Examinations Archives - MasterCompliance

Private Placement Best Practices from FINRA Disciplinary Actions

Posted on August 19, 2022 by admin

FINRA (Financial Industry Regulatory Authority) publishes a monthly review of disciplinary actions taken against both firms and individuals. These disciplinary actions are useful tools to look for trends in violations and other sanctions. These trends can assist you in identifying weak areas in your Firm’s compliance programs or surveillance. Below is a list of a few recent actions related to unregistered offerings or private placements including links to learn more about each as well as key takeaways. Due diligence obligations in connection with private offerings- Torch Securities In summary, Torch Securities failed to establish and maintain WSPs reasonably designed to Read more about Private Placement Best Practices from FINRA Disciplinary Actions[…]

FINRA’s Top Priorities for 2022

Posted on March 11, 2022 by admin

Early in the year, FINRA released their 2022 Report on FINRA’s Examination and Risk Monitoring Program, which is designed to inform member firms’ compliance programs by providing annual insights from FINRA’s ongoing regulatory operations. In this report detailing FINRA’s top priorities for 2022, FINRA addresses 21 regulatory areas which are grouped into 4 categories: (1) Firm Operations, (2) Communications and Sales, (3) Market Integrity, and (4) Financial Management. From these 21 regulatory areas, FINRA highlights 7 that they feel are the most important and affect a large portion of member firms, which are as follows: Reg BI and Form CRS Read more about FINRA’s Top Priorities for 2022[…]

Form ADV-E

Posted on May 21, 2021 by admin

Investment advisers that have custody of client funds or securities are required to undergo an annual surprise examination by an independent public accountant to verify client funds and securities. Form ADV-E is used as a cover page for a certificate of accounting of securities and funds of which the investment adviser has custody, aka a surprise exam report. Form ADV-E contains both information about the adviser and the surprise exam conducted. The Form ADV-E is filled out by the investment adviser and then submitted along with the surprise examination report or statement by the independent public accountant after a surprise inspection of the adviser.

Annual Reviews for State Registered RIAs

Posted on May 5, 2021 by admin

Investment advisers should review, no less frequently than annually, the adequacy of its written compliance policies and procedures and the effectiveness of their implementation. The states expect annual reviews to take into consideration any compliance matters that arose during the previous year, any changes in the business activities of the adviser or its affiliates, and any changes in the Investment Advisers Act or related rules that may impact the adviser’s policies and procedures. In addition, the state expects that an investment adviser will review its compliance policies and procedures on an interim basis in response to significant compliance issues, changes in business activities, and new regulation. In accordance with state rules, this memorandum summarizes the key components of annual reviews for the adviser.

Outside Business Activities for RIAs

Posted on April 28, 2021 by admin

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.

RIA Branch Audit Planning

Posted on April 21, 2021 by admin

Investment advisers should consider the need to perform a branch office inspection of branch offices pursuant to a branch office inspection schedule. Firms should consider whether a branch audit is warranted using factors such as nature and complexity of the branch’s business, volume of business, complaints, disclosures, number of registered persons, and other relevant factors determined by the firm. Firms are to document the exam schedules for each branch office including a description of the factors used to determine the exam cycle for such locations.

Various states require investment advisers to conduct regular inspections of their branch offices. For example, an investment adviser registered in Georgia is required to inspect each office location at least annually to ensure that its written policies and procedures are enforced. Even when an investment adviser is not explicitly required to conduct branch inspections, it should still implement a branch inspection program as part of its supervisory procedures. Also, investment advisers lacking an adequate branch office inspection program expose themselves to significant liability for failure to supervise in the event misconduct at the branch goes undetected.