In 2017, we’ve published over 100 blog posts on a variety of registered investment adviser (“RIA”) practice management and regulatory compliance topics. We’ve received over 145,000 visits to our blog this year and many of the most popular posts relate to U.S. Securities and Exchange Commission (“SEC) RIA compliance risk alerts, rules, and guidance. We help over 1,500 RIA firms stay compliant with our regulatory compliance software platform and consulting support.
Here’s our top 12 RIA compliance blog posts from 2017 in chronological order highlighting topics we are discussing with our clients:
- SEC Announces 2017 RIA Examination Priorities (January 12, 2017)
On January 21, 20167 the SEC Office of Compliance Inspections and Examinations (“OCIE”) released its annual top exam priorities for the 2017 calendar year. The OCIE is the SEC division which conducts examinations of RIA firms and this priority list can help investment advisers be better properly prepared for a regulatory examination. In general, the list of priorities for 2017 closely mirrors the agency’s past 2015 and 2016 examination priority lists as well as recently issued risk alerts. Similar to past years, the OCIE is focused on three categories: important retail investor issues, risks specific to elderly and retiring investors, and assessing general market-wide risks.
- SEC Risk Alert Identifies Most Common RIA Examination Deficiencies (February 8, 2017)
On February 7, 2017, the SEC OCIE released a new National Exam Program Risk Alert identifying the five compliance areas most commonly cited in deficiency letters sent to RIA firms registered with the SEC . The OCIE is the SEC division which conducts examinations of investment adviser firms and this new list of top deficiencies can help investment advisers better prepare for a regulatory examination. The risk alert focuses on deficiency letters from over 1,000 RIA audits conducted over the past two years. This latest SEC OCIE staff guidance also follows similar examination deficiency guidance provided by the North American Securities Administrators Association (“NASAA”) in its 2015 RIA coordinated examination report.
- Every RIA Firm with Staff Should Conduct an Annual Compliance Meeting (February 15, 2017)
As part of a firm’s annual compliance tasks, every investment advisory firm should host an annual compliance meeting for all supervised persons of the firm. This is an opportunity to obtain annual attestation statements, deliver all documents relevant to the attestation statements, discuss any relevant regulatory changes, reinforce the firm’s “culture of compliance,” and provide an overview of the compliance responsibilities that impact each individual staff member of the firm. This posts provides a few tips on how to best conduct an annual compliance meeting.
- SEC Issues RIA Standing Letter of Authorization (SLOA) Custody Guidance (February 27, 2017)
On February 21, 2017, the SEC Division of Investment Management issued a no-action letter in response to a letter from the Investment Adviser Association (“IAA”) asking for clarification and assurances related to Rule 206(4)-2 (“Custody Rule”) under the Investment Advisers Act of 1940 (“Advisers Act”). In particular, the IAA sought to 1) confirm that an RIA firm “utilizing a standing letter of instruction or other similar asset transfer authorization arrangement established by a client with a qualified custodian (‘SLOA’)” would not be deemed to have custody and 2) that SEC staff would not recommend enforcement action under Section 206(4) of the Advisers Act and the Custody Rule against an RIA firm if it acts pursuant to a SLOA, as described in the IAA’s letter, without the advisory firm obtaining a surprise independent verification (“surprise examination”) as required by Rule 206(4)-2(a)(4).
On February 23, 2017, the SEC Division of Investment Management released new regulatory compliance guidance related to automated online advisers more commonly referred to as “robo advisers.” The detailed guidance highlights that, “robo advisers, like all registered investment advisers, are subject to the substantive and fiduciary obligations of the Investment Advisers Act of 1940 (the “Advisers Act”),” and zeroes in on three particular regulatory compliance areas that such automated investment advisers should be focused on properly addressing. This latest guidance follows recent SEC staff guidance released in January announcing that the robo adviser business model would be an investment adviser 2017 regulatory examination focus area.
