A Tailored Compliance Testing Program for Investment Advisers

Course Description:

A central and necessary component of a sound compliance program is testing the firm’s actual compliance with its written policies and procedures. The SEC, in its release adopting Rule 206(4)-7 under the Investment Advisers Act of 1940, stated that an investment adviser’s policies and procedures should employ “compliance tests that analyze information over time” to determine the effectiveness of its compliance policies and procedures.

In May 2005, the SEC staff suggested using three compliance tests: transactional, periodic and forensic. The SEC staff has since repeatedly sent clear signals in its Compliance Outreach Program, speeches and other communications that they take the issue of forensic testing seriously, and has encouraged the implementation of forensic testing.

SEC Document Request Lists typically request: “Information relating to the firm’s compliance testing, including any compliance reviews, quality control analyses, surveillance, and/or forensic or transactional test performed by the firm. This information should include any significant findings, both positive and negative, of such testing and any information about corrective or remedial actions taken regarding these findings. Staff will review these documents on-site.”

This presentation will focus on developing and documenting a tailored and comprehensive compliance testing plan and effectively employing forensic testing to monitor your firm’s compliance program.

Learning Objectives:

After completing this course you should be able to:

  • Develop a compliance testing plan tailored to your firm
  • Distinguish among three types of compliance tests: transactional, periodic and forensic
  • Expand your firm’s library of tests and testing processes in key areas such as brokerage arrangements, trading, personal trading, gifts and entertainment, billing, valuation, AML, email and cybersecurity
  • Identify and conduct appropriate tests for your firm’s operations
  • Learn how information technology can support forensic testing
  • Establish a protocol for reviewing and reporting forensic test results
  • Use forensic, transactional and periodic tests to enhance internal controls and procedures

For whom: Designed to increase the professional competence of investment adviser professionals with legal, compliance, operations and management responsibilities.

Suggested Skill Level: Intermediate

Instructional Method: Group Internet-Based

Prerequisites for participation: No prerequisites are required. However, attendees can benefit by reviewing the Investment Advisers Act of 1940 to become familiar with the structure and terms.

Advance Preparation: None

Continuing Education Credits:

NRS Continuing Education Guide
Maximum recommended CPE Credit: 2 in the Regulatory Ethics field of study
Maximum recommended IACCP® CE Credit: 2
Maximum recommended CA MCLE Credit: 2
Maximum recommended CFP Credit: Pending