By Cory Roberson, Principal at RIA Review and RIA Consults
Are you a Start-up or Breakaway Advisor?
As a new advisor, you’ve probably moved past the initial
stages of registering your RIA with the Securities & Exchange Commission (“SEC’)
or a state jurisdiction. The process,
combined with tax season, likely created a barrage of new paperwork burdens. Now, while the summer season approaches, could
be great time to evaluate your firm’s annual and ongoing compliance
obligations.
At some point, more paperwork will be required by
examiners whether you are a U.S-based traditional advisory practitioner,
robo-advisor, or a budding crypto hedge fund practice.
The following is a list of general guidelines
that your firm can use to create a compliance program for ongoing reporting
purposes. This list is not an exhaustive
group of requirements that may/may not apply to your practice.
Post
Registration: within the first year and afterwards
Generating Forms/Templates:
Agreements consist of
investment advisory, financial planning, consulting, private placements, and/or
solicitor relationships between the firm and the client. A solicitor arrangement will also require a
disclosure statement and the delivery of an ADV 2A/B brochure to the client.
Business Continuity Plans
include a summary of procedures that would apply during a standard business
disruption (emergency) and/or a reference point of key vendors to contact as a
safeguard to continue firm operations.
Policies & Procedures Manuals
include a summary of standard compliance provisions for adhering to the SEC Investment
Advisors Act and/or similar state rules.
Privacy Policy Notices contain
a summary of disclosures in alignment with the Federal Trade Commission (FTC),
Gramm-Leach-Bliley Act, and the Securities and Exchange Commission’s (SEC)
provisions on the safeguarding of client information. Ref. Reg. S-P.
ADV Offer Letters are
a required component of annual brochure rule requirements for client delivery
purposes. Ref. SEC
Rule 204-3 (and similar state rules).
Client
Onboarding Process: for new account opening procedures
Sending Documentation:
Agreements/Brokerage Forms must
include a signed copy of a service agreement(s) (including associated fee
schedules) and new account paperwork to execute legal arrangements of services
offered. Signatures should be from the
client and firm principal/authorized representative.
Financial Planning Engagement Letters (for Certified Financial Planners or CFP’s)
should include an overview of financial planning services. Contents of the engagement letter can be included
with the financial planning agreement.
ADV Part 2A/B brochures include
a comprehensive overview of the firm’s business, services, and required disclosures.
Clients and prospects should receive a
brochure on or before the time of agreement.
Privacy Policy Notices
include a summary of provisions for the safeguarding of client information in
alignment with Reg S-P, Reg S-ID, and GDPR for European clients/residents.
Business Continuity Plans can
be offered or delivered in summary format to clients using a print or
electronic format. Ref. 260.238.3 - California firms.
Advertising materials
include circulars, newsletters, performance data, reports, and/or investment analysis
summaries.
Investment Policy Statements contain
information about a client’s risk profile, investment objectives, and preferences
in alignment with SEC, state, and or FINRA investment suitability provisions. Ref. SEC Rule
204/205/206 and FINRA Rule 2111.
Client
Notices – 120 days after fiscal year—deliver annually
Offer letter can include:
ADV brochure or summary of material changes
in print or electronic format*.
Privacy Policy Notice should be delivered in print
or electronic format*.
Business Continuity Plan summary should be offered
or delivered in print or electronic format*
*Obtain permission from client (authorization form) if
selecting electronic delivery method.
Annual
Renewal Fees Due – usually due on/around second week of December
State Fees:
Preliminary Renewal statements released in
November annually.
Firms can pay via CRD/IARD E-bill (link
checking account) or a check to FINRA.
Annual
Review (required by SEC and some states):
at least
once a year
Procedures Review includes
checklists or other documentation that demonstrates the testing of the compliance
program and its effectiveness.
Chief Compliance Officer (CCO) summary includes
a checklist or other documentation that details the supervision of firm procedures
by the designated Chief Compliance Officer.
Risk Assessment contains an overview for the
identification of firm risks and the mitigation process for handling them.
Common items to update for clients – during/after first year
Privacy Policy Notice
Business Continuity Plan
Investment Policy Statement
Service Agreements (services/fees)
ADV Part 2A/B Brochure
Haven’t started on
the registration process yet?
Consulting resources are available for entrepreneurs that are seeking to register with the SEC or a state jurisdiction. In addition to consulting services, we offer an online compliance management software for ongoing management purposes.
Try
a version for access to more in our compliance management system: RIA Review.
Compliance and Business Management
FIN Compliance (FINCompliance.io) is a
consortium of compliance services including: RIA Consults-Roberson Consults
Group, a compliance consulting firm, RIA Review, a compliance-management
software tool (SaaS), B-D Review, a RIA/Broker-Dealer compliance management
software tool, and FINLancer is a business
management portal featuring: E-signature tools; Invoicing integration,
Vendor Directory, continuity directory*, business client document portal, and
more (available by Q3 2019). Access all services
on one site: FINCompliance.io.
Impact
FIN Missions (FINmissions.com) provides business support group
sessions for other entrepreneurs. In addition, Cory has volunteered
for more than fifteen youth programs in locations such as like S. Korea, China,
S. Africa, Thailand, and India.
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