Navigating the Regulatory Maze for Registered Investment Advisors

Join Our Webinar - Maintaining Required Books & Records for a Registered Investment Adviser

2009-06-25T22:26:00.018-05:00

If an examiner of the Securities and Exchange Commission ("SEC") or a state securities regulator showed up in your registered investment adviser's office tomorrow, could you provide all of the investment advisory books and records required by the examiner? Do you even know exactly what books and records a registered investment adviser is required to maintain? Your registered investment adviser needs to be ready for an examination by a securities regulator at anytime. If your registered investment adviser is examined, you are required to provide examiners with requested investment advisory records in a timely manner (typically expected within 24 hours).

Your registered investment adviser is required to make and keep true accurate and current certain books and records relating to its investment advisory business. For SEC registered investment advisers, these required books and records are outlined in SEC Rule 204-2 of the Investment Advisers Act of 1940 ("Advisers Act"). Every investment adviser registered with the SEC should familiarize themselves with the requirements of this rule in relation to the documents and reports that need to be maintained, where and for how long the documents must be maintained, and how the documents may be maintained. Most state securities regulators impose books and records requirements similar to the SEC for state registered investment advisers, however, your registered investment adviser will need to make sure that it understands the specific requirements of its state securities regulator.

Maintenance of books and records is something that should be covered in a registered investment adviser's compliance program. It is not enough just to know what books and records your registered investment adviser needs to maintain, your registered investment adviser should perform periodic testing to make sure that it is maintaining and can provide the appropriate books and records to the securities regulator. A best practice is to have a mock examination performed of your registered investment adviser. Take the list of required books and records and test to determine if your registered investment adviser is prepared to present all required documents and if it can do so in a timely manner. This mock examination of your registered investment adviser's books and records is something that can be performed internally or you can hire RIA Compliance Consultants to perform this service for your registered investment adviser.

It is surprising how many books and records deficiencies are discovered during our mock examinations of registered investment advisers. The following are some examples of common books and records deficiencies found by our compliance consultants:

Not maintaining an order memorandum or not maintaining complete information in the order memorandum as outlined in Rule 204-2(a)(3) the Advisers Act;

Not maintaining current financial or complete financial records;

Not maintaining proper documentation to support performance advertising figures;

Not maintaining a list of all access persons for the past five years;

Not maintaining access person holdings reports;

Not maintaining records to support the firm's duty of best execution;

Not maintaining or unable to locate contracts the firm has executed with service providers, sub-advisors, or solicitors;

Not able to easily or timely produce copies of requested email records; and

Not having complete or adequate written compliance programs or having written compliance programs that are not consistent with what the firm is actually doing.

For more information and guidance on maintaining the appropriate books and records for you registered investment adviser, register for the Maintaining Required Books and Records webinar that will be presented by RIA Compliance Consultants on Thursday, July 23, 2009 from 12:00 -1:00 p.m. Central Standard Time. During the webinar you will have the ability to direct questions to our staff. The fee for the webinar is $59.95 and space is limited so sign up today!

For online payment by credit card, after completing the webinar registration page, you will be re-directed to a PayPal shopping cart for processing. If you prefer to pay over the telephone, after completing the webinar registration page, please contact Crystal Walz at 877-345- 4034 x 100.

Purchase now your webinar seat for $59.95: https://www2.gotomeeting.com/register/497126507

SEC Files Enforcement Action Against an RIA for Allegedly Failing to Disclose Compensation Received from Private Investment Funds

2009-06-21T22:20:00.009-05:00

On May 20, 2009, the U.S. Securities and Exchange Commission ("SEC") announced that it had filed an emergency civil action charging Wealth Management LLC (registered investment adviser), James Putman (founder, majority owner and Chief Executive Officer of Wealth Management), and Simone Fevola (former President and Chief Investment Officer of Wealth Management) with engaging in a kickback scheme and other fraudulent conduct involving unregistered investment pools for which Wealth Management served as a General Partner or Managing Member and as the registered investment adviser responsible for managing the pooled assets.

In the complaint, the SEC alleges breach of fiduciary duty and fraud for misrepresenting the safety and stability of the two largest private funds managed by Wealth Management while placing their clients into these investments even though they were unsuitable for some of their clients. The SEC's complaint also alleged, among other things, that Mr. Putman and Mr. Fevola each accepted at least $1.24 million in undisclosed payments derived from certain investments made within the private funds that were managed by Wealth Management, while continuing to cause clients to invest in these private funds.

The offering documents for the private investment funds disclose that Wealth Management would be compensated for managing the funds through a management fee based on a percentage of assets under management. Additionally, on four of the six funds that were managed by Wealth Management an annual "Incentive Allocation" of up to 10% (depending on the fund) of the annual profits could be paid to Wealth Management. No other forms of compensation were disclosed, and Wealth Management's Form ADV indicated that the adviser and its associated persons did not receive any economic benefits from non-clients in connection with giving investment advice to clients. No references were made regarding the payments received from the investments made within the funds.

This case should serve as a reminder to a registered investment adviser that it has a fiduciary duty to its clients. As a fiduciary, a registered investment adviser has an affirmative duty of utmost good faith to act solely in the best interests of the client and to make full and fair disclosure of all material facts, especially when the registered investment adviser's interest may conflict with the client's interest. Not providing proper disclosure to advisory clients can result in violations to the anti-fraud provisions of the Investment Advisers Act of 1940. The receipt of any form of additional compensation received from any source other than the client when the adviser is recommending a security to a client is just one example of a conflict of interest that must be fully disclosed to the client.

The Adminstration Seeks Fiduciary Duty for B/Ds -- Is the SEC Chairman Advocating the Establishment of an SRO for RIAs?

2009-06-20T13:17:00.012-05:00

In the white paper, "Financial Regulatory Reform: A New Foundation," recently released by the U.S. Treasury Department, the Obama Administration proposes the establishment of a fiduciary duty for broker-dealers offering investment advice and harmonization of the regulations of broker-dealers and registered investment advisers.

Although there were only six paragraphs concerning the broker-dealer v. registered investment adviser issue in the white paper consisting of eighty-nine pages, the few details provided by the Administration are worthy of review.

In particular, the Administration takes the position that "standards of care for all broker-dealers when providing investment advice about securities to retail investors should be raised to the fiduciary standard to align the legal framework with investment advisers." Moreover, the Administration urges that the U.S. Securities and Exchange Commission ("SEC") be empowered to prohibit forms of compensation that allow an intermediary (a broker-dealer or registered investment adviser) to put a client in a product profitable to the intermediary and not in the best interests of the client. Finally, the Administration proposes that legislation should provide simple and clear disclosure to investors regarding the scope and terms of the relationship with the intermediary and ban certain conflicts of interest and sales practices contrary to best interests of an investor.

