Annual Reviews – SEC Rule 206(4)-7

SEC Rule 206(4)-7 requires investment advisers to review, no less frequently than annually, the adequacy of its written compliance policies and procedures and the effectiveness of their implementation. The SEC expects 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 SEC 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.  Read More…

Investment Advisers: SEC vs. State Registration

Due to the Dodd-Frank legislation, as of mid-2012, there are rules for registration eligibility that are primarily determined by a firm’s assets under management (“AUM”). For all firms below $100 million AUM, registration is required with the appropriate state jurisdictions.  For firms above $100 million AUM, registration will be at the SEC level, unless a registration exemption exists. In order to account for fluctuations in AUM, the SEC has imposed, by rule, a buffer for Investment Advisers with AUM between $90 million and $110 million. An adviser may register with the SEC once it reaches AUM of $100 million. An adviser must register with the SEC if it’s AUM is $110 million or more at the time they file their annual ADV amendment. Once registered with the SEC, a mid-size adviser can remain registered with the SEC as long as its AUM is at least $90 million at the time they file their ADV amendment.  Read More…

SEC Releases New RIA Form ADV Filing Requirements Effective October 2017

Securities and Exchange Commission (SEC) adopted amendments to Investment Advisers Act rules in August 2016 that will result in significant changes to Form ADV for advisory firms working with SMA’s (Separately Managed Accounts).  The additional data will help the SEC focus on examining firms more often that present the greatest risks. Read More…

2017 Examination Priorities for RIA’s and BD’s

The Office of Compliance Inspections and Examinations (“OCIE”) of the Securities and Exchange Commission (“SEC”) continues another year of exam priorities for its Registered Investment Advisors (“RIA”) and Broker-Dealers. OCIE are the “eyes and ears” of the SEC, and its exams are used by the SEC to inform rule-making initiatives, identify and monitor risks, improve industry practices, and pursue misconduct. Read More…

Reminder: Testing ORF and ADF Changes for Trade Reporting and T+2 Settlement

In accordance with the industry-led initiative to shorten the settlement cycle from three business days (T+3) to two business days (T+2), FINRA continues to make testing available in the NASDAQ Testing Facility (NTF) for associated changes to equity trade reporting. The amended rule is designed to enhance efficiency, reduce risk, and ensure a coordinated and expeditious transition by market participants to a shortened standard settlement cycle. Please refer to Regulatory Notice 16-09 and SR-FINRA-2016-047 for more information on the changes to trade reporting related to the shortened settlement cycle.   Read More…

SEC Issues Ransomware Risk Alert Highlighting Cybersecurity Best Practices

The SEC’s Office of Compliance Inspections and Examinations (OCIE) recently published a Risk Alert pertaining to “WannaCry,” the ransomware worm that infected hundreds of thousands of computers in over 150 nations earlier in May, 2017. WannaCry infects computers with malicious software that encrypts users’ files and demands payment to regain access to the data. The alert provides cybersecurity best practices, including a new initiative towards “rapid response” methods that firms should use to respond to cybersecurity challenges. It also describes factors that firms may consider to (1) assess their supervisory, compliance and/or other risk management systems related to cybersecurity risks, and (2) make any changes, as may be appropriate, to address or strengthen such systems.  Read More…

Communications with the Public – Part II

[Continued from Communications with the Public – Part I]

Investment Analysis Tools

Pursuant to FINRA Rules 2210(c)(3)(C) and 2214(a), firms that intend to offer an investment analysis tool must file templates for written reports produced by, or retail communications concerning, the tool, within 10 business days of first use. Rule 2214 also requires firms to provide FINRA with access to the tool itself, and provide customers with specific disclosures when firms communicate about the tool, use the tool or provide written reports generated by the tool.

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Communications with the Public – Part I

In April 2014, FINRA began a review of its communications with the public rules to assess their effectiveness and efficiency. FINRA later published a report concluding that, while the rules have met their intended investor protection objectives, they could benefit from some updating to better align the investor protection benefits and the economic impacts. To this end, the SEC recently approved amendments to certain FINRA rules governing communications with the public effective January 9, 2017.  The amendments revise the filing requirements in FINRA Rule 2210 and FINRA Rule 2214 and the content and disclosure requirements in FINRA Rule 2213.  Below is a summary of some of these changes.

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MSRB Revises Content Outline for Series 50 Exam

In June 2016, the Municipal Securities Rulemaking Board (MSRB) filed a proposed rule change with the Securities Exchange Commission (SEC) to revise the content outline for the Municipal Advisor Representative Qualification Examination (Series 50 exam). The content outline for the Series 50 exam has been amended to reflect changes to the laws, rules and regulations covered by the examination. These amendments also, among other things, incorporate the functions and associated tasks performed by a municipal advisor representative.

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Exempt Reporting Adviser Registration – Part II

[Continued from Exempt Reporting Adviser Registration – Part I]

Requirements for Exempt Reporting Advisers:

Exempt Reporting Advisers (“ERAs“) must submit to the SEC, and periodically update, a truncated version of the Form ADV.  More specifically, ERAs must complete the following items of Part 1A of Form ADV:

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