Compliance Solutions for Investment Advisers

Monthly Archives: March 2015

Undisclosed Compensation Arrangements

Such arrangements may include, among others, undisclosed solicitation arrangements. It is not uncommon to have a discussion with a client about whether they can pay a certain person for client referrals. Often they cannot because the person is not qualified to act as a solicitor (e.g., they are not appropriately registered nor do they fit

2 Most Common Registration Deficiencies

The 2 most common registration deficiencies: Inconsistencies in responses to similar items found on Part 1 and Part 2 of Form ADV (e.g., Item 8C of Part 1A indicates that the adviser does not have investment discretion, but the adviser then discusses its discretionary authority in Item 16 of Part 2A). Inadequate or incomplete disclosures

An Ounce of (Compliance) Prevention

The enforcement staff gives credit to registrants that demonstrate effective compliance programs and a genuine commitment to ethical principles.  Advisers should focus on persuading the enforcement staff of the quality and depth of a firm’s compliance culture and its record of ethical conduct at the outset of an investigation, rather than discussing compliance programs during

5 Exam Focus Areas for New Advisers

The SEC has been engaging in shorter, more streamlined “presence exams” for newly registered advisers.  The following five focus areas make up the bulk of these exams: Marketing; Portfolio management; Conflicts of interest; Safety of client assets; and Valuation.  Streamlined though they may be, these focus areas still cover a lot of territory.

Don’t Exaggerate AUM

Assets under management is a defined term on Form ADV. Don’t exaggerate to stay registered with the SEC. The SEC has enforcement actions underway against multiple SEC-registered advisory firms that puffed up their assets.

SEC Hunting Down Performance Outliers

Make sure you can verify your performance numbers and that you maintain all records necessary to substantiate the performance. The SEC is hunting down performance outliers. If you are posting numbers that wildly outperforms a benchmark the SEC will take an interest and will inquire further.