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In addition, advisors must not make materially misleading statements related to recommendations; they should make required disclosures prior to engaging in a recommended transaction, establish and enforce policies and procedures, and complete the retrospective review report.

Timing

The retrospective review, report and certification must be completed at least annually and no later than six months following the end of the period covered by the review. A review covering the calendar year 2022 must be completed by or before July 1, 2023.

The investment advisor must retain the report, certification and supporting data for six years and provide these documents to a DOL or Internal Revenue Service official within 10 business days of a request.

Written Report

The methodology and results of the retrospective review must be reduced to a written report. The written report must:

• Describe the policies and procedures in place at the investment advisory that ensure compliance with the requirements of the Impartial Conduct Standards;
• Explain violations of the investment advisor’s compliance policies and procedures during the review period, including a description of the issue, how the issue was detected and how the issue was remediated; and
• Disclose whether any self-corrections were required, as discussed below, as well as how the policies and procedures were modified, if at all.

The written report should be provided to one of the investment advisor’s senior executive officers, who must then make certain certifications related to their review of the report. These certifications include:

• The senior executive officer has reviewed the report of the retrospective review;
• The financial institution has in place policies and procedures prudently designed to achieve compliance with the conditions of the exemption; and
• The financial institution has in place a prudent process to modify such policies and procedures as business, regulatory and legislative changes and events dictate, and to test the effectiveness of such policies and procedures on a periodic basis, the timing and extent of which is reasonably designed to ensure continuing compliance with the conditions of the exemption.

Thomas D. Giachetti is chairman of the Investment Management and Securities Practice of Stark & Stark. A former investment banker and NASD registered representative, Giachetti’s legal practice is devoted to investment-related matters, including the representation of investment advisers, financial planners, broker-dealers, CPA firms and registered reps.

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