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NASAA’s latest exam data shows books and records remain a compliance problem

Writing on compliance in InvestmentNews, reporter Mark Schoeff, Jr. says that according to the North American Securities Administrators Association Inc. (NASAA), the latest batch of state-coordinat
ed exams show that investment advisors improved their compliance with securities laws by 30% from 2013 to 2015.

But…before you pat yourself on the back, both Schoeff and the NASAA note that the “picture wasn’t all rosy.” In fact, the biggest compliance problems state-based advisors still face is in maintaining their books and records — nearly 74.8% of advisers were documentation deficient.



Top trouble area highlights included:

  • Contracts (failing to explain fees);
  • Registration     (inconsistencies on ADV Part 1 and Part 2);
  • Fees (not charging what’s outlined in the ADV); and
  • Custody (improper client invoices for direct-fee deductions).



William Beatty, NASAA president and Washington State Securities director, underscored that “Maintaining sound books and records is the best way for investment advisers to protect themselves and their clients.” We agree.

The NASAA recommends Investment Advisors:

  • Prepare and maintain all required records, including financial records, and to back-up electronic data and protect records;
  • Set up and maintain client profiles or other client suitability info;
  • Review and update all contracts. Ensure all fees are clearly noted and adequately explained in the contract;
  • Review and revise Form ADV and disclosure brochure annually to reflect current and accurate information and file amendments in a timely manner;
  • Prepare and distribute a privacy policy initially and annually;
  • Calculate and document fees correctly in accordance with contracts and ADV;
  • Keep accurate financials and file in a timely fashion with the jurisdiction. Maintain a surety bond if required;
  • Implement appropriate custody safeguards and pay attention to direct fee deduction if applicable;
  • Review all advertisements, including website and performance advertising, for accuracy;
  • Provide a disclosure brochure to clients initially. Then, provide updates and offers to deliver afterwards as required;
  • Prepare a written compliance and supervisory procedures manual relevant to the type of business and include a business continuity plan;
  • Review solicitor agreements, disclosures, and delivery procedures.

Sound like a lot of work? It is.

So, how do you organize and oversee, prepare records and maintain them, distribute appropriately and follow up? More important, how do you keep track everything? Paper files? Spreadsheets? Calendaring?

Are you juggling? Or, are you outsourcing the burden of tracking and organizing your data and documents to an independent regulatory archival and compliance solutions specialist, like us to help keep your compliance processes and procedures running smoothly and compliantly? Ask about Patrina‘s cost-effective and comprehensive regulatory archival and compliance solutions specifically designed for Broker/Dealers, RIAs, and FCMs.

Let’s talk (212- 233-1155).

Graphics Source:
2015 NASAA Investment Adviser Coordinated Examinations Reports