jg advisory presentation 2008 (powerpoint)

Investment Adviser Employee Training:

Cornerstone Revolutions Webinar

April 22, 2008

2JG ADVISORY SERVICES LLC – For Cornerstone Revolutions Webinar only. May not be reproduced.

Why Train your Employees?

• It’s required in some areas

• It reduces operational, compliance and litigation risk

• It helps employees do their jobs better!


What are the Requirements for Investment Advisers?

“Empower staff. Make sure that all people clearly know what their responsibilities are. Train new employees and have regular communication about how the policies work and what their role is in the overall compliance system.”

From Remarks by Lori Richards, Director, OCIE; May 1, 2000; “Compliance Priorities for Investment Advisers”

JG ADVISORY SERVICES LLC – For Cornerstone Revolutions Webinar only. May not be reproduced.

Best Practices – President’s Working Group Draft Report

“Robust Training Program” designed to:

-foster understanding of compliance program

-tailor to type of business

-at least annually for those performing significant functions regarding relevant topics


Supervision

“A primary responsibility of an investment adviser is the supervision of its employees, to ensure that all of its activities comply with disclosures made to clients and with the provisions of applicable securities laws. The most effective way to fulfill this responsibility is to construct and implement a comprehensive system of internal controls and supervisory procedures.”From “Letter From the Office of Compliance Inspections and Examinations: to Registered Investment Advisers, on Areas Reviewed and Violations Found During Inspections”; May 1, 2000; emphasis added.


Code of Ethics

“Although we do not believe it is necessary to require employee education as an element of codes of ethics, we expect most advisory firms will ensure that their employees have received adequate training on the principles and procedures of their codes. Many firms that have already implemented codes of ethics hold periodic orientation or training sessions with new and existing employees to remind them of their obligations under the code; others may require employees to certify that they have read and understood the code of ethics, and require annual recertification that the employee has re-read, understands and has complied with the code. We are not mandating any of these procedures, but they are among best practices for advisers.” From “SEC Release on Investment Adviser Codes of Ethics”, Release Nos. IA-2256, IC-26492; File No. S7-04-04;17 CFR Parts 270, 275 and 279. Emphasis added.


Insider Trading Procedures and Duty of Supervision

“Section 204A of the Advisers Act requires investment advisers (whether SEC-registered or not) to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material, nonpublic information by the investment adviser or any of its associated persons. Investment advisers also have a duty to supervise persons associated with the investment adviser with respect to activities performed on the adviser's behalf.”

From “General Information on the Regulation of Investment Advisers” issued by the SEC Division of Investment Management; modified 5/10/05. Emphasis added.


CFTC requirement

• Statement of Acceptable Practices• CPOs and CTAs must provide ethics training

programs• Need written supervisory policies on the training

program• Can be done by independent firm• “periodically”, at discretion of the firm


AML Requirement

• USA Patriot Act requirement to provide ongoing AML training to appropriate personnel

• Applies to “financial institutions”, which may not include investment advisers


Unlawful Employment Practices

• Discrimination/ “protected classifications”

• Harassment (including sexual harassment)/ “hostile work environment”

• Retaliation

• Training helps to mitigate these claims


What are Other Training Requirements?

Check your compliance manual for specific requirements.

May be above and beyond regulatory requirements!


Why Train your Employees?

• It’s required in some areas

• It reduces operational, compliance and litigation risk

• It helps employees do their jobs better!


Training Methodology Spectrum

Low High Tech Tech

Have In Person Industry Desktop

Employees Training Conf’s Accessible/

Read Manual Session/Class Online


This presentation has been prepared by JG Advisory Services LLC specifically for use at the Cornerstone Revolutions Webinar on April 22, 2008. No other use or distribution is permitted without the express written permission of JG Advisory Services. This presentation does not contain legal advice. It is for educational use only.

www.jgadvisory.com917 375-6852