It's noteworthy that the Obama Administration's white paper on financial regulatory reform only identifies what appear to be as deficiencies with broker-dealer regulations and its standard of care. There were no references within the Treasury Department's release to the establishment of a self-regulatory organization ("SRO") for registered investment advisers.

Although the term "harmonization of regulations" is used in the title for this broker-dealer versus registered investment adviser section of the white paper, there is actually little explanation by the Administration within the white paper as what is actually meant, except for the prohibition of certain broker-dealer conduct described above. However, the day after the Administration's white paper was released Mary L. Schapiro, Chairman of the SEC, commented about the harmonization of these regulations:
While I believe that a consistent fiduciary standard of conduct should be applied to all financial professionals providing personalized investment advice, I also understand that the fiduciary standard is not a panacea to deter all fraud against individual investors.

Unfortunately, malevolent behavior still occurs, even by those who owe a fiduciary obligation to their clients. Since I became Chairman, the SEC has brought 26 actions against Ponzi or Ponzi-like schemes, which on average is more than one action per week. Roughly one-third of those actions involved investment advisers that were subject to the fiduciary standard of care. Thus, we cannot build an effective regulatory regime around the fiduciary standard of conduct alone.

That is why more needs to be done to effectively harmonize our regulatory structure for broker-dealers and investment advisers and meaningfully protect investors. If both broker-dealers and investment advisers are providing virtually identical services to retail investors, then the regulatory regimes that govern those activities should be virtually identical as well.

Is Chairman Schapiro suggesting that an SRO should be established for the regulation of registered investment advisers or is she laying the ground work for the case that the SEC needs more resources to regulate registered investment advisers? This ambiguity could be intentional during this early stage of the legislative process and may provide the SEC Chairman more options and flexibility at a later point. Time well tell.

Proposal for SEC to Study Use Mandatory Arbitration Clauses in Investment Advisory Agreements

2009-06-20T10:20:00.003-05:00

As noted in the proposal, "Financial Regulatory Reform: A New Foundation," released by the U.S. Treasury Department earlier this week, the Obama Administration is calling for legislation to be passed giving the U.S. Securities and Exchange Commission ("SEC") clear authority to prohibit the use of mandatory arbitration clauses by broker-dealers and registered investment advisers with retail customers.

The Obama Administration explains that the legislation should provide that before the SEC may exercise such authority, the SEC be required to study "whether investors are harmed by being unable to obtain effective redress of legitimate grievances, as well as whether changes to arbitration are appropriate."

Since many federally registered investment advisers utilize arbitration clauses in their client agreements and legislation on this topic has already been introduced in Congress, registered investment advisers will need to monitor the progress of this proposal to prohibit mandatory arbitration clauses and be prepared to make comments to lawmakers.

Obama Administration Calls for Managers of Hedge Funds and Other Private Investment Funds to Register as Investment Advisers

2009-06-20T09:27:00.006-05:00

Earlier this week, the Obama Administration called for all managers of hedge funds and other private investment pools (including private equity funds and venture capital funds) that exceeded a modest asset threshold to register with the U.S. Securities and Exchange Commission ("SEC") under the Investment Advisers Act of 1940.

Moreover, the Obama Administration proposes that all investment funds managed by SEC registered investment advisers be subject to record keeping, investor disclosure and regulatory reporting requirements requirements and periodic examinations by the SEC.

As explained in the U.S. Treasury Department's proposal entitled "Financial Regulatory Reform: A New Foundation," by requiring SEC registration of investment advisers to hedge funds and other private investment funds, the SEC could monitor and assess whether these private funds have become so large, leveraged and interconnected so as to require further regulation.

It's appears that the Obama Administration proposal goes well beyond the SEC's previous efforts to regulate hedge fund managers. As these proposals to regulate private investment funds and their managers are considered in the U.S. Senate and House of Representatives, RIA Compliance Consultants will note key developments in our blog, Navigating the Regulatory Maze for Investment Advisers.

Investment Adviser Reps May Need to Update Form U4

2009-06-12T10:06:00.003-05:00

The U.S. Securities and Exchange Commission ("SEC") has approved FINRA’s proposed changes to Form U4 (Uniform Application for Securities Industry Registration or Transfer) and Form U5 (Uniform Termination Notice for Securities Industry Registration), and these changes may require an investment adviser representative to update his or her Form U4.

The changes to disclosure questions on the Forms U4 and U5 included the addition of questions about certain regulatory actions. The revised Forms have been implemented in the Central Registration Depository (CRD) system as of May 18, 2009. In summary, the changes included:

Revision of questions on the Forms U4 and U5 to enable FINRA and other regulators to more readily identify individuals and firms subject to statutory disqualification based upon willful violations (pursuant to Section 15(b)(4)(D) or (E) of the Securities Exchange Act).
Revision of question regarding the disclosure of arbitrations or civil litigations to require the reporting of allegations of sales practice violations made against a representative in an arbitration or civil lawsuit regardless of whether the representative is a named party in the arbitration or civil litigation.
Revision to the monetary threshold for reporting of settlements of customer complaints, arbitrations, and civil litigations from $10,000 to $15,000 and making a conforming change for FINRA’s description of “Historic Complaints”.
Revision to the definition of “Date of Termination” in Form U5, and enabling firms to amend the “Date of Termination” and “Reason for Termination” sections of the Form U5 subject to certain conditions and notifications.

The new questions regarding willful violations require a person to answer whether the SEC, the Commodity Futures Trading Commission or any self-regulatory organization has ever found them to have willfully violated any provision of the securities acts, to have willfully aided, abetted, counseled, commanded, induced, or procured the violation by any person of any provision of the securities acts, or to have failed reasonably to supervise another person subject to their supervision, with a view to preventing the violation of any provision of the securities acts. For these new questions related to willful violations, the reference to securities acts includes the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Commodity Exchange Act, or any rule or regulation under any of such Acts, or any MSRB rules. See http://www.sec.gov/rules/sro/finra/2009/34-59916.pdf.

These changes to the Forms U4 and U5 became effective May 18, 2009, except with regard to the new disclosure questions regarding willful violations, which become effective 180 days from May 18, 2009, which is on November 14, 2009. A registered investment adviser firm should amend its investment adviser representative's Form U4 to respond to these new questions the first time a Form U4 amendment is filed after the effective date of May 18, 2009, but in any event, not later than 180 days following that date, which is November 14, 2009.

