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Personal Liability and SEC Enforcement

posted in: Compliance | 0

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 … Continued

SEC Warns on CCO Outsourcing

posted in: Compliance | 0

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 … Continued

Treasury Department Proposes AML Regs for Advisers

posted in: Client Relations | 0

On August 25, 2015, the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) released proposed anti-money laundering (“AML”) regulations that would require investment advisers registered or required to register with the SEC to have written AML programs meeting certain minimum requirements … Continued

Keeping Trade Confirmations

posted in: Books & Records | 0

Recently an adviser asked if they still needed to keep trade confirmations since they were retained by their broker-dealer/custodian. I think an adviser must retain them in their books and records for three reasons: 1.  The repository at the BD … Continued

Testimonials

posted in: Advertising & Marketing | 0

Yesterday, for whatever reason, I was rummaging around a few adviser web sites and came across one that included a testimonial. How did I know it was a testimonial? Was it my compliance expertise? My familiarity with the nuances of … Continued

The Need for a Risk Assessment

posted in: Compliance | 0

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, … Continued

Three Steps in Developing an Effective IPS

posted in: Client Relations | 0

The initial questionnaire should accurately identify the client’s circumstances, investment objectives, risk tolerance, and all investment restrictions and preferences. Review of the questionnaire responses is a great time for the advisor to assess the client’s investment sophistication and to provide … Continued

Soft Dollar Disclosures

posted in: Brokerage Practices | 0

One part of Item 12 (Brokerage) in the ADV Part 2A that advisers tend to miss when disclosing their soft dollar activities: You must describe the types of products and services you or any of your related persons acquired with … Continued

Undisclosed Compensation Arrangements

posted in: SEC Examinations | 0

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 … Continued

An Ounce of (Compliance) Prevention

posted in: Compliance, SEC Examinations | 0

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 … Continued

5 Exam Focus Areas for New Advisers

posted in: SEC Examinations | 0

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 … Continued

Don’t Exaggerate AUM

posted in: Registration & Licensing | 0

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.

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