More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Advertising Advisor Services and Credentials Section 206 of the Investment Advisers Act contains the anti-fraud provision of the statute and ensures that RIAs advertising and marketing practices are consistent with the fiduciary duty owed to clients and prospective clients.
Advisors are honing their social-media savvy, with nearly 83% of firms adopting formal social media policies this year—up from 64% in 2011 and nearly double the 43% of advisors who had such policies in 2010, according to a just-released compliance survey by the Investment Adviser Association, ACA Compliance Group and Old Mutual Asset Management.
The online survey of 462 registered investment advisors, conducted from April 18 to May 17, also found that fewer firms (49%) are prohibiting the use of social media sites for business purposes, down from 54% in 2012. Forty-three percent reported that their social media testing has increased in the past year.
Since last year’s survey, compliance testing has increased the most in the areas of advertising and marketing, personal trading, disaster recovery planning, and political contributions/pay to play, with 79% of firms indicating that they have not decreased compliance testing in any area.
The survey found that while 8% of firms reported detecting material compliance issues, 22% said they found none. The most common material issues were in the areas of advertising and marketing, personal trading, client guidelines and custody.
Laura Grossman, IAA’s assistant general counsel, said in a statement that the survey “confirms that investment advisory compliance professionals continue to adapt their firms’ compliance programs to address the progressively complex regulatory environment.”
Compliance professionals, she said, “are increasing testing, using more automated compliance systems, and implementing policies and procedures to respond to new challenges. For example, the percentage of firms that have adopted formal written social media policies has risen dramatically over a short period of time.”
As to the chief compliance officer role, 99% of firms reported that they do not outsource the CCO role, while 63% said their CCO is wearing two or more hats. Thirty-two percent of the firms polled reported having only one person in a full-time legal/compliance role, while 68% of firms reported that their CCO is a senior executive in the firm.