Because FINRA acts as the operator of the IARD and CRD systems and does not have regulatory authority over investment advisers, there may be a question as to the applicability to registered investment advisers of these changes and FINRA’s deadline for responding to the new willful violation questions. It should be noted that North American Securities Administrators Association ("NASAA") filed a comment letter dated April 15, 2009 in support of the proposed changes to the Forms U4 and U5. Generally, regarding the Forms U4 and U5, investment adviser representatives have an obligation to update previously filed Forms U4 and U5 if they become aware of new disclosure information. Since NASAA has supported the proposed changes to Forms U4 and U5, it is our opinion that the individual states are likely to expect investment adviser representatives to comply with FINRA’s requirements and effective dates regarding the changes to the Forms U4 and U5. If you have any questions regarding your state’s implementation and effective dates with respect to these changes to the Forms U4 and U5, we recommend you directly contact your state securities department.

If you wish to review FINRA’s Regulatory Notice 09-23, Revised Forms U4 and U5 in its entirety, you may access that Notice at the following link: http://www.finra.org/Industry/Regulation/Notices/2009/P118706

RIA Compliance Consultants, Inc. can help your registered investment adviser prepare and submit Forms U4 or U5. Please contact us at 877-345-4034 if you are interested in discussing such services.

Join RIA Compliance Consultants for its June 18, 2009 Webinar on the Proposed Changes to the SEC’s Custody Rule

2009-06-06T15:51:00.006-05:00

Last month, the U.S. Securities and Exchange Commission ("SEC") proposed amendments to the custody rule under the Investment Advisers Act of 1940, which the SEC explained are designed to increase protections for investors who entrust their funds and securities to registered investment advisers. According to the proposed rule changes, all SEC registered investment advisers will be required to hire an accounting firm to perform an annual surprise audit. The SEC has stated that it believes the surprise accounting audits will impact approximately 9,600 of the approximately 11,000 SEC registered investment advisor firms. The surprise accounting audits would be far-reaching because they would apply to all investment advisory accounts of which the registered investment advisor has any form of custody, including the ability to deduct advisory fees.

As the registered investment adviser industry wrestles with the proposed SEC rule changes, numerous questions are being asked. What do the changes mean for registered investment advisers? What is the practical implication of the proposed SEC rule? What will the costs be to the registered investment adviser? What new procedures will a registered investment adviser need to implement? What is the definition of custody, and what does a surprise accounting audit mean?

During a June 18 webinar, our consulting team will be discussing the major changes proposed by the SEC and providing answers to the many questions being asked by registered investment advisers. During the webinar we’ll examine some of the following topics:

SEC’s intent and basis for proposing the changes;
Definition and examples of custody;
Fee deduction procedures;
Proposed annual surprise audits for all firm’s with custody and the more stringent proposal requiring PCAOB accounting firm audits;
Form ADV and client disclosure requirements; and
Guidance on what an investment advisor can do during the proposed rule’s comment period.

The webinar sponsored by RIA Compliance Consultants will take place on Thursday, June 18, 2009 from 12:00 -1:00 pm Central Standard Time. During the webinar you will have the ability to direct questions to our staff. The fee for the webinar is $59.95 and space is limited so sign up today!

Purchase now your webinar seat for $59.95: https://www2.gotomeeting.com/register/466750603

SEC Internal Compliance Program for Personal Securities Trading of Its Employees Is a Reminder to RIAs About Supervising PST of Its Access Persons

2009-06-06T15:03:00.008-05:00

In a May 22, 2009 U.S. Securities and Exchange Commission ("SEC") press release, Mary Schapiro, SEC Chairman, outlined new steps being taken to strengthen the SEC's internal compliance program to guard against inappropriate personal securities trading by SEC employees. Previous internal rules for SEC employees prohibited, among other things, short selling, carrying securities on margin, engaging in options or futures transactions in instruments whose value is derived from an underlying security, and holding a security interest in broker-dealers and registered investment advisers. These existing internal rules of the SEC also required employees to hold stock they purchased for at least six months and to report all trades within five days of receiving confirmations.

The SEC's new compliance program for personal securities trading by its employees will include the following rules:

SEC employees are required to pre-clear all of their personal securities transactions;

SEC employees are prohibited from personal trading in securities of companies under SEC investigation regardless of whether the employee has personal knowledge of the investigation;

SEC employees are prohibited from personal trading in any security if an employee has access to non-public information about a company's registration statement;

SEC employees are prohibited from owning securities in publicly-traded exchanges and transfer agents, in addition to existing prohibitions against owning securities in broker-dealers, registered investment advisers, and others directly regulated by the SEC;

SEC employees are required to authorize their brokers to provide duplicate confirmation statements to the agency; and

SEC employees are required to certify before any personal securities trade that they do not process any non-public information about the company being traded.

In addition, the SEC will require its supervisors to perform periodic reviews to ensure SEC employees are in compliance with these internal rules for personal securities trading. The SEC is also contracting with an outside firm to develop a new computer system that will enable pre-clearance and tracking of all employee personal securities transactions for compliance with these internal rules.

This release and the new internal SEC rules should serve as a reminder to all registered investment advisers of the importance the SEC places on developing strong policies and procedures to supervise personal securities transactions for all access persons affiliated with the adviser. Investment advisers should review their current personal securities transactions policies and procedures to ensure that they are meeting all requirements under SEC Rule 204A-1 and that adequate controls and monitoring policies and procedures are currently in place to ensure that personal securities transactions do not disadvantage the adviser's clients in any way or raise any fiduciary requirements or anti-fraud provisions.

If your registered investment adviser needs assistance developing written policies and procedures for supervising the personal securities transactions of its access persons, please contact RIA Compliance Consultants.

SEC Backing Off Proposal to Require Third-Party Compliance Audits

2009-05-27T14:00:00.003-05:00

According to a recent article in Investment News which quotes an official of the Financial Planning Association ("FPA"), the chairman of the U.S. Securities and Exchange Commission ("SEC"), Mary Schapiro, is backing off of her previously discussed, but never formerly considered by the SEC, proposal to require each federally registered investment adviser to engage a third-party to conduct an annual compliance audit of the investment adviser.

Based upon recent public comments by several other SEC commissioners during the past month, this report isn't surprising. The fact that the third-party compliance audit requirement was not included with the SEC's recently proposed surprise audit and SAS 70 Type II audit requirement was a telltale sign that there wasn't a consensus among SEC commissioners for this approach.

Of course, this leads to the question of what, if any, additional reform efforts will the SEC support with respect to registered investment advisers. As the SEC's position become clearer, RIA Compliance Consultants will keep its readers of these developments.

