Each year, the Office of Compliance Inspections and Examinations (“OCIE”) conducts examinations of thousands of investment advisers and broker-dealers for compliance with the Investment Advisers Act of 1940 (the “Advisers Act”). Below, grouped by topic, are the most common deficiencies that have been identified by the OCIE.
Compliance Rule
The Compliance Rule makes it unlawful for an investment adviser to provide investment advice to clients unless the adviser adopts and implements certain written policies and procedures to prevent violation of the Advisers Act and reviews those policies at least annually. The most common deficiencies identified related to the Compliance Rule are as follows:
Regulatory Filings
Advisers are obligated to accurately complete and timely file certain regulatory filings with the Commission. The most common deficiencies identified related to regulatory filings are as follows:
Custody Rule
Advisers with custody of client cash or securities must comply with the Custody Rule. The most common deficiencies identified related to the Custody Rule are as follows:
Code of Ethics Rule
The Code of Ethics Rule requires an adviser to adopt and maintain a code of ethics. The most common deficiencies identified related to the Code of Ethics Rule are as follows:
Books and Records Rule
The Books and Records Rule requires advisers to create and maintain certain books and records relating to their investment advisory business. The most common deficiencies identified related to the Books and Records Rule are as follows:
Compliance Issues Related to Best Execution
As a fiduciary, an adviser must execute securities transactions for clients in such a manner that the client’s total costs or proceeds in each transaction are the most favorable under the circumstances. The most common deficiencies related to best execution obligations are as follows:
Most Frequent Compliance Issues Related to Advisory Fees and Expenses
Advisers must adopt and implement written policies and procedures reasonably designed to prevent violations of the Advisers Act that pertain to advisory fees and expenses. The most common deficiencies identified related to advisory fees and expenses are as follows:
We are ready to answer your questions and provide the resources that you need. In the meantime, if you have questions, please contact your Elliott Davis Advisor or our investment Companies Practice Leader, Renee Ford.
Resources:
https://www.sec.gov/ocie
https://www.sec.gov/ocie/Article/risk-alert-5-most-frequent-ia-compliance-topics.pdf
https://www.sec.gov/files/ocie-risk-alert-advisory-fee-expense-compliance.pdf
https://www.sec.gov/ocie/announcement/risk-alert-most-frequent-best-execution-issues-cited-adviser-exams-1
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.