NASAA Releases Investment Adviser Best Practices To Improve Compliance

The North American Securities Administrators Association has updated its best practices for investment advisers. The best practices were developed after a series of exams revealed several problem areas.

458 state-level investment advisers took part in examinations between January and May 2009. Some 1,887 deficiencies in 13 compliance areas, including the areas of books and records, registration, supervision, unethical business practices, and financials, were found.

NASAA President Denise Voigt Crawford says the best practices should help strengthen internal compliance programs. This will hopefully decrease the chances of regulatory violations (that can lead to securities fraud) while helping investment advisers provide better client services and meet compliance challenges.

NASAA Best Practices Recommendations for Compliance Procedures and Practices:

• Update contracts.
• Revise and update the disclosure brochure and form ADV every year.
• Back up information that is stored electronically.
• Ensure records are protected.
• Prepare and maintain financial records, other mandatory records, and client profiles.
• Develop a manual of relevant, written compliance and supervisory procedures.
• Make sure financials are always accurate.
• Each year, prepare and send out a current privacy policy.
• If necessary, maintain surety bond.
• If applicable, put into place the proper custody safeguards.
• Ensure that all advertisements are accurate.
• Look at disclosures, solicitor agreements, and delivery procedures.

At this time, state regulators are in charge of overseeing investment advisers who manage under $25 million. The Securities and Exchange Commission supervises investment advisers who manage over $25 million. NASAA is seeking to increase state oversight to include investment managers who oversee assets of up to $100 million. The Financial Industry Regulatory Authority also wants to expand its investment adviser authority.

Related Web Resources:
State inspectors find fewer problems among investment advisers, Investment News, September 29, 2009
NASAA Outlines Best Practices For Investment Advisers, NASAA.org
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