All advisers registered with the SEC must adopt and enforce a written code of ethics reflecting the adviser’s fiduciary duties to its clients. The firm’s code of ethics is required to meet minimum standards to appropriately address conflicts of interest identified by the firm. To ensure compliance with the code of ethics requirements, a written acknowledgement should be obtained from each supervised person confirming receipt of the firm’s code of ethics. Firms with more than one access person are should also ensure transaction reporting is being done by all access persons.
When a registered investment adviser on boards a new registered person, there are a couple of new hire forms the firm needs to collect to be compliant with applicable securities laws and regulations.
To evidence completion of new hire forms by all associated persons, firms should adopt and implement written policies and procedures reasonably designed to prevent violations. Implementation of procedures will often rely on the use of forms and other documents designed to gather or report important data. While the completion of some forms is required by law or regulation, the implementation of other forms reflects principles of good management and controls. Regulators view the adequacy of procedures and the proper completion of forms as indicators of a culture of compliance within the firm. Consequently, firms should periodically verify the adequacy of their policies, procedures, and controls related to new hire forms.
Firms will use a wide range of customized forms and attestations to help them achieve compliance with applicable securities laws and regulations. Firms should periodically assess how it can enhance its compliance program and better supervise employees through the use of new or improved forms, reports, acknowledgments, or attestations.
Knowing firm requirements as set forth in the Investment Advisers Act is essential, and learning from the mistakes of others in this area can be a valuable and motivating tool for striving for compliance in the financial services industry. In an atmosphere where Chief Compliance Officers (CCO) are being added to disciplinary proceedings, learning and taking immediate corrective action is the name of the game. No longer is the firm the only name blasted across SEC complaints; regulators will ensure that individuals are equally held responsible. Read More…
COVID-19 has bought a “new normal”. From stay-at-home orders and teleworking requirements to market volatility, consumer worry, and delayed public disclosure, the face of the industry will be forever changed. In light of this, Registered Investment Advisor compliance departments should consider reviewing the landscape of the Code of Ethics requirements.