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.
November 18, 2014
There is only a short amount of time left to register for RIA Compliance Consultants’ upcoming webinar, “Preparing Your Compliance Calendar for 2015,” which will be hosted Thursday, November 20, 2014, at 12:00 CST. This webinar will provide an overview of ongoing regulatory requirements for investment advisers, including discussion on items that should be done throughout the calendar year in efforts to stay compliant with regulatory requirements. Our consults will also provide tips for preparing a customized compliance calendar, checklists and forms to assist your investment adviser with meeting annual regulatory requirements.
December 31, 2013
On Thursday, January 2, 2014, Final Renewal Statements and reports are available viewing and printing. Registered investment adviser firms should download and review these reports as soon as they become available; the deadline for receipt of Final Renewal Statement payments in January 10, 2014. Additionally, investment advisers firms with a fiscal year end of December 31 are encouraged to begin preparing their required Form ADV annual updating amendments. The Form ADV annual amendment must be submitted through the Web CRD / IARD system 90 days from an investment adviser’s fiscal year. An investment adviser needs to understand that failure to update the Form ADV, as required by the Form ADV General Instructions, is a violation of U.S. Securities and Exchange Commission (“SEC”) rules and similar state rules that could lead to an investment adviser’s registration being revoked. A registered investment adviser with a fiscal year end other than December must make sure to file its annual updating amendment within 90 days of the investment adviser firm’s fiscal year end.
December 04, 2013
Determining ongoing compliance requirements may seem overwhelming to many registered investment advisers. Complying with the rules and regulations under the Investment Advisers Act of 1940 (“Investment Advisers Act”) and similar state investment adviser regulations must be a central part of an investment adviser’s fiduciary duties. Investment advisers have a variety of duties to perform throughout the year in order to comply with the requirements of the Investment Advisers Act and similar rules of state securities regulators. Having a well-organized process can help streamline an investment adviser’s ongoing compliance requirements. To help manage the ongoing compliance process, registered investment advisers should consider developing a compliance calendar that can serve as an effective and proactive tool to assist the investment adviser with meeting its ongoing compliance requirements. Developing a compliance calendar can help strengthen an investment adviser’s written compliance policies and procedures that must be developed pursuant to Rule 206(4)-7 of the Investment Advisers Act and similar state rules to detect, prevent, and correct possible regulatory violations that can occur throughout the year.
August 28, 2013
Rule 204-2 (the “Books and Records Rule”) under the Investment Advisers Act of 1940 (“Investment Advisers Act”) requires investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) to make and keep true, accurate, and current certain books and records relating to its investment advisory business. Most books and records requirements for state registered investment advisers are the same as or similar to the SEC requirements, but each investment adviser needs to make sure that it is familiar with the requirements of the appropriate governing authority. Generally, investment advisers will be required to maintain and preserve most books and records in an easily accessible location for five years from the end of the fiscal year during which the last entry was made on the record or, in the case or marketing pieces or other forms of communications, from the end of the fiscal year during which the investment adviser last published or otherwise disseminated the document. The most recent two years of the required books and records must be maintained in an appropriate office location of the investment adviser. Information must be provided on the Form ADV Part 1 if any of the investment adviser’s books and records are kept in a location other than the investment adviser’s principal office location.
August 13, 2013
Under Rule 206(4)-2 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), custody means “holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them.” An investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) will be deemed to have custody of a client’s assets if it meets this definition or if a related person of the investment adviser holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them, in connection with advisory services the investment adviser provides to clients. Examples of custody include: “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; any arrangement (including a general power of attorney) under which [the investment adviser] is authorized or permitted to withdraw client funds or securities maintained with a custodian upon [the investment adviser’s] instruction to the custodian; and any capacity (such as general partner of a limited partnership, managing member of a limited liability company or comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives [the investment adviser] or [its] supervised persons legal ownership of or access to client funds or securities.”
August 06, 2013
On March 4, 2013, the U.S. Securities and Exchange Commission (“SEC”), by the Office of Compliance Inspections and Examinations issued a risk alert that discusses deficiencies involving investment advisers and custody. As stated in the risk alert, “One of the most critical rules under the Investment Advisers Act of 1940 is the custody rule, which is designed to protect advisory clients from the misuse or misappropriation of their funds and securities. Yet, the SEC’s National Examination Program (“NEP”) has observed widespread and varied non-compliance with elements of the custody rule.”
In the final rule release for Rule 206(4)-7 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), which requires investment advisers registered with the Securities and Exchange Commission (“SEC”) to adopt and implement written policies and procedures, the SEC indicated that when designing investment advisory policies and procedures each investment adviser “should first identify conflicts and other compliance factors creating risk exposure for the firm and its clients in light of the firm’s particular operations and then design policies and procedures that address those risks.” This process of an investment adviser identifying these risks is commonly referred to as a risk assessment. As RIA Compliance Consultants previously discussed, a risk assessment should serve as a mechanism for an investment adviser to identify its unique set of risks and evaluate what risks are present and how such risks affect the investment adviser and its business operations. A risk assessment should be a critical step used when developing strong written policies and procedures.
June 19, 2013
Social media presents a challenge for investment advisers in their effort to comply with the Investment Advisers Act of 1940 (“Investment Advisers Act”) and other regulations. The Risk Alert regarding Investment Adviser Use of Social Media issued by the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations states that investment advisers using social media should adopt and review their policies and procedures periodically; “Firms should create usage guidelines on appropriate and inappropriate use of social media and should consider adopting policies and procedures to address conducting firm business on personal social media sites.” Additionally, investment advisers have recordkeeping requirements that require certain communications made through social media sites to be retained. According to the Risk Alert “registered investment advisers that communicate through social media must retain records of those communications if they contain information that satisfies the recordkeeping obligations under the [Investment] Advisers Act.”
Recent Disciplinary Actions Can Serve as a Warning for Investment Advisers to Have in Place Strong Email Retention and Supervision Policies and Procedures
June 18, 2013
Rule 204-(2)(a)(7) of the Investment Advisers Act of 1940 (“Investment Advisers Act”) requires investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”), to preserve “all written communications received and copies of all written communications sent by such investment adviser relating to (i) any recommendation made or proposed to be made and any advice given or proposed to be given, (ii) any receipt, disbursement or delivery of funds or securities, or (iii) the placing or execution of any order to purchase or sell any security . . . .” The SEC has stated that electronic communications are considered written communications and are subject to the supervisory and record keeping requirements. Most books and records requirements for state registered investment advisers are the same as or similar to the SEC requirements, but each state registered investment adviser needs to make sure that it familiarizes itself with the requirements of its securities regulator.