State-Registered Investment Advisers: A Compliance Tutorial for Working with State Regulators


Course Description:

The North American Securities Administrator Association (NASAA) Coordinated Exams Program is a biennial initiative conducted to identify common investment adviser deficiencies. NASAA issues a comprehensive report that documents examination outcomes from a sample of state level investment advisers and provides suggested best practices to avoid regulatory violations. The last report (September 2015) recorded 1,170 examinations and found 4,983 deficiencies in 22 categories. The top five areas of deficiencies for state-registered investment advisers were books and records, contracts, registration, fees and custody.

The course will begin with a review of the rules that determine who must register with the SEC and the states, and will highlight some of the key differences between SEC and state requirements. Instructors who regularly interact with state-registered advisers and state regulators will then review how state-registered advisers can readily find the laws and rules of the various states in which they conduct business. Instructors will then carefully consider those best practices that have been identified in the 2015 and 2013 NASAA Reports.

The NRS panel will provide practical insight and state-specific perspectives on the following identified best practices:

  1. Review and revise the Form ADV and disclosure brochure annually to reflect current and accurate information
  2. Review and update contracts
  3. Prepare and maintain all required records, including financial records
  4. Prepare and maintain client profiles
  5. Prepare a written compliance and supervisory procedures manual relevant to the type of business
  6. Prepare and distribute a privacy policy initially and annually
  7. Keep accurate financials. File with the jurisdiction in a timely manner. Maintain surety bond if required
  8. Calculate and document fees correctly, in accordance with contracts and ADV
  9. Review and revise all advertisements, including Web sites and performance advertising, for accuracy
  10. Implement appropriate custody safeguards, if applicable
  11. Review solicitor agreements, disclosure, and delivery procedures

Instructors will also discuss how to effectively respond to inquiries from state regulators and how to best access information regarding state laws, rules and regulations.

A well-run state-registered investment adviser can easily turn these best practices into everyday practices, which will, in turn, provide a strong framework for working effectively with state regulators.

Learning Objectives:

After attending this course, attendees should be able to:

  • Recognize the unique challenges facing state-registered advisers
  • Identify the elements of a well-run and compliant state-registered investment advisory firm to protect the firm and investors
  • Use regulations and best practices to develop a robust compliance program that will withstand regulatory scrutiny
  • Identify resources to explore specific states’ regulations to keep current with regulatory developments
  • Work effectively with state regulators for the mutual benefit of the firm, its clients, compliance professionals and regulators.

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

Suggested Skill Level: Basic

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