Two Trading Compliance Challenges: Valuation and Trade Errors
Trade errors are inevitable. What distinguishes compliant firms is that they detect and identify them quickly, resolve them fairly and expeditiously, and minimize the likelihood of errors in the first place. The SEC will focus on trade errors and their resolution during its examinations of investment advisers. The Investment Advisers Act is silent on how to handle trade errors and is equally silent on the issue of who should bear the responsibility for losses resulting from such errors. In fact, the SEC staff has provided limited guidance on the issue. A review of enforcement proceedings, however, does shed light on the SEC’s position with respect to the correction of trade errors. This session will provide insight and guidance on what SEC examiners will expect to see and articulate best practices for addressing trade errors that are consistent with fiduciary standards.
Recent market events offer valuable lessons regarding the need for effective policies and controls addressing the timely and accurate valuation of securities and other investments. This session will emphasize the “best practices” that the SEC staff has identified during examinations and highlight those areas where enforcement actions have been brought.
After attending this course you will be able to:
- Examine how the SEC views trade error accounts
- Provide common examples of trade error resolutions
- Explore factors that should be considered when calculating a trade error
- Highlight SEC staff positions and enforcement proceedings involving trade errors
- Discuss how an adviser should document a trade error and its resolution to disclose the firm’s policy to clients
- Explain the SEC’s focus on valuation practices to draft and refine appropriate policies and procedures
- Recognize conflicts of interest that might arise with the valuation process
- Examine forensic tests on valuation procedures to detect and correct abnormalities
For Whom: Designed to increase the professional competence of investment adviser professionals with legal, compliance, operations, trading and management responsibilities.
Suggested Skill Level: Intermediate
Instructional Method: Group Internet-Based and Group Live
Pre-requisites 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
NRS Continuing Education Guide
Maximum Recommended CPE Credit: 2
Maximum Recommended IACCP® CE Credit: 2
Maximum Recommended CA MCLE Credit: 2
Maximum Recommended CFP® Credit: 2