Investment firms are required to meet specific regulatory standards, such as maintaining written policies and procedures. RIA compliance services help firms meet these requirements; this allows businesses to remain compliant and operate efficiently. Because regulatory standards require ongoing attention, compliance services provide continuous support throughout the year. They assist firms with preparing for regulatory examinations, maintaining effective compliance programs, and addressing evolving requirements. Here’s information about RIA compliance services and how they help firms meet regulatory standards:
Exploring Regulatory Compliance Requirements
Compliance extends beyond the initial RIA filing. Registered investment advisers (RIAs) need to create and maintain a compliance program after their firm is registered. RIA compliance services help firms complete the correct forms and make sure they register at the SEC or state level. Securities and Exchange Commission (SEC) registration is typically for larger firms that have $100 million or more in Regulatory Assets Under Management (RAUM). Smaller firms may register with the state, but varied circumstances determine if they should apply with the SEC instead. These include how many clients are in a state, where the clients live, and more.
There are various compliance obligations that RIAs need to complete, such as:
- Form ADV: This form is the base disclosure filing; firms must fill out Part 1, Part 2A, and potentially Part 2B(s) and Part 3 (Form CRS).
- Disclosures: RIAs need to provide transparent information to clients about the firm’s fees, services, and any other relevant information.
- Recordkeeping: Maintaining compliance involves keeping accurate and current records and books.
- Fiduciary Responsibilities: This is part of creating an effective Code of Ethics, and it details how advisors should interact with clients.
Building an Effective Compliance Program
An RIA compliance program is tailored for a business’s specific operations, risks, and clients; a generic template could leave gaps in its policies and procedures. The program helps identify areas of conflict, so firms are able to address them promptly. Cybersecurity is one area that needs close attention. The program should detail how the firm intends to protect client information and other sensitive data. A consultant company may perform an annual test to verify that cybersecurity protocols are working and up to date.
Small firms, or ones updating their compliance program, benefit from working with an outsourced chief compliance officer (CCO). This consultant provides support when building the compliance program and maintaining it on a day-to-day basis. Some outsourced CCOs are FINRA Series 24 registered principals, so they understand how to make sure the firm stays compliant. They may bring extensive knowledge of the industry and general practices from working at firms of varying size.
Building an effective compliance program involves creating a Code of Ethics. This details proper employee conduct, particularly in their responsibilities to and interactions with clients. The Code of Ethics should address reporting obligations; this may include personal securities transactions and holdings. A CCO can administer the Code of Ethics, review insider trading, and obtain disclosures from representatives.
Using Ongoing Compliance Support
Firms need to regularly update their compliance program to stay current with changing activities and a growing client base. Ongoing support from a consultant confirms that:
- Records are being properly maintained.
- Employees are following procedures.
- Marketing materials are reviewed.
- New activities address potential compliance risks.
Based on Rule 206(4)-7, firms are required to complete an annual review. An annual compliance review makes sure that the program’s policies are appropriate for the business’s operations. It checks for any gaps and provides solutions to strengthen compliance to better meet regulatory standards. Consultants can also perform mock examinations before the mandatory review; this allows them to address issues and improve internal controls so the firm is prepared.
Marketing and advertising support a growing business, but they should be incorporated properly into the compliance program. Continually monitoring a firm’s marketing plan helps verify that promotional materials are compliant before they reach the public. It also makes sure that endorsements and testimonials have clear disclosures about any material conflicts of interest.
Partner With RIA Compliance Services
Maintaining regulatory compliance requires ongoing review of a firm’s operations and potential gaps in policies. Customized compliance programs address a firm’s specific needs, and it shows that the procedures are actionable. RIA compliance services help firms properly review areas of interest, such as private investments and personal trading. This confirms that they meet regulatory standards and are properly serving their clients. Look for RIA services that will assist you in maintaining compliance.
