Podcast Center
Video Center
Webcasts
Resource Center
Events
February 01, 2011 at 07:00 PM
1. Has the firm determined whether or not it has custody as defined under amended Rule 206(4)-2? I suspect that many firms have not. I appreciate that the amended rule is very confusing, and that additional SEC guidance needs to be forthcoming, but it is not too late to comply—tardy compliance is better than non-compliance.
2. Is the firm prepared to finalize and file its new written disclosure statement on new Form 2A by March 31? My strong recommendation is for firms who have not previously sought experienced assistance to do so. Clear and concise disclosure of any actual or potential conflicts of interest must be provided.
3. Has the firm updated its policies and procedures to reflect regulatory changes, including custody, new written disclosure statement, political contributions and other Dodd-Frank issues?
4. Do the firm’s policies and procedures reflect the firm’s operations or have they been purchased from a “one size fits none” consulting firm? If the latter, the firm must review and revise to reflect the firm’s business practices. That is not to say that the firm should not engage or disengage such providers, but only that it requires some additional review to ensure they reflect the firm’s practices.
5. Is the firm adequately prepared for a regulatory exam? The scope of the regulatory examination process continues to become increasingly more complex. However, if the firm is adequately prepared to answer all of the issues that will be raised by the SEC during the examination process, the exam should not at all be a painful or worrisome experience! As I write, I am on a plane to the southeastern part of the country to prepare a firm for an exam. Please continue to be mindful that issues uncovered during mock exams conducted by non-law firms are discoverable by regulators and plaintiff’s lawyers, especially any written reports regarding the same.
6. Has the firm continued to reconfirm client investment objectives on an ongoing basis? Does the firm use an Investment Policy Statement? If so, has it been updated to reflect any changes? Correspondingly, does the firm use a “canned” initial client questionnaire? Questions such as how much of a market decline you could afford or tolerate should be reconsidered. Why? Because most advisors never go back and review such statements subsequent to the client engagement. Clients never respond by indicating that they can withstand or tolerate large fluctuations or losses—most firms greatly exceeded those parameters during the 2008-2009 correction.
