There are several requirements that an adviser must cover to stay in regulatory compliance. This includes business continuity plans, how fees are based on the valuation of your client’s assets, and how assets of clients are valued. It also includes the advisers trading practices, the policies and procedures that the adviser uses to safeguard the privacy of the client’s information, and the policies and procedures related to portfolio management of the adviser.
It is extremely important to have written policies and procedures in place, and they must be updated annually. Under one such Securities and Exchange Commission (SEC) order back in 2015, the SEC issued an order that an adviser had violated Rule 30(a) of Regulation S-P. This regulation specifically addressed the issue of cyber security and the safeguard of client information. In this case, there was a cyber attack on the adviser’s computer system, and although no client was harmed as a result, the SEC still found that this adviser had violated Regulation S-P. The adviser agreed to be censured and pay a $75,000 penalty!
As you can see, the rules and compliance requirements are complex. Failure to understand the compliance regulations will not be a defense when the SEC comes knocking. Therefore, many people find a benefit in hiring our office at their General Compliance Counsel.
For more information
If you have a legal question regarding your investment adviser business, including a compliance question, or you are interested in retaining our office as your General Compliance Counsel, please contact our office at (513) 241-0400. You can also fill out the contact form on our website and one of our attorneys will respond shortly.