Background Information for RIAs Concerning SAS 70 Type II Audit Reports by PCAOB Accountants

2009-05-16T09:33:00.013-05:00

In light of the recent proposal by the U.S. Securities and Exchange Commission ("SEC") to require federally registered investment advisers, whose client assets are not held or controlled by a qualified custodian independent of the investment adviser, to obtain annually a SAS 70 Type II audit report from a PCAOB registered and inspected accountant, RIA Compliance Consultants thought it might be helpful to share some background information about this type of audit report and the PCAOB.

1. What is a SAS 70 Type II audit report? The American Institute of Certified Public Accountants ("AICPA") has developed auditing standards for services organizations known as Statement on Auditing Standards No. 70: Service Organizations ("SAS 70"). The Type II SAS 70 audit report (also known as a "Report on Controls Placed in Operation and Tests of Operating Effectiveness"), which will report the internal controls in place and test the effectiveness of such internal controls for period of six to twelve months.

2. What will be the scope of a SAS 70 Type II audit report under the proposed SEC rule? Based upon SEC Chairman Schapiro's speech, it appears that the scope of this SAS 70 Type II audit report will focus upon the custody controls of the registered investment adviser.

3. What is the PCAOB? According to its website, "The Public Company Accounting Oversight Board ("PCAOB") is a private-sectior, non-profit corporation, created by Sarbanes-Oxley Act of 2002, to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports."

4. How can I find an accountant registered and inspected by the PCAOB? The PCAOB maintains a list of PCAOB registered public accounting firms. Click here for a list of such accounting firms.

Once the SEC posts the text of the proposed amendments to its custody rule for federally registered investment advisers along with its interpretative release, RIA Compliance Consultants will provide its readers with further guidance about the scope of the proposed SAS 70 Type II audit report for a registered investment adviser using an affiliated qualified custodian.

SEC Proposes New Custody Rule for RIAs Requiring Annual Surprise Audits

2009-05-15T22:48:00.006-05:00

During an open meeting yesterday, the U.S. Securities and Exchange Commission ("SEC") proposed amendments to Rule 206(4)-2 which, according to the SEC, are designed to increase protections for investors who entrust their funds and securities to registered investment advisers.

The proposed changes would require all federally registered investment advisers that have custody, as defined under Rule 206(4)-2, to undergo annual surprise examinations. The surprise examinations would have to be conducted by independent accounting firms for the purpose of verifying the safety and location of client assets.

Under the proposed amendments to the custody rule, registered investment advisers that use an affiliated qualified custodian will need to undergo an additional custody control review, known as a Statement on Auditing Standards ("SAS") No. 70 Type II report, conducted by an accounting firm registered and inspected by the Public Company Accounting Oversight Board ("PCAOB"). By requiring a SAS 70 Type 2 report prepared by a PCAOB accounting firm for federally registered investment advisers that use affiliated qualified custodians, the SEC is attempting to encourage registered investment advisers to use independent qualified custodians.

Unfortunately, the SEC has yet to publish the proposed rule and interperative release, but it is expected to be available on the SEC website soon. Once it is available, the proposal will have a 60 day public comment period before the final rule is voted on by the SEC commissioners.

Based on comments by SEC commissioners during the open meeting, it does not appear that the SEC will change the definition of custody, which is defined under Rule 206(4)-2 as “holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them. Custody includes the following:

(i) Possession of client funds or securities, (but not of checks drawn by clients and made payable to third parties,) unless you receive them inadvertently and you return them to the sender promptly but in any case within three business days of receiving them;

(ii) Any arrangement (including a general power of attorney) under which you are authorized or permitted to withdraw client funds or securities maintained with a custodian upon your instruction to the custodian; and

(iii) Any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives you or your supervised person legal ownership of or access to client funds or securities.

Some of the more common types of investment adviser custody observed by RIA Compliance Consultants, Inc. include investment advisers or their associated persons serving as trustee to a client, having full power of attorney on an account, accepting stock certificates from a client to forward to the qualified custodian, providing bill paying services, and deducting fees directly from client accounts.

The surprise audit requirement appears to be far-reaching as it would apply to all investment advisory accounts of which the investment advisor has any form of custody, including the ability to deduct advisory fees directly from the accounts. What is not clear at this point is the applicability of the rule when a client of a federally registered investment adviser has a third-party deduct advisory fees on behalf of the investment adviser and client. This could include another investment advisor, a broker/dealer or other administrator. It is also not clear if the previous SEC no-action letters in place before the SEC made changes to Rule 206(4)-2 in 2004 will be reinstated. According to those SEC no-action letters, a registered investment adviser could avoid the surprise examination requirement by (1) receiving the client’s written authorization to deduct fees; (2) deliver a written invoice to the client prior to fees being deducted; and (3) confirming the actual fee deducted is listed on the client’s account statement delivered from the qualified custodian. Hopefully, the proposed rule release will clarify this issue further, but early indication is that all federally registered investment advisers that deduct advisory fees will be subject to the surprise audit requirement.

Another issue that is seems unclear is a federally registered investment adviser’s authority to disburse funds from a client’s account directly to a client or directly to another account owned by a client. While the ability to disburse funds from an account to a third-party is clearly a form of custody under SEC rules, the ability to disburse funds to the client is often not as clear. Hopefully, the SEC will comment on this issue in the proposed rule release.

The proposed changes to the custody rule would no longer allow a federally registered investment advisor to send client statements in lieu of account statements prepared by the qualified custodian. It appears that proposed rule will require the qualified custodian to send account statements directly to underlying clients. This raises a question for registered investment advisers that maintain client accounts in omnibus accounts. How will such registered investment advisers comply with the rule? Hopefully, the SEC rule release will comment on the logistical issues concerning the use of omnibus accounts.

As part of the proposed rule, federally registered investment advisers will be required to disclose their accounting firms on Form ADV Part 1. Materials findings from the audits will need to be reported to the SEC. Accounting firms will need to report the termination of their agreement with an investment advisor directly to the SEC and report, if applicable, any problems with the examination that led to the termination of its engagement.

Once the SEC releases the actual text of the proposed amendments to SEC Rule 206(4)-6, RIA Compliance Consultants will host a webinar on this topic. Please stay tuned for more developments concerning the proposed custody rule and the registration information for our webinar.

SEC Issues First Enforcement Action Against a RIA for Violation of Proxy Voting Rule

2009-05-15T22:21:00.005-05:00

On May 8, 2009, the U.S. Securities and Exchange Commission ("SEC") announced that it has initiated an administrative proceeding to charge a federally registered investment adviser and its former chief operating officer for violating the SEC’s proxy voting rule. Under SEC Rule 206(4)-6 of the Investment Advisers Act of 1940, it is considered a fraudulent act for a registered investment adviser to vote its clients proxies unless the investment adviser establishes sufficient written policies and procedures, provides a summary of those policies and procedures to all clients along with an offer to provide a complete copy of the policies and procedures, votes all proxies in the best interests of the clients, and maintains adequate books and records for all proxy votes.

