Ep. 101: Preparing for Year-End: Investment Adviser Compliance Checklist

On episode 101 of the CCO Buzz, Managing Director of Consultation Services, Tina Mitchell, provides a year-end compliance checklist for Investment Advisers.


CCO Buzz: Hello and welcome back to the CCO Buzz! Can you believe it’s already November? The year-end, and the New Marketing Rule compliance date, kind of creeped up on us before we even knew it. With a little over month away before we close out 2022 – the question remains… what does your firm need to accomplish before the end of the year? And what proactive steps can you take to start 2023 off successfully?

Well listeners, today you are in for a treat. We are joined by Core Compliance’s very own Managing Director of Consultation Services, Tina Mitchell. She’s here to discuss her highly anticipated risk management update and annual year-end checklist titled, “2022 Investment Adviser Compliance Checklist in Preparation for Year-End.”

So with that, let’s dive in…

Tina, I think CCOs and firms everywhere are looking for guidance after the whirlwind of regulatory changes that happened in 2022. What do you think were the biggest impacts this year for the compliance industry?

Tina Mitchell: There are two important regulations that had 2022 compliance deadlines. The first was the ERISA exemption, and that’s commonly referred to as “PTE 2020-02” in the industry, and it covers rollover advice given to retirement investors by certain financial advisors.  The compliance dates for the exemption were tiered, the first one was January 31st of this year, and the second was July 1st.  The other regulation is the revised Rule 206(4)-1 of the Investment Advisers Act of 1940, which is being referred to in the industry as the new “Marketing Rule.” This new rule is applicable to all SEC registered advisers and it had a compliance date of November 4th.

Also noteworthy is the fact that in the first half of 2022, the SEC actually proposed new regulations that apply to investment advisers, which cover cybersecurity risk management programs, disclosures on ESG investing, and regulations that pertain to private funds and their advisers.

CCO Buzz: Wow, that’s a lot to take in and to change in a year. I wouldn’t even know where to start, especially in Q4. But Tina, your article this past month gives some great insight on how firms should tackle this last quarter, mind walking us through?

Tina Mitchell: Of course.  The first thing I will mention is for advisory firms to ensure they have implemented all the requirements of the new Marketing Rule that are applicable to their firm.  This is more than just updating the firm’s policies and procedures that covering marketing/advertising activities. The new rule revised the books and records rule under the Advisers Act and repealed the solicitation rule.  In regard to the latter, CCOs should check the language in their Form ADV 2A, specifically Item 14, to remove any specific mention of adherence to Rule 206(4)-3.  If there are current solicitation arrangements in place, then firms should check with legal counsel to determine if any updates to agreements are necessary.  And of course, confirm that the firm’s advertising/marketing activities are in compliance with the new rule going forward.

Since we’re now in November, it’s time for pulling IARD Preliminary Renewal Statements, and paying the annual filing fees, which carry a deadline of December 12th.

CCOs should ensure that a risk assessment and annual review is performed, and that the firm’s policies and procedures address business practices, applicable regulations, and address firm risk areas, including cybersecurity risks.

It’s also important to confirm that all your applicable required federal and/or state filings are made, and that includes Form 13F, Form 13H, Schedule 13D/G, if applicable, Form PF and Form D, which apply to private funds, NFA filings, state net capital filings, state registrations and notice filings for firms and representatives, and then the blue sky filings

Now is also a good time to perform testing of the firm’s business continuity plan and an assessment of your firm’s cybersecurity program.

CCO’s should check to confirm that due diligence has been performed on service providers, and I want to note here that the SEC recently proposed a new regulation on service provider oversight responsibilities for investment advisers, which can be found on their website.

For December, while everybody is looking forward to time off and the holidays –don’t forget to provide important compliance training to firm personnel.

There are a lot of compliance tasks to think about between now and the end of the year, and I’ve only mentioned a few today, but our October Risk Management Update that’s posted on our website contains an extensive list.  I also want to mention that we will be hosting a webinar on December 1st for our clients on year end preparation.

CCO Buzz: Well, I’ve never heard a better teaser, Ms. Tina. Thank you so much for joining us today and Happy Early Thanksgiving to you and our listeners!

For more information or assistance with your firm’s year-end preparation, the team at Core Compliance can help set your team up for success in 2023 and beyond. You can contact our team or schedule your consultation, at info@corecls.com, by calling us at (619) 278- 0020 or by visiting us at www.corecls.com. Thanks and have a great day!


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