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 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
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
The purpose of this Compliance Alert is to familiarize you with key insider trading concepts and issues. What is Insider Trading? The buying or selling of a security, in breach of a fiduciary duty or other relationship of trust and … Continued
As most of you know (and dread) the SEC sends out a document request list about two weeks prior to the on-site portion of the audit. However, be prepared to provide other documents on the fly. For example, examiners have … Continued
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 … Continued
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
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
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 … Continued
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
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
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.
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 … Continued
Conflicts of interest in allocating investment opportunities among your advisory clients can arise in a multitude of situations, including: Accounts subject to performance fees versus those that do not pay performance fees; Accounts that pay a higher investment management fee … Continued
The SEC’s website specifically lists “Form ADV Disclosures” as a risk that may be present as part of an investment adviser’s everyday operations. Some of the specific risks listed are: Inaccurate, omitted, or unclear disclosures; Out of date disclosures; Misrepresentation … Continued
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. … Continued
Investment advisers have a fiduciary duty to act in the best interests of their clients. A central tenant of this duty is full and fair disclosure of all material facts to clients. So what you tell your clients about your … Continued
Applicants for investment adviser registration should not only be concerned about the accuracy of their firm’s primary registration documents (i.e., Form ADV Part 1 and Part 2A), but also that these documents, along with the firm’s advisory agreements, are consistent … Continued
With the proliferation of smart phones, iPads and table computers in the advisory business, I would suggest that all advisers probably would benefit from developing and implementing policies and procedures regarding their use. Here are some issues you should consider: … Continued
Are you really at the same weight you were in 2003? You would be positively amazed at how quickly the information on the Form U-4 can become outdated. Why? Because unlike the ADV 1, you can renew an investment adviser … Continued