According the SEC, the registered investment adviser and COO that are charged in this proceeding failed to properly disclose a material conflict of interest between the investment adviser and its clients. Further, the registered investment adviser’s policies and procedures did not include how it would address material potential conflicts of interest between the investment adviser's interests and those of its clients. In fact, disclosures made by the registered investment adviser to its clients included a statement that because the investment adviser used a third-party proxy voting service, it did not expect that any conflicts would arise in the proxy voting process. Subsequently, the named registered investment adviser is accused of not sufficiently describing its proxy voting policies and procedures to clients.

The SEC’s announcement serves as a wake up call to all registered investment advisers that vote proxies and have not developed sufficient policies and procedures. Registered investment advisers that vote proxies need to make sure that all votes are cast in the best interests of the firm’s clients, diligent books and records are retained and a process must be developed to allow clients the ability to view how votes are made. Most importantly, conflicts of interest between the registered investment adviser and client with respect to how the investment adviser votes need to be disclosed to all clients. Registered investment advisers need to fully understand the requirements of the SEC's proxy voting rule including record keeping requirements. A chief compliance officer of a registered investment adviser needs to carefully analyze its procedures and identify any potential conflicts of interest. Proxy voting disclosures to clients need to be accurate and consistent with a registered investment adviser's actual procedures so as not to be deemed misleading.

If your registered investment adviser votes clients proxies and has questions about whether its policies and procedures comply with SEC Rule 206(4)-6, please call RIA Compliance Consultants, Inc. to learn more about our proxy-voting compliance consulting services.

SEC Will Consider at May 14 Meeting Whether to Propose Amendments to Rule 206(4)-2 Requiring Audits of Investment Advisers with Custody

2009-05-13T11:00:00.010-05:00

The Securities and Exchange Commission ("SEC") has announced that the Commission will consider whether to propose amendments to Rule 206(4)-2 under the Investment Advisers Act of 1940 during its open meeting scheduled for Thursday, May 14, 2009.

The agenda posted for this SEC open meeting explains that "[t]he proposed amendments would enhance the protections provided advisory clients when they entrust their funds and securities to an investment adviser. If adopted, the amendments would require investment advisers having custody of client funds and securities to obtain a surprise examination by an independent public accountant, and, unless the client assets are maintained with an independent custodian, obtain a review of custodial controls from an independent public accountant."

There is no reference in the posted agenda to the previously discussed requirement of a third-party compliance audit of the registered investment adviser or a requirement that a registered investment adviser's senior executive certify annually the adequacy of the investment adviser's internal controls. Of particular interest to many registered investment advisers is whether any proposed audit requirement for registered investment advisers will apply to those registered investment advisers that have custody solely due to automatic fee-deduction.

Following the SEC's open meeting on May 14, 2009, RIA Compliance Consultants will provide readers with more details of any proposed amendments to the custody rules for registered investment advisers.

SEC Will Consider This Week: New Controls for Registered Investment Advisers with Custody

2009-05-12T20:21:00.012-05:00

In a speech to the Investment Company Institute last week, the Chairman of the U.S. Securities and Exchange Commission ("SEC"), Mary Schapiro, noted that "[n]ext week [the SEC] will consider rule proposals for significant enhancements to controls around investment adviser custody of customer assets, to reduce dramatically the possibility that frauds like Madoff might happen again at a registered broker-dealer or investment adviser."

Based upon this speech and other public comments by SEC Chairman Schapiro, RIA Compliance Consultants presumes that the SEC will be considering this week proposals to require registered investment advisers to undergo a surprise audit as to custody of client assets, to complete a third-party compliance audit, and to certify through a senior executive the adequacy of the registered investment adviser's internal controls.

Once the SEC announces these proposed investment adviser rules, RIA Compliance Consultants will provide a detailed analysis to its readers.

SEC Commissioner Calls for Uniform Fiduciary Duty for All Financial Professionals & Harmonization of Regulations for BDs & RIAs

2009-05-06T20:51:00.012-05:00

In a recent speech, Commissioner Elisse Walter of the U.S. Securities and Exchange Commission ("SEC") advocated that every financial professional should act as a fiduciary and the regulations of broker-dealers and registered investment advisers should be harmonized.

The premise underlying SEC Commissioner Walter is the belief "... that regulation of a financial professional should depend on what she does, not what she calls herself or how she is paid .... and retail investors should not bear the burden of understanding distinctions between financial professionals that have become increasingly less relevant over the years."

In particular, the following examples were offered by SEC Commissioner Walter as to how the regulations of broker-dealers and registered investment advisers could be harmonized through either the SEC's rule-making process under current statutory authority or legislative changes to the Securities Exchange Act of 1934 and Investment Advisers Act of 1940:

Registration Process - a unitary registration system for broker-dealers and registered investment advisers with a vetting process whereby the registrant evidences capacity to carry on its proposed business;
Licensing & Continuing Education - proficiency tests and continuing education requirements for all financial professionals;
Disclosure Obligations - a uniform disclosure document explaining conflicts of interest (as currently with registered investment advisers) and central database of disciplinary and employment history of firms and their personnel;
SRO Membership - a requirement that all financial professionals belong to a self-regulatory organization;
Remedies - aggressive enforcement by the SEC and a non-mandatory arbitration venue (via an SRO) for clients of all financial professionals; and
Uniform Standard of Conduct - a requirement that every financial professional act as a fiduciary, based upon the scope of the engagement and type of client, coupled with business practice rules.

At this point, it is unclear as to whether there is a consensus among a majority of the Commissioners of the SEC for this type of change and how Congress will weigh in on the regulation of financial professionals. RIA Compliance Consultants will continue to monitor and report developments to its readers.

FPA Questions SEC's Proposed Suprise Custody Audits, Third-Party Compliance Audits & Internal Controls for RIAs

2009-05-04T23:54:00.011-05:00

In a recent letter to Mary Schapiro, Chairman of the U.S. Securities and Exchange Commission ("SEC"), the Financial Planning Association ("FPA") questions SEC Chairman Schapiro's potential changes to the custody rule for registered investment advisers, third-party compliance audits of registered investment advisers, and internal controls of registered investment advisers.

With respect to the SEC Chairman's proposed surprise audit of registered investment advisers with custody of client assets, the FPA noted that it is under the impression that the third-party surprise audit requirement proposed by the SEC Chairman would apply to registered investment advisers that custody assets with qualified custodians since a registered investment adviser is already subject to a surprise audit requirement under SEC Rule 206(4)-2 if the investment adviser has custody of client assets.

