Episode 83: Jump-Start Your Compliance Program for 2021

For our first CCO Buzz episode of 2021, Senior Compliance Consultant Kurt Nuñez and Compliance Analyst Zachary Frank help us unpack the best methods for jump-starting your compliance program in 2021.

 

(GUITAR INTRO)  

CCO Buzz: Hello and Happy New Year! It’s good to be back and have 2020 finally behind us. We have so much to look forward to in the coming year. Speaking of which, the CCO Buzz is going to go through a bit of a change in the coming months/episodes. We are so excited for our audience to come along for the ride. We have a bunch to unveil and we are so excited to share.

To kick off the year, we have not one, but two guests joining us, Core Compliance’s very own dynamic duo- Senior Compliance Consultant Kurt Nuñez and Compliance Analyst Zachary Frank! These gentlemen are here to help us unpack the best methods for jump-starting your compliance program in 2021. As you may or may not know, the SEC loaded the industry with tons of guidance right at the end of December and Kurt and Zach are here to help us unpack and understand the SEC’s guidance and how to apply it to this year’s compliance programs.

Not to be so up front, but Zach- you’re a new member to the Core Compliance team, right? Before we jump in, how about you tell the CCO Buzz audience a little bit about yourself.

Zachary Frank: Sure. Hello everyone! As you heard, my name is Zachary Frank, but I go by Zach. I come from U.S. Bank Global Fund Services, and I’m fairly new to the team. I am eager to hit the ground running in 2021 and help our clients and the audience navigate their way to continued success in compliance. In fact, Kurt and I just authored this month’s upcoming Risk Management Update titled “Considerations for Advancing Your Compliance Program in 2021,” where we will go into detail about the Risk Alerts and guidance of late 2020 and how it should transform compliance programs in 2021.

Kurt Nuñez: [chuckle] Well that’s a great transition to the article. Zach’s eagerness to help our clients and the industry really speaks throughout the piece. He did a great job writing it and I’m just as eager to see Zach come into his own throughout his time as an integral part of Core Compliance.

CCO Buzz: That is such a true statement and great to hear about the team expanding. But let’s get focused back to the article. What are some key areas that firms should focus [on] and address as we revisit and assess compliance for 2021?

Zachary Frank: The guidance provided at the end of the fourth quarter of 2020 provided ample information for where firms should focus efforts, but in my opinion, firms should home in on a few things like examination deficiencies and rule changes that arose in the previous year. This is done to eliminate the reoccurrence of these deficiencies. Firms also will want to ensure policies and procedures are created or amended to comply with new rules or rule changes. Another hot topic of 2020 was Business Continuity Plans. Business Continuity Plans should be reviewed and revised as needed to address the supervision of colleagues while working remotely.

Kurt Nuñez: I’d like to add that as firms start to prepare for their Form ADV filings and annual updates, they’ll also want to find time toward the end of Q1 to review their Policies and Procedures for 2021. We find that the time after annual filings is the best opportunity to assess and ensure the firm’s manual is being maintained, as well as enhanced due to new industry demands and protocols - like internal cybersecurity controls for example.

CCO Buzz: Wow, that’s a lot to unpack. How about we break it down into a few focuses for each? Kurt, you mention Form ADV and Annual Updates – with those on the horizon and time ticking away, when do you think these focuses should be assessed and focused on for firms in general?

Kurt Nuñez: I’ll let Zach answer the first part.

Zachary Frank: Thank you Kurt. Well, each of the areas we discuss in the article do have their own focus where we provide takeaways and tips for firms to consider. I will provide a few, but I think it’ll be best for the audience to read the article when it is released in a few days.

For Business Continuity Plans, firms should address…

  • Steps to be taken to ensure data is protected at remote sites.
  • Revising your firms’ alternative worksite for business operations to include the possible occurrence of remote work.
  • [And] Pandemic response and preparedness.

Additionally, a few areas that firms should consider focusing on this year when revising policies and procedures are:

  • Tailoring policies and procedures to fit the business model of your firm.
  • Implementing controls to prevent reoccurrence of compliance related issues that had occurred last year.
  • Adding controls or processes in response to the COVID-19 pandemic.
  • Implementing or revising anti-money laundering procedures.
  • And lastly, revising policies and procedures to comply with the amendments made to the advertising rule, Rule 206(4)-1.

And I know we barely scratched the surface, but in the article we also provide insight on cybersecurity considerations- a few of those we discuss in the article are…

  • Ensuring colleagues are using strong passwords, multi-factor authentication, secure wi-fi networks and [have] heightened awareness of phishing attacks.
  • Also, implementing the use of RDS, which is Remote Desktop Servers, or VPN, which are Virtual Private Networks, for each employee to securely connect to your firm’s systems and protect clients’ information.
  • Also consider implementing proactive vulnerability and patch management programs that detect risks to the technology environment and firm.

CCO Buzz: Ok now Kurt, you brought up Form ADV earlier and I know our audience is starting their own preparation for their annual updates. When do you think would be best to implement these considerations for firms trying to prepare for 2021?

Kurt Nuñez: Well in a word, now. For most advisory firms, the end of the fiscal year is December 31st. As per the rule, firm’s are required to file their Form ADV annual amendments within 90 days of the end of their fiscal year. We are virtually in that window now. I typically recommend that advisory firms complete their annual Form ADV amendment as soon as practical, while ensuring the accuracy of the filing, rather than waiting until the end of the deadline. If they are able to take care of that important requirement early, they’ll still have time in the 1st quarter to review and implement changes to their policies and procedures before we’re too far into the new year.

I’d also like to encourage clients to think about all of these considerations throughout the quarter or simultaneously throughout your Form ADV process. The team at Core Compliance cannot only help navigate your filing process, but we can also help firms assess their compliance programs to ensure success and growth into 2021. For more information, please contact us at (619) 278.0020 or at www.corecls.com.

CCO Buzz: Wow, that’s one way to kick off the new year at the CCO Buzz. Thank you, gentlemen, for joining us today. I hope what we’ve discussed gives our listeners an ample starting list for 2021. Happy New Year! Thank you.

Well that’s it for this week’s episode. If you’d like additional information, please check out our website at www.corecls.com. You can also follow us on Facebook, LinkedIn, or Twitter @CoreCls. Thank you, and we hope you tune-in to next week's episode of the CCO Buzz.

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