” The SEC’s enforcement actions are the result of the investment adviser firms each failing to effectively act upon previous warnings and correct compliance deficiencies that had been previously identified.  In the press release Andrew Bowden, director of the SEC’s National Examination Program, stated that, “After SEC examiners identified significant deficiencies, these firms did little or nothing to address them by the next examination. Firms must fix deficiencies identified by our examiners.”

Continue Reading

Risk Alert Issued by SEC Identifies Significant Deficiencies Involving Failure of Investment Advisers to Comply with the Custody Rule

March 19, 2013

In a Risk Alert issued March 4, 2013 by the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”), it was revealed that “the SEC’s National Examination Program (“NEP”) has observed widespread and varied non-compliance with elements of the custody rule.” Rule 206(4)-2 under the Investment Advisers Act of 1940 (“Investment Advisers Act”), states that an investment adviser has custody of client assets if it or its related person holds, directly or indirectly, client funds or securities or has any authority to obtain possession of them.  The Risk Alert indicated that approximately one-third (over 140) of the recent examinations reviewed by the SEC’s National Examination Program staff included custody related issues. The Risk Alert was issued by the SEC’s Office of Compliance Inspections and Examinations to encourage registered investment advisers to review their policies and procedures and examine their practices related to the deficiencies noted in the Risk Alert to ensure that investment advisers are aware of “…their responsibilities under the custody rule to protect client assets.”

Continue Reading

Common Investment Advisor Exam Deficiencies

March 12, 2013

With the implementation last year of some of the new laws resulting from the required changes mandated under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), investment advisors should make sure that they are ready for a regulatory examination.  Many investment advisors had to change their registration status, most changes were from registration with the U.S. Securities and Exchange Commission (“SEC”) to registration with one or more state securities regulator, and some private fund managers that were previously exempt from investment advisor registration were required to become registered with the SEC.  One anticipated outcome from all of these changes is that investment advisors will receive more frequent regulatory examinations.  For some investment advisors this may mean that the investment advisor will be audited by a securities regulator for the first time.

Continue Reading