More On Legal & Compliancefrom The Advisor's Professional Library
- Scope of the Fiduciary Duty Owed by Investment Advisors A fiduciary obligation goes beyond the suitability standard typically owed by registered representatives of broker-dealer firms to clients. The relationship is built on the premise that the advisor will always do the right thing for the person or entity receiving advice.
- Proxy Voting RIAs are not required to vote proxies on behalf of their clients. However, when an RIA does assume responsibility for voting proxies, the firm’s policies and procedures should help to ensure that votes are cast in the best interest of 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.