Compliance Training: A Critical Component of Your Compliance Program

As the year is ending, we know that there are several items that you will be focused on completing. An important item that should be on your list, is confirming that adequate compliance training has been provided to your personnel.  Whether you are a registered investment adviser  or  broker-dealer, you will want to make sure that your employees have received compliance training by year-end.


There are several items that firms should be considering when creating their annual compliance training.  In this Risk Management Update (“RMU”) we will discuss these items and offer recommendations and best practices.


Annual Compliance Training


Under Rule 206(4)-7 of the Investment Advisers Act of 1940[1], an investment adviser is required to adopt and implement written policies and procedures reasonably designed to prevent violation of the Advisers Act by the adviser or any of its supervised persons.  Although not specifically stated, it is expected by the SEC that the adviser will conduct annual compliance training of its supervised persons on a variety of topics, including the adviser’s policies, procedures, and controls, as well as regulatory requirements that impact the investment adviser and its supervisory persons.

Similarly, broker-dealers are required, pursuant to FINRA Rule 3110(a)(7)[2], to evidence the attendance and participation of each of their registered persons at an annual interview or meeting, conducted by a designated person either in-person, via webcast or similar means.  This important component of the broker-dealers’ supervisory system allows the firm to remind registered personnel of their responsibilities under the written supervisory procedures (“WSPs) and to remain current on applicable regulatory changes.


Content Development

 Investment advisers should take a multi-prong approach when they are identifying subjects and creating content for their annual compliance meeting (“ACM”).  As noted in last month’s RMU and as part of the testing program under Rule 206(4)-7, CCOs should review the firm’s policies and procedures, conduct an annual risk assessment and create a conflicts inventory to confirm all identified risks and conflicts have been adequately addressed and properly disclosed.

Once the risk assessment and conflicts inventory have been completed, the CCO can focus on the highest identified compliance risks in creating training topics and content for the ACM.  Additionally, as part of this process, the CCO should review the risk alerts and examination announcements published by the SEC’s Office of Compliance Inspections and Examinations (“OCIE”).  Reviewing these publications will allow the CCO to identify key areas that the SEC and other regulators are focused on during examinations and are key items that should be included in the ACM[3].

After completing these reviews, you should have a list of topics for the ACM. Some recommended topics that should be on this list include the following:

  • Updates or changes to firm policies and procedures
  • Culture of Compliance and its importance to your business
  • Conflicts of interest/disclosures
  • Code of Ethics requirements
  • Outside Business Activities
  • Cybersecurity
  • Business continuity processes and controls
  • Privacy safeguards
  • Dealing with clients with Diminished Capacity
  • Registered Investment Adviser Representative Form U4 & Part 2b updates
  • Anti-money laundering processes and requirements
  • Any changes to business or controls in response to the COVID-19 pandemic

In identifying content for the broker-dealer ACM, firm compliance personnel should focus on issues of relevance to the firm, items noted as part of the firm’s annual review and risk assessment, as well as guidance provided by FINRA in their Annual Risk Monitoring and Examinations Priorities Letter as well as their Report on Examination Findings and Observations[4].

Like registered investment advisers, broker-dealers should consider the following topics for inclusion in this year’s ACM:

  • Updates or changes to firm written supervisory procedures
  • Culture of Compliance and its importance to business
  • Code of Ethics requirements
  • Outside Business Activities
  • Gifts & Entertainment Requirements
  • Cybersecurity
  • Business continuity processes and controls
  • Privacy safeguards
  • Dealing with clients with Diminished Capacity
  • Elder Abuse/Trusted Contact
  • Form U4 updates
  • Anti-money laundering processes and requirements
  • Any changes to business or controls in response to the COVID-19 pandemic


Design, Delivery and Attendance

As important as it is for both investment advisers and broker-dealers to identify topics and create content, it is just as important to design your training so that it provides the correct level of detail without overwhelming your audience.  Whether you are creating a PowerPoint presentation or presenting via videoconference , you should keep the content to short, precise bullet point statements. Another design feature that should be considered is the use of graphics or diagrams. Additionally, consider using real-life examples to illustrate your controls or consequences for non-compliance.  Also, it is okay to ask questions of your audience to test their knowledge of your policies and procedures.  These questions will help you tailor your content to areas of concern.

Finally, make sure that you track attendance at your training sessions. If presenting in-person, have your attendees sign an attendance sheet next to their printed name.  If due to the limitations caused by COVID-19, you are presenting the annual compliance meeting  via a Zoom or Go To Meeting, get an attendance list from the meeting invitation sent to your personnel or have them send  an email confirming attendance at the meeting.



This is also a good time to have your personnel attest to compliance with your policies and procedures for investment advisers or written supervisory procedures for broker-dealers.  As noted earlier, as part of the training content, you will want to highlight any changes made to your current procedure manual or written supervisory procedures.  The best way to deliver the manual or procedures and to gather the attestations would be to utilize a technology solution. Using these technology tools will allow this distribution process to be extremely efficient, both for your compliance team and your personnel.  It will also allow the compliance team to easily comply with books and records requirements by centralizing the attestations in a user-friendly system.


Planning for Next Year

Finally, it is never too early to start planning for next year.  The first step in creating a robust training program is the development of a plan. As part of this planning, both investment advisers and broker-dealers should consider the following:

  • Regulatory, business or product changes that are planned for next year
  • The time to develop the training
  • The best means of delivery, including increased use of technology
  • The best time of the year to present the training, and
  • How attendance will be confirmed.

Firms should also consider providing training throughout the year. There are various methods to provide training including third-party webinars, attendance at conferences, simulated phishing exercises, short (usually 1 minute) videos, as well as the more traditional periodic compliance emails. The SEC, FINRA and state regulators would rather see training provided throughout the year versus having a one and done training session, usually at the end of the year.



Development and delivery of annual compliance training is a critical pillar of your compliance program.  You will want to make sure that you have devoted time in the development, delivery, and completion of this critical pillar. Completing this important compliance requirement will help firms close out the year strongly and begin planning for 2021.

For assistance with year-end projects or other compliance assistance, please contact us at (619) 278- 0020, or visit us at for more information.

Author: Core Compliance & Legal Services (“Core Compliance”). Core Compliance 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.






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