This year, the Securities and Exchange Commission’s (“SEC’s”) Office of Compliance Inspections and Examinations (“OCIE”) issued their annual examination priorities update in February. The examination priorities were in a new brochure format, with a distinct section covering the five main principles that govern their execution of the four pillars that their work stands on. The priorities covered a wide range of topics, but placed special emphasis on retail investors.
This year, the five main themes of the OCIE examination priorities are as follows:
- Matters of importance to retail investors, including seniors and those saving for retirement;
- Compliance and risks in critical market infrastructure;
- Financial Industry Regulatory Authority (“FINRA”) and Municipal Securities Rulemaking Board (“MSRB”);
- Cybersecurity; and
- Anti-money laundering programs.
Incorporated more and more into each new set of examination priorities is the focus on digital aspects of investment advice. This year, the SEC will be focusing on electronic investment advice, cryptocurrency, as well as compliance protocols arounds cybersecurity. It is more important than ever that your firm have a robust set of policies and procedures around the digital aspects of your firm’s functions. This can range from firms utilizing trading algorithms or digital investing platforms, to the administrative side and how data is controlled, backed up, or restored, among other potential cybersecurity or digital risks.
In their efforts to manage regulatory risks and improve efficiency in their firms, many investment advisers rely on third party service providers to help with support services related to their compliance requirements. While we at Core Compliance℠ do not specifically endorse any of the following service providers, our clients have shared positive experiences with us of working with the following vendors. Core Compliance recognizes that the needs, budgets, and experiences of one investment adviser or another can materially differ, and it is essential that you and your firm conduct due diligence in a thorough and ongoing manner prior to engaging with any vendor, as well as part of your annual reviews every year thereafter.
Compliance Certifications and Continuing Education
An integral need for most firms, maintaining the appropriate certifications as well as continuing education is required, or at least a best practice, for ensuring your staff are trained and informed on what’s required of your firm. Below are some of the certifications, services, or groups that can assist in your ongoing regulatory education.
National Society of Compliance Professionals: A Certified Compliance Professional (CSCP) Certification - Certification that distinguishes individuals as intermediate to advanced proficiency as compliance professionals.
The Wharton School: FINRA Certified Regulatory and Compliance Professional (CRCP) Program – a compliance certification program created jointly by the Financial Industry Regulatory Authority (“FINRA”) and the Wharton School at the University of Pennsylvania for securities law and regulation education.
Quest CE – offers compliance education and training options to the financial services industry. In addition to offering continuing education (“CE”) for professionals holding insurance licenses and professional designations like the CFP, CPA, CIMA and CLU/ChFC designations, Quest CE also provides a complete spectrum of compliance training solutions.
RegEd, Inc. – provides annual compliance meetings, needs analysis, training plans, tracking and reporting, firm element CE, insurance CE, exam preparation licensing training with exam preparation self-study, and on-line practice exams.
Securities Training Corporation – offers securities CE, securities licensing, insurance CE, and insurance pre-licensing and exam preparation licensing training in a classroom or self-study format.
For many firms, it’s necessarily to utilize an effective compliance technology solution to assist in maintaining and reviewing various aspects of running the firm. The following technology solutions have been specifically designed with the financial industry in mind.
CORE TRAC Technology Resources and Consulting – provides automated compliance technology that assists with supervisory monitoring and operational efficiencies. CORE TRAC is a great resource for registered investment advisers, broker-dealers, mutual funds, private equity firms, hedge funds and public companies. You may choose from a variety of different modules to build a customized package that is right for your firm, including compliance workstation, employee trade activity management and transaction monitoring. As part of these services, we will provide consultation services to assist with onboarding and implementation.
BasisCode Compliance Work Flow Solution – delivers a simple, centralized compliance platform, enabling compliance personnel to focus on high risk areas while meeting critical regulatory and documentation requirements. The dashboard-driven system consists of a flexible menu including compliance calendar customization, testing, certifications and attestations, gifts and entertainment monitoring, risk assessments, form builder tool, personal trading, whistleblower, and document library management.
MyComplianceOffice Compliance Program Manager and Other Solutions – provides a software system for compliance requirements and employee trading activity management, as well as task management and workflow, compliance calendar building, attestation management, disclosure management, gifts and entertainment monitoring, case and document management, risk management and more.
Errors & Omissions (E&O) Insurance
Marsh & McLennan – offers insurance coverage for a variety of exposures, including crisis management, mergers and acquisitions, business continuity and operational risk.
Starkweather & Shepley Insurance, Inc.’s Investment Industry Practice Group – provides a variety of financial insurance, risk management, and related services worldwide.
Willis Group Holdings – a global leading risk advisor, insurance and reinsurance broker.
Electronic Books & Records Solutions
CA Technologies, Inc. – offers a comprehensive portfolio of identity-centric data loss prevention for IT security professionals. As part of CA’s technology solutions, data protection using CA’s DataMinder™ enables businesses to protect all types of sensitive information and assets to help minimize accidental, negligent and malicious misuse of data, as well as help you remain compliant with regulations, corporate policies and reduce overall business risk.
