Blog Article

Top 2019 NASAA RIA Compliance Deficiencies: Registration

Nov 12, 2019

In 2019, 49.5% of registered investment adviser (RIA) firms which were examined had registration-related regulatory compliance deficiencies.

The North American Securities Administrators Association (NASAA) has released its 2019 Investment Adviser Coordinated Examinations Report. This report is released on a bi-annual basis and analyzes the findings from adviser examinations and offers best practices. As RIA Compliance Consultants, we recommend that the Chief Compliance Officer (CCO) of all investment advisory firms review the regulatory exam summary report to determine if any changes should be implemented at their firm as a result of NASAA’s findings.

In this week’s installment of our break-down of the 2019 report, we focus on one of NASAA’s most common RIA regulatory compliance deficiency categories: registration. Of the 1,078 investment advisory firms examined in 2019, 49.5% of all firms examined with regulatory assets under management (AUM) had at least one registration-related regulatory deficiency. In general, about half of advisory firms audited had a registration-related deficiency.

As depicted below,  the number of deficiencies related to registration has trended downward until 2017, in which the number of registration deficiencies increased from 41.5% to 54.3%. In 2019, registration-related deficiencies continued to trend downwards. The graph below highlights the changes over the last 12 years of reports:

Top 2019 NASAA RIA Compliance Deficiencies: Registration

In 2019, the top 5 registration-related deficiencies were:

  1. Form ADV – Inconsistencies between Part 1 and Part 2 (10.9%)
  2. Form ADV – Services Provided (10.4%)
  3. Timely filing of ADV amendments (10.1%)
  4. Form ADV – Fee structure (10.0%)
  5. Form ADV – Business description (8.9%)

In 2017, the top 5 registration-related deficiencies were:

  1. Form ADV – Inconsistencies between Part 1 and Part 2 (14.8%)
  2. Other Issues (12.3%)
  3. Form ADV – Fee structure (10.6%)
  4. Timely filing of amendments (7.6%)
  5. Form ADV- Business description (7.6%)

Form ADV inconsistencies between the Part 1 and Part 2 have consistently topped the list of registration related-compliance deficiencies. As a best practice, it is recommended that investment advisers regularly review the Form ADV and update it to reflect all changes within the business on an ongoing basis. Compared to the 2017 report, “Form ADV – Services provided” is the second-highest deficiency related to registration, with 10.4% of firms had at least one deficiency in this category. 

Be sure to also check out our related blog posts analyzing the results of the 2019 survey including books and records and overall top deficiencies