In speaking to hundreds of RIA firms annually of all different sizes, business models, and locations, I needless to say receive a very wide range of questions. Many of them are firm specific, jurisdiction specific, or relating to a new regulation that has been recently proposed. However, within the wide range of questions I receive each year, there are a certain number of repetitive questions that I hear time and time again, that every RIA firm is curious about. One of these common questions that I receive is: “Does hiring outside compliance assistance make me look incompetent from a compliance standpoint? Is it ever frowned upon by the regulators?”
The simple answer to this question is no. What many advisors do not realize is that a large percentage of the Chief Compliance Officers that we work with, and even that we do not work with, have little to no compliance background. That of course does not apply to everyone; many firms hire in house CCO’s that specialize specifically in compliance, or some CCO’s have a general compliance background having been in the business for many years, but it is not uncommon to come across CCO’s with little to no compliance background at all. Many of our clients and RIA’s in general are on the smaller side, and do not have a budget to hire a full-time CCO. One of the advisors at the firm then is forced into wearing multiple hats and dueling as an advisor and the CCO, and sometimes more. The SEC and states realize this; they are aware that many CCO’s do not necessarily specialize in compliance.
While this point is not a problem, these firms are still expected to remain as compliant as any other firm, which is where outside assistance comes into play. It is never frowned upon if you seek outside compliance assistance as long as you are remaining compliant on an ongoing basis. This is all the regulators really care about, regardless of the method you take. This may seem obvious, but I receive a ton of questions about it when firms are looking into compliance options. Just remember that staying compliant is the end goal, regardless of how you get there!
Lexington Compliance and RIA in a Box LLC are not law firms, investment advisory firms, or CPA firms. Lexington Compliance and RIA in a Box LLC do not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.