Last October, the North American Securities Administrators Association (“NASAA”) released its 2017 Investment Adviser Coordinated Examinations Report. The biannual report is a must read for registered investment adviser (“RIA”) firms. 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.
In this week’s installment of our break-down of the new 2017 report, we focus on one of NASAA’s most common RIA regulatory compliance deficiency categories: brochure delivery. Of the 1,227 investment advisory firms examined in 2017, 14.1% of all firms examined with regulatory assets under management (“AUM”) had at least one brochure delivery-related regulatory deficiency. In total, there were 134 brochure delivery-related deficiencies cited across all firms which were audited.
Compared to 2015, the frequency of brochure delivery-related deficiencies decreased from 16.7% to 14.1%. Since 2013, when brochure delivery deficiencies first appeared in NASAA’s biannual report, the frequency of brochure delivery-related deficiencies have slightly decreased. The table below highlights the changes over the last 10 years of reports:
In 2017, the top brochure delivery-related deficiencies were:
- Annual offering / delivery (42.2%)
- Update / material change delivery (29.63%)
- Initial delivery (11.9%)
In 2015, the top brochure-related deficiencies were:
- Annual offering / delivery (63.3%)
- Update / material change delivery (23.1%)
- Initial delivery (13.6%)
Given that the vast majority of RIA firms have a December 31 fiscal year end, this is a great reminder of the need for many advisory firms to make the annual offering / deliver of the Form ADV Part 2 narrative brochure before April 30.
Although brochure delivery-related deficiencies have declined a bit over recent years, it still remains a common RIA compliance deficiency. RIA firms need to take a step back and ensure that they are meeting the annual delivery requirements to stay in compliance with the relevant state of SEC statutes. We strongly encourage the CCO of the investment advisory firm to take a few minutes to review the firm’s current brochure delivery procedures and to ensure that the RIA compliance service the firm utilizes properly assists with this requirement.
Be sure to also check out our past blog post on the top investment adviser brochure delivery compliance deficiencies from the 2015 NASAA report.
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.