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Wednesday, January 17, 2018

Five Key Compliance Topics for Advisors in 2018

By Cory Roberson, Principal at RIA Review and RIA Consults
Going into 2018, we wanted to send a reminder to firms for their annual compliance obligations.  Last year, the SEC Office of Compliance Inspections and Examinations (OCIE) issued a risk alert titled The Five Most Frequent Compliance Topics as identified by its examinations of investment advisers.  

Link –

Five most common issues include:

1.  Compliance Rule/Annual Review (Rule 206(4)-7) or similar state rules:

What to check?

Firms should customize Compliance manuals to the firm’s business practices.

Examples of customization include specifying:

Investment strategies, all types of clients;
 Firm trading procedures;
 Valuation procedures (sources of data, fair value, illiquid securities); and
 All advisory fees.

Firms should perform Annual (or periodic) internal reviews.

Firm should update its Compliance manuals.

2. Regulatory Filings (Rule 204-1) or similar state rules:

What to check?

Firms should review disclosures on Form ADV Part 1A, 2A, and/or 2B for accuracy.

Examples of disclosures include:

Reporting custody
Regulatory assets under management,
Disciplinary history,
Types of clients and

Firms should update their Form ADV Part 1, 2A, and/or 2B when certain information becomes inaccurate and within 30 days of material change.

Firms should file their annual updating amendments within 90 days of firm’s fiscal year end (typically March 31st for firms that use calendar based FYE dates).

Firms should check their Form PF filings for accuracy (for private equity or venture capital advisors).

Firms should check their Form D filings for accuracy (for private funds, hedge funds, Reg. D exemption offerings).

3.  Custody (Rule 206(4)–2):

What to check?

Firms should detect and review procedures to adhere to Custody Rule.

Firms should review their custody procedures to determine if online access to client accounts (and can move/withdraw funds) is available.

Firms should review their custody procedures to determine if online access to client usernames and passwords is available.

Firms should review their custody procedures to determine if surprise examinations are: (1) conducted by an independent accounting firm and (2) include all client accounts for which the firm has custody.

Firms should review their custody procedures to determine if power of attorney (the ability to move, withdraw, or write checks with client funds) is available.

4.  Code of Ethics (Rule 204(A)-1):

What to check?

Firms should establish a code of ethics provision (standards of conduct) for all supervised persons.

Firms should require all supervised persons to report personal securities transactions to CCO or principal.

Firms should require pre-approval for IPO’s, private placements (Reg. D offerings) and ICO (cryptocurrency) offerings

Firms should identify all access persons for the firm (people with access to non-public information). 

Firms should specify collection/review of holdings report or personal securities transactions in procedures. 

Firms should ensure submission of transactions reports.

Firms should add description/disclosures of Code of Ethics in the Form ADV.

5. Books and Records - (Rule 204-2):

What to check?

Firms should retain all required records for a minimum of five years. Examples include: trade records, advisory agreements and general ledgers.

Firms should maintain accurate and updated books and records.

Firms should keep consistent recordkeeping procedures.

Applies to: SEC and State Registrants

Our Mission: “Serving the Investment Community to Make a Social Impact”

Cory Roberson is Principal of RIA Review, a compliance and document management portal ( - 110+ users and growing.  He is also Principal of RIA Consults -Roberson Consults Group), a consulting firm providing compliance, operations, and business development services for registered investment advisors and next-gen fintech entrepreneurs ( more than 160 SEC & State advisors clients across the US (including a few in Europe).  His third platform, RegTech Review, a FinTech compliance portal site: ( is currently in prototype stage.   

As a social entrepreneur, through his mission-driven arm SoCap Missions (, he provides business support group sessions and has volunteered for more than 15 youth programs in locations such as S. Korea, China, S. Africa, Thailand, and India.

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