The SEC released a Risk Alert on March 27th, related to Newly-Registered Advisers, focusing on what areas are frequently investigated during Examinations and what Compliance Problems are frequently discovered.
The complex regulatory environment, and the challenges facing Firms that are new to registration with the SEC, have made it increasingly difficult to remain compliant without experienced compliance support.
Key Problems for Firms During Examinations
- Inadequate compliance policies and procedures that:
- Did not adequately address risk areas applicable to the firm.
- Lacked procedures to enforce the written policies.
- Were not followed by staff/employees due to ignorance or incompatibility with actual business operations.
- Had no review process to evaluate their effectiveness.
- Use of “off-the-shelf” compliance manuals that were inconsistent or inoperable for the business.
- Inadequate number of resources dedicated to compliance.
- Responsibilities were typically placed on the CCO, who had limited time to dedicate to compliance or monitoring compliance personnel.
- Outsourcing compliance functions without assessing how the tasks were performed or if they were consistent with firm policies and procedures.
- Undisclosed conflicts of interest due to advisory personnel carrying out multiple roles and responsibilities, and no way to mitigate these conflicts.
- Disclosure documents and filings that omitted important details or contained inaccurate information.
- Use of marketing materials containing:
- False or misleading information.
- Inaccurate information about advisory personnel’s experience, credentials, rankings, or performance.
- Factual claims without any ability to substantiate.
How Dedicated Support From Vigilant Can Help Decrease These Risks
- Tailored compliance policies and procedures that are both applicable to your business, enforceable, and defendable to regulators.
- Leveraging decades of combined compliance experience and industry insight to help create a “culture of compliance” as your new Firm grows.
- Providing specialized compliance support that opens time and resources for your staff to focus on business goals.
- Full transparency of our operations through:
- Consistent communication with key Firm members.
- A Compliance Committee that reports the results of our annual Rule 206(4)-7 Report and discusses activities our firm was responsible for.
- A trained advertising review team that provides thorough yet quick turnaround for materials.
- Use of Mock Examinations to help your firm find and mitigate any compliance weaknesses.
New Firms face many challenges when they first register with the SEC.
Outsourced compliance support can provide significant benefits that help decrease a Firm’s risk of regulatory headaches and steep financial penalties that come from non-compliance.
Reach out to us today if you have any concerns related to this Risk Alert or any other compliance concerns.