1. Investment Adviser Compliance National Compliance Services, Inc.
2014 Regulatory Update:
Key Focus Areas for
Investment Adviser Compliance
Presented by:
Kelli A. Capitano, Esq.
extension 207
National Compliance Services, Inc.
Delray Beach, FL
©2014 National Compliance Services, Inc. 1

2. Discussion topics SEC Examination Initiatives and Priorities
Examination Priorities for 2014
New Initiatives and Emerging Issues
Enhanced Examination Activity by State Regulators
Key Focus Areas for Compliance Programs
Suitability – One size doesn’t fit all!
Failure to Supervise – This can really get you in trouble!
ADV Disclosure – Tell it like it is!
Identity Theft – How to spot red flags…Don’t miss the signs!
Social Media – The Do’s and Don’ts…“Like” it or not! 2 2

3. SEC Examination Initiatives
IA Examination Priorities for 2014
Safety of Client Assets and Custody
Marketing/Performance
Allocation of Investment Opportunities
Compensation Arrangements
Filings & Disclosure
New Initiatives and Emerging Issues
Presence Exams
Never-Before Examined Advisers
Wrap Fee Programs
Alternative Investments
Request for Funding Via User Fees (11/22/2013) 3 3

4. Enhanced Exam Activity by State Regulators
*NASAA 2013 Coordinated Investment Adviser Examinations, Investment Adviser Operations Project Group, October 2013 4 4

5. Suitability Document the Investment Process
Maintain Documentation Evidencing Basis for Recommendations Specific to Client
Incorporate Procedures for Initial and Ongoing Assessments
Document Due Diligence for Alternative Investments 5 5

6. Failure to Supervise
Duty to Supervise Under Section 203(e)(6) of the IA Act of 1940
Increased Regulatory Action
Supervisors and Supervisory Process Should be Accurately Identified in Policies and Procedures
IAR Supervisors Should be Identified in Form ADV Part 2Bs 6 6

7. Form ADV Disclosure Top Deficiency Area for Examinations
Disclosure Must Be Accurate and Consistent with Marketing Materials, Agreements, Policies and Procedures, etc.
Implement Policies and Procedures to Periodically Review Disclosures
Pay Attention to Critical Focus Areas 7 7

8. April 15, 2014 SEC Risk Alert: OCIE Cybersecurity Initiative
Identity Theft
April 15, SEC Risk Alert: OCIE Cybersecurity Initiative
Over 50 registered BDs and RIAs will be examined by the SEC, focusing on areas related to cybersecurity
Red Flags Rule
Includes advisers with authority to withdraw assets and direct payments to third parties upon the client’s instruction.
Policies and Procedures Should Be Designed to:
Identify;
Detect; and
Respond appropriately to red flags 8 8

9. Advertising Top Area for Compliance Deficiencies
Social Media Content Must Always Comply with Advertising Standards
Recognizing False or Misleading Content
Prohibition on Testimonials
Incorporating Disclosures
Examples: Recent Advertising Deficiencies 9 9

10. Use of Social Media
RIAs must consider antifraud, compliance, and recordkeeping provisions
3/2014 SEC Guidance Update on Testimonial Rule and Social Media
Provides guidance on testimonial issues specific to:
Third party commentary
Advertisements on independent social media sites
IA references to commentary on independent social media sites
Client lists
Fan/community pages 10 10

11. Use of Social Media
Non-exhaustive list of factors that RIAs should consider when evaluating the effectiveness of its social media policies and procedures:
Usage Guidelines/Content Standards
Monitoring /Frequency of Monitoring
Approval of Content
Criteria for Approving Participation
Training
Certification
Functionality
Personal/Professional Sites
Information Security
Firm Resources 11 11

12. National Compliance Services, Inc.
Contact Information
Kelli A. Capitano, Esq.
extension 207
National Compliance Services, Inc.
Delray Beach, FL 12 12