The North American Securities Administrators Association announced a series of investment adviser best practices that it is recommending after it conducted investment adviser tests that showed 2135 deficiencies in 13 compliance areas. 418 investment advisers in 43 states and provinces participated in the tests, which were overseen by NASAA’s Investment Adviser Operations Project Group.
Five of the categories that had the largest amount of deficiencies included supervisory compliance (174 deficiencies), registration (504 deficiencies), books and records (384 deficiencies), unethical business practices (318 deficiencies) and privacy (142 deficiencies).
The leading three deficiencies in the category of registration involved:
• Inconsistencies between the first two parts of Form ADV • Not amending the form in a manner that is considered timely • Not providing or offering to give the disclosure document to clients
Leading unethical business practices included:
• Excessive fees • Contract deficiencies,
• Misrepresenting qualifications, services, or fees • Unsuitable recommendations
NASAA is offering “Best Practices” to help advisers create compliance practices and procedures:
• Regularly review and update Form ADV and the disclosure brochure • Keep all contracts current
• Prepare and keep current all records • Prepare and keep client profiles up-to-date • Create a written compliance and supervisory procedures manual
NASAA is also recommending that advisory firms maintain accurate financial records and file documents and information in a timely manner. NASAA is encouraging advisory firms to properly supervise advisers’ activities.
Related Web Resources:
Coordinated Examinations Identify Investment Adviser Deficiencies, NASAA.org, October 15, 2007
Nationwide NASAA Exams Reveal Advisor Deficiencies, Investment Advisor, October 16, 2007