If an examiner of the Securities and Exchange Commission (“SEC”) or a state securities regulator showed up in your registered investment adviser’s office tomorrow, could you provide all of the investment advisory books and records required by the examiner? Do you even know exactly what books and records a registered investment adviser is required to maintain? Your registered investment adviser needs to be ready for an examination by a securities regulator at anytime. If your registered investment adviser is examined, you are required to provide examiners with requested investment advisory records in a timely manner (typically expected within 24 hours).
Your registered investment adviser is required to make and keep true accurate and current certain books and records relating to its investment advisory business. For SEC registered investment advisers, these required books and records are outlined in SEC Rule 204-2 of the Investment Advisers Act of 1940 (“Advisers Act”). Every investment adviser registered with the SEC should familiarize themselves with the requirements of this rule in relation to the documents and reports that need to be maintained, where and for how long the documents must be maintained, and how the documents may be maintained. Most state securities regulators impose books and records requirements similar to the SEC for state registered investment advisers, however, your registered investment adviser will need to make sure that it understands the specific requirements of its state securities regulator.
Maintenance of books and records is something that should be covered in a registered investment adviser’s compliance program. It is not enough just to know what books and records your registered investment adviser needs to maintain, your registered investment adviser should perform periodic testing to make sure that it is maintaining and can provide the appropriate books and records to the securities regulator. A best practice is to have a mock examination performed of your registered investment adviser. Take the list of required books and records and test to determine if your registered investment adviser is prepared to present all required documents and if it can do so in a timely manner. This mock examination of your registered investment adviser’s books and records is something that can be performed internally or you can hire RIA Compliance Consultants to perform this service for your registered investment adviser.
It is surprising how many books and records deficiencies are discovered during our mock examinations of registered investment advisers. The following are some examples of common books and records deficiencies found by our compliance consultants:
- Not maintaining an order memorandum or not maintaining complete information in the order memorandum as outlined in Rule 204-2(a)(3) the Advisers Act;
- Not maintaining current financial or complete financial records;
- Not maintaining proper documentation to support performance advertising figures;
- Not maintaining a list of all access persons for the past five years;
- Not maintaining access person holdings reports;
- Not maintaining records to support the firm’s duty of best execution;
- Not maintaining or unable to locate contracts the firm has executed with service providers, sub-advisors, or solicitors;
- Not able to easily or timely produce copies of requested email records; and
- Not having complete or adequate written compliance programs or having written compliance programs that are not consistent with what the firm is actually doing.
For more information and guidance on maintaining the appropriate books and records for you registered investment adviser, register for the Maintaining Required Books and Records webinar that will be presented by RIA Compliance Consultants on Thursday, July 23, 2009 from 12:00 -1:00 p.m. Central Standard Time. During the webinar you will have the ability to direct questions to our staff. The fee for the webinar is $59.95 and space is limited so sign up today!
For online payment by credit card, after completing the webinar registration page, you will be re-directed to a PayPal shopping cart for processing. If you prefer to pay over the telephone, after completing the webinar registration page, please contact Crystal Walz at 877-345- 4034 x 100.
Purchase now your webinar seat for $59.95: https://www2.gotomeeting.com/register/497126507
