Earlier this year, the U.S. Securities and Exchange Commission (“SEC”) proposed new requirements for registered investment advisor firms that have custody of clients funds and securities. According to current SEC Rule 206(4)-2, Custody or Possession of Funds of Securities of Clients, custody is defined as “holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them. Custody includes –
Join Our Webinar – Auditing Investment Advisory Fee Calculations, Deductions & Refunds
September 21, 2009
NASAA Proposes Model Rule Regarding Solicitors for Registered Investment Advisors
September 08, 2009
The Investment Adviser Regulatory Policy and Review Project Group of the North American Securities Administrators Association (known as “NASAA” and essentially consisting of state securities regulators) recently solicited comments from the public on a proposed model rule regarding solicitors for registered investment advisors. The comment period ended in August and NASAA has not yet released a final version of the model rule. According to NASAA’s website, the model rule “is necessary and appropriate to facilitate the regulation of solicitor activity for the benefit of investors, to promote uniformity among the states and between states and federal rules, and to provide guidance to the industry.”
Registered Investment Advisors Need to Monitor Outside Business Activities of Investment Advisor Representatives
September 07, 2009
The establishment of policies and procedures designed to monitor the outside business activities (“OBAs”) of supervised persons (i.e. officers, directors, partners, investment advisor representatives, and employees) should be part of every registered investment advisor firm’s written compliance programs. RIA Compliance Consultants, Inc. suggests that some type of “outside business activities form” be created and all supervised persons be required to complete the form on an annual basis and whenever changes are needed. A supervised person should disclose and seek approval of an outside business activity prior to engaging in the activity.
A registered investment advisor has a fiduciary duty to disclose all real and potential conflicts of interests to clients as well as all material arrangements. Often times this broad requirement encompasses outside business activities the registered investment advisor considers non-advisory and would otherwise not disclose to clients. For example, a registered investment advisor that spends only 10% of its time on investment advisory activities and 90% of its time on non-advisory activities is required to disclose this fact. It must be made clear to all clients that the registered investment advisor will not devote all of its time to investment advisory functions unlike other registered investment advisor firms whose only activity is acting as an investment advisor.
Upcoming Webinar Addressing Succession Planning for RIAs
August 31, 2009
Many individuals who operate their own registered investment adviser firms have a tendency to delay succession planning and deal almost exclusively with shorter-term business issues. However, succession planning is a critical issue, in particular, for a small registered investment adviser firm due to the risks that one key investment adviser representative could become unavailable, on either a temporary or permanent basis, to serve clients and operate the registered investment adviser firm. In the interest of both the investment advisory practice and its clients, it is critical to plan for continuity and succession of the registered investment adviser firm.
