Earlier this month, the North American Securities Administrators Association (NASAA) released its 2019 Investment Adviser Coordinated Examinations Report. This biannual report documents the findings from 1,078 routine exams conducted by NASSA on state-registered investment advisers (RIA).
Category Archives: Examination
California Securities Regulation Division Is Currently Conducting Online Examinations of State Registered Investment Advisers
October 25, 2018
RIA Compliance Consultants was recently made aware that the California Department of Business Oversight – Securities Regulation Division is conducting “Online Written Examinations” of investment adviser firms registered with the State of California regardless of whether or not the investment adviser firm has offices located in California.
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.
SEC Continues to Focus on Cybersecurity for Investment Advisers
August 02, 2016
As in 2015, the Securities and Exchange Commission (“SEC”) Examination Priorities for 2016 identify cybersecurity as an area of “potentially heightened [market-wide] risk.” Citing the Office of Compliance Inspections and Examinations (“OCIE”) 2015 Risk Alert, the SEC promised to continue using its exams to evaluate investment adviser firms’ cybersecurity preparedness. Click here to read our blog on the OCIE Cybersecurity Risk Alert.
SEC Examination Priorities for 2014
February 19, 2014
On January 9, 2014, the Office of Compliance Inspections and Examinations (“OCIE”) National Examination Program (“NEP”) of the U.S. Securities and Exchange Commission (“SEC”) published its examination priorities for 2014. This report is published to “communicate with investors and registrants about areas the that the staff perceives to have heightened risk and to support the [SEC] mission to protect investors; to maintain fair, orderly, and efficient markets; and to facilitate capital formation.”
Investment Advisers Need to Look Beyond the Books and Records Requirements to Prepare for an SEC or State Securities Regulator Examination
September 18, 2013
Under Rule 204-2, the “Books and Records Rule,” of the Investment Advisers Act of 1940 (“Investment Advisers Act”), every investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) must make and keep true, accurate, and current certain books and records relating to its investment advisory business. Most state securities regulators have the same or similar recordkeeping requirements. All records required to be maintained by investment advisers under the Books and Records Rule or similar state securities regulations are subject to examinations by the SEC or state securities examiners. In order to be fully prepared for an SEC or state securities regulator examination, investment advisers may need to look beyond the books and records specifically outlined under the Books and Records Rule or similar state securities regulations. SEC or state securities examiners may, and often do, request additional records that are not specifically required under the Books and Records Rule or similar state securities regulations. Many of these additional records specifically relate to or are incidental to records that are required under the SEC or state securities regulatory books and records requirements. Examples of additional records that may be requested include:
Over the past year, we have written several articles warning investment advisers to prepare for regulatory examinations as both the U.S. Securities and Exchange Commission (“SEC”) and state securities regulators have indicated that investment advisers should expect to see an increase in the number of exams being conducted. RIA Compliance Consultants is seeing the effects of more frequent investment adviser exams. Lately, we have experienced an increase in the number of calls from clients and prospective clients because they have recently been trough an SEC or state investment adviser exam or have been notified by an SEC or state securities regulator that their investment advisers will be audited in the near future. One of the most common inquiries we are receiving is regarding what we can do to assist with preparing or updating the investment adviser’s written policies and procedures. Too often, we are hearing that, although the investment adviser has been registered for some time, the investment adviser does not have customized written supervisory policies and procedures or has not properly maintained current and customized policies and procedures.
The Minnesota Department of Commerce – Securities Unit recently announced that during the last legislative session a bill was passed that has now been signed into law, resulting in changes to investment adviser representative (“IAR”) registration requirements. One of the significant changes that will likely impact many federally and state registered investment advisers, located or conducting business in Minnesota, is the requirement to register investment adviser representatives through the Web CRD/IARD system. Prior to this recent legislation, Minnesota did not have registration requirements for investment adviser representatives. However, Minnesota Statute 80A.58 Section 403(a) has now been revised to state, “It is unlawful for a person to transact business in this state as an investment adviser or investment adviser representative unless the person is registered under this chapter or is exempt from registration. . . .”
As Regulators Prepare to Conduct More Examinations, Registered Investment Advisers Should Make Sure They are Prepared
May 29, 2013
Registered investment advisers must make sure that they have strong compliance programs in place and they are prepared for regulatory examinations as regulators expect to increase the number of examinations being conducted. In recent testimony before the U.S. House of Representatives Committee on Financial Services, Chairman Mary Jo White of the U.S. Securities and Exchange Commission (“SEC”) discussed some of the recent activities of the SEC. The testimony addressed several key areas of SEC oversight and focus including the areas of SEC enforcement and the SEC’s inspection and examination program. During the testimony, Chairman White stated, “the [SEC] needs to further strengthen the enforcement and examination functions of the SEC. Strong enforcement of the securities laws is necessary for investor confidence and is essential to the integrity of our financial markets. Successful enforcement actions result in sanctions that deter and punish wrongdoing and protect investors, both now and in the future. Similarly, our National Examination Program is critical to improving compliance by regulated entities, preventing and detecting fraud, and monitoring market risks.”
Has your investment advisor conducted a review of its compliance program? Is a consultant led compliance review beyond your budget this year?