The FPA explained that if the SEC intends to apply the surprise audit requirement to registered investment advisers that custody client assets with a qualified custodians, the costs of such a surprise audits will be significant, especially for small investment advisers. Moreover, the FPA argued that a surprise audit will not offer any benefit to clients since the qualified custodian already possess the assets and sends a statement to the client.

In response to SEC Chairman's proposed third-party compliance audits of registered investment advisers, the FPA asks whether such compliance audits will include only registered investment advisers with custody or a broader segment of investment advisers. The FPA is concerned that such a requirement would cause registered investment advisers to incur significant expense with no benefit to clients since the FPA believes that the problems of the financial marketplace are not due to registered investment advise failing to maintain effective compliance progra. As an alternative, the FPA supports increasing the resources of the SEC so its staff may evaluate registered investment advisers' compliance programs.

Concerning the proposed requirement that a senior officer of the registered investment adviser attest or certify to the sufficiency of the registered investment adviser's internal controls to protect client assets, the FPA asserts that the cost of such certification would not justify the protection afforded to clients. The FPA believes the senior officer will expend significant resources to reassure him or herself of the adequacy of the compliance controls, which will be especially burdensome for small registered investment advisers.

As more details emerge about the SEC's proposals for registered investment advisers, RIA Compliance Consultants will update its readers on these developments.

SEC Considering Rules Requiring Surprise CPA Exams and Third-Party Compliance Audits for Registered Investment Advisers

2009-04-27T17:23:00.003-05:00

In a speech today, Mary L. Schapiro, Chairman of the U.S. Securities and Exchange Commission (“SEC”), announced that in response to the recent investment scams, the SEC will consider, in short order, a new proposal for strengthening the controls over investment advisers with custody of client funds and securities.

Ms. Schapiro explained “that this proposal will include a consideration of ‘surprise’ examinations by a certified public accountant, and a requirement that investment advisers undergo third-party compliance audits.” Unfortunately, she did not clarify whether custody due solely to automatic fee deduction would trigger the requirement of a third-party compliance audit.

Additionally, Ms. Schapiro noted that she has requested that the SEC draft a rule requiring a senior officer of an investment advisor with custody to “certify that controls are in place to protect investor assets.”

Once the actual text of these proposed rules are released by the SEC, RIA Compliance Consultants will provide its readers with more details and analysis. Stay tuned.

Nebraska Fines B-D Rep $3,000 for Advertising Violations - IA Reps Should Make Sure Any Advertising Discloses Advisory Services Offered Through RIA

2009-04-25T16:50:00.004-05:00

A recent consent order in a matter before the Nebraska Securities Bureau serves as a reminder to registered investment advisors of the necessity to clearly and accurately disclose that advisory services are offered by the registered investment advisor and not an outside business activity of the investment advisor representative.

According to the consent order, the individual, who was subject to this enforcement proceeding by the Nebraska Securities Bureau, advertised an upcoming savings and retirement protection seminar through a flyer that described the seminar as sponsored by the individual's outside business activity and listed himself as a registered representative of his outside business activity, which was not a registered entity with the Nebraska Securities Bureau; however, the flyer also described the individual as a registered representative of a broker-dealer and noted the outside business activity and the broker-dealer were not affiliated, which were both accurate statements. The Nebraska Securities Bureau concluded in the consent order that the individual violated NASD Rule of Conduct 2210(d)(2)(C), in that the flyer did not identify the products and services of the broker-dealer. The Nebraska Securities Bureau fined the individual in question $3,000 for this and other violations.

Although this enforcement proceeding by the Nebraska Securities Bureau was against a registered representative of a broker-dealer, this type of problem can often be found with a registered investment advisor that lacks a clear disclosure about the services offered by the firm as compared to the outside business activities of its investment advisor representatives. If you would like compliance assistance with your registered investment advisor's advertising, please contact RIA Compliance Consultants.

Did your Firm Renew for 2009? Don’t Forget About Form ADV Annual Amendments

2009-01-12T10:16:00.003-06:00

Now that we are into a new year, can you confirm your registered investment advisor and its advisor representatives were properly renewed for 2009? Every year there are always a handful of firms that fail to submit renewal fees through the IARD system in a timely fashion. Therefore, even if you think the renewal payment was sent in time, please make sure your firm retrieves the Final Renewal Statement and confirms it is renewed for calendar year 2009.

The Final Renewal Statement will indicate one of the following.

1. Paid in Full - If your firm's renewal statement has been paid in full, the renewal process is complete. You should print a copy of the Final Renewal Statement and file it with your firm's books and records.

2. Outstanding Balance Due or Refund - If your firm paid its Preliminary Renewal Statement in full, but added or removed a state registration or advisor representative during the time period between the posting of Preliminary Renewal Statements and the 2008 shut down period, then your firm will either have additional fees due or receive a credit. If additional fees are due, the fees should be submitted as soon as possible, but must be posted by February 4, 2009. If your firm received a refund, the credit will automatically be transferred to your firm's Daily Account.

3. Failed to Renew - If a firm's Final Renewal Statement indicates Failed to Renew, FINRA did not receive the total balance due on the Preliminary Renewal Statement prior to the December deadline. In these cases, it is standard operating procedure for FINRA to automatically terminate all advisor representatives of the firm. In addition, over thirty states have given FINRA the authority to automatically terminate a registered investment advisor that does not pay its renewal fees in full. If your firm's statement indicates Failed to Renew, you will need to contact each state jurisdiction immediately to determine an appropriate course of action.

Finally, it is important to make sure your registered investment advisor submits all required documentation directly to the states where the firm is registered.

If your firm failed to renew through IARD, it is important to take immediate action to rectify the situation. Give us a call to find out more about our re-registration services and pricing.

In addition to confirming your firm’s registration renewal for 2009, we would like to remind registered investment advisors of their responsibility to prepare and file their Form ADV Part 1 Annual Amendment. The Annual Amendment must be filed no later than 90 days after a registered investment advisor firm’s fiscal year ends. Many registered investment advisors use December 31 as their fiscal year end which results in a March 31, 2009 deadline to submit the Annual Amendment through the IARD system. The Annual Amendment is used to update information such as number of clients, number of accounts, and assets under management. We recommend registered investment advisors closely review the entire Form ADV to confirm all information is correct.

