Earlier this week, the NASD fined four broker-dealers affiliated with Fidelity Investments. According to the news release published on its website (www.nasd.com), NASD fined the firm a total of $3.75 million for, “improperly maintaining NASD registrations for 1,100 individuals, failing to assign registered supervisors to 1,000 individuals, failing to retain the email of 1,900 registered individuals, and other electronic recordkeeping failures. NASD also ordered the four broker-dealers to conduct comprehensive audits of the firms’ systems, policies and procedures relating to registration and electronic recordkeeping.”
Category Archives: Compliance Program
Attention State IA Firms – Are you in Compliance with the IAA of 1940?
February 20, 2007
If your firm is registered with a state regulatory body, are you aware that some sections of the Investment Advisors Act of 1940 do apply to your firm? Many state registered firms believe because they are exempt from SEC registration, they are also exempt from all requirements and provisions of the Advisers Act. While it is true that the majority of rules under the Advisers Act apply only to federal firms, there is several provisions that apply to state firms. Therefore, in addition to becoming familar with your home state’s rules (and the rules of any state where your firm has clients), state registered firms must still pay close attention to the Advisers Act to identify those provisions the firm must comply with.
Best Execution Review
February 02, 2007
As an investment advisor, your firm has a fiduciary duty to attempt to achieve best execution for your clients. This means an advisor firm must execute transactions for clients in a manner that the clients’ total costs or proceeds in each transaction are most favorable under the circumstances. This obligation is something that should be made part of your firm’s annual assessment of its policies and procedures. While RIA Compliance Consultations recommend on-going reviews of broker-dealers used, it is important to conduct at least an annual best execution and due diligence review of all broker-dealers that the advisor directs client trades. This is true for those advisor firms that use only one or two recommended broker-dealers. It is also true even when using a large, reputable broker-dealer such as Fidelity, Fiserve, Pershing, Schwab, or TD Ameritrade.
Have you considered a mock regulatory examination or training audit?
February 02, 2007
As the new business year begins, many firms are constructing their compliance budgets and initiatives for 2007. A tool we feel can be vital for measuring your firm’s compliance barometer is to hire an outside consulting firm to conduct mock examinations or training audit. Such a visit from an outside consulting firm, such as RIA Compliance Consultants, can provide numerous benefits for a firm, regardless of its size. A mock examination provides an objective look at the compliance and regulatory structure of your advisor firm. It can help assess whether or not your firm is prepared for an actual regulatory visit and what the firm needs to do to shore up its compliance policies and procedures. Such a visit also provides an opportunity to receive training from an outside expert who is focused on helping advisor firms meet their fiduciary and regulatory responsibilities. It can also be integrated into your firm’s assessment of its internal policies and procedures. It indicates to regulators that the firm is committed to a culture of compliance.
Annual Assessment of Written Compliance Programs
December 20, 2006
The end of the year is a great time to complete a written review of your investment advisor firm’s compliance and procedures program. In fact, if your firm is registered with the SEC and you have not done a written analysis of your compliance program within the last 12 months, you need to complete such a review as soon as possible. While we believe that a written compliance program should be reviewed continuously and updated whenever needed, SEC registered firms are required to review and update their compliance programs at least annually. The key is to document these reviews and maintain them as part of the firm’s master books and records. Previous versions of the firm’s written policies and procedures must also be maintained under the books and records rules. Issues identified during the review must be documented and a plan of action formulated to take corrective action.
Annual Review of Compliance Programs – Rule 206(4)-7
September 28, 2006
As outlined in Rule 206(4)-7(b) of the Investment Advisers Act, it is unlawful for an SEC registered investment advisor firm to provide investment advice to clients unless the firm, no less frequently than annually, reviews the adequacy of the firm’s written compliance and supervisory policies. An SEC registered firm must establish written policies and procedures to prevent violation, by the firm and its supervised persons, of the Act and the rules thereunder.
Earlier this month, the SEC filed an administrative proceeding against an advisor firm for, among other things, failing to meet the requirements of Rule 206(4)-7 which requires an investment adviser registered with the SEC to adopt and implement written policies and procedures reasonably designed to prevent violation of the Advisers Act and the rules there under. During a follow-up visit the SEC felt the firm failed to adequately correct deficiencies noted during a previous examination. In addition, the firm had not implemented any written compliance programs designed to meet the requirements of Rule 206(4)-7. The firm was censured, order to cease and desist from violating several rules under the Advisers Act, and ordered to pay a monetary fine totaling $65,000.
End of Year Compliance Items – Part 3
January 02, 2006
This is the third entry in a series of blogs RIA Compliance Consultants is posting concerning annual compliance requirements and end of year filings. While we are trying to touch upon the items that all advisor firms are required to complete, it is important that you refer to your regulatory authority to ensure you have an all inclusive list of the requirements your firm must meet. If your firm has questions or concerns about one of the items listed in this entry, please give us a call to discuss how we can help your firm meets its regulatory obligations.
End of Year Compliance Items – Part 2
January 02, 2006
This is the second entry in a series of blogs RIA Compliance Consultants is posting concerning annual compliance requirements and end of year filings. While we are trying to touch upon the items that all advisor firms are required to complete, it is important that you refer to your regulatory authority to ensure you have an all inclusive list of the requirements your firm must meet. If your firm has questions or concerns about one of the items listed in this entry, please give us a call to discuss how we can help your firm meet its regulatory obligations.
Internal Controls – Supervision
November 30, 2005
A recent administrative complaint filed by the State of Massachusetts against a broker/dealer provides another reminder of the importance of strong internal compliance and supervision policies and procedures. In the complaint, Massachusetts is alleging that the named firm instituted weak internal supervisory programs that have enabled its registered representatives to conduct investment advisory activities without being licensed as investment advisor representatives, which in turn led to unsuitable sales of equity-indexed annuities.
