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.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
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 recently released compliance survey by the Investment Adviser Association, ACA Compliance Group and Old Mutual Asset Management.
The online survey of 462 registered investment advisors, performed 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.
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.
Read about other compliance issues that will affect advisors soon in Melanie Waddell's accompanying article, "Compliance Matters."