Please contact RIA Compliance Consultants, Inc. if you are interested in our Form ADV Annual Amendment services. We would also like to invite you to attend our upcoming webinar on January 15, “Preparing the Form ADV Part 1 Annual Amendment”. The registration fee for our webinar is $59.95. During this webinar, RIA Compliance Consultants will discuss the items that must be updated as part of the Form ADV Part 1 Annual Amendment including how securities regulators expect a registered investment advisor to calculate assets under management. In addition, we will review common mistakes when preparing the Form ADV Part 1 Annual Amendment. Finally, we will cover some common examples of material changes that should have been updated to your Form ADV during the past year.

Fourth Quarter 2008 Form 13F Reports – RIA Compliance Consultants 13F Webinar on January 8, 2009

2009-01-02T10:38:00.003-06:00

According to Section 13(f) of the Securities Exchange Act of 1934, an institutional money manager that exercises investment discretion over $100 million of Section 13(f) securities must submit quarterly 13F reports to the SEC. Registered investment advisors meet the definition of institutional money manager and are therefore subject to this rule when they exercise investment discretion over $100 million of Section 13(f) securities. A registered investment advisor that does not currently submit Form 13F reports with the SEC needs to make sure it did not exceed the 13(f) discretion threshold of $100 million at any time during calendar year 2008. To the extent your firm did exceed $100 million of Section 13(f) securities any time during 2008, your firm will need to file its first Form 13F by February 14, 2009. The Form 13F must report ending values as of December 31, 2008. Your firm will then need to submit filings for quarters ending March, June, and September 2009, even if the market value of your Section 13(f) securities falls below the $100 million level. Current Form 13F filers that exceeded $100 million of discretionary 13(f) securities on the last trading day of at least one month during the year 2008 must also submit their fourth quarter 2008 reports by February 14, 2009.

Does your firm need to begin preparing and/or continue submitting Form 13F to be in compliance with Section 13(f) of the Securities Exchange Act of 1934? If you are unsure or would like to learn more about the reporting of Section 13(f) securities please join us for our webinar, “Filing 13F Reports”, next Thursday, January 8, 2009 at 12:00 CST. The registration fee for our webinar is $59.95. The goal of our webinar is to help attendees better understand when a registered investment adviser is required to file the Form 13F. We will discuss how a filing firm can establish an EDGAR account, examine what is and what is not a Section 13(f) security, and then closely review the Form 13F instructions.

If you are unable to attend the webinar, please contact us to learn more about our Form 13F consulting services which focus on helping registered investment advisors understand the Section 13(f) requirements and then help your investment advisor to determine whether your firm is required to file a Form 13F. Through strategic alliances with EDGAR filing firms, we can help your firm establish an EDGAR account and timely submit all required reports.

New CFP Disclosure Requirements - Enforcement Date of January 1, 2009

2008-12-29T14:13:00.001-06:00

In May 2007, the Certified Financial Planner Board of Standards, Inc. (“CFP® Board”) announced the adoption of updated Standards of Professional Conduct. The Standards had an effective date of July 1, 2008 and have an enforcement date of January 1, 2009.

One of the updates made by the CFP® Board is the requirement that CFP® certificants provide specific disclosures to clients and prospective clients. The CFP® Board has indicated that the new disclosure requirements will ensure that clients and prospective clients are provided with contact information for their CFP® certificant, a description of the services being provided, any conflicts of interest the CFP® certificant may have, and the costs to the client associated with the services being provided, which costs include compensation arrangements, financial or investment product fees, or other costs related to transactions or advice provided by the CFP® certificant.

RIA Compliance Consultants, Inc. can help you review the adequacy of your existing disclosures for compliance with the CFP® disclosure requirements and as necessary, create customized disclosures in order to comply with the CFP® disclosure requirements. Please contact us if you have questions or need assistance regarding the CFP® disclosure requirements.

New Areas of Focus by SEC Staff during Investment Adviser Examinations

2008-11-07T15:48:00.007-06:00

During a recent speech to the National Society of Compliance Professionals, an official of the U.S. Securities and Exchange Commission (“SEC”) identified certain new areas of focus by the SEC examination staff due to these volatile markets.

Based upon this unofficial guidance by an SEC official, the following are some new questions that your registered investment adviser should address in light of recent events.

Portfolio Management – Are the portfolio managers of your registered investment adviser trading more aggressively to make up recent performance losses? Are the written investment objectives of your clients consistent with the investment strategies currently utilized in your clients’ accounts?

Financial Controls – Is your registered investment adviser in a precarious financial position that hasn’t been disclosed to your clients?
Valuation – Do your investment advisory clients know the current fair market value of their investments? If using a broker’s quote or pricing service, does your registered investment adviser understand and has it disclosed to the client whether the quote or price is based upon an actual transaction or another methodology? Does your registered investment require the use of multiple pricing sources for difficult to price securities?
Sales of Structured Products – Does your registered investment adviser adequately disclose all of the risks associated with such products?
Controls at Acquired/Merged Investment Adviser – If your registered investment adviser merges with or acquires another investment adviser, has your investment adviser taken steps to ensure compliance controls and processes are implemented at the acquired/merged investment adviser?
Money Market Funds – Have you evaluated whether the portfolios of the money market funds of your clients are credit worthy? Are your clients utilizing money market funds that are stretching too far for returns with undisclosed risk?
Short Selling – If your registered investment adviser is presently a 13F filer, has it filed a Form SH for any opened or closed short position? Is your registered investment adviser utilizing false or misleading information to manipulate prices of securities?
Acts of Desperation – Is your registered investment adviser concealing losses, inflating revenues/profits or avoiding the delivery of bad news? Is your investment adviser’s chief compliance officer reminding your investment adviser’s associated persons of their ethical obligations during these challenging periods?

The SEC examination staff also will be focusing upon other compliance risks facing investment advisers that we’ve previously discussed. Please click here for more information these other areas of focus.

In the event that your registered investment adviser is preparing to conduct its annual review of its compliance policies and procedures before the end of the year, RIA Compliance Consultants would encourage your firm to address these particular questions as part of its annual review.

If you need assistance in reviewing and assessing your registered investment adviser’s compliance program pursuant to SEC Rule 206(4)-7, please enroll in our webinar, “Conducting an Annual Review,” scheduled for Thursday, November 13, 2008 from 12:00 p.m. to 1:00 p.m. CST.

In order to participate in this one-hour webinar, you will need to purchase a seat by paying a registration fee of $59.95 to RIA Compliance Consultants. You can start the webinar registration process by clicking below. Please contact Annie Dilocker with RIA Compliance Consultants at 877-345-4034 in order to process your credit card payment for the registration fee.

SEC Takes Disciplinary Action Against Chief Compliance Officer

2008-11-07T15:29:00.001-06:00

The U.S. Securities and Exchange Commission (“SEC”) recently issued an order bringing sanctions against an individual who had served as an investment adviser’s president and chief compliance officer regarding investment pools operated by an associated person of the investment adviser.

