2014 regulatory update: key focus areas for investment adviser compliance presented by: kelli a....
TRANSCRIPT
2014 Regulatory Update:Key Focus Areas for
Investment Adviser Compliance
Presented by:
Kelli A. Capitano, Esq. 561.330.7645 - extension 207
National Compliance Services, Inc.Delray Beach, FLwww.ncsonline.com
©2014 National Compliance Services, Inc.
Discussion topics
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SEC Examination Initiatives and Priorities
Examination Priorities for 2014 New Initiatives and Emerging Issues
Enhanced Examination Activity by State Regulators
Key Focus Areas for Compliance Programs
Suitability – One size doesn’t fit all! Failure to Supervise – This can really get you in trouble! ADV Disclosure – Tell it like it is! Identity Theft – How to spot red flags…Don’t miss the signs! Social Media – The Do’s and Don’ts…“Like” it or not!
SEC Examination InitiativesIA Examination Priorities for 2014
Safety of Client Assets and Custody Marketing/Performance Allocation of Investment Opportunities Compensation Arrangements Filings & Disclosure
New Initiatives and Emerging Issues Presence Exams Never-Before Examined Advisers Wrap Fee Programs Alternative Investments
Request for Funding Via User Fees (11/22/2013)
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Enhanced Exam Activity by State Regulators
4*NASAA 2013 Coordinated Investment Adviser Examinations, Investment Adviser Operations Project Group, October 2013
SuitabilityDocument the Investment Process
Maintain Documentation Evidencing Basis for Recommendations Specific to Client
Incorporate Procedures for Initial and Ongoing Assessments
Document Due Diligence for Alternative Investments
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Failure to SuperviseDuty to Supervise Under Section 203(e)(6) of the IA
Act of 1940
Increased Regulatory Action
Supervisors and Supervisory Process Should be Accurately Identified in Policies and Procedures
IAR Supervisors Should be Identified in Form ADV Part 2Bs
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Form ADV Disclosure
Top Deficiency Area for Examinations
Disclosure Must Be Accurate and Consistent with Marketing Materials, Agreements, Policies and Procedures, etc.
Implement Policies and Procedures to Periodically Review Disclosures
Pay Attention to Critical Focus Areas
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Identity Theft
April 15, 2014 SEC Risk Alert: OCIE Cybersecurity InitiativeOver 50 registered BDs and RIAs will be examined by the SEC, focusing on areas related to cybersecurity
Red Flags RuleIncludes advisers with authority to withdraw assets and direct payments to third parties upon the client’s instruction. Policies and Procedures Should Be Designed to:Identify; Detect; and Respond appropriately to red flags
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Advertising
Top Area for Compliance Deficiencies
Social Media Content Must Always Comply with Advertising Standards
Recognizing False or Misleading Content
Prohibition on Testimonials
Incorporating Disclosures
Examples: Recent Advertising Deficiencies
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Use of Social MediaRIAs must consider antifraud, compliance, and
recordkeeping provisions
3/2014 SEC Guidance Update on Testimonial Rule and Social Media Provides guidance on testimonial issues specific to:
Third party commentary Advertisements on independent social media sites IA references to commentary on independent social media sites Client lists Fan/community pages
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Use of Social Media Non-exhaustive list of factors that RIAs should consider when evaluating the effectiveness of its social media policies and procedures:
•Usage Guidelines/Content Standards•Monitoring /Frequency of Monitoring•Approval of Content•Criteria for Approving Participation•Training•Certification•Functionality•Personal/Professional Sites•Information Security•Firm Resources
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Contact Information
Kelli A. Capitano, Esq. 561.330.7645 - extension 207
National Compliance Services, Inc.Delray Beach, FL
www.ncsonline.com
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