Compliance Science C-TRAC™ – an enterprise scaled tool designed to capture and certify institutional contract data across all clients and counterparty agreements including investment management contracts, sub-advisory agreements, prospectuses, subscriptions, side letters, and more. C-TRAC™ allows stakeholders to access and review all legal, compliance and operational obligations across the enterprise using secure browser-based technology.
Bloomberg Vault – cloud-based information management services that delivers compliance, eDiscovery and enterprise archiving by leveraging the scalability and reliability of Bloomberg’s global infrastructure, which distributes up to 250 million daily messages and manages more than 70 billion archived records on behalf of Bloomberg Vault subscribers.
Electronic Mail Archiving & Surveillance Tools
As a part of data management, record keeping, and risk management, you need to have email archiving in place. Archiving and surveillance tools are effective for many reasons, including business continuity, data recovery, email management, and more.
Global Relay – provides messaging services that provide the foundation for mail management, compliance, eDiscovery and business continuity. Ask a CCLS consultant about preferential pricing available to CCLS clients.
Smarsh – specializes in e-mail and instant message archiving, WORM Optical Storage, attachment archiving, virus protections, review and reporting tools, and spam filtering.
GIPS Verification and Performance Services
Ashland Partners & Company LLP – provides GIPS consultation and verification, surprise custody examinations, and SSAE No. 16 examination training.
CAPS Incorporated – provides a GIPS composite and management reporting workflow software solution for GIPS compliance and reporting.
Deloitte & Touche LLP – offers audit, tax, consultant and financial advisory services, including GIPS verifications.
Administration and Fund Auditing Services
EisnerAmper, LLP – a global firm serving a broad spectrum of financial services and high net worth clients, offering a full range of audit, accounting, taxation, and consulting services. Hedge fund advisory services include hedge fund audit and tax services as well as support for fund of funds, multi-strategy funds, and PIPES.
Marcum, LLP – provides consulting, tax and auditing services for private equity partnerships, hedge funds, off-shore funds, registered investment advisers, and real estate funds, in addition to traditional accounting, assurance and tax, including domestic and international tax planning.
KPMG, LLP – an international firm that provides audit, tax and advisory services and industry insight to help organizations negotiate risks and perform in the dynamic and challenging environments in which they do business.
Hedge Solutions, Inc. – provides specialized accounting services for fund structure or investment strategy, and also offers consolidated online investor access to key information, reporting and documents in a protected and secure environment.
Opus Fund Services, LLC – provides hedge fund administration, including fund accounting/NAV calculations, partner allocations, and year-end reporting services.
SS&C Technologies Holdings, Inc. – provides fund administration services for hedge funds, fund of funds, private equity funds and managed account managers. SS&C also offers back office, middle office and front office software for alternatives investment managers.
Portfolio Accounting and Trade Order Management Systems
SS&C Advent – offers innovative investment management solutions that integrate portfolio accounting, reporting, performance analytics, and client relationship management, effectively linking portfolio managers, operations, and client service staff on a single database platform.
Charles River Systems, Inc. – provides software, hosting and data services to automate front and middle office investment operations for buy-side firms. On-premise software solutions support portfolio management, compliance and risk monitoring, access to global liquidity, and trade processing.
Envestnet, Inc. (Tamarac) – offers scalable web-based portfolio management technology that enables investment managers to provide customized, tax-efficient, individual account management to a multitude of clients.
EZE Castle Software – provides comprehensive technology solutions to broker dealers, hedge funds, institutional asset managers, mutual funds, pension funds and wealth managers.
Orion – offers a portfolio accounting and trade order management platform that provides advisors with scalable solutions that allow them to manage their accounts and create, review and edit their trade orders with powerful back-end processing.
Personal Trading Surveillance and Archiving*
Schwab Compliance Solutions/Charles Schwab & Co., Inc. – offers employee trade surveillance technology that proactively blocks restricted trades that are not compliant with your firm’s employee trade monitoring policy.
TD Ameritrade, Inc. – provides a fully automated employee trading surveillance system that combines customized tools to help financial and professional services firms better monitor their employees’ personal trading accounts.
*Please also see Compliance Technology Services for Additional Solutions
Proxy Voting Services
Broadridge Financial Solutions – supplies tools to help manage proxy votes, keep records, and maintain compliance.
Glass Lewis – offers proxy vote management solutions that support all aspects of governance programs, from engagement before, during and after the proxy season, to the implementation of custom policies, to reporting for clients, management and regulators.
Institutional Shareholder Services, Inc. (ISS) – provides an integrated platform that helps investors manage proxy research, voting and reporting.
MSCI Inc. RiskMetrics Group, Inc. –– offers indices, portfolio risk and performance analytics, and governance tools, research and voting, social investment portfolio screening, proxy distribution, and corporate governance advisory services to financial institutions and corporations.
Author: Jennifer Greene, Marketing Strategist; Editor: Tina Mitchell, Lead Sr. Compliance Consultant Core Compliance & Legal Services (“CCLS”). CCLS works extensively with investment advisers, broker-dealers, investment companies, hedge funds, private equity firms and banks on regulatory compliance issues.
This article is for information purposes and does not contain or convey legal or tax advice. The information herein should not be relied upon in regard to any particular facts or circumstances without first consulting with a lawyer and/or tax professional.