Episode 19: Year End Preparations

On this week’s episode of the CCO Buzz we have Lead Senior Compliance Consultant Tina Mitchell. She provides a few helpful considerations for firms to keep top of mind as they prepare for Q4 and the upcoming new year. She also invites the audience to attend an upcoming Core Compliance Webinar this upcoming November.





CCO Buzz: Welcome Back! We’re on episode 19 of the CCO Buzz and on this episode, we have Core Compliance’s very own Lead Senior Compliance Consultant Tina Mitchell.

Tina Mitchell: For this CCO Buzz, I am going to discuss some the main compliance steps you should be considering for year-end planning. But actually before I do, I want to provide you with a brief summary of the regulatory activity that’s taken place this year.

The [Securities and Exchange Commission (“SEC”)] SEC has only issued two Risk Alerts, which is less than what they’ve done in the past, but they cover very important topics that affect all registered advisers – best execution and advisory fee disclosures.  

In addition, you’re going to want to look at the 50 enforcement actions that the SEC has taken against advisers specifically. Not only do they include well-known firms, but they are listing violations that cover a wide-variety of areas, and these include performance advertising, inadequate disclosures, custody rule issues, mis-calculation of assets under management, and then the old favorite – lack of robust compliance policies and procedures.

It is important to review and consider these areas, as they can help you assess whether you need to strengthen controls regarding these areas.

CCO Buzz: Tina, with 2018 coming to a close, what do you feel are important areas to focus on in preparation?

Tina Mitchell: Well, I think the main thing is to consider the strength of your compliance program and you’ll want to determine – what, if any, reviews and testing you still need to perform through year end. I’ll give you an example for a firm, one of the things the [Chief Compliance Officer (“CCO”)] CCO should do is audit the billing process to ensure the fees are being calculated properly and that your disclosures are matching current practices. So, in other words, do you disclose whether or not you pro rate for additions and withdrawals? Do you bill on cash? And if so, do you disclose that? Is billing being calculated in accordance with the agreements you have in place with clients.

For testing, you may want to look at your business continuity plan to see if it’s been fully tested. And that includes widespread disasters. So, what happens in the case of an earthquake or hurricane?

And then, of course, you’ll want to be sure that all your recommendations from last year’s annual review have been implemented.

And then, don’t forget, of course, about the risks because you’ll want to make sure you’ve performed a risk assessment and that you have solid policies and procedures covering any of those identified risks.

CCO Buzz: Now with cyber growing as a hot topic in the industry, do you have any recommendations for firm who want to stay abreast of the issue?

Tina Mitchell: Yes, this is an area that continues to be, as you said, a hot topic for the examiners and regulators, both state and federal. So what you want to do is ensure you have a comprehensive incident response plan and that you’ve performed the annual required risk assessment that the SEC is mandating through various different guidance they’ve provided.  

CCO Buzz: With technology evolving at a high demand are there other areas firms should also focus on?

Tina Mitchell: Marketing and Advertising are areas that are expanding, thanks to social media. So, you’re going to want to make sure you’re retaining copies of all your social media postings and also maintaining all the required backup for any marketing materials that include statistical information, such as performance.

Be sure that you’ve calendared for all year end registration and regulatory filings. And you to want to make sure that if you are required to get financial audits, like if you’re a manager to a private fund or you have custody of client assets and you have a surprise exam, be sure you have calendared for those, in regards to making sure you’ve contacted the auditors in order to perform the exams.    

Last, but not least, think about employee compliance training. This is actually a very important area because compliance belongs to everybody and these training areas are going cover, and should cover, Code of Ethics, business continuity, cybersecurity, identity theft, privacy, and that’s just to name a few. A tip is to remember – you know, training just doesn’t mean just in-person meetings, there’s a variety of ways you can do it and actually using technology helps with both the administration and documentation of providing training.

CCO Buzz: Wow, that really does help. Do you have anything else you’d like to add?

Tina Mitchell: Consider the SEC Exam Priority list that they issued in February that’s on their website. One of the topics, besides Cybersecurity, that keeps coming up is Senior Investors. So, you’ll want to look at, you know, your process and your policies and procedures regarding anything that is on their exam priority list that is pertinent to your firm.

Shortly we are actually going to issue a Risk Management Update that provides a more detailed checklist. And on November 1st we’re going to be hosting a webinar regarding the steps to help you prepare for yearend compliance. In the meantime, for more information or assistance with training please contact us at (619) 278-0020.

CCO Buzz: Thank you so much, Tina. 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 into next week’s episode of the CCO Buzz.


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