Regulatory Compliance E-newsletter – August 2017


Feature of the Month

Evolution Revolution Report Released

The 2017 Evolution Revolution Report, published jointly by National Regulatory Services and the Investment Adviser Association paints a picture of growth in 2017; citing increases in the universe of federally registered investment advisers along with their total aggregate regulatory assets under management (RAUM.) Key findings include:

  • RAUM managed by advisers grew by over 5%, up from $66.8 trillion in 2016 to $70.7 trillion – a record high
  • Strong job growth in 2017 in investment advisory positions – with over 13,000 Investment Advisory and Research jobs added in 2017
  • The number of private funds and registered private fund advisers grew, with over 4,000 advisers reporting advising on 34,409 private funds, totaling $11.5 trillion in gross asset value.

Download the report

(Top of page)

Education

How to Handle 21st Century Compliance Challenges

Contemporary compliance challenges are at the forefront of what advisers, managers and compliance professionals have to deal with, and the regulators have singled out many different firms that are less equipped to handle them. This includes violations from Form ADV disclosure conflicts of interest failures, to robo-advisers, trading and inefficient compliance oversight.*

With the industry continuing to evolve, it’s only a matter of time before regulators and investors detect new compliance deficiencies. One way firms are facing the challenge head on is through certification and ongoing education.

Why is education important?

The success of advisory firms is not only measured by their assets under management, but also by their reputation within the financial community. Part of that reputation comes from building a culture of compliance among stakeholders where a deep understanding of the rules and regulations drive daily operations. Knowledge of the rules coupled with the right judgment goes a long way towards building the right policies, procedures and practices, tailored to the firm, that promote uncompromising ethical expectations and the ability to influence compliance.

How do you begin?

While facing contemporary compliance challenges can sometimes prove to be challenging, it does not always have to be. Here are four tips to help your advisory firm start the path towards a stronger culture of compliance:

  • Take a fresh look at the Investment Advisers Act – While the Act has not changed, the rules that amend the Act change .Understand your duties under the Advisers Act – From seasoned professionals to new hires, help ensure that your stakeholders have a firm understanding on their fiduciary duties.
  • Help the right records are kept – Managing the right books and records for investment advisers can -impact the outcome of an.
  • Enroll in the NRS Investment Adviser Certified Compliance Professional® (IACCP®) Program

The NRS Investment Adviser Certified Compliance Professional® (IACCP®) Program

The NRS Investment Adviser Certified Compliance Professional®(IACCP®) Program, co-sponsored with the Investment Adviser Association (IAA) responds to the growing demand for compliance education and nationally recognized professional standards.

Position yourself as a leader and demonstrate your firm’s commitment to compliance. Learn more about the NRS IACCP and Core Compliance programs and how to enroll.

*August 1, 2017: Cadaret and Grant & Co., Inc. (Release Nos. 34-81274, IA-4736; File No. 3-18087); see also Administrative Summary (Form ADV disclosures); July 25, 2017: Brian Kimball Case, Bradway Financial, LLC and Bradway Capital Management, LLC (Release Nos. IA-4733, IC-32741; File No. 3-18073) (barred CCO)

(Top of page)

Consulting

Are you prepared for the new Form ADV Part 1?

On August 25, 2016, the SEC adopted amendments to Form ADV and the Advisers Act. As noted in the adopting release, the amendments to Form ADV Part 1 are designed to improve the depth and quality of information the SEC collects on investment advisers that will enhance the staff’s ability to effectively carry out risk monitoring initiatives and assist the SEC’s risk-based examination program.

In an e-mail released last week, the SEC reminded Investment Advisers about the coming changes to Form ADV Part 1. Beginning October 1, 2017, any changes made to an Adviser’s ADV Part 1 will need to be filed using the revised version of Form ADV. If amending Form ADV Part 1 for any reason on or after October 1, 2017, firms will now be required to answer the new questions. Some of these changes will be material for many firms and will require infrastructure designed to capture and monitor the required information so that filings can be made timely and accurately.

One of the more sweeping changes involves the reporting of advisory clients. Moving forward, advisers must:

  • Break down their RAUM by type of client
  • Calculate the number of clients by type
  • Report RAUM attributable to non-United States clients.

In addition, Advisers will be required to provide more information on their separately managed accounts (“SMAs”). The RAUM of SMAs will have to be broken down into twelve categories of investments, and advisers with SMAs over a certain RAUM threshold will have to additionally report borrowings attributable to the accounts, as well as any derivative exposure.

While these are some of the more notable changes coming to Form ADV Part 1 in October, it is not an exhaustive list. Most Advisers won’t be faced with answering these new questions until the Annual Updating Amendment filing in the first quarter of 2018. However, Advisers must take the time now to review the adopting release and determine the scope and applicability of the new requirements to their firms.

NRS Consulting

NRS is positioned to help you understand how the new ADV amendments will impact your firm and can assist with your ADV filings. With over 30 years of experience in helping Investment Advisers and Hedge Funds understand and manage their compliance challenges, NRS has the knowledge and resources you need to navigate the Form ADV filing landscape. Learn more here.

(Top of page)

Technology

What did I miss?

August is a time of year where most business professionals take time off from their busy schedules. However, almost everyone who has ever had the luxury of taking a vacation during this time, suffers the anxiety of forgetting something. In some cases, people have turned around in the middle of their road trip, just to check to see if they turned a light off.

For the Compliance Professional, who usually does not take enough vacation time, this translates to a monthly push to ensure that all requirements are covered

How you can prevent anxiety

A good checklist can go a long way towards relieving that anxiety and ensuring that your firm remains compliant. But just like that vacation checklist, your compliance needs can change frequently. The key is to utilize the right mix of technology and policy to develop a step-by-step compliance program that addresses all rules and regulations; ultimately saving time.

Here’s a checklist of what to look for in a solution:

  • Ease of use: A solution that organizes your monthly tasks into an easy-to-understand group of milestones, can save you time and ensure that you remain compliant.
  • Ongoing updates: The regulatory landscape continues to change. Engaging a technology solution and vendor that continuously updates the underlying policies and procedures that drives compliance is key to remaining ahead.
  • Expandable workflow: For compliance professionals, it’s not just about completing a series of monthly compliance tasks. A solution should be able to aggregate the monthly information you enter into quarterly and yearly tasks.

Compliance Guardian

Created by seasoned experts, Compliance Guardian allows compliance professionals to create a step-by-step program that guides stakeholders through critical supervisory compliance tasks to be certain that all compliance requirements are being addressed. Learn more about Compliance Guardian and sign up for a demo.

(Top of page)