The Securities & Exchange Commission (SEC) released a report detailing five major areas in which investment advisers typically fall short in terms of SEC compliance, and encouraging advisers to strengthen their programs and policies to ensure they are following the letter of the law.
Report shows weak areas in SEC Compliance
The report came from the SEC’s Office of Compliance Inspections and Examinations, which listed the five most common topics cited in deficiency letters sent to investment advisers after OCIE exams. The five most common inadequacies regarded: compliance policies and procedures, regulatory filings, custody of client cash or securities, codes of ethics and record-keeping.
By disseminating their report, the OCIE is hoping that advisers will reflect upon their own practices, policies, and procedures and make improvements where necessary to avoid potential complications.
With respect to compliance issues, OCIE notes that investment advisers tend to fail to tailor compliance manuals to their businesses to account for a particular type of client or trading method. Other problems arose from out of date manuals or the failure to follow compliance rules or conduct annual reviews when required.
Regarding regulatory filings, investment advisers most often ran into trouble with respect to inaccuracies on disclosure forms regarding “custody information, regulatory assets under management, disciplinary history, types of clients and conflicts.” Advisers were also cited for submitting filings late or not at all.
The OCIE noted inadequate compliance with the custody rule – most often when an adviser does not realize that he or she has custody. There were also frequent shortcomings regarding advisers’ required code of ethics, including not describing the code in mandatory disclosures as well as failing to fully identify the personal securities transactions of certain individuals within the firm.
Finally, the report noted issues surrounding compliance with record-keeping rules. Advisers’ books were found to be inaccurate, inconsistent or not kept at all.
Have You Suffered a Loss as a Result of Stockbroker Compliance?
Many of the advisers cited as a result of one of the aforementioned areas took steps to correct their deficiencies. By publishing the report, the OCIE is hoping that other advisers will take proactive steps to avoid getting into trouble of their own.
If you suffered a loss and believe your adviser may be failing in one or more of the above areas, you may have certain legal rights that require your immediate attention.
Call a Los Angeles Securities Attorney Today
Contact an experienced Los Angeles securities fraud attorney today for a consultation to discuss your rights and options.