- DOL Fiduciary Rule is Applicable to RIA Firms Starting Today (June 9, 2017)
As of 11:59 PM local time on June 9, 2017, all registered investment adviser (“RIA”) firms were required to comply with the June 9, 2017 applicability date for the Department of Labor (“DOL”) fiduciary rule. The deadline to comply with the rule was originally delayed 60 days from April 10, 2017 to June 9, 2017. During the “transition period,” RIA firms need to comply with the “Impartial Conduct Standards” when providing investment advice to applicable retirement accounts including IRAs. Recently, the DOL released its third set of frequently asked questions to provide additional guidance as to how firms can comply with the rule during the transition period.
Recently, the SEC submitted its budget request for the 2018 fiscal year. As has been the case in recent years, the budget request contains a wealth of valuable data as it relates to investment adviser compliance examinations conducted by the agency. Last year, we reviewed the key insights from the 2017 fiscal year budget request and now we bring you the latest new findings from this year’s budget request highlighted by an increasing examination frequency rate compared to prior years.
As part of the SEC’s new Form ADV filing requirements which took effect on October 1, 2017, RIA firms that have separately managed account (“SMA”) regulatory assets under management (“AUM”) are now required to disclose additional SMA information. The SEC staff notes “that collecting additional information about separately managed accounts will enhance our staff’s ability to effectively carry out our risk-based examination program and other risk assessment and monitoring activities.”
- August 2017 SEC Risk Alert Outlines RIA Cybersecurity Best Practices (August 14, 2017)
In early August, the SEC OCIE released a new National Exam Program Risk Alert providing a summary of observations from recent OCIE examinations conducted during the Cybersecurity Examination Initiative announced on September, 15 2015. As part of the SEC’s “Cybersecurity 2 Initiative,” OCIE staff recently audited a total of 75 firms consisting of registered investment advisers, broker dealers, and investment companies. This latest SEC OCIE staff guidance also follows the previous February 3, 2015 release of observations from the first round of SEC cybersecurity examinations and guidance issued in September 2014 by NASAA.
- RIA Compliance Focus Area: Employee Trade Monitoring and Reporting (August 28, 2017)
Rule 204A-1 (“Code of Ethics Rule”) requires every investment advisory firm registered with the SEC to “establish, maintain and enforce a written code of ethics.” A key element of the Code of Ethics Rule relates to personal securities trading by requiring all access persons of an advisory firm to submit securities holdings and transaction reports to the firm’s Chief Compliance Officer (“CCO”) or other designated person(s). Earlier this year, the SEC released a National Exam Program Risk Alert which listed “access persons not identified” and “untimely submission of transactions and holdings” as two of the most common regulatory deficiencies discovered during regulatory examinations.
- NASAA Releases 2017 Investment Adviser Coordinated Examinations Report (October 2, 2017)
Recently, the North American Securities Administrators Association (“NASAA”) released its 2017 Investment Adviser Coordinated Examinations Report. The biannual report is a can’t miss registered investment adviser compliance resource. 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 compliance changes need to be implemented at their firm. For this year’s report, 38 jurisdictions (the majority of states across the country) provided data for RIA examinations performed from January through June 2017. The characteristics of the 1,227 investment advisory firms which were audited break down as follows:
- Despite Today’s Delay, DOL Fiduciary Rule Remains Applicable to RIA Firms (November 27, 2017)
On November 27, 2017, the final exemptions related to the Department of Labor fiduciary rule were once again officially delayed until July 1, 2019. However, all RIA firms still need to comply with the current requirements of the fiduciary rule which went into effect on June 9, 2017. During this now extended “transition period” which started on June 9, 2017 and now extends to July 1, 2019, RIA firms will need to comply with the “Impartial Conduct Standards” when providing investment advice to applicable retirement accounts including IRAs. In May 2017, the DOL released its third set of frequently asked questions to provide additional guidance as to how firms can comply with the rule during the transition period.
RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.