Work From Home Investment Adviser Compliance with the SEC

How do SEC review Work from Home Investment Advisers?

 

A growing number of firms are overseeing investment advisers compliance located across the country with more aggregation taking place in the industry. This is a trend that has only spread with the pandemic, making it necessary for the business to operate nationwide. 

Despite growing concerns and great interest, the SEC has been monitoring the investment adviser regulation services in a work from home setup. In light of the additional and unique risks that arise as a result of operating in this manner, it has undertaken initiatives to determine with the SEC while operating out of multiple offices or locations that the investment adviser compliance is exercised. These firms are required by the SEC to adopt, implement, and follow written policies and procedures designed to prevent and detect abuses of the Advisers Act and/or the rules they impose on their employees. An internal review will be conducted by the SEC for its branch offices to assess how effective these processes are.

Implementing the following will be the SEC’s main focus: 

  • The role of investment adviser compliance personnel and empowerment, as well as their access to document and information relevant to branch offices
  • Form ADV filings of the investment adviser regulation services compared with actual practices for branch offices, including accuracy of information
  • Assessing the structure of supervision for specific risks in particular branches, including how such supervision is organized

As part of the risk assessment process, the staff may pay particular attention to one or more of the following areas based on the business activities of an examined adviser:

  • The fees and costs charged by the investment adviser, including invoicing and billing processes, client communication, and controls over the processes. 
  • Advertisements under its control, for instance how the advisor reviews and approves advertisements made or distributed by its branches. 
  • In addition, whether the adviser’s code of ethics is being implemented, and whether the adviser is properly monitoring the personal securities transactions and identifying branch access personnel.
  • The custody rule, including controlling where custody is retained and how branch offices participate in the determination of custody, as well as other disclosure requirements

A number of branch offices are being examined by the SEC to see how investment advisers make recommendations. Examining policies and procedures, along with supervisory controls put in place to deal with certain risks, will help ensure advisors are adhering to fiduciary standards.

The following areas may also be considered according to the practice of the company: 

  • The investment adviser compliance oversees and reviews all investment advice rendered to clients by individual branches and between branches, as well as the controls and processes related to investment authority, the suitability of advice provided, as well as any due diligence they have promised clients they would do.
  • Establishing, managing, and disclosing conflicts of interest that may arise in activities at the branch, including compensation arrangements and outside businesses of supervised personnel.
  • Accounting for investments made by client accounts, and how client disclosures are made of branch offices’ trading activity.

If you have branches and remote offices, you create more risk, and the SEC examines you closely.  

Having trouble preparing for your upcoming exam? What changes have you made to your regional offices and remote sites? Are you able to provide evidence to the SEC that you supervised your investment adviser compliance?

It may not have been easy for you to keep up. Our routine assistance with branch and remote office reviews makes MAH Advising an obvious choice. Contact us here to arrange your consultation.

Share this post

Leave a Reply

Your email address will not be published.