Cybersecurity continues to be registered investment advisors’ top compliance challenge, with 81% of advisors polled in a just-released Investment Adviser Association survey placing it at the top of their list, the fifth year cyber has held the spot, and nearly two-thirds indicating that their firms increased compliance testing in this area over the past year.
IAA’s 13th annual poll, the 2018 Investment Management Compliance Testing Survey, conducted jointly with ACA Compliance Group, found that other compliance hot topics include complying with the Securities and Exchange Commission’s Advertising Rule as well as the new disclosures relating to separately managed accounts on Form ADV.
The poll found that advisors are concerned about findings raised in the SEC’s September 2017 Risk Alert, which detailed deficiencies examiners found in Advertising Rule compliance. Advisors are also bracing for the SEC’s potential amendments to the Advertising Rule.
As Sanjay Lamba, IAA’s assistant general counsel noted in a recent legal brief, the agency’s Advertising Rule “has been on the books substantially unchanged for nearly six decades!” The good news, he says, is that the SEC’s regulatory priorities for 2018 include amending the rule to “enhance marketing communications and practices by investment advisors.”
Other areas of concern related to custody, identified by 28% of survey respondents, as well as issues relating to privacy.
Compliance professionals at 454 investment advisory firms participated in the survey.
The survey found that the majority of CCOs (66%) continue to wear more than one hat, with 20% also serving in some legal capacity.
“Among the many key takeaways of this year’s survey is that the job of a CCO is becoming more complex and varied, as demonstrated by the wide range of legal and compliance areas CCOs are responsible for, with new ones being added every year,” said Karen Barr, IAA’s president and CEO, in releasing the survey findings.