Compliance Solutions for Investment Advisers

Category Archives: Compliance

Top 4 Compliance Program Deficiencies

As stated in the recent SEC Risk Alert, the 4 most frequent compliance issues identified in examinations of investment advisers are as follows:

5 Most Frequent Compliance Topics Identified in Investment Adviser Exams

The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) identified the following five areas of compliance deficiencies or weaknesses frequently found during its staff’s examinations of SEC-registered investment advisers:

Way to Go CCO Companion!

Congratulations to the team at Digital Compliance and the launch of their very first compliance app – CCO Companion. We are proud to be the sole content provider for all of CCO Companion’s original compliance material. We believe, and from early indications the compliance profession does as well, that CCO Companion is a revolutionary step forward

Common Compliance Deficiencies – Weak Internal Controls

With the SEC’s greater emphasis on risk-based exams, SEC examiners’ primary focus is on an adviser’s controls and procedures. As such, they will perform an evaluation of the effectiveness of those controls. Where those controls are found to be weak and ineffective, or worse yet, non-existent, the adviser will be considered high-risk, and will have more frequent and in-depth

Common Compliance Deficiencies – Failure to Disclose

An investment adviser has a fiduciary duty to act in the best interests of its clients. A central tenant of this duty is full and fair disclosure of all material facts to clients. What you tell your clients about your business – and whether you conduct your business consistent with the disclosures you make to

Conduct Compliance Testing

“Forensic testing” is certainly the buzzword in compliance circles. Think CSI: Crime Scene Investigation. Essentially, an adviser should conduct some type of transactional or quality control tests that will assist the adviser in determining whether its activities are consistent with its stated compliance policies and procedures. A non-exhaustive list of tests includes: Reviewing client trade

Personal Liability and SEC Enforcement

Lest you think the SEC is not serious about holding individuals personally liable, here is an excerpt from a recent speech by Chairperson White: Individual Liability:  Any discussion of strong enforcement tools must include a discussion of our priority of pursuing individuals.  Personal accountability, of course, is a basic tenet of law enforcement.  And individual

SEC Warns on CCO Outsourcing

The SEC recently conducted examinations of around 20 SEC-registered investment advisers and investment companies that outsourced their CCOs to unaffiliated third parties. The general takeaway is that outsourced CCOs sometimes were not knowledgeable about a firm’s business practices, did not have access to its documents and did not communicate regularly with its principals. It seems that many outsourced

Everyone is Responsible for Compliance

Busy schedules and deadlines can make shortcuts seem appealing. But the work we complete and how we complete it matters.

The Need for a Risk Assessment

The SEC has made it clear time and time again that the first step toward developing strong written policies and procedures is for an investment adviser to identify all areas that create risk exposure or the potential for risk exposure. Accordingly, a risk assessment should serve as a mechanism for an investment adviser to identify its unique

Define a “Material” Compliance Event

The SEC Office of Compliance Inspections and Examinations encourages advisory firms to define what a material compliance event is for their organization. While there as many definitions as there are advisory firms, a common definition of a “Material Compliance Event” is “a breach of a securities rule or regulation, a willful violation of a Company policy

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

The Compliance Manifesto

In a recent speech an SEC official said that the presence of robust, effective compliance programs would allow companies to reap significant credit in their dealings with regulators. He spoke about the ways the SEC supports compliance and ethics programs. Informal Guidance – He urged companies to walk the walk – to demonstrate a highly

3 Types of Compliance Testing

Transactional Tests Transactional tests (also known as quality control tests) are compliance tests that are conducted contemporaneously with the activity in question and are used to detect deviations of actual transactions from firm policies or regulatory standards. Examples of transactional testing include checking personal trades submitted for pre-approval against any watch or restricted lists and

7 Ways to Prepare for a SEC Exam

Make sure your compliance program and its implementation are up to par; Know if you have custody and make sure you have satisfied any attendant requirements; Conduct a through risk assessment; Establish a culture of compliance at the top of your advisory firm; Be disciplined in your record keeping; Conduct compliance testing to find the

The Annual Review Process Part 2 – The Methodology

Dear Compliance Professional, In the first installment of this series on the annual review process, we learned that the primary goals of the annual review are to determine the adequacy and effectiveness of your policies and procedures in light of your firm’s businesses, advisory services, and regulatory requirements. This installment will discuss the methodology for conducting the annual review. We

Annual Review Process – The Goals

Dear Compliance Professional, Advisers Act Rule 206(4)-7 (commonly referred to as the Compliance Rule) requires SEC-registered investment advisers to conduct an annual review of the adequacy and effectiveness of their policies and procedures. Many states have also, either expressly or implicitly, adopted some variation of the SEC annual review requirement. Failure to conduct an annual review

Conflicts of Interest

As part of the examination process, the SEC will meet with senior management to discuss how each firm identifies and mitigates conflicts of interest and legal, compliance, financial, and operational risks. This initiative is designed to: (i) evaluate firms’ control environment and “tone at the top,” (ii) understand firms’ approach to conflict and risk management,

Risk Assessment Process

Dear Compliance Professional, As part of the examination process, the SEC meets with senior management to discuss how each advisory firm identifies and mitigates conflicts of interest and legal, compliance, financial, and operational risks. This initiative is designed to: (i) evaluate firms’ control environment and “tone at the top,” (ii) understand firms’ approach to conflict

No Action Letters & Enforcement Actions

On odd pairing indeed. But more closely related than you think. No-Action Letters let advisers know what actions under what specific circumstances are permitted. Enforcement actions let advisers know what actions under what specific circumstances are NOT permitted. Both are incredibly important sources of information for determining the parameters of your compliance obligations.