Last week at the IA Compliance Best Practices Summit in Washington, DC, Lori Richards, the Director of the SEC's Office of Compliance Inspections and Examinations (OCIE) spoke on steps that investment advisory firms need to take now to ensure their compliance programs are effectively dealing with many of the issues in today's environment. When the SEC senior staff speaks on issues such as this, you can believe that these are issues that the examiner staff will be reviewing. Here is a summary of Ms. Richards' four key areas, but compliance officers for RIAs ought to take 4 minutes and read her speech:
1. Disclosure. The SEC is reverting to the main focus of securities regulation: disclosure. Here, RIAs should be careful that all disclosures are made to their clients, including any conflicts of interests.
2. Custody. Are your advisory clients' assets safe? How do you know? With recent headline-grabbing articles on ponzi schemes and other fraudulent conduct, Ms. Richards indicated that SEC examiners will be focusing on controls over custody of assets.
3. Performance claims. Are yours accurate? They better be.
4. Resources. Does your compliance program have adequate resources devoted to it to ensure that the RIA carries out an effective compliance program?
Forewarned is forearmed. Don't wait until state or SEC examiners are in your firm asking questions about these issues.
