
Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Author: Dan Brecher
Date: March 16, 2017
Counsel
212-286-0747 dbrecher@sh-law.comAs investment advisers conduct their annual review, they can learn a lot from their peers. The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) recently issued a Risk Alert detailing the five compliance topics most frequently identified in deficiency letters that were sent to registered investment advisers.Below is a brief summary of the SEC risk alert:
Advisers Act Rule 206(4)-7 makes it unlawful for an adviser to provide investment advice to clients unless the adviser: (1) adopts and implements written policies and procedures reasonably designed to prevent violation, by the adviser and its supervised persons, of the Advisers Act and the rules that the Commission has adopted under the Advisers Act; (2) reviews, no less frequently than annually, the adequacy of its policies and procedures and the effectiveness of their implementation; and (3) designates a chief compliance officer responsible for administering the compliance policies and procedures that the adviser adopts. In conducting examinations, the SEC identified the following deficiencies or weaknesses:
Advisers are obligated to accurately complete and timely file certain regulatory filings and disclosures with the SEC, including Form ADV, Form PF, and Form D. The Risk Alert provides the following examples of deficiencies or weaknesses with respect to adviser regulatory filing obligations
Advisers with custody of client cash or securities must comply with the Custody Rule, which prescribes several requirements intended to safeguard client assets from unlawful activities or financial problems of the adviser. The SEC identified the following common compliance violations of Advisers Act Rule 206(4)-2:
Pursuant to Advisers Act Rule 204A-1, advisers must adopt and maintain a code of ethics. The code of ethics must: (1) establish a standard of business conduct that the adviser requires of all its supervised persons; (2) require an adviser’s “access persons” to periodically report their personal securities transactions and holdings to the adviser’s chief compliance officer or other designated persons; and (3) require that access persons obtain the adviser’s pre-approval before investing in an initial public offering or private placement. The SEC identified the following examples of deficiencies or weaknesses with respect to the Code of Ethics Rule:
The Books and Records Rule requires advisers to make and keep certain books and records relating to their investment advisory business. The SEC highlighted the following compliance failures:
This article provides only an overview of the issues discussed in the Risk Alert. Registered advisers should thoroughly review the document and work with experienced counsel to ensure that you have robust practices, policies and procedures in these areas.
Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Dan Brecher, at 201-806-3364.
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