The North American Securities Administrators Association has issued an updated set of best practices to help investment advisors stay in compliance.
NASAA President and North Dakota Securities Commissioner Karen Tyler said the best practices were developed after a nationwide series of coordinated examinations of investment advisors by 43 state and provincial securities examiners revealed a significant number of problem areas. Tyler said 418 examinations of investment advisors were conducted between Jan. 1, 2007 and May 31, 2007. These exams revealed 2,135 deficiencies in 13 compliance areas.
The five categories with the greatest number of deficiencies were registration, unethical business practices, books/ records, supervisory/compliance and privacy. In the unethical practices area, NASAA found 198 advisors representing 318 deficiencies, including contract deficiencies, unsuitable recommendations, excessive fees, and misrepresenting qualifications, services or fees. To stay in compliance, NASAA suggests investment advisors:
- Review and revise the Form ADV and disclosure brochure annually to reflect current and accurate information.
- Review and update all contracts.
- Prepare and maintain all required records including financial records.
- Prepare and maintain client profiles that show suitability information.
- Prepare a written compliance and supervisory procedures manual relevant to the type of business.
- Keep accurate financials. File timely with the jurisdiction. Maintain surety bond if required.
- Calculate and document fees correctly in accordance with contracts and ADV.
- Review and revise all advertisements, including Web site for accuracy.
- Implement appropriate custody safeguards, if applicable.
- Review solicitor agreements, disclosure, and delivery procedures.