For several years now, investment advisers have been hearing that they must create a “culture of compliance” throughout their firms. Understanding what a “culture of compliance” means is not always clear to many investment advisers. In a speech presented in October 2007 by Lori Richards, former Director of the Office of Compliance Inspections and Examinations for the U.S. Securities and Exchange Commission (“SEC”), she explained this concept in greater detail:
Category Archives: Webinar
Qualifications of a Chief Compliance Officer
February 12, 2013
Rule 206(4)-7 under the Investment Advisers Act of 1940 (“Investment Advisers Act”) requires each investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) to designate a chief compliance officer (“CCO”) to administer its compliance policies and procedures. There are no specific exam, continuing education, or industry experience requirements outlined under Rule 206(4)-7 for an SEC registered investment adviser’s CCO. However, the SEC’s final rule release for Rule 206(4)-7 states, “An [investment] adviser’s chief compliance officer should be competent and knowledgeable regarding the [Investment] Advisers Act and should be empowered with full responsibility and authority to develop and enforce appropriate policies and procedures for the firm. Thus, the compliance officer should have a position of sufficient seniority and authority within the organization to compel others to adhere to the compliance policies and procedures.”
Compliance Is Not Just the Responsibility of the Investment Adviser’s Chief Compliance Officer
February 06, 2013
One of the requirements of Rule 206(4)-7 under the Investment Advisers Act of 1940 (“Investment Advisers Act”) is that each investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) is required to designate a chief compliance officer (“CCO”) to administer the investment adviser’s compliance policies and procedures. While the CCO has the primary responsibility for developing and enforcing appropriate policies and procedures for the investment adviser, this does not mean that the CCO has to be the sole party responsible for making sure that all compliance functions within the firm are carried out. The CCO can delegate duties and supervisory responsibilities related to the investment adviser’s ongoing compliance responsibilities.
According to Rule 206(4)-7 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), each investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) must adopt and implement written policies and procedures reasonably designed to prevent violation of the Investment Advisers Act and the rules that the SEC has adopted under the Investment Advisers Act. Rule 206(4)-7 also requires an SEC registered investment adviser to designate an individual to serve in the role as chief compliance officer (“CCO”). The investment adviser’s designated CCO will be responsible for administering the investment adviser’s compliance policies and procedures adopted pursuant to the requirements of Rule 206(4)-7.
An investment adviser is required to prepare and submit a completed Form ADV as part of the initial registration process. In addition to the review by the U.S. Securities and Exchange Commission (“SEC”) or state securities regulator(s) for purposes of determining whether to approve or deny an application for investment adviser registration, the Form ADV Part 2 is also used as the investment adviser’s disclosure document which is required to be provided to all investment advisory clients. The Form ADV must provide accurate, current, and consistent disclosures. The general instructions for the Form ADV provides the investment adviser with details regarding the frequency at which the investment adviser is required to update certain information in the Form ADV. At a minimum, an SEC registered investment adviser must file a Form ADV annual updating amendment at least annually within 90-days of the investment adviser’s fiscal year end. Most state securities regulators have similar requirements for a state registered investment adviser.
Registered Investment Advisers Form ADV Annual Amendments
December 27, 2012
An investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) is required to file an amendment to the investment adviser’s Form ADV at least annually within 90-days of the investment adviser’s fiscal year end. Most state securities regulators have similar rules requiring the Form ADV annual amendment filing. Many registered investment advisers have a fiscal year end of December 31, which means that a Form ADV annual amendment will need to be filed through the IARD system no later than March 30, 2013, in order to comply with SEC and state securities regulators’ requirements. Failure to amend an investment adviser’s Form ADV is a violation of SEC and similar state securities regulations and could lead to an investment adviser’s registration being revoked.
Conducting an Annual Review of a Registered Investment Adviser
November 01, 2012
Under SEC Rule 206(4)-7 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) are required to maintain written policies and procedures reasonably designed to prevent and detect violations of the Investment Advisers Act and the SEC’s related rules by the investment adviser or any of its supervised persons. Many state securities regulators have similar requirements regarding written policies and procedures. As part of developing the investment adviser’s written policies and procedures, the investment adviser should identify the areas of risk that need to be addressed.
Conducting a Risk Assessment of an Investment Adviser
October 23, 2012
Under Rule 206(4)-7 of the Investment Advisers Act of 1940 (“Investment Advisers Act”), investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) are required to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act and the rules that the SEC has adopted under the Investment Advisers Act. Well-designed policies and procedures should also be able to detect violations that have occurred and to promptly correct any violations that have occurred. Most state securities regulators have adopted similar rules requiring investment advisers to develop and implement written compliance policies and procedures. As an investment adviser, the first step in developing written policies and procedures should be to identify the areas of risk related to the investment adviser’s practice and business model. This process of identifying risks that make the investment adviser vulnerable to violations of the Investment Advisers Act is often referred to as a “Risk Assessment,” a “Gap Analysis,” or the compilation of a “Risk Inventory.”
RIA Compliance Consultants recently hosted a webinar, Establishing Information Security Programs for Registered Investment Advisors. During this webinar, our compliance consultant discussed the regulatory requirements for establishing an information security program and then went into a detailed discussion on how a registered investment advisor can establish an information security program that effectively protects its client data.
Does Your Investment Adviser Have a Written Privacy Policy?
September 12, 2012
Under Rule 30 of Regulation S-P, registered investment advisers are required to implement a written security program to safeguard customer information. Specifically, investment advisers are required to have in place an information security program that is reasonably designed to:
