Jan 06, 2014 | News

SEC Targeting Deficiencies in RIA Compliance Programs in 2014

With the passage of the Dodd Frank Act, the SEC has made clear the intent to focus its examinations and disciplinary efforts on the investment adviser community.   The SEC has expanded its reach to previously exempt RIAs.

Six cases were brought up on violations at the end of 2013 alone.  Some of the violations included:

  • Failure to conduct an annual compliance review
  • Omitting disclosures required in connection with the marketing of performance information
  • Making false and misleading statements about compensation in Form ADV and marketing materials
  • Insufficient or misleading disclosure to clients concerning conflicts of interest
  • Insufficient written supervisory procedures
  • Discrepancies between the amount of funds under management as disclosed on the adviser’s Form ADV and the dollar amount stated in marketing materials

Some of these cases resulted in significant fines and required a complete overhaul of their compliance programs.  Furthermore, some sanctioned RIAs that were required to appoint an independent public accountant to complete the process of inspection and annual audit were sanctioned because they failed to do so.

Given the recent flurry of enforcement actions, it is recommended that ALL investment advisers review their supervisory procedures and compliance programs.  Contact the SEC if you are an RIA and may now require an annual independent review and audit.