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2014 Regulatory Update: Key Focus Areas for Investment Adviser Compliance Presented by: Kelli A. Capitano, Esq. 561.330.7645 - extension 207

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Presentation on theme: "2014 Regulatory Update: Key Focus Areas for Investment Adviser Compliance Presented by: Kelli A. Capitano, Esq. 561.330.7645 - extension 207"— Presentation transcript:

1 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.

2 Discussion topics 2  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!

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

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

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

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

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

8 Identity Theft  April 15, 2014 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

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

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

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

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


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