Earlier this year, the U.S. Securities and Exchange Commission (“SEC”) adopted Rule 203A-5 to implement changes to SEC registration criteria, including increasing the assets under management threshold for SEC registration from $25 million to $100 million. In order to convert to the new standards for SEC registration, the SEC is requiring all investment advisor firms registered with the SEC on January 1, 2012, to file a Form ADV Part 1A amendment by no later than March 30, 2012. Each investment advisor firm will be required to report the market value of its assets under management (determined within 90 days of the filing of the amendment) and to specify if the investment advisor firm remains eligible for SEC registration. If it is determined that the investment advisor firm is not eligible to remain registered with the SEC, the investment advisor must withdraw from SEC registration by submitting a Form ADV-W by no later than June 28, 2012. If the investment advisor firm intends to continue operations, then the investment advisor firm’s registration must be approved by state regulators before the firm withdraws its SEC registration.
Category Archives: Compliance Program
Broker Dealers and Investment Advisers Need to Have Policies and Procedures in Place for Social Media Use
October 04, 2011
A recent FINRA enforcement action highlights the need for broker dealers and investment advisers to implement policies and procedures for social media use. FINRA alleged the registered representative created websites related to her firm without obtaining firm approval, on several occasions she falsely stated online that she was not affiliated with any broker dealer, and she was using her Twitter account to give stock recommendations without making the necessary disclosures. As a result of this alleged conduct, FINRA fined her $10,000 and suspended her from associating with a broker dealer for one year.
Investment Advisers Should Expect More Frequent Regulatory Exams
September 13, 2011
With the upcoming regulatory switch of mid-sized investment advisers from the U.S. Securities and Exchange Commission (“SEC”) to state securities regulators and Congress considering whether to authorize a self-regulatory organization (“SRO”) for investment advisers, we believe that the frequency of investment adviser examinations is going to rise.
The Benefits of Being Prepared for a Regulatory Examination
September 09, 2011
The best approach for an investment adviser firm to prepare for a regulatory examination begins with ongoing compliance training. A report released by the U.S. Securities and Exchange Commission (“SEC) on February 2011, stated “In most cases, the staff considers the quality of the [investment adviser’s] compliance systems and its internal control environment when determining the scope of the examination and the areas to be reviewed.” Investment advisers with a vigorous compliance program, including training and preparing for regulatory examinations, will find that regulatory audits are more likely to progress smoothly. Investment adviser firms that fail to demonstrate a solid understanding of their investment adviser’s compliance program will likely leave the securities regulator with concerns that the investment adviser is failing to protect the safety of its client’s assets. The examiners may deem it necessary to seek further information and request additional documentation from the investment adviser. Failure to provide requested documentation and a display of an inadequate compliance program will likely be the result of a deficiency letter, and/or remedial or enforcement action against your investment adviser firm. In the same report discussed above, the SEC has stated that unfortunately, “most examinations conclude with a deficiency letter.”
Do You Understand the Responsibilities Related to Serving as an Investment Adviser’s Chief Compliance Officer?
August 09, 2011
Your investment adviser’s chief compliance officer (“CCO”) must be knowledgeable regarding the Investment Advisers Act of 1940, competent in regard to administering your compliance program and empowered to enforce compliance with your policies and procedures.
When establishing a compliance program, an investment adviser is required to review and monitor the personal securities transactions by “access persons” in order to prevent inappropriate trading.
SEC Publishes July 2008 ComplianceAlert
July 22, 2008
Today, the U.S. Securities and Exchange Commission (SEC) released its July 2008 ComplianceAlert letter which identifies and describes common deficiencies and weaknesses that SEC examiners have found during compliance examinations of SEC registered investment advisers/mutual funds, broker-dealers, and transfer agents. The release, which is considered official comment from the SEC’s Office of Compliance Inspections and Examinations and other select SEC department staff, provides valuable guidance for registered investment advisors trying to navigate the regulatory maze. In the release, the SEC provides guidance on four major areas: (1) personal trading by advisory staff; (2) proxy voting and funds’ use of proxy voting services; (3) valuation and liquidity issues in high yield municipal bond funds; and (4) soft dollar practices of investment advisors.
With the end of first quarter 2008, RIA Compliance Consultants would like to remind SEC registered investment advisors of their requirement to collect or prepare updated personal securities transaction reports from all access persons. The information on the reports must reflect transactions that took place during first quarter of 2008 and must officially be reported to the firm no later than 30 days after the end of the quarter. Therefore, all reports must have been collected by April 30. As part of the SEC Code of Ethics rule, all SEC registered investment advisor firms are required to review the activity of their access persons’ securities holdings at the end of every calendar quarter. The quarterly reports and documented review/approval of each report must be retained as part of a registered investment advisor firm’s official books and records.
Lori Richards Provides Insight to SEC Exam Focus
May 05, 2008
On March 20, Lori Richards, Director – SEC’s Office of Compliance Inspections and Examinations, delivered a speech explaining the SEC’s current registered investment advisor examination priorities. The speech highlights the “top 10” areas of focus during routine examinations. While not an official statement from the SEC, Ms. Richards’ speech provides excellent insight into the current mindset of the SEC Office of Compliance Inspections and Examinations.
First Quarter 2007 Personal Securities Transactions
May 11, 2007
RIA Compliance Consultants, Inc. would like to remind all SEC registered advisor firms of their obligation to collect and review first quarter personal securities transactions. These reports should have been officially collected by the end of April. If your investment advisor firm has not collected its reports, please make sure you do so as soon as possible. Quarterly transaction reports must be submitted no later than 30 days after the end of each calendar quarter. According to the SEC’s Investment Adviser Codes of Ethics rule, specifically Rule 204A-1(b)(2), a federally registered investment advisor’s code of ethics must require access persons to submit to the chief compliance officer, or other persons designated in the code of ethics, quarterly securities transaction reports that meet the following requirements:
