If you are SEC registered and have yet to receive an exam, you better prepare.
For months the SEC has alluded to its focus on "never-before examined advisers".On February 20, 2014, despite tight resources at the SEC, they formally issued a letter to Firm Owners and Chief Compliance Officers.
"Our [SEC] records indicate your firm is a registered investment adviser that has never been examined by the Office of Compliance Inspections and Examinations (“OCIE”) within the United States Securities and Exchange Commission (“Commission”)." [See SEC Letter dated February 20, 2014.]
So, we have established they are coming. Now we are left with "when" and are you ready?
As a compliance consultant, I can attest that the SEC has been active. We have been neck deep in supporting advisor exams throughout the fall and coming into 2014. However, it is quite doubtful that they will get to all NBE Advisers in 2014, but your firm must prepare as if your turn is imminent.
The SEC has disclosed two approaches towards these examinations, including: a risk assessment reviews and focused reviews.
Risk-Assessment Reviews are broader examinations that cover your entire compliance program. These reviews will focus on the effectiveness of your overall compliance program in preventing, detecting and correcting violations of the securities laws. In these examinations, the SEC will examine your overall business model and ensure you not only have the policies and procedures in place, but that your firm adheres to these policies consistently. The SEC will focus on your documentation and its consistency. [Note: If you can prove you completed a task or action, it did not happen in the eyes of the regulators. So please maintain proper documentation of business and compliance activities.]
Focused Reviews will target specific areas of your business model, including the Compliance Program, Filings/Disclosures, Marketing, Portfolio Management, and Safety of Client Assets. While these items may sound focused, they are both broad and inherent in most aspects of your enterprise risk and compliance. If the SEC finds some areas of weakness, they are very likely to continue into a deeper examination. In addition, the SEC recently announced their 2014 Priorities, which may yield some additional insights into the topics for Focused Reviews.
So how do you prepare?
There is no single answer to this question, but certainly taking no action has a certain end result. Here are some suggestions:
Best of luck in your preparation
The registration for Investment Advisor Representative (IAR) registrations in Minnesota is January 31, 2014
In August 2013, Minnesota enacted a law bringing its IAR rules in line with virtually every other state. [See August Post]. Effective August 31, 2013, Minnesota law required formal registration for all IARs.
Due to system delays at FINRA, the Minnesota Department of Commerce issued [“Implementation of Registration Process for Investment Adviser Representatives.” dated October 31, 2014], which set forth the required filing period [November 1, 2013 to January 31, 2014].
A Form U4 must be filed for each IAR. Further, each IAR must have completed the required examinations [Series 65 or 66] or have a recognized exemption from the examination requirements [CFP®, ChFC®, CFA®, PFS, or CIC designations in good standing].
If you are in need of assistance with these requirements, please contact us at email@example.com or call 617-800-0388.
Below is a notice emailed to advisor from the Minnesota Department of Commerce.
Minnesota issued an update to all Minnesota Registered Investment Advisors on February 6, 2014
As of February 1, 2014 The Minnesota Department of Commerce has closed the initial Investment Advisor registration window. This allowed investment advisors to register with the State of Minnesota without first meeting an exam requirement per the Amended Order (.pdf) issued on October 31st, 2013.
Any applications that have been submitted on or prior to January 31st 2014, will be reviewed and processed as outlined in the amended order. Any applications received on or after February 1, 2014 will need to comply with the requirements as outlined in Minnesota Statute 80A.58 [AA Note: which requires the Series 65 or 66 exam or specific exemption].
To date, close to 10,000 investment advisor representatives have been approved for registration and more than 2,000 refunds have been issued to firms. If you are waiting for a refund please remember to send the following information to the Securities Registration mailbox.
Firm Name/CRD Number
Individual name/CRD number
Transaction Number & Transaction Date
Please send questions or comments to: firstname.lastname@example.org.
For additional information please visit the Securities Registration and Enforcement Section of the Minnesota Department of Commerce website.
Financial Advisor Magazine reports that the SEC will begin conducting Cyber security exams for investment advisory firms by late September.More at http://www.fa-mag.com/news/cyber-security-exams-coming-for-advisors--says-sec-16805.html?section=101
Hopefully you made it safely through the FINRA renewal process this year.
With new, but still outdated FINRA systems and states in need of funds, we find ourselves at the edge of our seats through the renewal payment season.
Based on the limitations of the FINRA systems, some firms were forced to overpay in November and December. Now it is time to get a refund. FINRA will not automatically refund any overpayments. A formal request to FINRA is required.
Here's how you do this...
How to Request a Refund from Your Account
Firms may choose to withdraw funds from their Flex-Funding Account due to various circumstances (e.g., renewal refund, or account overfunding). To request a refund from your firm's account, send an email to FINRA Refunds.
Email must be sent from an appropriate firm signatory
Reference the Firm CRD number
Include requested refund amount
Please include the total balance of your firm’s Flex-Funding Account for verification purposes in the email.
Note: The refund check will be made payable to the firm and mailed to the address of record. Most refund requests should be processed within 10 business days of receipt except during the annual renewal season.
For AdvisorAssist Compliance Clients, we will be contacting you to determine any refunds you would like processed.
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