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.
Category Archives: Webinar
Although the Investment Advisers Act of 1940 (“Investment Advisers Act”) does not explicitly require investment advisory contracts to be written, Section 205 of the Investment Advisers Act requires all advisory contracts to include certain provisions and prohibits investment advisory contracts from including other provisions. Most state securities regulations require written agreements between the investment adviser and each client. Regardless of whether a written contract is required by the investment adviser’s primary regulator, the use of a written agreement with each client is generally considered best practice and in the best interest of the investment adviser and the investment advisory client. A properly drafted investment advisory agreement can help limit an investment adviser’s professional liability. During an investment adviser examination, the U.S. Securities and Exchange Commission (“SEC”) or state securities regulator will likely review an investment adviser’s written client contracts and the following are some of the common deficiencies that an investment adviser may encounter:
Routinely, the U.S. Securities and Exchange Commission (“SEC”) will conduct examinations of investment adviser firms. During the examination process the SEC will request certain information or documents that the SEC examiners will review as part of the examination process. As part of the examination process, investment adviser can anticipate that their firm’s investment advisory agreements will be reviewed. Investment advisers may encounter deficiencies or similar regulatory violations if the investment adviser’s advisory contracts do not comply with the applicable SEC or state regulations. Additionally, having in place a properly drafted investment advisory agreement or contract can help limit an investment adviser’s professional liability. To help your investment adviser further understand investment advisory client contracts, RIA Compliance Consultants is hosting a webinar, “Key Elements that Should be Included in an Investment Advisory Client Contract – Presented by Bryan Hill Law.” (RIA Compliance Consultant’s is not a law firm.) This webinar will cover topics pertaining to advisory client contracts, including, but not limited to:
Understanding the Provisions Required for Registered Investment Adviser Client Contracts
May 16, 2013
Under Section 205 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) shall not “enter into, extend, or renew any investment advisory contract, or in any way to perform any investment advisory contract entered into, extended, or renewed…” unless the investment advisory contract meets certain requirements specified under Section 205. Section 205(d) of the Investment Advisers Act defines an investment advisory contract as “any contract or agreement whereby a person agrees to act as an investment adviser to or to manage an investment or trading account of another person….”
A Registered Investment Adviser Needs to Ensure that Power of Attorney Over Client’s Account is Limited
May 08, 2013
In order to trade or otherwise access a client’s account held by a custodian, a registered investment adviser must be granted written authorization by the client. Such authorization is generally granted in the form of a power of attorney. Although a power of attorney over a client’s account is necessary for a registered investment adviser to manage the client’s account, it is important for an investment adviser to ensure that the power of attorney is limited to only the functions actually intended by the client and the investment adviser.
Investment advisers must develop a strong culture of compliance within the investment adviser firm in order to help prevent and detect regulatory violations. In order to do so, investment advisers must figure out a way to stay current on regulatory changes and current areas of focus and should provide ongoing training to the investment adviser’s supervised persons. RIA Compliance Consultants provides a wide variety of investment adviser compliance webinars to help investment advisers understand ongoing compliance requirements, key areas of regulatory focus, and regulatory changes. Investment advisers can now purchase a yearly subscription webinar package. Investment advisers purchasing the yearly subscription webinar package will be provided unlimited access to any live and previously recorded webinars hosted by RIA Compliance Consultants during the term of the engagement. We have over 30 previously recorded webinars in our library and typically host at least 10 live webinars per year. Your investment adviser can use the webinars presented by RIA Compliance Consultants to assist your investment adviser with new staff training on basic investment adviser compliance, to learn best practices tips for chief compliance officers and to help the investment adviser stay current on recent regulatory developments. By purchasing this annual subscription now, your investment adviser can immediately reduce the average cost of attending multiple investment advisory compliance webinars presented by RIA Compliance Consultants and make sure that you and your supervised person have access to outstanding investment adviser compliance training presented by our veteran compliance consultants. To view our library of previously recorded webinars, please click here and to view our current schedule for live webinars, please click here. We update our live webinars schedule frequently, so please continue to check back for an updated schedule. To learn more about our compliance webinars package program or to purchase this package, please click here.
The U.S. Securities and Exchange Commission (“SEC”) recently released the final rules and guidelines for Identity Theft Red Flags Rules. Some investment advisers will be affected by the new Identity Theft Red Flags Rules and will be required to develop and implement a written identity theft prevention program.
Risk Alert Issued by SEC Identifies Significant Deficiencies Involving Failure of Investment Advisers to Comply with the Custody Rule
March 19, 2013
In a Risk Alert issued March 4, 2013 by the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”), it was revealed that “the SEC’s National Examination Program (“NEP”) has observed widespread and varied non-compliance with elements of the custody rule.” Rule 206(4)-2 under the Investment Advisers Act of 1940 (“Investment Advisers Act”), states that an investment adviser has custody of client assets if it or its related person holds, directly or indirectly, client funds or securities or has any authority to obtain possession of them. The Risk Alert indicated that approximately one-third (over 140) of the recent examinations reviewed by the SEC’s National Examination Program staff included custody related issues. The Risk Alert was issued by the SEC’s Office of Compliance Inspections and Examinations to encourage registered investment advisers to review their policies and procedures and examine their practices related to the deficiencies noted in the Risk Alert to ensure that investment advisers are aware of “…their responsibilities under the custody rule to protect client assets.”
Common Investment Advisor Exam Deficiencies
March 12, 2013
With the implementation last year of some of the new laws resulting from the required changes mandated under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), investment advisors should make sure that they are ready for a regulatory examination. Many investment advisors had to change their registration status, most changes were from registration with the U.S. Securities and Exchange Commission (“SEC”) to registration with one or more state securities regulator, and some private fund managers that were previously exempt from investment advisor registration were required to become registered with the SEC. One anticipated outcome from all of these changes is that investment advisors will receive more frequent regulatory examinations. For some investment advisors this may mean that the investment advisor will be audited by a securities regulator for the first time.
On February 21, 2013, the U.S. Securities and Exchange Commission (“SEC”) released its examination priorities for 2013 for the National Examination Program (“NEP”) of the Office of Compliance Inspections and Examinations. The release states that the NEP published these examination priorities to communicate with investors and SEC registered investment advisers about areas that are perceived by NEP staff to have heightened risk, and to support the SEC’s mission “…to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” The 2013 examination priorities “…are aligned with the SEC’s mission by seeking to improve compliance, prevent fraud, inform policy, and monitor firm-wide and systemic risk.”