According to the SEC, beginning in 2002, the investment adviser, Battery Wealth Management, Inc. (“Battery”), recommended to its clients that they participate in investment pools controlled by an individual, who was also a vice president, co-founder and co-owner of Battery (“Associated Person”). In total, the Associated Person and the individual serving as both the president and chief compliance officer of Battery (“President/CCO”) sold $6.5 million of investments in the Associated Person’s investment pools to 25 clients of Battery. The Associated Person’s investment pools had provided quarterly statements to investors reporting positive performance and increasing asset values. The President/CCO had reviewed those quarterly account statements before recommending that Battery’s clients invest in the pools. The President/CCO had also reviewed the Associated Persons website, which was provided as a direct link from Battery’s website and which website was found to have falsely misrepresented that the investment pools held over $134 million in assets.

In its examination of Battery, the SEC staff determined that brokerage account statements reporting account valuations in the various investment pools of the Associated Person were forged and that approximately $90 million of investor funds were unaccounted for or lost. The SEC determined that the Associated Person had misappropriated or lost assets invested in the pools.

The SEC found that the President/CCO had ignored facts that strongly suggested the Associated Person was likely deceiving advisory clients, and that he did not follow up on red flags or inquire whether the investment pools were investing consistent with representations made to investors. For example, the SEC’s order indicates that the President/CCO was aware of information indicating that the Associated Person’s reported income was insufficient to support the Associated Person’s “lavish” lifestyle and that the Associated Person’s loan pool consisted of personal notes issued by the Associated Person -- in many instances to IRA accounts of Battery’s clients. The SEC’s order states that the President/CCO knew of the Associated Person’s personal cash flow problems, that property owned by the Associated Person was facing potential foreclosure and that an investment pool of the Associated Person had failed to comply timely with a redemption request made by a Battery client.

The SEC found Battery to have willfully violated Sections 206(1) and 206(2) of the Investment Advisers Act by advising its clients, through the Associated Person and President/CCO, to invest in the investment pools while the Associated Person knew the pools did not have the claimed assets and that the purported returns were fictitious and the President/CCO took no steps to verify the pools’ assets or returns. Furthermore, the SEC order states that Battery’s compliance manual “did not address the particular risks of Battery’s business, particularly the conflicts of interest resulting from [the Associated Person’s] operation of a side business that offered and managed pooled funds that [the Associated Person and President/CCO] recommended to Battery’s advisory clients” and also that the compliance manual did not address conflicts of interest regarding borrowing monies from advisory clients. The President/CCO was found responsible for the manual and its deficiencies.

The SEC ordered that the President/CCO be barred from association with any investment adviser with the right to reapply for association after one (1) year and pay a civil penalty of $40,000 and disgorgement and prejudgment interest of $6,731.

As a chief compliance officer of an investment adviser, it is critical that you both identify and follow up on red flags alerting of compliance violations. Additionally, it is critical that conflicts of interest are adequately disclosed to advisory clients and that your investment adviser implement supervisory procedures to mitigate such conflicts. If you have questions about your investment adviser’s compliance obligations, RIA Compliance Consultants can help. You can reach us at 877-345-4034.

IARD System Fee Waiver

2008-11-05T16:50:00.000-06:00

In a joint statement issued last week, the SEC and NASAA announced that they will continue the waiver of the IARD initial and annual system fees applied to registered investment advisor firms. The fee waiver will continue through July 31, 2009. NASAA also announced a waiver of the annual $30 system fee for investment adviser representatives. Initial fees for investment adviser representatives will be waived beginning January 1, 2009 and go through December 31, 2009. The fee waiver does not apply to state registration and licensing fees. States will continue to collect initial and annual fees for firms and representatives via the IARD system. Preliminary Annual Renewal Statements which detail the state fees charged to registered investment advisers will be available via IARD on Monday, November 10.

RIA Compliance Consultants is offering a special package that includes assistance with completing both the annual renewal requirement and filing the Annual Amendment to Form ADV Part 1. For the low price of $450, RIA Compliance Consultants will help your firm confirm its registration status in all necessary jurisdictions and confirm the registration status of all investment advisor representatives for 2009. You will also receive an Annual Amendment Questionnaire for you to complete so that we may prepare and file your Form ADV Part 1 Annual Amendment within the necessary timeframe.

Engagements received after November 15 are subject to availability so complete and return the Agreement for Services today! Click here to view the Agreement for Services.

*If you are an existing RIA Compliance Consultants hourly retainer client, you do not need to complete the Agreement for Services. Simply contact your lead consultant to sign-up for this service.

**If you are an RIA Compliance Consultants annual retainer client, this service is included in your retainer agreement. To learn more about our retainer services and fees, please contact us at 877-345-4034.

SEC to Consider Final Amendments to Form ADV Part 2 in December 2008 - Start Preparing by Joining Our Free Webinar on Thursday, November 19, 2008

2008-11-05T16:37:00.003-06:00

According to the Investment Adviser Association (IAA), the U.S. Securities and Exchange Commission (SEC) recently sent a letter to IAA Executive Director David Tittsworth. The letter, signed by SEC Chairman Christopher Cox, stated that the “tentative schedule for consideration of final amendments to Form ADV, Part 2 is early December 2008.” The letter went on to state the SEC will be considering the approximately 80 comment letters it received. The letter did not give an indication of when the new Form ADV Part 2 rule would be passed. However, the letter is a clear indication that the new Form ADV, Part 2 is still on the SEC’s short-term agenda.

As we have previously discussed, the SEC originally proposed material changes to the disclosure and format requirements of the Form ADV Part 2 for a registered investment adviser in April 2000. That proposal was never adopted and in March of this year the issue was re-proposed. If the SEC adopts the proposed new Form ADV Part 2 in whole or part, it undoubtedly will take a significant amount of effort by a registered investment adviser over relatively short time period to meet the proposed requirements. However, a registered investment adviser can begin preparing for this possible regulatory change by taking the time now to more fully understand the likely changes and impact of a new Form ADV Part 2. RIA Compliance Consultants encourages registered investment advisor firms to read the proposed rule, particularly the new Form ADV Part 2 instructions. You can view the proposed rule by clicking here. The proposed instructions begin on page 123.

Take the opportunity to better understand the details of the SEC's proposed new Form ADV Part 2 by attending our complimentary webinar, Understanding the SEC's Proposed New Form ADV Part 2, on Wednesday, November 19, 2008 from 12:00 p.m. to 1:00 p.m. CST. Please click on the link below if would you like to attend this free webinar. For more information about this webinar, you may also call Annie Dilocker at 877-345-4034.