Small or medium Registered Investment Adviser (RIA) firms are required to have a compliance program. A regulatory consultant company is able to assist a firm by providing RIA compliance services; this helps prevent securities violations and other potential consequences. Creating a scalable compliance program allows for adjustments, allowing the company to remain compliant as it grows. Here is more information about building a scalable compliance program for a growing RIA:
Finding a CCO
An RIA firm is required to file with the Securities and Exchange Commission (SEC) or a state securities regulator. This depends on the amount of assets under management; firms that have $100 million or more register with the SEC, while smaller firms register with the state. A Chief Compliance Officer (CCO) offers RIA compliance services. They help with the registering process, where they create and maintain the firm’s compliance program. CCOs remain informed about regulatory requirements; they help the firm stay compliant with state laws and the SEC as needed. A firm can choose to have an in-house CCO and receive additional support from a regulatory consultant company or outsource the role as needed.
Compliance requirements include addressing fiduciary responsibilities, cybersecurity practices, and managing potential conflicts of interest. CCOs also perform day-to-day compliance responsibilities, serving as the Web Investment Advisor Registration Depository administrator. A CCO helps put together a compliance timeline and calendar; this allows them to make sure the firm completes the required activities and meets deadlines. They also make sure to receive required representative disclosures. The internal team should be regularly educated on compliance topics as regulations change and the firm grows. A CCO helps provide internal training meetings, and they can organize committee meetings.
Creating Manuals and Policies
Creating a compliance manual is required for registering with the Securities and Exchange Commission. A CCO helps develop a customized compliance manual for the firm; they can also maintain the manual. As regulations and the firm change, the manual should be updated. Building a program also includes creating compliance policies, such as the Code of Ethics, the Insider Trader Policy, and the BCP. A CCO also helps with revising policies and procedures as needed.
Installing Regular Monitoring
Regular monitoring and approval practices work to keep the firm in compliance. The firm’s CCO is responsible for monitoring the insider trading policy and reviewing and approving firm advertising. Electronic communication, such as emails, should be randomly reviewed; this makes sure they are following company policy.
Rule 206(4)-7 of the Investment Advisers Act requires SEC-registered advisers to review the compliance program. A CCO completes and documents this annual review of the program, identifying areas for improvement. This may include:
- Checking the compliance manual
- Looking for potential conflicts of interest
- Confirming that books and records are following the transparency policy
- Making sure all disclosures are accurate
Some regulatory consultant companies offer annual review services, performing assessments that align with a customized risk profile. As part of the annual review, they check prior examinations and corrections to see whether the company has adhered to best practices. Gaps may develop as the firm changes, and the annual review provides a way to identify them and check compliance efficiency. Exit interviews and a final report offer detailed findings and recommendations. CCOs also help provide guidance for SEC examinations. They conduct mock exams to help prepare the firm; they also manage communication with examiners before and afterward.
Practicing Form Management
A CCO helps with creating documents, such as the ADV Parts 1 and 2 forms, for SEC registration. ADV forms, such as Form ADV Part 2A, need to be regularly submitted, with updated forms being sent within 120 days of the end of the year. A CCO is also able to file annual ADV forms and make amendments as needed; completing Form ADV accurately helps prevent any delays with SEC application. They also complete state notice filings and Section 13 filings.
Learn More About RIA Compliance Services
Building a scalable, regularly updated compliance program helps prevent potential SEC issues, such as insufficient oversight or inadequate policies. An outsourced CCO from a regulatory consulting company informs the RIA firm of industry trends, and they help maintain records. To learn more about RIA compliance services, find a regulatory compliance firm today.
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