Broker-Dealer & Investment Adviser Compliance – United States
As financial planners and money managers for wealthy individuals and corporations, registered investment advisors or RIAs must comply with a set of rules and regulations laid down by the Securities and Exchange Commission (SEC). Broker-Dealers are also no exception when it comes to compliance.
Establishing a Culture of Compliance for Dealers & Investment Advisers
According to the Investment Advisers Act of 1940, the Registered Investment Advisors (RIAs) have to set up plans and strategies that will help them comply with the rules established by the Securities and Exchange Commission. They are required to comply with general regulations & responsibilities such as general responsibility, disclosures to clients, maintenance of records.
The Top Challenges to Broker-Dealer & Investment Adviser Compliance
Professionals face punishment or suspension by boards of standards if investment advisors do not follow the rules and regulations.
Here are some of the most common compliance issues advisers encounter in today’s industry:
Here are some of the most common compliance issues advisers encounter in today’s industry:
- Getting a Valuation Right
- Identity Theft and Cybersecurity
- Compliance with Advertising and Marketing
- Custody of Assets
- Compliance with Foreign Taxes
Consequences of Broker-Dealer & Investment Adviser Non-compliance
The failure to maintain adequate compliance policies is a significant violation.
Failure to comply with advertising regulations would also attract a quantum of penalties.
Failure to obtain client’s consent for transactions and collect the required securities disclosure reports can result in regulatory action.
Generic solution to avoid Broker-Dealer & Investment Adviser Non-compliance
RIS and Brokers need to plan and build a holistic compliance program. Adopting a systematic approach to compliance, digitalizing records, maintaining policies, and managing evidence to meet any audit requirements, providing full disclosure of material facts to clients – all can ensure compliance.
Keep Your Data and Systems Secure
If a customer’s data or assets are stolen, it can land an RIA firm in deep trouble. To safeguard their organization from cybersecurity thefts, advisors must run their cybersecurity measures through frameworks such as CIS, PCI, NIST, and SOC 2.
Manage the Custody of Your Assets
Broker –dealers have to protect other customer assets such as security documents, money, cheques, and account files. To prevent physical assets from being stolen, advisors must implement controls and better procedures and educate customers on keeping their assets safe.
Record Keeping
RIAs are required to maintain maintain books and records, and must make and keep true, accurate and current books and records relating to their investment advisory business.
Comply with Marketing Rules
RIAs must keep a constant tab on changing regulations around marketing. Advisors need to follow the advertising rules in the Truth-In-Lending Act and establish controls to make sure that they add necessary disclaimers and that their advertisements are truthful.
How VComply can help with broker dealer and investment adviser non-compliance
VComply helps you to map your compliance obligation with controls, assess risks, analyze the status of obligations, and remediate compliance issues.
Policy and Procedure Management
- Set up a policy portal with written compliance policies and procedures
- Maintain a central repository for filing requirements and documents
- Attest your policies and train your employees to keep them abreast on policy changes
- Digitalize record keeping and practices to avoid violations and to confirm they are dealt with appropriate manner
Compliance Process and Task Design
- Setup or import frameworks and controls, and identify tasks required for meeting standards.
- Establish compliance task library to map obligations to controls.
- Create tasks that corresponds to controls that address risks.
- Automate compliance tasks and activities.
Compliance Reporting
- Track the status of compliance tasks in real time.
- Automatically generate compliance reports that provide a 360-degree view of the compliance posture.
- Gain compliance and risk insights, understand issues and drive alignment on decisions
- Proactively plan and stay prepared for future compliance requirements.
Compliance Risk Management
- Define a plan for risk management and communication across the team.
- Define the corrective action planning for crisis management.
- Proactively create risk mitigation plan and automate the processes.
- Provide real-time insights into risk status with dynamic dashboards.
