Website Reviews

Website Reviews

Firms should have appropriately established controls for review, approval, and archiving of all firm related websites and related content. Firms must be able to readily produce all current and historical website content that promotes the firm or any of its covered persons. The firm should establish controls to ensure that all content is approved prior to use by a designated supervisor. Such supervisor is to have appropriate knowledge related to such content requirements. The guidelines below do not represent an exclusive list of considerations that a supervisor must make in determining whether such website complies with all applicable standards. Content Read more about Website Reviews[…]

Gifts and Gratuities

Gifts and Gratuities

Advisory representatives are prohibited from accepting anything of value that might influence their investment decisions or serve to reward them in connection with their investment advisory activities. Additionally, advisory representatives are expected to refrain from knowingly conducting advisory business with any individuals or entities that use gifts, gratuities, or other items of value to bribe or influence others.

The provision and receipt of gifts and business entertainment by investment advisers and their employees are subject to pervasive regulation. Firms are to supervise and document all gifts and gratuities given to or received from any clients and prospective clients. The rule protects against the improprieties that may arise when firms or their associated persons gives gifts or gratuities. Firms must take any action to identify or examine the nature, frequency, extent and dollar amount to determine if such gifts and/or gratuities are in compliance with the firm’s policies. RIA’s are to adopt a policy governing professional conduct and conflicts of interest. Such policy is to provide that all associated persons have high standards of performance, integrity, productivity and professionalism. The firm should monitor for any and all conflicts of interest that could result, including instances of preferential treatment over other clients.

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Material Changes to Form ADV

Material Changes to Form ADV

An investment adviser must promptly update its brochure if the information contained in it becomes materially inaccurate. This updated brochure is referred to as an “interim amendment”. Upon updating the brochure to reflect material changes, the investment adviser should begin delivering the interim amendment to its prospective clients before or at the time it advisory contract with such clients. For some material changes, the investment adviser will be further obligated to promptly deliver the interim amendment to its existing clients.

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Share Class Selection

Share Class Selection

Advisers have a fiduciary obligation to recommend a share class that will provide their clients with the lowest overall expenses, based on anticipated transaction costs and holding periods. Moreover, if the Firm recommends mutual funds that carry 12b-1 fees when lower share class options exist, the Firm must make full and fair disclosure, including conflicts associated with making investment decisions in light of the receipt of 12b-1 fees; and selecting the more expensive 12b-1 fee paying share class when a lower-cost share class is available for the same fund. Share class selection is a regulatory priority. The SEC has indicated that examiners will conduct focused, risk-based examinations to assess whether investment advisers are meeting their obligations to

  1. Seek best execution;
  2. Disclose material conflicts of interest; and
  3. Maintain an effective compliance program.

Investment adviser should determine its approach for meeting these three obligations and train its personnel to comply with any policies, procedures, and guidelines governing share class selection.

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Outside Business Activities for RIAs

Outside Business Activities for RIAs

Outside Business Activities (“OBAs”) of individuals can create potential conflicts of interests with the registered investment advisers that employ them. Advisors are responsible for providing written notice before they act as an employee, independent contractor, sole proprietor, officer, director or partner of another person; or receive compensation or have the expectation of compensation from any other person as a result of any business activity outside the scope of the relationship with their registered investment adviser.

Additionally, this includes situations where compensation is to be paid or if there is a reasonable expectation of compensation as a result of any business activity outside the scope of the relationship with his or her firm. Passive investments are exempted from this requirement. To ensure all individuals are compliant with OBA requirements, make sure your firm reviews the following.

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What Should an RIA’s Training Plan Cover?

What Should an RIA’s Training Plan Cover?

Registered investment advisers (“RIAs”) should ensure training is assigned periodically to keep covered persons up to date on industry and product related topics. In planning, developing, and implementing an RIA’s training plan, firms should consider its size, structure, and the scope of its business activities, as well as any regulatory developments. After training is assigned, it is important to follow up to ensure completion by all assigned individuals.

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