The Challenges of Compliance for State-Registered Advisers

Are you the designated chief compliance officer of a state-registered investment advisory firm? If so, you must be clocking many extra hours these days! It seems the state regulators are just as busy as the Securities and Exchange Commission. New Jersey, Massachusetts and Nevada have all introduced their own Fiduciary duty standard rules. The North American Securities Administrators Association (NASAA) introduced a model act to protect vulnerable adults. In addition, NASAA members voted to adopt an information security model rule package. All this and we haven’t even mentioned the potential implications of the SEC’s new Form CRS on your workload.

Add to that state regulators’ increased frequency of regulatory examinations and you have yourself a nearly unmanageable situation! State CCOs have to work harder on the limited budget that compliance is allotted. And while keeping ahead of the regulations, many investment advisers’ CCOs are also the primary adviser meeting clients and trying to grow their business. But growing your business may be hindered if your compliance program is not up to state standards.

Here are a few topics state CCOs should be focusing on, along with some helpful hints to further guide you in strengthening your compliance program:

  • Be aware of the Senior Safe Act and provide your entire staff with training.
  • Working with Senior Clients and Vulnerable Adults is a hot topic! Have policies and procedures in place covering this topic: trusted contact forms, SARs reports, etc. Familiarize yourself with the Serve Our Seniors website!
  • Cybersecurity is everyone’s concern, but mostly the CCOs these days. Get to know the model NASAA information security and privacy rule and implement protocols to protect your firm. The model rule requires investment advisers to adopt policies and procedures regarding information security.
  • Regulatory examinations are challenging, so prepare in advance for when the big day comes.
  • Find a resource to keep on top of new regulations.
  • Monitor for more than five clients in a new state (or other exceptions) – you may have triggered a new state registration and may be acting as an unregistered adviser in that state. Yikes!
  • Figure out if you are keeping all the required books and records. Are you aware that NASAA amended the recordkeeping requirements for investment advisers mode rule? If not, it’s a great exercise to go through the list and ensure you know where the records are located for ease of reference.

So how does one stay ahead of all these moving parts? The reality is that a single blog post can’t address all of the many things that you need to stay ahead of as a chief compliance officer! Participation in our complimentary monthly ComplianceCasts is a great first step toward laying the building blocks of a successful compliance program. You can check out our archive here. Additionally, Ascendant, the compliance services arm of CSS, provides step-by-step compliance with the many obligations of a state-registered investment adviser. If you do not have that great partner, have a look at our service offerings and give us a call!

If you need more help on Form CRS, visit our Ultimate Guide to Form CRS page, with information about the regulation, as well as our solution.


Subscribe to CSS Blog

CSS frequently publishes blog posts which are written by our team from their observations in the field, at conferences and through experiences with compliance professionals. These posts are designed to further knowledge and share industry best practices. Topics run the gamut, including Form ADV, cybersecurity, MiFID II, position limit monitoring, technology challenges and more. Complete and submit the brief form below to receive notifications when we publish new content.

Latest Content

Service Provider Due Diligence – Building Effective Partnerships

In 2009, the SEC stated at its CCOutreach Program that “when a service provider is utilized, the adviser still retains its fiduciary responsibilities for the delegated services.” This philosophy is as true today as it was 10-plus years ago. Therefore, the question becomes how do you establish a due diligence oversight program for your firm’s … Continued

SEC Adopts Changes to Reporting Forms

Regulation of Derivatives Use by RICs and BDCs Recognizing the proliferation of new derivate products in our markets, the SEC voted to adopt a new regulatory framework for the use of derivatives by mutual funds, ETFs, closed-end funds, and business development companies. The SEC’s press release stated that, “The new rule and rule amendments will … Continued

Time to Use the Bat Phone: Who to Call When a Compliance Officer Needs Help?

It seems that the burden of work continues to increase for compliance professionals in the investment management industry. While also ensuring that their compliance program is effective, compliance officers must also be aware of cybersecurity threats, business continuity plans, new regulations, changes in business strategy, and more – all while doing this under a work … Continued