In order to provide state-registered investment advisers with a better understanding of what they need to do to “stay out of trouble” we analyzed all the state-level compliance material (e.g., examination request lists, deficiency letters, policy notices, speeches) we have assembled over the years to develop a list of compliance issues that are of greatest concern to all state regulators.
As a matter of first course, we thought it best to list the deficiencies most commonly found by state regulators.
- Registration – inconsistencies between Parts I and 2A of Form ADV and failing to amend Form ADV in a timely manner.
- Preparation and maintenance of books and records – not maintaining suitability information, not properly safeguarding records and not backing up data.
- Unethical business practice deficiencies involved missing or no contracts and other contract-related issues, and misrepresenting qualifications, services and fees.
- Supervision – failure to have any written supervisory/compliance procedures or having inadequate procedures in place.
- Financials – deficiencies included inaccurate financials, insufficient or inaccurate net worth, no bank reconciliations and poor financial conditions.