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Regulation and Compliance > State Regulation > NASAA

How to stay out of hot water

By National Ethics Bureau

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If you’re registered as an investment advisor, you’d best pay attention to the results of the North American Securities Administrators Association’s latest field examinations. According to NASAA, the examinations of 458 state-level investment advisers, conducted between January and May 2009, revealed 1,887 deficiencies in 13 compliance areas.

Specifically, NASAA found that the leading unethical business practice deficiencies involved missing or no contracts and other contract-related issues, and misrepresenting qualifications, services and fees.

Based on its findings, NASAA recommends the following “Best Practices” for investment advisors wishing to stay out of hot water:

  • 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. Back-up electronic data and protect records.
  • Prepare and maintain client profiles.
  • Prepare a written compliance and supervisory procedures manual relevant to the type of business.
  • Prepare and distribute a privacy policy initially and annually.
  • 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 website and performance advertising, for accuracy.
  • Implement appropriate custody safeguards, if applicable.
  • Review solicitor agreements, disclosure, and delivery procedures.

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