The Office of Compliance Inspections and Examinations issued a Risk Alert on November 7, 2017. The alert is based on 110 examinations conducted as part of the Municipal Advisor Examination Initiative.
Key takeaways of the Risk Alert include:
- Registration Deficiencies. The examinations found common failures in registration. Specifically, firms failed to file annual amendments or updates to Form MA-1, Form A-12 and Form MA when needed. A number of firms also did not register with the MSRB or SEC before taking part in municipal advisory (MA) actions. In addition, failure to withdraw MSRB Form A-12 and file Form MA-W was observed among advisors who were withdrawing from registration. Compliance issues regarding payment of MSRB registration fees was also observed.
- Books and Records Deficiencies. In MA activities, SEC staff noted some firms and advisors failed to keep copies of all electronic and written communication. Other common compliance issues included the failure to keep needed and accurate financial records, such as ledgers, and failure to keep mandated records related to client recommendations.
- Supervisory Deficiencies. During SEC examinations, staff noted several firms did not have adequate systems to monitor employees involved in MA activities, which made it harder for firms to see whether regulations regarding issues such as travel expenses and gifts were followed. Where systems did exist, they were not always customized to the tasks and risks of each firm, meaning they were not as effective as they might be. In addition, SEC staff noted that many firms did not have at least one principal overseeing supervisory activities, a fact which placed firms at risk.
Contact Vigilant Compliance for a Compliance Assessment
Vigilant works with fund advisors across the country to review compliance policies and procedures. Our professional team can help you address any deficiencies and support you in registration. Contact Vigilant Compliance.